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What changed in Toast, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Toast, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+371 added−402 removedSource: 10-K (2025-02-26) vs 10-K (2024-02-27)

Top changes in Toast, Inc.'s 2024 10-K

371 paragraphs added · 402 removed · 286 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

66 edited+32 added−52 removed44 unchanged
Biggest changeChannels for Disclosure of Information Our Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports, filed or furnished pursuant to Sections 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, are available, free of charge, on our website as soon as reasonably practicable after such reports are electronically filed with, or furnished to, the Securities and Exchange Commission, or the SEC.
Biggest changeAdditionally, as we grow our business internationally, international privacy legislation such as the European Union General Data Protection Regulation, or the EU GDPR, and the EU GDPR in such form as incorporated into the laws of the United Kingdom, or UK GDPR, collectively with EU GDPR referred to as GDPR, and Canada’s Personal Information Protection and Electronic Documents Act along with provincial legislation similarly impact our operations on account of requirements related to collecting, processing and cross-border transfers of personal information. 16 T able of Contents Channels for Disclosure of Information Our Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports, filed or furnished pursuant to Sections 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, are available, free of charge, on our website as soon as reasonably practicable after such reports are electronically filed with, or furnished to, the Securities and Exchange Commission, or the SEC.
In-store payments through the Toast integrated card reader and Toast Tap support card dipping, tapping, and swiping as well as Apple Pay, Google Pay, and Samsung Pay, with fraud detection capabilities to minimize transaction risks. Using Toast-provided payments across channels simplifies our customers’ experience, providing them with a single daily deposit of funds and consolidated reporting for easier accounting.
In-store payments through the Toast integrated card reader and Toast Tap reader support card dipping, tapping, and swiping as well as Apple Pay, Google Pay, and Samsung Pay, with fraud detection capabilities to minimize transaction risks. Using Toast-provided payments across channels simplifies our customers’ experience, providing them with a single daily deposit of funds and consolidated reporting for easier accounting.
The Federal Trade Commission, or FTC, enforces Section 5 of the FTC Act against non-banks and has a history of pursuing enforcement actions for alleged unfair or deceptive acts or practices in connection with the marketing or servicing of financial products and services that are marketed to consumers or small businesses.
The Federal Trade Commission, or FTC, enforces Section 5 of the FTC Act against non-banks and has a history of pursuing enforcement actions for alleged unfair or deceptive acts or practices in connection with the marketing or servicing of financial and other products and services that are marketed to consumers or small businesses.
Privacy and Consumer Information Security In the ordinary course of our business, we access, collect, store, use, transmit and otherwise process certain types of data, including personal information, which subjects us to certain federal and state privacy and information security laws, rules, industry standards and regulations designed to regulate consumer information and data privacy, security and protection, and mitigate identity theft.
Privacy and Consumer Information Security In the ordinary course of our business, we access, collect, store, use, transmit and otherwise process certain types of data, including personal information, which subjects us to numerous federal and state privacy and information security laws, rules, industry standards and regulations designed to regulate consumer information and data privacy, security and protection, and mitigate identity theft.
PCI DSS is a set of requirements designed to ensure that all companies that process, store, or transmit payment card information maintain a secure environment to protect cardholder data. We are also subject to the operating rules of the National Automated Clearing House Association, or NACHA.
PCI DSS is a set of requirements designed to ensure that all companies that process, store, or transmit payment card information maintain a secure environment to protect cardholder data. We are also subject to the operating rules of Nacha, formerly the National Automated Clearing House Association.
Our hardware utilizes the open-source Android mobile operating system which enables us to freely distribute the operating system to the Toast terminal and handheld devices. Proprietary management tools allow Toast to safely and efficiently upgrade POS software and device firmware as well as to monitor the health of devices across the fleet.
Our hardware utilizes the open-source Android mobile operating system which enables us to freely distribute the operating system to the Toast terminal and handheld devices. Proprietary management tools are designed to allow Toast to safely and efficiently upgrade POS software and device firmware as well as to monitor the health of devices across the fleet.
We compete on the basis of a number of factors including: • the ability to provide an all-in-one software and financial technology platform specifically designed to meet the existing and future technology needs of prospective customers, including comprehensive partner ecosystem integrations; • product performance, flexibility, durability, ease of use, security, scalability, and reliability; • brand recognition, reputation, and customer satisfaction; • the availability and quality of support and other professional services, including the ability to onboard prospective customers in a timely and cost-efficient manner; • the ability to operate and support all geographic markets specified by the prospective customer; and • the ability to integrate systems seamlessly and at low costs to provide important data insights.
We compete on the basis of a number of factors including: 11 T able of Contents • the ability to provide an all-in-one software and financial technology platform specifically designed to meet the existing and future technology needs of prospective customers, including comprehensive partner ecosystem integrations; • product performance, flexibility, durability, ease of use, security, scalability, and reliability; • brand recognition, reputation, and customer satisfaction; • the availability and quality of support and other professional services, including the ability to onboard prospective customers in a timely and cost-efficient manner; • the ability to operate and support all geographic markets specified by the prospective customer; and • the ability to integrate systems seamlessly and at low costs to provide important data insights.
These laws, some of which are discussed below, impose obligations with respect to the collection, processing, storage, disposal, use, transfer, retention and disclosure of personal information, and, with limited exceptions, give consumers the right to prevent use of their personal information and disclosure of it to third parties.
These laws, some of which are discussed below, impose obligations with respect to the collection, processing, storage, disposal, use, transfer, retention and disclosure of personal information, and, with limited exceptions, give consumers the right to restrict the use of their personal information and the disclosure of it to third parties.
We built our entire platform to be cloud-based, so our customer success team can provide seamless support remotely. Due to the all-in-one nature of our platform, we offer restaurants a single point of contact for any issues across their entire technology stack. We invest significantly in customer support and consider these investments to be a key competitive differentiator.
We built our entire platform to be cloud-based, so our customer success team can provide seamless support remotely. Due to the all-in-one nature of our platform, we offer customers a single point of contact for any issues across their entire technology stack. We invest significantly in customer service and consider these investments to be a key competitive differentiator.
Financial Technology Solutions • Payment Processing : Toast provides a fully-integrated platform that enables our customers to securely accept and process payments, while also providing valuable data-driven insights and driving our guest engagement programs.
Financial Technology Solutions Toast provides a fully-integrated platform that enables our customers to securely accept and process payments, while also providing valuable data-driven insights and driving our guest engagement programs.
Our Market R estau rants are highly diverse and complex and generally operate with low margins, high employee turnover, highly perishable products, and complex regulations. At the same time, restaurants operate in a dynamic environment with changing food costs, labor constraints, evolving guest preferences, and the imperative to utilize technology and data to innovate.
Our Market Restaurants are highly diverse and complex and generally operate with low margins, high employee turnover, highly perishable products, and complex regulations. At the same time, restaurants operate in a dynamic environment with changing food costs, labor constraints, evolving guest preferences, and the imperative to utilize technology and data to innovate.
Today, we have partnerships in place across a spectrum of solutions that include employee management, reservations, inventory, accounting, security, analytics, marketing and customer relationship management, loyalty, mobile pay, gift cards, online ordering, and digital signage.
Today, we have partnerships in place across a spectrum of solutions that include employee management, reservations, inventory, accounting, security, analytics, marketing and customer relationship management, loyalty, mobile pay, gift cards, online ordering, and more.
We have also developed a patent program and a strategy to identify, apply for, and secure patents for innovative aspects of our platform and technology. As of December 31, 2023, we have 62 U.S. patent applications allowed/granted, and in addition we have 6 U.S. patent applications pending. Our issued patents are estimated to expire between 2034 and 2042.
We have also developed a patent program and a strategy to identify, apply for, and secure patents for innovative aspects of our platform and technology. As of December 31, 2024, we have 65 U.S. patent applications allowed/granted, and in addition we have 6 U.S. patent applications pending. Our issued patents are estimated to expire between 2034 and 2042.
Additionally, states impose a variety of licensing requirements on entities engaged in certain insurance related activities. Our subsidiary, Toast Insurance Services, Inc., has obtained certain insurance related licenses from a majority of the 50 states plus Washington, D.C.
Additionally, states impose a variety of licensing requirements on entities engaged in certain insurance related activities. Our subsidiary, Toast Insurance Services, Inc., has obtained certain insurance related licenses from all 50 states plus Washington, D.C.
This capability allows customers to continue to place orders, print tickets and receipts, and take credit card payments. Many customers can also send orders to Kitchen Display Systems in offline mode. In offline mode, all credit card information is securely encrypted and stored on the Toast device until it regains connection. • Partner APIs.
This capability allows customers to continue to place orders, send orders to Kitchen Display Systems, print tickets and receipts, and take credit card payments. In offline mode, credit card information is securely encrypted and stored on the Toast device until it regains connection. • Partner APIs .
We believe we are in the early stages of capturing our addressable market opportunity and we see a significant opportunity to increase sales to both new and existing customers, expand the usage of our platform outside the United States, and address more of the diverse needs of restaurant industry stakeholders.
We believe we are in the early stages of capturing our addressable market opportunity and we see a significant opportunity to increase sales to both new and existing customers, address more of the diverse needs of restaurant industry stakeholders, and expand our platform outside the United States and with different types of customers.
We have an ongoing trademark and service mark registration program pursuant to which we register our brand names and product names, taglines, and logos in the United States and other countries to the extent we determine appropriate and cost effective. We also have common law rights in some trademarks and numerous pending trademark applications in U.S. jurisdictions.
We have an ongoing trademark and service mark registration program pursuant to which we register our brand names and product names, taglines, and logos in the United States and other countries to the extent we determine appropriate and cost effective. We have multiple pending trademark applications and also have common law rights in some trademarks.
We offer competitive compensation and benefits that support our employees’ overall well-being, including healthcare, mental health support programs, and parental and family leave, as well as equity compensation, retirement savings, and company 401k match. 16 Table of Contents Diversity, Equity & Inclusion At Toast, we power successful restaurants of all sizes.
We offer competitive compensation and benefits that support our employees’ overall well-being, including healthcare, mental health support programs, and parental and family leave, as well as equity compensation, retirement savings, and company 401k match. At Toast, we power successful restaurants of all sizes.
We invest in scalable and efficient onboarding solutions that offer a differentiated customer experience. We currently offer on-site, remote, and self-guided implementation options to our customers. We offer multi-channel customer support 24 hours per day, 7 days a week, 365 days per year via chat, phone, or web.
We invest in scalable and efficient onboarding solutions that offer a differentiated customer experience. We currently offer on-site, remote, and self-guided implementation options to our customers. 10 T able of Contents We offer multi-channel customer support 24 hours per day, 7 days a week, 365 days per year via chat or phone.
Seasonality Information regarding seasonality is provided in this Annual Report on Form 10-K in Part II, Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the heading “Seasonality.” Human Capital As of December 31, 2023, we had approximately 5,500 employees worldwide.
Seasonality Information regarding seasonality is provided in this Annual Report on Form 10-K in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the heading “Seasonality.” Human Capital As of December 31, 2024, we had approximately 5,700 employees worldwide.
We are uniquely positioned to provide our restaurants with access to capital using patented systems for loan origination that incorporate data science models, historical POS data, and payment processing volume.
We are uniquely positioned to provide our restaurants with access to capital using proprietary systems to assist with loan origination that incorporate data science models, historical POS data, and payment processing volume.
In addition, under these laws and regulations, including the federal Gramm-Leach-Bliley Act, or GLBA, and Regulation P promulgated thereunder, we must disclose our privacy policy and practices, including those policies relating to the sharing of nonpublic personal information with third parties. The GLBA may restrict the purposes for which we may use personal information obtained from consumers and third parties.
Under certain U.S. federal laws, including, for example, the Gramm-Leach-Bliley Act, or GLBA, and Regulation P promulgated thereunder, we must disclose our privacy policy and practices, including those policies relating to the sharing of nonpublic personal information with third parties. The GLBA may restrict the purposes for which we may use personal information obtained from consumers and third parties.
Corporate Information We were incorporated under the laws of Delaware in December 2011 under the name Opti Systems, Inc. We changed our name to Toast, Inc. in May 2012. Our principal executive offices are located at 401 Park Drive, Boston, Massachusetts 02215 and our telephone number is (617) 297-1005. Our website address is www.toasttab.com.
Corporate Information We were incorporated under the laws of Delaware in December 2011 under the name Opti Systems, Inc. We changed our name to Toast, Inc. in May 2012. Our principal executive offices are located at 333 Summer Street, Boston, Massachusetts 02210 and our telephone number is (617) 297-1005. Our website address is www.toasttab.com.
Toast has curated a portfolio of over 200 restaurant technology partners that utilize Toast APIs to deliver a broad range of specialized solutions. Payments Toast provides fast and secure, integrated payment processing through its POS devices, standalone contactless reader, or Toast Tap, and online ordering applications. • Security and compliance . Toast is a PCI-DSS compliant Level 1 Service Provider.
Toast has curated a portfolio of over 200 restaurant technology partners that utilize Toast APIs to deliver a broad range of specialized solutions. Payments Toast provides fast and secure, integrated payment processing through its POS devices, standalone contactless reader, or Toast Tap reader, and online ordering applications. • Security and compliance .
Our platform combines functionality from numerous product categories, and we therefore compete with a range of providers, including cloud-based point of sale platforms, legacy point of sale platform payments solutions, and point technology providers with products addressing specific front of house or back of house operations.
Competition The market is competitive and evolving rapidly. Our platform combines functionality from numerous product categories, and we therefore compete with a range of providers, including cloud-based point of sale platforms, legacy point of sale platform payments solutions, and point technology providers with products addressing specific front of house or back of house operations.
We also expect to see continued location growth among our existing customers, both as they open new locations and as we continue to roll out the Toast platform to more of our customers’ existing locations. • Increase adoption of our products.
We also expect to see continued location growth among our existing customers, both as they open new locations and as we continue to roll out the Toast platform to more of our customers’ existing locations. • Expand our addressable market .
Other trademarks and trade names referred to in this Annual Report on Form 10-K are the property of their respective owners. 21 Table of Contents
Other trademarks and trade names referred to in this Annual Report on Form 10-K are the property of their respective owners. 17 T able of Contents
The restaurant industry is one of the most diverse industries - we embrace that diversity and encourage inclusivity and equity for all within our company. We believe that the success of our business comes only with the success of all our employees.
The restaurant industry is one of the most diverse industries - we embrace that diversity and encourage inclusivity and equity for all within our company. We believe that the success of our business comes only with the success of our employees. We believe that having a diverse and inclusive workforce is a strategic enabler to our business success.
All of our card processing products and services are assessed annually by an independent security organization that has been qualified by the PCI Security Standards Council to validate an entity's adherence to PCI-DSS. • Reliability .
Toast is a PCI-DSS compliant Level 1 Service Provider. All of our card processing products and services are assessed annually by an independent security organization that has been qualified by the PCI Security Standards Council to validate an entity's adherence to PCI-DSS. • Reliability .
Our research and development teams are located in the United States, Europe, and India. Each location has a combination of product management, user experience design, software engineering, and quality assurance personnel. Restructuring Plan In February 2024, we announced a restructuring plan, or the Restructuring Plan, designed to promote overall operating expense efficiency.
Our research and development personnel are located in North America, Europe, and Asia. The team has a combination of product management, user experience design, software engineering, and quality assurance personnel. Restructuring Plan In February 2024, we announced a restructuring plan, or the Restructuring Plan, designed to promote overall operating expense efficiency.
We have not experienced any work stoppages and consider our employee relations to be strong. We continue to maintain high employee engagement and satisfaction, as assessed by our annual internal culture and independent surveys. Compensation, Well-being and Safety Toast is committed to supporting employee safety and well-being.
Our Toast values guide our culture, and support a sense of belonging among Toasters. We have not experienced any work stoppages and consider our employee relations to be strong. We continue to maintain high employee engagement and satisfaction, as assessed by our annual internal culture and independent surveys. Toast is committed to supporting employee safety and well-being.
We also engage consultants as needed to support our business and operations from time to time. In February 2024, we announced the Restructuring Plan, impacting approximately 550 employees. Core to our success is our passionate and diverse team of Toasters, led by a skilled and experienced leadership team with a proven track record of scaling leading platforms and organizations.
We also engage consultants as needed to support our business and operations from time to time. Core to our success is our passionate and diverse team of Toasters, led by a skilled and experienced leadership team with a proven track record of scaling leading platforms and organizations.
We also are, or may be in the future, subject to rules promulgated and enforced by multiple authorities and governing bodies in the United States, including federal, state and local agencies, payment card networks and other authorities, and internationally.
We also are, or may be in the future, subject to rules promulgated and enforced by multiple authorities and governing bodies in the United States, including federal, state and local agencies, payment card networks and other authorities, and internationally. These descriptions are not exhaustive, and these laws, regulations, and rules frequently change and are increasing in number.
Our Growth Strategy Our strategy is to continue to invest in areas that align with our customers’ needs. We expect that both we and our customers will continue to realize the value of our platform as we scale, make enhancements to our technology, offer more products and services, and help restaurants increase revenue while saving time and money.
We expect that both we and our customers will continue to realize the value of our platform as we scale, make enhancements to our technology, offer more products and services, and help our customers increase revenue while saving time and money.
These descriptions are not exhaustive, and these laws, regulations, and rules frequently change and are increasing in number. 18 Table of Contents BSA and FinCEN Regulation Certain of our payment technology solutions are or may become subject to anti-money laundering laws and regulations under the Bank Secrecy Act of 1970, as amended by the USA PATRIOT Act of 2001, or the BSA.
BSA and FinCEN Regulation Certain of our payment technology solutions are or may become subject to anti-money laundering laws and regulations under the Bank Secrecy Act of 1970, as amended by the USA PATRIOT Act of 2001, or the BSA.
Despite our rapid growth and scale, we estimate that our current locations account for just above 10% of restaurant locations in the United States. We expect the restaurant industry to continue to shift toward innovative, digital, cloud-based solutions as restaurants seek to leverage technology to drive more growth and operate more efficiently.
Despite our rapid growth and scale, we estimate that U.S. restaurant locations on our platform account for approximately 15% of the U.S. restaurant market. We expect the restaurant industry to continue to shift toward innovative, digital, cloud-based solutions as restaurants seek to leverage technology to drive more growth and operate more efficiently.
The customers who utilize our gift card processing products and services may be subject to these laws and regulations, which may include the Credit Card Accountability Responsibility and Disclosure Act of 2009.
The customers who utilize our gift card processing products and services may be subject to these laws and regulations, which may include the Credit Card Accountability Responsibility and Disclosure Act of 2009. Communications Regulation We send texts, emails, and other communications to our customers in a variety of contexts.
As a part of this initiative, in each of 2021, 2022, and 2023, we transferred 0.5 million shares of Class A common stock, which represent our first three annual installments of the total 5.5 million shares reserved by our Board as bona fide gifts to a charitable organization to fund our social impact initiatives through Toast.org.
As a part of this initiative, our Board reserved a total of 5.5 million Class A common shares, annual installments of which are transferred as bona fide gifts to a charitable organization to fund our social impact initiatives through Toast.org.
Our digital technology platform includes: Software, cloud-based services, and partner ecosystem • Reliable cloud services. Our highly scalable, services-based, multi-tenant architecture runs on Amazon Web Services. • Offline POS capabilities . In the event of an internet or network disruption, Toast’s offline POS capabilities provide essential continuity of operations.
Our highly scalable, services-based, multi-tenant architecture runs on Amazon Web Services. 8 T able of Contents • Offline POS capabilities . In the event of an internet or network disruption, Toast’s offline POS capabilities provide essential continuity of operations.
Hardware • User-friendly, durable, and designed to last. Our custom-designed hardware is pre-configured to enable self-installation with limited support and is created to be spill- and drop-proof with a long battery life to withstand the rigors of the restaurant environment. 13 Table of Contents • Device management.
Hardware • User-friendly, durable, and designed to last . Our custom-designed hardware is pre-configured to enable self-installation with limited support and is created to be restaurant grade for spills and drops with a long battery life. • Device management .
Toast both drives and benefits from the success of our customers—when restaurants grow, Toast grows through higher payments volume and increased adoption of our full platform. • Fuel efficient location growth with both new and existing customers.
Toast both drives and benefits from the success of our customers—when they grow, Toast grows through higher payments volume and increased adoption of our full platform. 9 T able of Contents • Fuel efficient location growth in our core U.S. market.
If enacted or adopted, those proposals or issuances could affect PayOut’s operating environment in substantial and unpredictable ways. These proposals or issuances may impact our ability to offer PayOut in a particular jurisdiction, or at all. Stored Value Services Stored value cards, gift cards and electronic gift certificates may trigger various federal and state laws and regulations.
These proposals or issuances may impact our ability to offer PayOut in a particular jurisdiction, or at all. 15 T able of Contents Stored Value Services Stored value cards, gift cards and electronic gift certificates may trigger various federal and state laws and regulations.
Card Network and NACHA Rules We rely on our relationships with financial institutions and third-party payment processors to access the payment card networks, such as Visa and Mastercard, which enable our acceptance of credit cards and debit cards, and our ability to explore and offer certain other products.
As a result, we are currently subject to a variety of, and may in the future become subject to additional or newly enacted, state insurance laws and regulations in various jurisdictions. 14 T able of Contents Card Network and Nacha Rules We rely on our relationships with financial institutions and third-party payment processors to access the payment card networks, such as Visa and Mastercard, which enable our acceptance of credit cards and debit cards, and our ability to explore and offer certain other products.
This approach provides multiple entry points into the Toast platform ranging from a single terminal point of sale to a multi-product setup for a complex restaurant. As Toast continues to grow, so does the importance of brand recognition and our investments into strengthening it. This brand recognition will help continue to drive growth in the restaurant community and increase referrals.
As Toast continues to grow, so does the importance of brand recognition and our investments into strengthening it. This brand recognition will help continue to drive growth in the restaurant and retail community and increase referrals.
Alongside this platform, our commitment to customer success drives a differentiated customer experience, powers operational innovation, and enables our and our customers' long-term growth and success. As restaurants adopt more of our platform, our solutions work better together to help drive even more success for them.
Alongside this platform, our commitment to customer success helps drive a differentiated customer experience, power operational innovation, and enable our and our customers' long-term growth and success. As customers use more of our platform, our solutions work together to create opportunities for better outcomes, enabling greater success for our customers.
Integrated POS and payroll create a single employee record across systems, allowing for hours, tips, and employee data to synchronize seamlessly - helping managers save time and improving the employee experience. • Sling by Toast: Sling by Toast provides streamlined scheduling and team communication.
Team Management Toast’s payroll and team management products offer a centralized hub that streamlines the employee onboarding, management, and payroll process. Integrated POS and payroll creates a single employee record across systems, allowing for hours, tips, and employee data to synchronize seamlessly - helping managers save time and improving the employee experience.
Sales and Marketing The restaurant industry is a local industry. Restaurant operators purchase everything from food and alcohol to equipment and table linens from individuals that they know and trust. Our sales and marketing motion is designed from the ground up to integrate into this dynamic by combining a high-volume marketing engine with a localized and consultative sales force.
Sales and Marketing The food and beverage industry is a local industry. Restaurant operators purchase everything from food and alcohol to equipment and table linens from individuals that they know and trust.
Despite our efforts to protect our intellectual property rights, they may not be respected in the future or may be invalidated, circumvented, or challenged. See the sections titled “Risk Factors,” including the section(s) titled “Risk Factors—Risks Related to Our Intellectual Property” for a description of the risks related to our intellectual property.
Despite our efforts to protect our intellectual property rights, they may not be respected in the future or may be invalidated, circumvented, or challenged.
Government Regulation Various aspects of our business and service areas are subject to U.S. federal, state, and local regulation, as well as regulation outside the United States.
See the sections titled “Risk Factors,” including the section(s) titled “Risk Factors—Risks Related to Our Intellectual Property” for a description of the risks related to our intellectual property. 13 T able of Contents Government Regulation Various aspects of our business and service areas are subject to U.S. federal, state, and local regulation, as well as regulation outside the United States.
Social Impact and Environmental Sustainability Social Commitment At Toast, we are committed to enriching the food experience for all and harnessing the full strength of our business - our people, our products, and our philanthropy - to maximize our positive impact on the world.
Corporate Social Responsibility At Toast, we are committed to enriching the food experience for all and harnessing our business - our people, our products, and our philanthropy - to maximize our positive impact on the world. 12 T able of Contents Toast.org, our social impact arm, is dedicated to solving critical issues in the food ecosystem that impact communities and the planet.
The NACHA Rules and Operating Guidelines impose obligations on us and our partner financial institutions, such as audit and oversight by the financial institutions and the imposition of mandatory corrective action, including termination, for serious violations. 19 Table of Contents State Loan Disclosure Requirements and Other Substantive Lending Regulations Loans facilitated by Toast Capital are subject to state laws and regulations that impose requirements related to commercial loans, including loan disclosures and terms, credit discrimination, and credit reporting.
The Nacha Rules and Operating Guidelines, which collectively are referred to as the Nacha Rules, impose obligations on us and our partner financial institutions, such as audit and oversight by the financial institutions and the imposition of mandatory corrective action, including termination, for serious violations.
For example, as restaurants adopt our digital ordering solutions such as Order & Pay and Online Ordering, they can use data they collect through these solutions to fuel their Toast marketing and loyalty programs, increasing the likelihood of return visits, and even driving more guests to the restaurant’s online ordering channel with Toast, which, in turn, helps restaurants save on third-party commissions, ultimately driving incremental margin for the restaurant.
For example, restaurants that adopt our digital ordering solutions such as Online Ordering and Order & Pay, can unlock synergies with Toast’s marketing and loyalty programs, increasing the likelihood of return visits, and even driving more guests to the restaurant’s online ordering channel with Toast, which can help restaurants save on third-party commissions and deliver incremental margins for the restaurant. 6 T able of Contents Point-of-Sale (POS) & Restaurant Operations Toast’s in-store POS and restaurant operations offerings are built to help reduce time to take an order, optimize operations, and seamlessly handle payments.
The Restructuring Plan includes a reduction in force and certain other actions to reorganize our facilities and operations. We expect to complete the Restructuring Plan by the end of fiscal year 2024.
The Restructuring Plan included a reduction in force and certain other actions to reorganize our facilities and operations. We completed the Restructuring Plan by the end of fiscal year 2024. See Note 12 in “Notes to Consolidated Financial Statements” of this Annual Report on Form 10-K for additional information regarding the Restructuring Plan.
Our sales team is organized by three main functional areas: an acquisition team that is focused on new location growth and organized by restaurant size (i.e., number of locations per customer), an upsell team that focuses on expansion into the install base, and a growth team focused on sales enablement and operations.
This deep knowledge of the local food and beverage scene provides us with a competitive advantage. Our sales team consists of an acquisition team that is focused on new location growth and is organized by restaurant size (i.e., number of locations per customer), type, and geography.
We maintain competitive and clear pricing, our systems are in compliance with PCI Security Council standards, and our hardware supports EMV and NFC payment technology. • Toast Capital : Toast Capital offers eligible restaurants access to fast and flexible funding via loans issued by our bank partner and repaid along with fees generally through a daily holdback of payment card receipts.
Toast Capital offers eligible restaurants access to fast and flexible funding via loans issued by our bank partner that are generally repaid through a portion of their daily transactions.
Toast Capital provides applicants with a straightforward process that can deliver funds as soon as the next business day after signing a credit agreement, allowing restaurateurs to focus on running and growing their businesses. • Purchase Plans : We also offer a number of ways for customers to reduce the upfront cost of our products, often one of the largest barriers to switching to or purchasing a new POS system.
Toast Capital provides applicants with a straightforward process that allows approved borrowers access to funds as soon as the next business day after signing a credit agreement, allowing restaurateurs to focus on running and growing their businesses. Our Technology Our proprietary technology underpins our products to provide a streamlined, integrated customer experience.
Delphi provides indoor and outdoor digital menu boards that allows restaurants to dynamically adjust menu items and drive thru technology that is designed to increase order sizes and improve speed of service. 10 Table of Contents Digital Ordering & Delivery • We provide software solutions that allow customers to take control of and consolidate digital ordering and delivery across Toast-provided solutions and third-party ordering channels: ◦ Toast Online Ordering & Toast TakeOut : Our commission-free, first-party online ordering product and consumer Toast TakeOut application simplify the digital ordering experience for guests, increases order accuracy, and allows restaurants to reduce reliance on third parties for driving online orders.
Our commission-free, first-party online ordering product and the consumer Local by Toast application are designed to simplify the digital ordering experience for guests, increase order accuracy, and allow restaurants to reduce reliance on third parties for driving online orders.
We have a small and growing international sales team and are investing in research and development efforts to address this market opportunity. 14 Table of Contents Customer Success Our customer success team supports our customers through their entire lifecycle beginning with onboarding and extending to ongoing customer care, including product enablement and education around industry best practices.
We believe that the scale of our partner ecosystem provides additional visibility into what products would be most valuable to our customers. Customer Success Our customer success team supports our customers through their entire lifecycle beginning with onboarding and extending to ongoing customer care, including product enablement and education around industry best practices.
Our environmental efforts span our operations, platform, and products — including our workplaces, the full life cycle of our hardware and how we can help our customers and their guests reduce their impacts. In 2023, we shared our full fiscal year 2022 greenhouse gas (GHG) inventory inclusive of Scope 1, Scope 2, and relevant Scope 3 categories.
We are committed to supporting efforts to mitigate climate change by minimizing both our use of natural resources and waste production. Our environmental efforts span our operations, platform, and products — including our workplaces, the full life cycle of our hardware and how we can help our customers and their guests reduce their impacts.
Supply Chain & Accounting • xtraCHEF by Toast: xtraCHEF provides a suite of back-office tools for restaurants, including accounts payable automation, inventory management, ingredient price tracking, and recipe costing. xtraCHEF provides operators with insights designed to help them take control of changing inventory costs, automate accounts payable, and streamline back-office tasks to proactively manage margins and increase overall profitability.
We enable operators to better manage costs and spend less time on administrative tasks - allowing them to focus more on their guests and teams. 7 T able of Contents xtraCHEF by Toast provides a comprehensive set of back-office tools for restaurants, including accounts payable automation, inventory management, ingredient price tracking, and recipe costing.
Toast.org also bolstered its commitment to creating a more sustainable food ecosystem with a $1 million partnership with ReFED, a national nonprofit dedicated to ending food loss and waste, to facilitate the development and adoption of food waste solutions for restaurants.
In 2024, Toast.org commitments focused on creating a more sustainable food ecosystem, and supporting the next generation of industry leaders through culinary training programs. We continued our partnership with ReFED, a national nonprofit dedicated to ending food loss and waste.
To generate and capture demand we invest heavily in the primary discovery channels for restaurant operators. We combine our demand generation efforts with pricing and packaging that is designed to increase platform adoption and simplify the buying process for restaurants.
We combine our demand generation efforts with pricing and packaging that is designed to increase platform adoption and simplify the buying process for restaurants. This approach provides multiple entry points into the Toast platform ranging from a single terminal point of sale to a multi-product setup for a complex restaurant or food and beverage retail operation.
We start with in-market sales teams that are deeply familiar with, and trusted by, the local community. This deep knowledge of the local food and beverage scene provides us with a competitive advantage.
Our sales and marketing motion is designed from the ground up to integrate into this dynamic by combining a high-volume marketing engine with a localized and consultative sales force. We start with in-market sales teams that are deeply familiar with, and trusted by, the local community.
Multi-Location Management also allows customers to view their centralized data across all their locations for a single, clear view of business performance. ◦ Kitchen Display System : Our proprietary Kitchen Display System software seamlessly connects the front of the house with the kitchen staff.
Robust above-store offerings include our multi-location management and menu management tools that allow operators to configure our products to fit the specific needs of individual locations while also providing customers with the ability to view data across their locations for a centralized, clear view of business performance.
If a restaurant does not have its own drivers, it can use Toast Delivery Services to dispatch an on-demand driver from our partner network of delivery drivers. ◦ Third-Party Delivery Integrations and Orders Hub: Through Toast Delivery Partners, we provide POS integrations for restaurants using third-party delivery services to streamline order intake, eliminate the need for extra third-party tablets, and sync menus in real-time.
We enable restaurants to offer delivery services in a variety of ways that can be tailored to the different needs and operations of restaurants. With our POS integrations, restaurants can streamline order intake, eliminate the need for third-party tablets, and seamlessly sync menus.
Our credit-card linked loyalty program automatically accrues points each time the guest pays using their card and special offers can be customized by the restaurant to help drive repeat visits and increased spend over time. • Email Marketing : Our data driven insights allow restaurants to easily create and send pre-built email campaigns based on guest interactions across our product suite, such as visit frequency and spending patterns. • Toast Gift Cards : Toast allows customers to sell physical and electronic gift cards, designed to help customers increase sales and guest retention.
Additionally, certain of our products enable operators to create tailored marketing based on guest interactions across our product suite, such as visit frequency and spending patterns, to drive guest engagement and help improve retention. Data-driven insights within these products allow operators to easily create and optimize their marketing efforts over time.
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Our Products and Platform Toast’s all-in-one platform powers the entire restaurant community. Our portfolio spans several product categories: restaurant operations & point of sale, digital ordering & delivery, marketing & loyalty, team management, supply chain & accounting, financial technology solutions, and platform & insights.
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See the section titled “Our Growth Strategy” below for additional details. Our Products and Platform Toast’s all-in-one technology platform is purpose-built for the food and beverage community. Our proprietary Android-based software powers our single platform of vertically integrated solutions with seamless connectivity across the operations of our customers, their guests, and their employees.
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Restaurant Operations & Point of Sale • Software . Our Android-based software has been custom built for the restaurant industry and is the foundation that powers our single platform of vertically integrated solutions.
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Our technology supports restaurants of all types and sizes and food and beverage retailers; and our product portfolio covers the critical needs of our customers: taking orders and payments, managing a digital presence, driving guest traffic, labor management, supply chain and accounting, and more.
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Our proprietary software enables seamless connectivity across restaurant operations, guests, and employees, and drives a differentiated dining experience. 8 Table of Contents ◦ Toast POS : Our core software module integrates payment processing with point of sale functionality tailored for the needs of restaurants of all types and sizes.
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This includes software to run fixed-location POS terminals, handheld POS devices, and self-service kiosks that allow restaurant staff to take orders and guests to pay, all of which run on Toast hardware with proprietary technology.
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Our products help drive reduced time to take an order, optimize operations, and seamlessly handle payments. Toast POS is easy to use, leverages consumer technology, allows restaurant employees to quickly get up to speed on the software and seamlessly use it throughout their day.
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In the kitchen, our Kitchen Display System and kitchen printers allow operators to integrate in-store and online orders, helping keep kitchen staff organized and driving operational efficiencies.
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We provide solutions designed to give restaurants the option to take orders at the counter or at the table, leveraging software feature sets that support speed and help meet hospitality needs. Additionally, through an integrated payment solution, we are able to offer key payments features from the POS.
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Operators can analyze data generated by staff and guest interactions with our products to understand menu and operational performance. They can also assess performance against aggregated data from restaurants in their local markets using Toast Benchmarking.
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Our integrated solution helps to increase speed of checkout with a suite of products built for restaurant needs. ◦ Toast Now: Our proprietary mobile application is designed to allow restaurant owners and operators to manage their restaurants, get real-time reporting, and communicate with staff on their mobile devices.
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Marketing Toast’s marketing products provide simple, integrated solutions to deliver targeted email and SMS campaigns, build loyalty programs, offer gift cards, and take reservations to drive further engagement with a restaurant’s guests.
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It allows owners and operators to view sales data across multiple locations, view which employees are currently working, manage employee breaks, and view menu items that have sold out.
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Features within our marketing products, such as our writing assistant powered by artificial intelligence, or AI, custom templates and one-click email campaigns, are designed to help operators save time on crafting marketing strategies.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIf laws and regulations change, or are interpreted by courts or regulators as subjecting us to licensing or other compliance requirements, we may be subject to government supervision and enforcement actions, litigation, and related liabilities, our ability to offer financial solutions may be negatively impacted, our costs associated with existing financial solutions, including Toast Capital, may increase or we may decide to discontinue offering financial solutions altogether, and our business, financial condition, and results of operations would be negatively impacted. 37 Table of Contents Our revolving credit facility provides our lenders with a first-priority lien against substantially all of our assets, and contains financial covenants and other restrictions on our actions that may limit our operational flexibility or otherwise adversely affect our results of operations.
Biggest changeOur revolving credit facility provides our lenders with a first-priority lien against substantially all of our assets, and contains financial covenants and other restrictions on our actions that may limit our operational flexibility or otherwise adversely affect our results of operations.
We derive, and expect to continue to derive, a majority of our revenue and cash inflows from our integrated cloud-based restaurant management platform, which encompasses software, financial technology, and hardware components. As such, our ability to attract new customers, retain existing customers, and increase use of the platform by existing customers is critical to our success.
We derive, and expect to continue to derive, a majority of our revenue and cash inflows from our integrated cloud-based restaurant management platform, which encompasses software, financial technology, and hardware components. As such, our ability to attract new customers, retain existing customers, and increase use of the platform by our customers is critical to our success.
Our operations involve the storage, transmission, and processing of our customers’ proprietary information and sensitive and personal information of our customers and their guests and employees, including contact information and payment information, purchase histories, lending information, and payroll information.
Our operations involve the storage, transmission, and processing of our customers’ proprietary information and sensitive and personal information of our customers, their guests, and their employees, including contact information and payment information, purchase histories, lending information, and payroll information.
The concentrated voting power of these stockholders could have the effect of delaying or preventing an acquisition of the company or another significant corporate transaction, and may limit or preclude your ability to influence corporate matters for the foreseeable future, including the election of directors and amendments of our organizational documents.
The concentrated voting power of these stockholders could have the effect of delaying or preventing an acquisition of our company or another significant corporate transaction, and may limit or preclude your ability to influence corporate matters for the foreseeable future, including the election of directors and amendments of our organizational documents.
These provisions include: 62 Table of Contents • a classified Board with three-year staggered terms, which could delay the ability of stockholders to change the membership of a majority of our Board; • the denial of any right of our stockholders to remove members of our Board except for cause and, in addition to any other vote required by law, upon the approval of not less than two-thirds of the total voting power of all our outstanding voting stock then entitled to vote in the election of directors; • the ability of our Board to issue shares of preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer; • the exclusive right of our Board to elect a director to fill a vacancy created by the expansion of our Board or the resignation, death, or removal of a director, which prevents stockholders from being able to fill vacancies on our Board; • provide for a dual-class common stock structure in which holders of our Class B common stock have the ability to control the outcome of matters requiring stockholder approval, even if they own significantly less than a majority of the outstanding shares of our Class A and Class B common stock, including the election of directors and significant corporate transactions, such as a merger or other sale of our company or its assets; • a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders; • the requirement that a special meeting of stockholders may be called only by the chairperson of our Board, chief executive officer, or by the Board acting pursuant to a resolution adopted by a majority of our Board, which could delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; • certain amendments to our amended and restated certificate of incorporation will require the approval of two-thirds of the then-outstanding voting power of our capital stock; and • advance notice procedures with which stockholders must comply to nominate candidates to our Board or to propose matters to be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of us.
These provisions include: • a classified Board with three-year staggered terms, which could delay the ability of stockholders to change the membership of a majority of our Board; • the denial of any right of our stockholders to remove members of our Board except for cause and, in addition to any other vote required by law, upon the approval of not less than two-thirds of the total voting power of all our outstanding voting stock then entitled to vote in the election of directors; 57 T able of Contents • the ability of our Board to issue shares of preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer; • the exclusive right of our Board to elect a director to fill a vacancy created by the expansion of our Board or the resignation, death, or removal of a director, which prevents stockholders from being able to fill vacancies on our Board; • provide for a dual-class common stock structure in which holders of our Class B common stock have the ability to control the outcome of matters requiring stockholder approval, even if they own significantly less than a majority of the outstanding shares of our Class A and Class B common stock, including the election of directors and significant corporate transactions, such as a merger or other sale of our company or its assets; • a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders; • the requirement that a special meeting of stockholders may be called only by the chairperson of our Board, chief executive officer, or by the Board acting pursuant to a resolution adopted by a majority of our Board, which could delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; • certain amendments to our amended and restated certificate of incorporation will require the approval of two-thirds of the then-outstanding voting power of our capital stock; and • advance notice procedures with which stockholders must comply to nominate candidates to our Board or to propose matters to be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of us.
Our failure or perceived failure to achieve some or all of our ESG goals or maintain ESG practices that meet evolving stakeholder expectations or regulatory requirements could harm our reputation, adversely impact our ability to attract and retain employees or customers, and expose us to increased scrutiny from the investment community, regulatory authorities, and others or subject us to liability.
Our failure or perceived failure to achieve some or all of our ESG goals or maintain ESG-related practices that meet evolving stakeholder expectations or regulatory requirements could harm our reputation, adversely impact our ability to attract and retain employees or customers, and expose us to increased scrutiny from the investment community, regulatory authorities, and others or subject us to liability.
We also have policies and procedures in place to contractually require third parties to which we transfer data to implement and maintain appropriate security measures. Sensitive and personal information is processed and stored by our customers, software and financial institution partners and third-party service providers to whom we outsource certain functions.
We also have policies and procedures in place to contractually require third parties to which we transfer data to implement and maintain appropriate security and privacy measures. Sensitive and personal information is processed and stored by our customers, software and financial institution partners and third-party service providers to whom we outsource certain functions.
In addition, any security breaches that occur may remain undetected for extended periods of time. While we also have and will continue to make significant efforts to address any IT security issues with respect to acquisitions we make, we may still inherit such risks when we integrate these companies.
In addition, any security breaches that occur may remain undetected for extended periods of time. While we also have and will continue to make significant efforts to address any IT security and privacy issues with respect to acquisitions we make, we may still inherit such risks when we integrate these companies.
Any failure to timely and effectively resolve any such errors, defects, or vulnerabilities could adversely affect our business, reputation, brand, financial condition, and results of operations. We may use artificial intelligence in our platform and product offerings. Issues relating to the use of artificial intelligence and machine learning could adversely affect our results of operations.
Any failure to timely and effectively resolve any such errors, defects, or vulnerabilities could adversely affect our business, reputation, brand, financial condition, and results of operations. We use artificial intelligence in our platform and product offerings. Issues relating to the use of artificial intelligence and machine learning could adversely affect our results of operations.
In addition to payment cards, our transaction processing services are subject to the National Automated Clearing House Association Rules, or NACHA Rules. Any changes in the NACHA Rules that increase our cost of doing business or limit our ability to provide processing services to our customers will adversely affect the operation of our business.
In addition to payment cards, our transaction processing services are subject to Nacha Rules, formerly the National Automated Clearing House Association Rules. Any changes in the Nacha Rules that increase our cost of doing business or limit our ability to provide processing services to our customers will adversely affect the operation of our business.
We expect the competitive landscape in the restaurant technology industry will continue to change in a variety of ways, including: • rapid and significant changes in technology, resulting in new and innovative payment methods and programs, that could place us at a competitive disadvantage and reduce the use of our platform and services; • competitors, including third-party processors and integrated payment providers, customers, governments, and/or other industry participants may develop products and services that compete with or replace our platform and services, including products and services that enable payment networks and banks to transact with consumers directly; 40 Table of Contents • competitors may also elect to focus exclusively on one segment of the restaurant industry and develop product offerings uniquely tailored to that segment, which could impact our addressable market and reduce the use of our platform and services; • participants in the financial services, payments, and payment technology industries may merge, create joint ventures, or form other business alliances that may strengthen their existing business services or create new payment services that compete with our platform and services; and • new services and technologies that we develop may be impacted by industry-wide solutions and standards related to migration to Europay, Mastercard, and Visa standards, including chip technology, tokenization, and other safety and security technologies.
We expect the competitive landscape in the restaurant technology industry will continue to change in a variety of ways, including: • rapid and significant changes in technology, resulting in new and innovative payment methods and programs, that could place us at a competitive disadvantage and reduce the use of our platform and services; • competitors, including third-party processors and integrated payment providers, customers, governments, and/or other industry participants may develop products and services that compete with or replace our platform and services, including products and services that enable payment networks and banks to transact with consumers directly; • competitors may also elect to focus exclusively on one segment of the restaurant industry and develop product offerings uniquely tailored to that segment, which could impact our addressable market and reduce the use of our platform and services; • participants in the financial services, payments, and payment technology industries may merge, create joint ventures, or form other business alliances that may strengthen their existing business services or create new payment services that compete with our platform and services; and • new services and technologies that we develop may be impacted by industry-wide solutions and standards related to migration to Europay, Mastercard, and Visa standards, including chip technology, tokenization, and other safety and security technologies.
We have administrative, technical, and physical security measures in place and proactively employ multiple security measures at different layers of our systems to defend against intrusion and attack and to protect our information; however, we have experienced security incidents in the past, and we may face additional security incidents in the future.
We have administrative, technical, and physical security measures in place and proactively employ multiple security measures at different layers of our systems to defend against intrusion and attack and to protect our information; however, we have experienced security and privacy incidents in the past, and we may face additional incidents in the future.
Further, because data security is a critical competitive factor in our industry, we may make statements in our privacy statements and notices and in our marketing materials describing the security of our platform, including descriptions of certain security measures we employ or security features embedded within our products.
Further, because data security is a critical competitive factor in our industry, we may make statements in our privacy statements and notices and in our marketing materials describing the privacy and security of our platform, including descriptions of certain security measures we employ or such features embedded within our products.
If we were to fail to comply with these requirements, we could be subject to liability, regulatory sanctions, or claims by our customers or our bank partner, and our bank partner could terminate its relationship with us. We intend to continue to explore other financial solutions to offer to our customers.
If we were to fail to comply with these requirements, we could be subject to liability, regulatory sanctions, or claims by our customers or our bank partner, and our bank partner could terminate its relationship with us. We intend to continue to explore additional financial or other solutions to offer to our customers.
This risk is particularly pronounced with restaurants, as each year a meaningful percentage of restaurants go out of business, and can be impacted by inflation and interest rate changes, and other global financial, economic, political, and health events.
This risk is particularly pronounced with restaurants, as each year a meaningful percentage of restaurants go out of business, and can be impacted by inflation and interest rate changes, policy changes and other global financial, economic, political, and health events.
Further, while many of our customers deploy our platform to all of their restaurant locations, some of our customers initially deploy our platform to a subset of locations. We also accommodate select enterprise customers by entering into certain arrangements that do not contain a minimum location commitment.
Further, while many of our customers deploy our platform to all of their locations, some of our customers initially deploy our platform to a subset of locations. We also accommodate select enterprise customers by entering into certain arrangements that do not contain a minimum location commitment.
We, our customers, our partners, and other third parties, including third-party vendors, cloud service providers, and payment processors that we use, obtain and process large amounts of sensitive and personal information, including information related to our customers, their guests, and their transactions.
We, our customers, our partners, and other third parties, including third-party vendors, cloud service providers, and payment processors that we use, obtain and process large amounts of sensitive and personal information, including information related to our customers, their employees, their guests, and their transactions.
The publication of our privacy statements, notices, and other documentation that provide promises and assurances about privacy and security can subject us to potential state and federal action if they are found to be deceptive, unfair, or misrepresentative of our actual practices, which could, individually or in the aggregate, materially and adversely affect our business, financial condition, and results of operations.
The publication of our privacy statements, notices, and other documentation that provide promises and assurances about privacy and security can subject us to potential state and federal action if they are found to be non-compliant, deceptive, unfair, or misrepresentative of our actual practices, which could, individually or in the aggregate, materially and adversely affect our business, financial condition, and results of operations.
These risks and challenges include, but are not limited to, our ability to: • accurately forecast our revenue and plan our operating expenses; • increase the number of and retain existing customers and their guests using our platform; • successfully compete with current and future competitors; • successfully expand our business in existing markets and enter new markets and geographies; • anticipate and respond to macroeconomic changes and changes in the markets in which we operate; • maintain and enhance the value of our reputation and brand; • comply with regulatory requirements in highly regulated markets; • adapt to rapidly evolving trends in the ways customers and their guests interact with technology; • avoid interruptions or disruptions in our service; • develop a scalable, high-performance technology infrastructure that can efficiently and reliably handle significant surges of usage by our customers and their guests as compared to historic levels and increased usage generally, as well as the deployment of new features and services; • maintain, scale, and effectively manage our internal infrastructure systems, such as information strategy and sharing and interconnectivity between systems; • hire, integrate, and retain talented technology, sales, customer service, and other personnel; • effectively manage rapid growth in our personnel and operations; and • effectively manage our costs.
These risks and challenges include, but are not limited to, our ability to: • accurately forecast our revenue and plan our operating expenses; • increase the number of and retain existing customers and their guests using our platform; • successfully compete with current and future competitors; • successfully expand our business in existing markets and enter new markets and geographies; • anticipate and respond to macroeconomic changes and changes in the markets in which we operate; • maintain and enhance the value of our reputation and brand; • comply with regulatory requirements in highly regulated markets; • adapt to rapidly evolving trends in the ways customers and their guests interact with technology; • avoid interruptions or disruptions in our service, including prevention of cyber-attacks or otherwise; • develop a scalable, high-performance technology infrastructure that can efficiently and reliably handle significant surges of usage by our customers and their guests as compared to historic levels and increased usage generally, as well as the deployment of new features and services; • maintain, scale, and effectively manage our internal infrastructure systems, such as information strategy and sharing and interconnectivity between systems; • hire, integrate, and retain talented technology, sales, customer service, and other personnel; • effectively manage rapid growth in our personnel and operations; and • effectively manage our costs.
The company's ability to utilize its federal and state attributes could be limited by ownership changes that may occur in the future. We experience elements of seasonal fluctuations in our financial results, which could cause our stock price to fluctuate . Our business is highly dependent on the behavior patterns of our customers and their guests.
Our ability to utilize our federal and state attributes could be limited by ownership changes that may occur in the future. We experience elements of seasonal fluctuations in our financial results, which could cause our stock price to fluctuate . Our business is highly dependent on the behavior patterns of our customers and their guests.
These factors could include: • restrictions on credit lines to consumers or limitations on the issuance of new credit cards; • uncertainty and volatility in the performance of our customers’ businesses, particularly SMBs; • customers or consumers decreasing spending for value-added services we market and sell; • declining economies and the pace of economic recovery which can change consumer spending behaviors; • low levels of consumer and business confidence typically associated with inflationary or recessionary environments; • high unemployment levels, which may result in decreased spending by consumers; • budgetary concerns in the United States and other countries around the world, which could impact consumer confidence and spending; and • government actions, including the effect of laws and regulations and any related government stimulus.
These factors could include: • restrictions on credit lines to consumers or limitations on the issuance of new credit cards; • uncertainty and volatility in the performance of our customers’ businesses, particularly SMBs; • customers or consumers decreasing spending for value-added services we market and sell; • declining economies and the pace of economic recovery which can change consumer spending behaviors; 32 T able of Contents • low levels of consumer and business confidence typically associated with inflationary or recessionary environments; • high unemployment levels, which may result in decreased spending by consumers; • budgetary concerns in the United States and other countries around the world, which could impact consumer confidence and spending; and • government actions, including the effect of laws and regulations and any related government stimulus.
We also rely on third parties to provide some support services, and our ability to provide effective support is partially dependent on our ability to attract and retain qualified and capable third-party service providers. As we continue to grow our business and improve our offerings, we will face challenges related to providing high-quality support services at scale.
We also rely on third parties to provide some support services, and our ability to provide effective support is partially dependent on our ability to attract and retain qualified and capable third-party service providers. As we continue to grow our business and improve our offerings, we may face challenges related to providing high-quality support services at scale.
These evolving regulations and laws may cover taxation, tariffs, user privacy, data protection, pricing and commissions, content, copyrights, distribution, social media marketing, advertising practices, sweepstakes, mobile, electronic contracts and other communications, consumer protection, and the characteristics and quality of our services.
These evolving regulations and laws may cover taxation, tariffs, user privacy, data protection, pricing and commissions, content, copyrights, trademarks, patents, distribution, social media marketing, advertising practices, sweepstakes, mobile, electronic contracts and other communications, consumer protection, and the characteristics and quality of our services.
We previously identified material weaknesses in our internal controls over financial reporting and may identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, which may result in material misstatements of our consolidated financial statements or cause us to fail to meet our periodic reporting obligations.
We previously identified material weaknesses in our internal control over financial reporting and may identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal control, which may result in material misstatements of our consolidated financial statements or cause us to fail to meet our periodic reporting obligations.
Conducting international operations subjects us to risks that we have not generally faced in the United States, including but not limited to: • managing geographically separate organizations, systems, and facilities; • challenges caused by language, cultural, and ethical differences; • difficulties in staffing and managing foreign operations, including employment laws and regulations; • presence of more established competitors and/or local competitors favored by local business practices; • compliance challenges related to the complexity of multiple, conflicting, and changing governmental laws and regulations, including data privacy, employment, tax, anti-money laundering, and anti-bribery laws and regulations and sanction regimes, including but not limited to, additional exposure to GDPR, rules and programs administered by the Treasury Department’s Office of Foreign Assets Control, or OFAC, domestic and international anti-corruption laws, such as the U.S.
Conducting international operations subjects us to risks that we have not generally faced in the United States, including but not limited to: • managing geographically separate organizations, systems, and facilities; • challenges caused by language and cultural differences; • difficulties in staffing and managing foreign operations, including employment laws and regulations; • presence of more established competitors and/or local competitors favored by local business practices; 24 T able of Contents • compliance challenges related to the complexity of multiple, conflicting, and changing governmental laws and regulations, including data privacy, employment, tax, anti-money laundering, and anti-bribery laws and regulations and sanction regimes, including but not limited to, additional exposure to GDPR, rules and programs administered by the Treasury Department’s Office of Foreign Assets Control, or OFAC, domestic and international anti-corruption laws, such as the U.S.
We experience seasonality in our financial technology revenue which is largely driven by the level of GPV processed through our platform. For example, our average customers typically have greater sales during the warmer months, though this seasonal effect varies regionally. As a result, our financial technology revenue per location has historically been stronger in the second and third quarters.
We experience seasonality in our financial technology revenue which is largely driven by the level of payment volume processed through our platform. For example, our average customers typically have greater sales during the warmer months, though this seasonal effect varies regionally. As a result, our financial technology revenue per location has historically been stronger in the second and third quarters.
If these provisions were found to be unenforceable, in whole or in part, or specific claims are required to be exempted, we could experience an increase in our costs to litigate disputes and in the time involved in resolving such disputes, and we could face increased exposure to potentially costly lawsuits, each of which could adversely affect our business, financial condition, and results of operations. 28 Table of Contents We have closed multiple acquisitions and may acquire or invest in other companies or technologies in the future, which could divert management’s attention, fail to meet our expectations, result in additional dilution to our stockholders, increase expenses, disrupt our operations, or harm our operating results.
If these provisions were found to be unenforceable, in whole or in part, or specific claims are required to be exempted, we could experience an increase in our costs to litigate disputes and in the time involved in resolving such disputes, and we could face increased exposure to potentially costly lawsuits, each of which could adversely affect our business, financial condition, and results of operations. 26 T able of Contents We have closed multiple acquisitions and may acquire or invest in other companies or technologies in the future, which could divert management’s attention, fail to meet our expectations, result in additional dilution to our stockholders, increase expenses, disrupt our operations, or harm our operating results.
In addition, in the future, it is possible that foreign government entities in jurisdictions in which we seek to expand our business may seek to or may even attempt to block access to our mobile applications and website.
In addition, in the future, it is possible that foreign government entities in jurisdictions in which we have expanded or seek to expand our business may seek to or may even attempt to block access to our mobile applications and website.
These decisions may not be consistent with the expectations of investors and may not produce the long-term benefits that we expect, in which case our business may be materially and adversely affected. 35 Table of Contents Unfavorable conditions in the restaurant industry or the global economy could limit our ability to grow our business and materially impact our financial performance.
These decisions may not be consistent with the expectations of investors and may not produce the long-term benefits that we expect, in which case our business may be materially and adversely affected. Unfavorable conditions in the restaurant industry or the global economy could limit our ability to grow our business and materially impact our financial performance.
While we have implemented various measures intended to anticipate, identify, and address the risk of these types of activities, these measures may not adequately address or prevent all illegal or improper activities by these parties from occurring and such conduct could expose us to liability, including through litigation, or adversely affect our brand or reputation. 47 Table of Contents We are subject to extensive and complex rules and regulations, licensing, and examination by various federal, state and local government authorities and government agencies, and a failure to comply with the laws and regulations applicable to us could have a material adverse effect on our business.
While we have implemented various measures intended to anticipate, identify, and address the risk of these types of activities, these measures may not adequately address or prevent all illegal or improper activities by these parties from occurring and such conduct could expose us to liability, including through litigation, or adversely affect our brand or reputation. 42 T able of Contents We are subject to extensive and complex rules and regulations, licensing, and examination by various federal, state and local government authorities and government agencies, and a failure to comply with the laws and regulations applicable to us could have a material adverse effect on our business.
If we cannot source capital or partner with financial institutions to fund financial solutions for our customers, we might have to reduce the availability of these services, or cease offering them altogether. 36 Table of Contents Toast Capital’s bank partner offers qualified Toast customers working capital loans in accordance with credit policies established by our bank partner.
If we cannot source capital or partner with financial institutions to fund financial solutions for our customers, we might have to reduce the availability of these services, or cease offering them altogether. Toast Capital’s bank partner offers qualified Toast customers working capital loans in accordance with credit policies established by our bank partner.
Additionally, various sources of supply-chain risk, including strikes or shutdowns at delivery ports or loss of or damage to our products while they are in transit or storage, intellectual property theft, losses due to tampering, third-party vendor issues with quality or sourcing control, failure by our suppliers to comply with applicable laws and regulation, potential tariffs, including those applicable to our relationships with vendors in China, or other trade restrictions, or other similar problems could limit or delay the supply of our products, or harm our reputation.
Additionally, various sources of supply-chain risk, including strikes or shutdowns at delivery ports or loss of or damage to our products while they are in transit or storage, intellectual property theft, losses due to tampering, third-party vendor issues with quality or sourcing control, failure by our suppliers to comply with applicable laws and regulation, existing and potential tariffs and sanctions, including those applicable to our relationships with vendors in China, or other trade restrictions, or other similar problems could increase our cost of production, limit or delay the supply of our products, or harm our reputation.
We are also subject to economic and trade sanctions programs, including those administered by OFAC, which prohibit or restrict transactions to or from or dealings with specified countries, their governments, and in certain circumstances, their nationals, and with individuals and entities that are specially-designated nationals of those countries, narcotics traffickers, terrorists or terrorist organizations, and other sanctioned persons and entities. 52 Table of Contents We may in the future operate our business in foreign countries where companies often engage in business practices that are prohibited by U.S. and other regulations applicable to us.
We are also subject to economic and trade sanctions programs, including those administered by OFAC, which prohibit or restrict transactions to or from or dealings with specified countries, their governments, and in certain circumstances, their nationals, and with individuals and entities that are specially-designated nationals of those countries, narcotics traffickers, terrorists or terrorist organizations, and other sanctioned persons and entities. 47 T able of Contents We may in the future operate our business in foreign countries where companies often engage in business practices that are prohibited by U.S. and other regulations applicable to us.
The Payment Network Rules require us to also comply with the Payment Card Industry Data Security Standard, or the Security Standard, which is a set of rules and standards designed to ensure that all companies that process, store, or transmit payment card information maintain a secure environment to protect cardholder data. 42 Table of Contents If we fail to, or are alleged to have failed to, comply with the Payment Network Rules or the Security Standard, we may be subject to fines, penalties, or restrictions, including, but not limited to, higher transaction fees that may be levied by the Payment Networks for failure to comply with the Payment Network Rules.
The Payment Network Rules require us to also comply with the Payment Card Industry Data Security Standard, or the Security Standard, which is a set of rules and standards designed to ensure that all companies that process, store, or transmit payment card information maintain a secure environment to protect cardholder data. 37 T able of Contents If we fail to, or are alleged to have failed to, comply with the Payment Network Rules or the Security Standard, we may be subject to fines, penalties, or restrictions, including, but not limited to, higher transaction fees that may be levied by the Payment Networks for failure to comply with the Payment Network Rules.
We may also be subject to the payment of damages in situations where we agreed to provide indemnification to our bank partner, as well as fines and penalties assessed by state and federal regulatory agencies. 51 Table of Contents Our involvement in our payroll and transaction processing services could be subject to federal and state money service business or money transmitter registration and licensing requirements that could result in substantial compliance costs, and our business could be adversely affected if we fail to predict how a particular law or regulation should be applied to our business.
We may also be subject to the payment of damages in situations where we agreed to provide indemnification to our bank partner, as well as fines and penalties assessed by state and federal regulatory agencies. 46 T able of Contents Our involvement in our payroll and transaction processing services could be subject to federal and state money service business or money transmitter registration and licensing requirements that could result in substantial compliance costs, and our business could be adversely affected if we fail to predict how a particular law or regulation should be applied to our business.
Furthermore, as the market for our platform matures, or as competitors introduce new products or services that compete with ours, we may be unable to attract new customers at the same price or based on the same pricing and packaging models that we have used historically.
Furthermore, as the market for our platform matures, or as competitors introduce new products or services that compete with ours, or change their pricing strategy, we may be unable to attract new customers at the same price or based on the same pricing and packaging models that we have used historically.
If our assumptions regarding these risks and uncertainties, which we use to plan and operate our business, are incorrect or change, or if we do not address these risks successfully, our results of operations could differ materially from our expectations and our business, financial condition, and results of operations could be adversely affected. 24 Table of Contents Our platform includes our payment services, and our ability to attract new customers and retain existing customers depends in part on our ability to offer payment processing services with the desired functionality at an attractive price.
If our assumptions regarding these risks and uncertainties, which we use to plan and operate our business, are incorrect or change, or if we do not address these risks successfully, our results of operations could differ materially from our expectations and our business, financial condition, and results of operations could be adversely affected. 20 T able of Contents Our platform includes our payment services, and our ability to attract new customers and retain existing customers depends in part on our ability to offer payment processing services with the desired functionality at an attractive price.
Any failure, or perceived failure, by us to comply with any of these laws or regulations could result in damage to our reputation and brand, a loss in business, and proceedings or actions against us by governmental entities or others, which could adversely affect our business, financial condition, and results of operations. 56 Table of Contents Risks Related to Our Intellectual Property If we fail to adequately protect our intellectual property rights, our competitive position could be impaired and we may lose valuable assets or revenue and become subject to costly litigation to protect our rights.
Any failure, or perceived failure, by us to comply with any of these laws or regulations could result in damage to our reputation and brand, a loss in business, and proceedings or actions against us by governmental entities or others, which could adversely affect our business, financial condition, and results of operations. 51 T able of Contents Risks Related to Our Intellectual Property If we fail to adequately protect our intellectual property rights, our competitive position could be impaired and we may lose valuable assets or revenue and become subject to costly litigation to protect our rights.
Accordingly, investors must rely on sales of their Class A common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investments. 63 Table of Contents Our third amended and restated bylaws designate certain specified courts as the sole and exclusive forums for certain disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees.
Accordingly, investors must rely on sales of their Class A common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investments. 58 T able of Contents Our third amended and restated bylaws designate certain specified courts as the sole and exclusive forums for certain disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees.
We also may be subject to similar review by state agencies that regulate our partner financial institutions. 49 Table of Contents The Interagency Guidance on Third-Party Relationships: Risk Management, jointly adopted by the federal banking regulators in 2023, provides a framework for clarifying the supervisory expectation on financial institutions that engage in financial services (such as lending activities) through third parties.
We also may be subject to similar review by state agencies that regulate our partner financial institutions. The Interagency Guidance on Third-Party Relationships: Risk Management, jointly adopted by the federal banking regulators in 2023, provides a framework for clarifying the supervisory expectation on financial institutions that engage in financial services (such as lending activities) through third parties.
The U.S. Department of Treasury can issue regulations and provide interpretive guidance, which could affect our compliance with the law and potentially impact our operational results when issued.
Department of Treasury can issue regulations and provide interpretive guidance, which could affect our compliance with the law and potentially impact our operational results when issued.
If we are unsuccessful in closing sales after expending significant funds and management resources, or we experience delays or incur greater than anticipated costs, our business, financial condition, and results of operations could be adversely affected. 41 Table of Contents Risks Related to Our Partners and Other Third Parties We rely on third-party payment processors to facilitate payments made by guests, payments made to customers, and payments made on behalf of customers, and if we cannot manage risks related to our relationships with our current or future third-party payment processors, our business, financial condition, and results of operations could be adversely affected.
If we are unsuccessful in closing sales after expending significant funds and management resources, or we experience delays or incur greater than anticipated costs, our business, financial condition, and results of operations could be adversely affected. 36 T able of Contents Risks Related to Our Partners and Other Third Parties We rely on third-party payment processors to facilitate payments made by guests, payments made to customers, and payments made on behalf of customers, and if we cannot manage risks related to our relationships with our current or future third-party payment processors, our business, financial condition, and results of operations could be adversely affected.
We launched our operations in 2013, have grown significantly in recent periods, and have a limited operating history, particularly at our current scale. In addition, we operate in an evolving industry and have frequently expanded our platform features and services and changed our pricing methodologies.
We launched our operations in 2013, have grown significantly in recent periods, and have a limited operating history, particularly at our current scale. In addition, we operate in an evolving industry and have frequently expanded our platform features and services and, from time to time, have changed our pricing methodologies.
This amount may vary, depending on, among other things, the success of our customers’ restaurant locations, the proportion of our customers’ payment volumes processed through our platform, ticket size, consumer spending levels in general, and overall economic conditions.
This amount may vary, depending on, among other things, the success of our customers’ businesses, the proportion of our customers’ payment volumes processed through our platform, ticket size, consumer spending levels in general, and overall economic conditions.
Further, our business and/or network interruption insurance may not be sufficient to cover all of our losses that may result from interruptions in our service as a result of system failures and similar events. From time to time, we may experience limited periods of server downtime due to server failure or other technical difficulties.
Further, our business and/or network interruption insurance may not be sufficient to cover all of our losses that may result from interruptions in our service as a result of system failures and similar events. 29 T able of Contents From time to time, we may experience limited periods of server downtime due to server failure or other technical difficulties.
We have published environmental, social, and governance, or ESG, initiatives, goals, and commitments. These goals, commitments, and targets reflect our current plans and aspirations and are not guarantees that we will be able to achieve them. We are also subject to the evolving and divergent views on ESG matters by different stakeholders including investors, employees, and regulatory agencies.
We have published ESG initiatives, goals, and commitments. These goals, commitments, and targets reflect our current plans and aspirations and are not guarantees that we will be able to achieve them. We are also subject to the evolving and divergent views on ESG matters by different stakeholders including investors, employees, and regulatory agencies.
As with the other laws and regulations noted above, these laws and regulations may change or be interpreted and applied differently over time and from jurisdiction to jurisdiction, and it is possible they will be interpreted and applied in ways that will materially and adversely affect our business. 53 Table of Contents As noted above, many states in which we operate have laws that protect the privacy and security of sensitive and personal information.
As with the other laws and regulations noted above, these laws and regulations may change or be interpreted and applied differently over time and from jurisdiction to jurisdiction, and it is possible they will be interpreted and applied in ways that will materially and adversely affect our business. 48 T able of Contents As noted above, many states in which we operate have laws that protect the privacy and security of sensitive and personal information.
Any litigation in international jurisdictions, including in China or other parts of Asia, may be protracted and result in substantial costs and diversion of resources and management attention. 45 Table of Contents We primarily rely on Amazon Web Services to deliver our services to customers on our platform, and any disruption of or interference with our use of Amazon Web Services could adversely affect our business, financial condition, and results of operations.
Any litigation in international jurisdictions, including in China or other parts of Asia, may be protracted and result in substantial costs and diversion of resources and management attention. 40 T able of Contents We primarily rely on Amazon Web Services to deliver our services to customers on our platform, and any disruption of or interference with our use of Amazon Web Services could adversely affect our business, financial condition, and results of operations.
In addition, any such action, particularly to the extent we were found to have engaged in violations or otherwise liable for damages, would damage our reputation and adversely affect our business, financial condition, and results of operations. 54 Table of Contents We cannot yet fully determine the impact these or future laws, rules, regulations, and industry standards may have on our business or operations.
In addition, any such action, particularly to the extent we were found to have engaged in violations or otherwise liable for damages, would damage our reputation and adversely affect our business, financial condition, and results of operations. 49 T able of Contents We cannot yet fully determine the impact these or future laws, rules, regulations, and industry standards may have on our business or operations.
Reporting obligations as a public company place a considerable strain on our financial and management systems, processes, and controls, as well as on our personnel. 64 Table of Contents We are also required, pursuant to Section 404 of the Sarbanes-Oxley Act, to furnish a report on the effectiveness of our internal control over financial reporting as of the end of each fiscal year, which requires us to document and test our internal control over financial reporting.
Reporting obligations as a public company place a considerable strain on our financial and management systems, processes, and controls, as well as on our personnel. 59 T able of Contents We are also required, pursuant to Section 404 of the Sarbanes-Oxley Act, to furnish a report on the effectiveness of our internal control over financial reporting as of the end of each fiscal year, which requires us to document and test our internal control over financial reporting.
Under such announced and implemented policies, the dual-class structure of our common stock would make us ineligible for inclusion in certain indices and, as a result, mutual funds, exchange-traded funds and other investment vehicles that attempt to passively track those indices would not invest in our Class A common stock.
Under such restrictions, the dual-class structure of our common stock would make us ineligible for inclusion in certain indices and, as a result, mutual funds, exchange-traded funds and other investment vehicles that attempt to passively track those indices would not invest in our Class A common stock.
We cannot guarantee that we have incorporated open-source software in our software in a manner that will not subject us to liability or in a manner that is consistent with our current policies and procedures. 59 Table of Contents Risks Related to Our Class A Common Stock The trading price of our Class A common stock may be volatile, and you could lose all or part of your investment.
We cannot guarantee that we have incorporated open-source software in our software in a manner that will not subject us to liability or in a manner that is consistent with our current policies and procedures. 54 T able of Contents Risks Related to Our Class A Common Stock The trading price of our Class A common stock may be volatile, and you could lose all or part of your investment.
The termination of our registrations, or any changes in the Payment Network Rules that would impair our registrations, could require us to stop providing payment facilitation services relating to the affected Payment Network, which would adversely affect our business, financial condition, or results of operations. 43 Table of Contents The Payment Network Rules, including rules related to the assessment of interchange and other fees, may be influenced by our competitors.
The termination of our registrations, or any changes in the Payment Network Rules that would impair our registrations, could require us to stop providing payment facilitation services relating to the affected Payment Network, which would adversely affect our business, financial condition, or results of operations. 38 T able of Contents The Payment Network Rules, including rules related to the assessment of interchange and other fees, may be influenced by our competitors.
As a result, it is possible that one or more of the persons or entities holding our Class B common stock could gain significant voting control as other holders of Class B common stock sell or otherwise convert their shares into Class A common stock. 61 Table of Contents We cannot predict the effect our dual-class structure may have on the market price of our Class A common stock.
As a result, it is possible that one or more of the persons or entities holding our Class B common stock could gain significant voting control as other holders of Class B common stock sell or otherwise convert their shares into Class A common stock. 56 T able of Contents We cannot predict the effect our dual-class structure may have on the market price of our Class A common stock.
Additionally, if customers try to pass along increased operating costs by raising prices for their guests, order volume may decline, which we expect would adversely affect our financial condition and results of operations. 44 Table of Contents We depend upon third parties to manufacture our products and to supply key components necessary to manufacture our products.
Additionally, if customers try to pass along increased operating costs by raising prices for their guests, order volume may decline, which we expect would adversely affect our financial condition and results of operations. 39 T able of Contents We depend upon third parties to manufacture our products and to supply key components necessary to manufacture our products.
In addition, these incidents can originate on our vendors’ websites or systems, which can then be leveraged to access our website or systems, further preventing our ability to successfully identify and mitigate the attack.
These incidents can also originate on our vendors’ websites or systems, which can then be leveraged to access our website or systems, further preventing our ability to successfully identify and mitigate the attack.
Any of these events could adversely affect our ability to increase our revenue. 46 Table of Contents Our business is subject to a variety of U.S. and international laws and regulations, many of which are unsettled and still developing, and our or our customers’ failure to comply with such laws and regulations could subject us to claims or otherwise adversely affect our business, financial condition, or results of operations.
Any of these events could adversely affect our ability to increase our revenue. 41 T able of Contents Our business is subject to a variety of U.S. and international laws and regulations, many of which are unsettled and still developing, and our or our customers’ failure to comply with such laws and regulations could subject us to claims or otherwise adversely affect our business, financial condition, or results of operations.
If we experience significant periods of service downtime in the future, we may be subject to claims by our customers against these service level commitments. These events have resulted in losses in revenue, though such losses have not been material to date.
If we experience significant periods of service downtime in the future, we may be subject to claims by our customers against these service level commitments. These events have resulted in losses in revenue, though such losses have not been material to date. System failures in the future could result in significant losses of revenue.
It is not clear how existing laws governing issues such as property ownership, sales, use, and other taxes, and personal privacy apply to the Internet and e-commerce.
It is not clear how existing laws governing issues such as property ownership, sales, use, and other taxes, and privacy apply to the Internet, e-commerce, and other new technologies.
Any of these results could harm our business, financial condition, and results of operations. 58 Table of Contents Our platform makes use of open-source software components, and a failure to comply with the terms of the underlying open-source software licenses could negatively affect our ability to sell our products and subject us to possible litigation.
Any of these results could harm our business, financial condition, and results of operations. 53 T able of Contents Our platform makes use of open-source software components, and a failure to comply with the terms of the underlying open-source software licenses could negatively affect our ability to sell our products and subject us to possible litigation.
Further, these agreements do not prevent our competitors from independently developing technologies that are substantially equivalent or superior to our products. 57 Table of Contents In order to protect our intellectual property rights, we may be required to spend significant resources to monitor and protect these rights.
Further, these agreements do not prevent our competitors from independently developing technologies that are substantially equivalent or superior to our products. 52 T able of Contents In order to protect our intellectual property rights, we may be required to spend significant resources to monitor and protect these rights.
For example, Washington state’s My Health My Data Act will come into effect in 2024 and will require regulated businesses to apply specific protections for consumer health data, which is defined broadly to include certain data categories that are not directly related to health, such as location information.
For example, Washington state’s My Health My Data Act came into effect in 2024 and requires regulated businesses to apply specific protections for consumer health data, which is defined broadly to include certain data categories that are not directly related to health, such as location information.
A finding that we failed to comply with applicable federal, state, and local law could result in actions that make our platform less convenient and attractive to, and potentially unsuitable for, customers and their guests or that have other materially adverse effects on our operations or financial condition.
A finding that we failed to comply with applicable federal, state, and local law could result in actions that make our platform less convenient and attractive to, and potentially unsuitable for, customers and their guests or that have other materially adverse effects on our operations or financial condition. Further, in June 2024, the U.S.
The cost of obtaining and maintaining licenses can be material. 48 Table of Contents Our subsidiary, Toast Insurance Services, Inc., and certain personnel hold insurance related licenses.
The cost of obtaining and maintaining licenses can be material. Our subsidiary, Toast Insurance Services, Inc., and certain personnel hold insurance related licenses.
Our senior management team has limited experience managing a public company, and regulatory compliance obligations may divert its attention from the day-to-day management of our business. The individuals who now constitute our senior management team have limited experience managing a publicly-traded company, interacting with public company investors and complying with the increasingly complex laws pertaining to public companies.
Our senior management team has limited experience managing a public company, and regulatory compliance obligations may divert its attention from the day-to-day management of our business. Many members of our senior management team have limited experience managing a publicly-traded company, interacting with public company investors and complying with the increasingly complex laws pertaining to public companies.
If a court or a state or federal enforcement agency were to deem Toast or Toast Capital, rather than our bank partner, the “true lender” for loans facilitated through our platform, and if for this reason (or any other reason) the loans were deemed subject to and in violation of certain state lender licensing and usury laws, we could be subject to fines, damages, injunctive relief (including required modification or discontinuation of our business in certain areas), and other penalties or consequences, and the loans could be rendered void or unenforceable in whole or in part, any of which could have a material adverse effect on our business (directly, or as a result of adverse impact on our relationships with our bank partner). 50 Table of Contents Last, terms of certain loans facilitated through the Toast Capital platform could, or may in the future, be challenged as violating applicable lending regulations.
If a court or a state or federal enforcement agency were to deem Toast or Toast Capital, rather than our bank partner, the “true lender” for loans facilitated through our platform, and if for this reason (or any other reason) the loans were deemed subject to and in violation of certain state lender licensing and usury laws, we could be subject to fines, damages, injunctive relief (including required modification or discontinuation of our business in certain areas), and other penalties or consequences, and the loans could be rendered void or unenforceable in whole or in part, any of which could have a material adverse effect on our business (directly, or as a result of adverse impact on our relationships with our bank partner).
Existing and future laws and regulations, or changes thereto, may impede the growth of the Internet, mobile devices, e-commerce, or other online services, increase the cost of providing online services, require us to change our business practices, or raise compliance costs or other costs of doing business.
Existing and future laws and regulations, or changes thereto, may impede the growth of our business, increase the cost of providing online services, require us to change our business practices, or raise compliance costs or other costs of doing business.
Factors that could cause fluctuations in the trading price of our Class A common stock include, but are not limited to, the following: • actual or anticipated changes or fluctuations in our results of operations; • the financial projections we may provide to the public, any changes in these projections, or our failure to meet these projections; • announcements by us or our competitors of new products or new or terminated significant contracts, commercial relationships, or capital commitments; • industry or financial analyst or investor reaction to our press releases, other public announcements, and filings with the SEC; • rumors and market speculation involving us or other companies in our industry; • price and volume fluctuations in the overall stock market from time to time; • changes in operating performance and stock market valuations of other technology companies generally, or those in our industry in particular; • failure of securities analysts to maintain coverage of us, changes in financial estimates by securities analysts who follow our company, the downgrading of our stock or our industry, or the stock of any of our competitors, the publication of inaccurate or unfavorable research about our business, or our failure to meet these estimates or the expectations of investors; • whether investors or securities analysts view our stock structure unfavorably, particularly our dual-class structure and the significant voting control of our executive officers, directors and their affiliates; • actual or anticipated developments in our business, or our competitors’ businesses, or the competitive landscape generally; • litigation involving us, our industry, or both, or investigations by regulators into our operations or those of our competitors; • actual or perceived privacy or security breaches or other incidents; • developments or disputes concerning our intellectual property rights, our products, or third-party proprietary rights; • announced or completed acquisitions of businesses or technologies by us or our competitors; • new laws or regulations or new interpretations of existing laws or regulations applicable to our business; • changes in accounting standards, policies, guidelines, interpretations, or principles; • any significant changes in our management or our Board; 60 Table of Contents • general economic conditions, such as rising inflation and interest rates, global recessionary conditions, and slow or negative growth of our markets; and • other events or factors, including those resulting from hostilities or wars (such as the Israel-Hamas war and Russia-Ukraine war), incidents of terrorism, natural disasters, public health concerns or epidemics, or responses to these events.
Factors that could cause fluctuations in the trading price of our Class A common stock include, but are not limited to, the following: • actual or anticipated changes or fluctuations in our results of operations; • the financial projections we may provide to the public, any changes in these projections, or our failure to meet these projections; • announcements by us or our competitors of new products or new or terminated significant contracts, commercial relationships, or capital commitments; • industry or financial analyst or investor reaction to our press releases, other public announcements, and filings with the SEC; • our ability to execute on our share repurchase program as planned, including whether we meet internal or external expectations around the timing or price of share repurchases, and any reductions or discontinuances of repurchases thereunder; • rumors and market speculation involving us or other companies in our industry; • price and volume fluctuations in the overall stock market from time to time; • changes in operating performance and stock market valuations of other technology companies generally, or those in our industry in particular; • failure of securities analysts to maintain coverage of us, changes in financial estimates by securities analysts who follow our company, the downgrading of our stock or our industry, or the stock of any of our competitors, the publication of inaccurate or unfavorable research about our business, or our failure to meet these estimates or the expectations of investors; • whether investors or securities analysts view our stock structure unfavorably, particularly our dual-class structure and the significant voting control of our executive officers, directors and their affiliates; • actual or anticipated developments in our business, or our competitors’ businesses, or the competitive landscape generally; • litigation involving us, our industry, or both, or investigations by regulators into our operations or those of our competitors; • actual or perceived privacy or security breaches or other incidents; • developments or disputes concerning our intellectual property rights, our products, or third-party proprietary rights; • announced or completed acquisitions of businesses or technologies by us or our competitors; • new laws or regulations or new interpretations of existing laws or regulations applicable to our business; 55 T able of Contents • changes in accounting standards, policies, guidelines, interpretations, or principles; • any significant changes in our management or our Board; • general economic conditions, such as fluctuating inflation and interest rates, global recessionary conditions, and slow or negative growth of our markets; and • other events or factors, including those resulting from political events such as the presidential election and transition, hostilities or wars, incidents of terrorism, natural disasters, public health concerns or epidemics, or responses to these events.
Selling to and retaining SMBs can be more difficult than retaining enterprise customers, as SMBs often have higher rates of business failure and more limited resources, may have decisions related to the choice of payment processor dictated by their affiliated parent entity and are more readily able to change their payment processors than larger organizations. 25 Table of Contents SMBs are also typically more susceptible to the adverse effects of economic fluctuations, including those caused by fluctuating inflation levels and interest rates.
Selling to and retaining SMBs can be more difficult than retaining enterprise customers, as SMBs often have higher rates of business failure and more limited resources, may have decisions related to the choice of payment processor dictated by their affiliated parent entity and are more readily able to change their payment processors than larger organizations. 21 T able of Contents SMBs are also typically more susceptible to the adverse effects of macroeconomic conditions, including those caused by fluctuating inflation levels and interest rates and policy changes.
We do not currently have similar partnerships with other financial institutions and are reliant on our bank partner to support this program.
We do not currently have partnerships with other financial institutions for such loans and are reliant on our bank partner to support this program.
If we fail to compete successfully, our business will be harmed. Potential changes in competitive landscape, including disintermediation from other participants in the payments chain, could harm our business.
If we fail to compete successfully, our business will be harmed. 35 T able of Contents Potential changes in competitive landscape, including disintermediation from other participants in the payments chain, could harm our business.
A deterioration in general economic conditions (including distress in financial markets, rising inflation and interest rates, and turmoil in specific economies around the world) may adversely affect our financial performance by causing a reduction in locations through restaurant closures or a reduction in gross payment volume.
A deterioration in general economic conditions (including distress in financial markets, fluctuations in inflation and interest rates, policy changes or changes relating to tariffs, and turmoil in specific economies around the world) may adversely affect our financial performance by causing a reduction in locations through restaurant closures or a reduction in gross payment volume.
We do not intend to pay dividends for the foreseeable future. We have never declared or paid cash dividends on our capital stock and do not intend to pay any cash dividends in the foreseeable future.
We do not intend to pay dividends for the foreseeable future. We have never declared or paid cash dividends on our capital stock and do not intend to pay any cash dividends in the foreseeable future. We do not anticipate declaring or paying any dividends to holders of our capital stock in the foreseeable future.
As a result, seasonality may cause fluctuations in our financial results, and other trends that develop may similarly impact our results of operations. 38 Table of Contents Our failure or perceived failure to achieve our ESG goals or maintain ESG practices that meet evolving stakeholder expectations could adversely affect us.
As a result, seasonality may cause fluctuations in our financial results, and other trends that develop may similarly impact our results of operations. 33 T able of Contents Our failure or perceived failure to achieve our environmental, social, and governance, or ESG, goals or maintain ESG practices that meet evolving stakeholder expectations could adversely affect us.
As a result, even though the number of customers using our platform has grown steadily in recent years, there can be no assurance that we will be able to retain these customers or any new customers that may enter into subscriptions.
Customers are not obligated to, and may not, renew their subscriptions after their existing subscriptions expire. As a result, even though the number of customers using our platform has grown steadily in recent years, there can be no assurance that we will be able to retain these customers or any new customers that may enter into subscriptions.
We may not be able to sustain our recent revenue growth in future periods. We have grown steadily over the last several years. For example, in the years ended December 31, 2023 and 2022, our revenue was $3,865 million and $2,731 million, respectively, representing a 42% growth rate.
We may not be able to sustain our recent revenue growth in future periods. We have grown steadily over the last several years. For example, in the fiscal years ended December 31, 2024 and 2023, our revenue was $4,960 million and $3,865 million, respectively, representing a 28% growth rate.
We must also comply with laws related to lending, loan brokering, loan servicing, debt collection, on-demand pay, insurance, money laundering, money transfers, and advertising, as well as a number of domestic and international privacy and information security laws, including the CCPA and the GDPR. Noncompliance with these privacy and security laws could result in significant penalties and remediation obligations.
We must also comply with laws related to lending, loan brokering, loan servicing, debt collection, on-demand pay, insurance, money laundering, money transfers, and advertising, as well as a number of domestic and international privacy and information security laws, including the CCPA and the GDPR.
As of December 31, 2023, we had accumulated $720 million and $773 million of federal and state net operating loss carryforwards, or NOLs, respectively, available to reduce future taxable income.
As of December 31, 2024, we had accumulated $768 million and $837 million of federal and state net operating loss carryforwards, or NOLs, respectively, available to reduce future taxable income.
Of the federal NOLs, $635 million have an indefinite carryforward period but may not offset more than 80% of current taxable income annually in accordance with the Tax Cuts and Jobs Act of 2017, and $85 million will expire at various dates through 2037. Of the state NOLs, the majority will begin to expire in 2034.
Of the federal NOLs, $683 million have an indefinite carryforward period but may not offset more than 80% of current taxable income annually, and $85 million will expire at various dates through 2037. Of the state NOLs, the majority will begin to expire in 2034.
The CCPA, as amended, requires companies covered by the legislation to provide disclosures to California consumers and afford such consumers rights with respect to their personal information, including the right to request deletion of their personal information, the right to receive the personal information on record for them, the right to know what categories of personal information generally are maintained about them, as well as the right to opt-out of certain sales of personal information and sharing personal information for certain advertising purposes.
For example, the CCPA was amended by the California Privacy Rights Act, which went into effect in January 2023, significantly amended the CCPA and requires companies covered by the legislation to provide disclosures to California consumers and afford such consumers rights with respect to their personal information, including the right to request deletion of their personal information, the right to receive the personal information on record for them, the right to know what categories of personal information generally are maintained about them, as well as the right to opt-out of certain sales of personal information and sharing personal information for certain advertising purposes.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeIn general, we seek to address cybersecurity risks through a cross-functional approach that is designed to preserve the confidentiality, security and availability of the information that we collect and store. 66 Table of Contents Governance Related to Cybersecurity Risks Our Board holds oversight responsibility over our strategy and risk management, including risks related to cybersecurity threats.
Biggest changeOur cybersecurity program is informed by industry standards, including the National Institute of Standards and Technology, or NIST, Cybersecurity Framework. In general, we seek to address cybersecurity risks through a cross-functional approach that is designed to preserve the confidentiality, security and availability of the information that we collect and store.
Our CISO also oversees the incident response team and is responsible for updating our Board on any cybersecurity incidents, including the mitigation and remediation of these incidents, should they occur. As discussed within “Item 1A, Risk Factors”, we rely on service providers to process sensitive business information.
Our CISO also oversees the cybersecurity incident response team and is responsible for updating our Board on any cybersecurity incidents, including the mitigation and remediation of these incidents, should they occur. As discussed within “Item 1A, Risk Factors”, we rely on service providers to process sensitive business information.
Cybersecurity is incorporated into our business strategy as cybersecurity risks may have a negative impact on our business as outlined within “Item 1A, Risk Factors.” Although risks from cybersecurity threats have to date not materially affected us, our business strategy, results of operations or financial condition, we have, from time to time, experienced threats to and security incidents of our and our third-party vendors’ data and systems.
Cybersecurity is incorporated into our overall business strategy as cybersecurity risks may have a negative impact on our business as outlined within “Item 1A, Risk Factors.” Although risks from cybersecurity threats have to date not materially affected us, our business strategy, results of operations or financial condition, we have, from time to time, experienced threats to and security incidents of our and our third-party vendors’ data and systems.
Item 1C. Cybersecurity We recognize the importance of managing cyber risks that we face and have established processes as part of our enterprise risk management, or ERM, program to identify, assess, and manage risks associated with cybersecurity. Our Board retains oversight of our cybersecurity risk management. Our cybersecurity program is informed by industry standards.
Item 1C. Cybersecurity We recognize the importance of managing cyber risks that we face and have established processes as part of our overall enterprise risk management, or ERM, program to identify, assess, and manage risks associated with cybersecurity. Our Board retains oversight of our cybersecurity risk management.
The chief compliance officer reports on the ERM process to the Audit Committee of our Board regularly. In addition, we have established a working council, or our Enterprise Risk and Compliance Committee, that meets regularly to review and report on the ERM framework to senior leadership.
In addition, we have established a management committee, or our Enterprise Risk and Compliance Committee, that meets regularly to review and report on the ERM framework to senior leadership.
For more information, please see “Item 1A, Risk Factors.” 67 Table of Contents
For more information, please see “Item 1A, Risk Factors.”
Through our cybersecurity program, we have developed response and recovery processes and procedures designed to address potential adverse impacts to the company should a cyber event or incident occur. We have implemented a process for employees to complete security and awareness training annually.
Through our cybersecurity program, we have developed prevention, response and recovery processes and procedures designed to address potential adverse impacts to our company should a cyber event or incident occur. We have implemented security and awareness training which is required for all employees during onboarding and annually thereafter, and we conduct regular phishing simulations.
We have established an incident response process to assess, respond, and report in the event that a cybersecurity incident is detected. Management has assembled a committee to assess the materiality of the impact of identified cybersecurity incidents on our business and determine any disclosure obligations arising from such incidents.
We have established an incident response process to assess, respond, and report in the event that a cybersecurity incident is detected. Management has also assembled a committee and an escalation protocol in connection with evaluating cybersecurity incidents for any potential disclosure obligations arising from such incidents.
Under the oversight of the Audit Committee, we have implemented an ERM framework that includes processes for identifying, assessing, and responding to cyber risk exposures. The enterprise risk management process is led by our chief compliance officer, where team members are responsible for working with cross-functional counterparts at the Company to assess risks across designated verticals, including cybersecurity.
The enterprise risk management process is led by our chief compliance officer, where team members are responsible for working with cross-functional leadership at our Company to assess risks across designated verticals, including cybersecurity. The chief compliance officer reports on the ERM process to the Audit Committee of our Board regularly.
Management reports cybersecurity risks to the Enterprise Risk and Compliance Committee in accordance with the risk management program and to our Board’s Audit Committee in an effort to keep members of the Audit Committee apprised of the rapidly evolving cyber threat landscape and to enable the assessment of the effectiveness of our overall cybersecurity and compliance programs.
Management reports cybersecurity risks to the Enterprise Risk and Compliance Committee in accordance with the risk management program and to our Board’s Audit Committee in an effort to keep our Board apprised of the rapidly evolving cyber threat landscape and to enable the assessment of the effectiveness of our overall cybersecurity and compliance programs. 61 T able of Contents Cyber Risk Management and Strategy Processes to identify, assess, and manage risks presented by cybersecurity threats are integrated into our overall ERM program and are informed by industry cybersecurity standards, including the NIST Cybersecurity Framework.
Cyber Risk Management and Strategy Processes to identify, assess, and manage risks presented by cybersecurity threats are integrated into our overall ERM program and are informed by industry cybersecurity standards. Our CISO, with support from the information security team, leads a risk assessment process to regularly evaluate cybersecurity risks. This process is also supported by periodic security testing and monitoring.
Our CISO, in collaboration with the team responsible for the ERM program and the information security team, conducts a risk assessment process to regularly evaluate, monitor, manage, and mitigate cybersecurity risks. This process is also supported by periodic security testing and monitoring.
Added
Governance Related to Cybersecurity Risks Our Board holds oversight responsibility over our strategy and risk management, including risks related to cybersecurity threats. Under the oversight of the Audit Committee, we have implemented an ERM framework that includes processes for identifying, assessing, and responding to cyber risk exposures.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe new lease commenced on December 1, 2023, with its term expiring on June 30, 2028, unless earlier terminated pursuant any provision therein. We use our corporate headquarters for administration, sales and marketing, technology and development and professional services. We also lease additional offices in North America, Europe and Asia.
Biggest changeItem 2. Properties Our corporate headquarters is located in Boston, Massachusetts, pursuant to an operating lease for approximately 102,000 square feet of office facilities that expires on June 30, 2028, unless earlier terminated pursuant any provision therein. We use our corporate headquarters for administration, sales and marketing, technology and development and professional services.
We believe that these facilities are generally suitable to meet our current needs. We intend to expand our facilities or add new facilities as we enter new geographic markets, and we believe that suitable additional or alternative space will be available as needed to accommodate any such growth.
We also lease additional offices in North America, Europe and Asia. We believe that these facilities are generally suitable to meet our current needs. We intend to expand our facilities or add new facilities as we enter new geographic markets, and we believe that suitable additional or alternative space will be available as needed to accommodate any such growth.
Removed
Item 2. Properties Our corporate headquarters is located in Boston, Massachusetts, pursuant to an operating lease, a portion of which was terminated as of June 2023 and a portion of which expires in December 2024. In the second half of 2023, we entered into a new lease agreement to relocate our corporate headquarters to 333 Summer Street, Boston Massachusetts 02210.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeAny future determination regarding the declaration and payment of dividends will be at the discretion of our Board and will depend on then-existing conditions, including our financial condition, operating results, contractual restrictions, capital requirements, business prospects, and other factors our Board may deem relevant. 68 Table of Contents Performance Graph This performance graph shall not be deemed “soliciting material” or to be “filed” with the SEC for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any filing of Toast, Inc. under the Securities Act, or the Exchange Act.
Biggest changeAny future determination regarding the declaration and payment of dividends will be at the discretion of our Board and will depend on then-existing conditions, including our financial condition, operating results, contractual restrictions, capital requirements, business prospects, and other factors our Board may deem relevant.
An investment of $100 is assumed to have been made in our Class A common stock and in each index on September 22, 2021, the date our Class A common stock began trading on the New York Stock Exchange, and its relative performance is tracked through December 31, 2023.
An investment of $100 is assumed to have been made in our Class A common stock and in each index on September 22, 2021, the date our Class A common stock began trading on the New York Stock Exchange, and its relative performance is tracked through December 31, 2024.
The actual number of stockholders is greater than this number of record holders and includes an indeterminate number of stockholders who are beneficial owner s but whose shares are held in street name by brokers and other nominees. As of December 31, 2023, there were 62 holders of record of our Class B common stock.
The actual number of stockholders is greater than this number of record holders and includes an indeterminate number of stockholders who are beneficial owner s but whose shares are held in street name by brokers and other nominees. As of December 31, 2024, there were 55 holders of record of our Class B common stock.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information for Common Stock Our Class A common stock has been listed on the New York Stock Exchange under the symbol “TOST” since September 22, 2021. Prior to that date, there was no public trading market for our Class A common stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 62 T able of Contents Market Information for Common Stock Our Class A common stock has been listed on the New York Stock Exchange under the symbol “TOST” since September 22, 2021.
Our Class B common stock is neither listed nor traded. Holders of Record As of December 31, 2023, there were 266 holders of record of our Class A common stock.
Prior to that date, there was no public trading market for our Class A common stock. Our Class B common stock is neither listed nor traded. Holders of Record As of December 31, 2024, there were 216 holders of record of our Class A common stock.
The graph uses the closing market price on September 22, 2021 of $62.51 per share as the initial value of our Class A common stock. Data for the S&P 500 and the S&P 500 Information Technology Index assume reinvestment of dividends. The returns shown are based on historical results and are not intended to suggest future performance.
The graph uses the closing market price on September 22, 2021 of $62.51 per share as the initial value of our Class A common stock.
Removed
Recent Sales of Unregistered Securities In September 2023, we issued and donated 1 million shares of Class A common stock to an independent donor advised fund to further our philanthropic goals through our Toast.org initiative, for consideration consisting of the benefit to the Company related to the purpose of the independent donor advised fund.
Added
Performance Graph This performance graph shall not be deemed “soliciting material” or to be “filed” with the SEC for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any filing of Toast, Inc. under the Securities Act, or the Exchange Act.
Removed
The offer, sale, and issuance of the securities were deemed to be exempt from registration under Section 4(a)(2) of the Securities Act under the Securities Act as a transaction by an issuer not involving a public offering. Issuer Purchases of Equity Securities None. Item 6. [Reserved] 69 Table of Contents
Added
Data for the S&P 500 and the S&P 500 Information Technology Index assume reinvestment of dividends. 63 T able of Contents The returns shown are based on historical results and are not intended to suggest future performance. Recent Sales of Unregistered Securities None. Issuer Purchases of Equity Securities None. Item 6. [Reserved] 64 T able of Contents

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

51 edited+15 added−25 removed43 unchanged
Biggest changeThe following tables present selected financial information related to our liquidity: Year Ended December 31, 2023 (1) 2022 (2) (in millions) Cash and cash equivalents $ 605 $ 547 Marketable securities 519 474 Cash and cash equivalents and marketable securities $ 1,124 $ 1,021 Available credit facility $ 330 $ 330 Total $ 1,454 $ 1,351 (1) Excludes $87 million of cash held on behalf of customers and $55 million of restricted cash (2) Excludes $60 million of cash held on behalf of customers and $28 million of restricted cash Year Ended December 31, (in millions) 2023 2022 Net cash provided by (used in) operating activities $ 135 $ (156) Net cash used in investing activities (86) (98) Net cash provided by financing activities 63 38 Net increase (decrease) in cash, cash equivalents and restricted cash $ 112 $ (216) 79 Table of Contents Cash, cash equivalents and marketable securities The net increase in cash, cash equivalents and marketable securities was primarily due to cash generated from operating activities of $108 million (which excludes changes in the balance of restricted cash) and proceeds of $36 million generated from the issuance of common stock.
Biggest changeThe following tables present selected financial information related to our liquidity: Year Ended December 31, (in millions) 2024 (1) 2023 (2) Cash and cash equivalents $ 903 $ 605 Marketable securities 514 519 Cash and cash equivalents and marketable securities $ 1,417 $ 1,124 Available credit facility $ 325 $ 330 Total $ 1,742 $ 1,454 (1) Excludes $123 million of cash held on behalf of customers and $59 million of restricted cash.
Represents the change in the fair value of our warrant liability related to warrants issued to purchase shares of our common stock. The warrant liability is remeasured at fair value at each reporting date which could have a significant effect on other income (expense) and our results of operations during each period. Other income (expense), net.
Represents the change in the fair value of our warrant liability related to warrants issued to purchase shares of our common stock. The warrant liability is remeasured at fair value at each reporting date which could have a significant effect on other income (expense) and our results of operations during each period. Other income, net.
Net Loss (GAAP) and Adjusted EBITDA (Non-GAAP) Adjusted EBITDA is defined as net income (loss), adjusted to exclude stock-based compensation expense and related payroll tax expense, depreciation and amortization expense, interest income (expense) net, income taxes and certain other items that are not considered to reflect our operating activities and performance within the ordinary course of business, such as restructuring and restructuring-related expenses, acquisition expenses, fair value adjustments on warrant liabilities, expenses related to early termination of leases (which includes associated asset impairments) and stock-based charitable contribution expense, as applicable.
Net Income (Loss) (GAAP) and Adjusted EBITDA (Non-GAAP) Adjusted EBITDA is defined as net income (loss), adjusted to exclude stock-based compensation expense and related payroll tax expense, depreciation and amortization expense, interest income, net, income taxes and certain other items that are not considered to reflect our operating activities and performance within the ordinary course of business, such as restructuring and restructuring-related expenses, acquisition expenses, fair value adjustments on warrant liabilities, expenses related to early termination of leases (which includes associated asset impairments) and stock-based charitable contribution expense, as applicable.
General and administrative expenses consist primarily of expenses related to management and administrative functions, including finance, legal, human resources, and information technology. General and administrative expenses also include costs related to fees paid for certain professional services, including legal, information technology, and tax and accounting services, as well as bad debt and credit related expenses.
General and administrative expenses consist primarily of expenses related to management and administrative functions, including finance, legal, human resources, and information technology. General and administrative expenses also include costs related to fees paid for certain professional services, including legal, information technology, and tax and accounting services, as well as bad debt and credit-related expenses. Restructuring expenses .
We have provided below a reconciliation of net loss, the most directly comparable GAAP financial measure, to Adjusted EBITDA. We believe Adjusted EBITDA is useful for investors in comparing our financial performance to other companies and from period to period.
We have provided below a reconciliation of net income (loss), the most directly comparable GAAP financial measure, to Adjusted EBITDA. We believe Adjusted EBITDA is useful for investors in comparing our financial performance to other companies and from period to period.
We allocate total arrangement consideration at the inception of an arrangement to each performance obligation using the relative selling price allocation method based on each distinct performance obligation’s standalone selling price, or SSP. Determining the SSP for each distinct performance obligation requires significant judgement.
We allocate total arrangement consideration at the inception of an arrangement to each performance obligation using the relative selling price allocation method based on each distinct performance obligation’s standalone selling price, or SSP. Determining the SSP for each distinct performance obligation requires judgement.
Our future capital requirements and the adequacy of available funds will depend on many factors, including those set forth under Part I, Item 1A, "Risk Factors” in this Annual Report on Form 10-K. CRITICAL ACCOUNTING POLICIES AND ESTIMATES The preparation of financial statements in conformity with GAAP requires us to make certain estimates and assumptions.
Our future capital requirements and the adequacy of available funds will depend on many factors, including those set forth under Part I, Item 1A, "Risk Factors” in this Annual Report on Form 10-K. 76 T able of Contents CRITICAL ACCOUNTING POLICIES AND ESTIMATES The preparation of financial statements in conformity with GAAP requires us to make certain estimates and assumptions.
The increase in financial technology solutions revenue during the year ended December 31, 2023 was primarily attributable to the increase in Locations on the Toast platform. The increase in hardware and professional services revenue during the year ended December 31, 2023 was primarily driven by growth in new Locations.
The increase in financial technology solutions revenue during the fiscal year ended December 31, 2024 was primarily attributable to the increase in Locations on the Toast platform. The increase in hardware and professional services revenue during the fiscal year ended December 31, 2024 was primarily driven by growth in new Locations.
Discussions related to the fiscal year ended December 31, 2021 and year over year comparisons between the fiscal years ended December 31, 2022 and 2021 are included in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on March 1, 2023, and incorporated herein by reference.
Discussions related to the fiscal year ended December 31, 2022 and year-over-year comparisons between the fiscal years ended December 31, 2023 and 2022 are included in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on February 27, 2024, and incorporated herein by reference.
Our effective tax rate fluctuates from period to period due to changes in the mix of income and losses in jurisdictions with a wide range of tax rates, the effect of acquisitions, changes resulting from the amount of recorded valuation allowance, and permanent differences between GAAP and local tax laws. 73 Table of Contents RESULTS OF OPERATIONS The following section discusses the fiscal years ended December 31, 2023 and 2022 and provides a year over year comparison between fiscal years ended December 31, 2023 and 2022.
Our effective tax rate fluctuates from period to period due to changes in the mix of income and losses in jurisdictions with a wide range of tax rates, the effect of acquisitions, changes resulting from the amount of recorded valuation allowance, and permanent differences between GAAP and local tax laws. 68 T able of Contents RESULTS OF OPERATIONS The following section discusses the fiscal years ended December 31, 2024 and 2023 and provides a year-over-year comparison between fiscal years ended December 31, 2024 and 2023.
Our platform provides a comprehensive suite of SaaS products, financial technology solutions including integrated payment processing, restaurant-grade hardware, and a broad ecosystem of third-party partners. We serve as the restaurant operating system, connecting front of house and back of house operations across service models including dine-in, takeout, delivery, catering, and retail.
We provide a comprehensive platform of software-as-a-service, or SaaS, products and financial technology solutions, including integrated payment processing, restaurant-grade hardware, and a broad ecosystem of third-party partners. We serve as the restaurant operating system, connecting front of house and back of house operations across service models including dine-in, takeout, delivery, catering, and retail.
As we continue to accumulate additional data related to our Class A common stock and forfeiture rates, we may adjust our estimates, which could materially impact our future stock-based compensation expense inclusive of RSUs. 82 Table of Contents Total stock-based compensation recognized in fiscal year 2023 related to stock-options was $45 million.
As we continue to accumulate additional data related to our Class A common stock and forfeiture rates, we may adjust our estimates, which could materially impact our future stock-based compensation expense inclusive of RSUs. Total stock-based compensation recognized in fiscal year 2024 related to stock-options was $42 million.
Primarily represents foreign currency transaction gains and losses and changes in fair value of our marketable securities. Income Tax Benefit (Expense) Income tax benefit (expense). Consists of U.S. federal and state income tax as well as international taxes in various foreign jurisdictions.
Primarily represents gains from warrant repurchases, foreign currency transaction gains and losses, and gains and losses from our marketable securities. Income Tax Benefit (Expense) Income tax benefit (expense). Consists of U.S. federal and state income tax as well as international taxes in various foreign jurisdictions.
If the impact of changes in our critical accounting estimates are material or considered necessary to understand our results of operations for the periods presented, then such information is disclosed within this Annual Report on Form 10-K in Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Revenue Recognition We recognize transaction fees for payment processing on a gross basis.
For further information on our critical accounting estimates and policies summarized below, refer to Note 2, "Summary of Significant Accounting Policies" included in this Annual Report on Form 10-K in “Notes to Consolidated Financial Statements.” If the impact of changes in our critical accounting estimates are material or considered necessary to understand our results of operations for the periods presented, then such information is disclosed within this Annual Report on Form 10-K in Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Revenue Recognition We recognize transaction fees for payment processing on a gross basis.
Debt During 2021 we entered into a senior secured credit facility, or the 2021 Facility, which we subsequently amended on March 2, 2023 to replace the London Interbank Offered Rate, or LIBOR, with the Secured Overnight Financing Rate, or SOFR. The 2021 Facility is subject to a minimum liquidity covenant of $250 million.
Debt During 2021 we entered into a senior secured credit facility, or the 2021 Facility, which we subsequently amended on March 2, 2023 to replace the London Interbank Offered Rate, or LIBOR, with the Secured Overnight Financing Rate, or SOFR.
Recent Accounting Pronouncements Refer to the sections titled “Recent Accounting Pronouncements” in Note 2 of the "Notes to Consolidated Financial Statements" included in Item 8, "Financial Statements and Supplementary Data" in this Annual Report on Form 10-K for more information.
For further information related to stock-based compensation expense and key assumptions utilized refer to Note 10, "Stock-Based Compensation Expense" included in this Annual Report on Form 10-K in “Notes to Consolidated Financial Statements.” Recent Accounting Pronouncements Refer to the sections titled “Recent Accounting Pronouncements” in Note 2 of the "Notes to Consolidated Financial Statements" included in Item 8, "Financial Statements and Supplementary Data" in this Annual Report on Form 10-K for more information.
The expected volatility of stock options is based upon the average historical volatility of a number of publicly traded companies in a similar industry. We also estimate a forfeiture rate to calculate the stock-based compensation expense for options and restricted stock units, or RSUs, based on an analysis of actual historical experience and expected employee attrition rates.
We also estimate a forfeiture rate to calculate the stock-based compensation expense for options and restricted stock units, or RSUs, based on an analysis of actual historical experience and expected employee attrition rates.
As of December 31, 2023 our fully diluted share count was as follows: Year Ended December 31, 2023 (1) (shares) (in millions) Class A and B common stock issued and outstanding 543 Options to purchase Class A common stock and Class B common stock 48 Unvested restricted stock units 33 Warrants to purchase Class B common stock 7 Shares reserved for charitable donations 4 Unvested restricted stock 1 Total fully diluted share count 636 (1) Share amounts presented above do not give effect to potential repurchases of common stock under the treasury stock method 80 Table of Contents For further information see "Note 3 .
As of December 31, 2024 our fully diluted share count was as follows: Year Ended December 31, 2024 (1) (shares in millions) Class A and B common stock issued and outstanding 572 Options to purchase Class A common stock and Class B common stock 28 Unvested restricted stock units 22 Warrants to purchase Class B common stock 1 Shares reserved for charitable donations 4 Total fully diluted share count 627 (1) Share amounts presented above do not give effect to potential repurchases of common stock under the treasury stock method.
For further information related to our most recent acquisitions, see Note 9, "Business Combinations” included in this Annual Report on Form 10-K in “Notes to Consolidated Financial Statements”. In addition to the above material cash requirements, we also recognize liabilities associated with financial guarantees related to loan purchase activities.
For further information refer to Note 6, "Lessee Arrangements” included in this Annual Report on Form 10-K in “Notes to Consolidated Financial Statements.” In addition to the above material cash requirements, we also recognize liabilities associated with financial guarantees related to loan purchase activities.
As our customers generate more sales and therefore more GPV, we generally see higher financial technology solutions revenue. 1 Please note that numbers may not tie due to rounding to the nearest hundred million. 71 Table of Contents Annualized Recurring Run-Rate (ARR) We monitor Annualized Recurring Run-Rate as a key operational measure of the scale of our subscription and payment processing services for both new and existing customers.
As our customers generate more sales and therefore more GPV, we generally see higher financial technology solutions revenue. Annualized Recurring Run-Rate (ARR) We monitor Annualized Recurring Run-Rate as a key operational measure of the scale of our subscription and payment processing services for both new and existing customers.
Cash generated from operating activities was impacted by use of cash for working capital, primarily driven by higher deferred contract acquisition costs, resulting, in part, from continued growth in Locations, partially offset by higher accrued expenses and other current liabilities due to higher financial technology solutions expenses related to our growth in GPV.
This increase was partially offset by cash severance charges paid in connection with the Restructuring Plan and a higher use of cash for working capital primarily driven by higher deferred contract acquisition costs and increases of accounts receivable, net, resulting, in part, from continued growth in Locations, partially offset by higher accrued expenses and other current liabilities due to higher financial technology solutions expenses related to our growth in GPV.
Our subscription services revenue is primarily based on a rate per location, and this rate varies depending on the number of software products purchased, hardware configuration, and employee count at each location. Financial technology solutions.
Consists primarily of fees charged to customers for access to our software applications, generally over a term ranging from 12 to 36 months. Our subscription services revenue is primarily based on a rate per location, and this rate varies depending on the number of software products purchased, hardware configuration, and employee count at each location. Financial technology solutions.
Stock-Based Compensation Expense We use the Black-Scholes option-pricing model to determine the estimated fair value of stock option awards. We have limited historical stock option activity and therefore estimate the expected term of stock options granted using the simplified method, which represents the average of the contractual term of the stock option and its weighted-average vesting period.
We have limited historical stock option activity and therefore estimate the expected term of stock options granted using the simplified method, which represents the average of the contractual term of the stock option and its weighted-average vesting period.
Such activities are further described within Note 2, "Summary of Significant Accounting Policies" included in this Annual Report on Form 10-K in “Notes to Consolidated Financial Statements”. See also Note 17, "Commitments and Contingencies" and Note 7, "Lessee Arrangements" included in this Annual Report on Form 10-K in “Notes to Consolidated Financial Statements”.
Such activities are further described within Note 2, "Summary of Significant Accounting Policies" included in this Annual Report on Form 10-K in “Notes to Consolidated Financial Statements.” See also Note 16, "Commitments and Contingencies" and Note 6, "Lessee Arrangements" included in this Annual Report on Form 10-K in “Notes to Consolidated Financial Statements.” We expect continued utilization of our available cash resources to support our ongoing business operations.
The expenses and other items which are excluded from the calculation of Adjusted EBITDA may differ from the expenses and other items that other companies may exclude from Adjusted EBITDA when they report their financial results. 77 Table of Contents The following table reflects the reconciliation of net loss to Adjusted EBITDA for each of the periods presented: Year Ended December 31, (in millions) 2023 2022 Net loss $ (246) $ (275) Stock-based compensation expense and related payroll tax 288 232 Depreciation and amortization 32 24 Interest income, net (37) (11) Termination of leases 14 (1) Stock-based charitable contribution expense 10 10 Change in fair value of warrant liability (3) (95) Acquisition expenses 1 2 Other (income) expense, net — 1 Income tax expense (benefit) 2 (2) Adjusted EBITDA $ 61 $ (115) Subscription Services and Financial Technology Solutions Gross Profit (GAAP) and Non-GAAP Subscription Services and Financial Technology Solutions Gross Profit (Non-GAAP) Non-GAAP Subscription Services and Financial Technology Solutions Gross Profit is defined as subscription services gross profit and financial technology solutions gross profit, adjusted to exclude stock-based compensation expense and related payroll tax expense, and depreciation and amortization expense.
The expenses and other items which are excluded from the calculation of Adjusted EBITDA may differ from the expenses and other items that other companies may exclude from Adjusted EBITDA when they report their financial results. 72 T able of Contents The following table reflects the reconciliation of net income (loss) to Adjusted EBITDA for each of the periods presented: Year Ended December 31, (in millions) 2024 2023 Net income (loss) $ 19 $ (246) Stock-based compensation expense and related payroll tax 256 288 Depreciation and amortization 46 32 Interest income, net (42) (37) Gain on warrant extinguishment (14) — Change in fair value of warrant liability 49 (3) Termination of leases 5 14 Stock-based charitable contribution expense 5 10 Restructuring and restructuring related expenses (1) 46 — Acquisition expenses — 1 Income tax expense 3 2 Adjusted EBITDA $ 373 $ 61 (1) Restructuring and restructuring-related expenses for the fiscal year ended December 31, 2024 include $32 million of severance benefits, $12 million of stock-based compensation expense, and $2 million of accelerated amortization related to facilities.
Our principal sources of liquidity are cash and cash equivalents and marketable securities. We also have access to external sources of liquidity through a credit facility as further described within “Debt” below.
We also have access to external sources of liquidity through a credit facility as further described below.
Generally Accepted Accounting Principles, or GAAP, and should be viewed independently of, and not combined with or substituted for, our revenue, gross profit, and other financial information determined in accordance with GAAP. Further, ARR is not a forecast of future revenue and investors should not place undue reliance on ARR as an indicator of our future or expected results.
Generally Accepted Accounting Principles, or GAAP, and should be viewed independently of, and not combined with or substituted for, our revenue, gross profit, and other financial information determined in accordance with GAAP.
The repurchase program has no expiration date, does not obligate us to acquire any particular amount of our Class A common stock, and it may be suspended at any time at our discretion. The timing and actual number of shares repurchased may depend on a variety of factors, including price, general business and market conditions, and alternative investment opportunities.
The repurchase program has no expiration date, does not obligate us to acquire any particular amount of our Class A common stock, and it may be suspended at any time at our discretion.
Dilution We calculate our fully diluted share count on an unweighted basis taking our total outstanding share count in addition to unexercised stock options, unvested restricted stock, shares reserved for charitable donations and other securities that can be converted to common stock, such as our warrants to purchase common stock.
The timing and actual number of shares repurchased may depend on a variety of factors, including price, general business and market conditions, and alternative investment opportunities. 75 T able of Contents Dilution We calculate our fully diluted share count on an unweighted basis taking our total outstanding share count in addition to unexercised stock options, unvested restricted stock, shares reserved for charitable donations and other securities that can be converted to common stock, such as our warrants to purchase common stock.
Our MD&A is organized as follows: • Overview . This section provides a general description of our business, recent developments, and key business metrics. • Results of Operations .
Our MD&A is organized as follows: • Overview . This section provides a general description of our business, recent developments, and key business metrics. • Results of Operations . This section provides an overview and analysis of our financial results for the fiscal year ended December 31, 2024 compared to the fiscal year ended December 31, 2023.
The increase in financial technology solutions costs during the year ended December 31, 2023 was due to an increase in GPV.
The increase in financial technology solutions costs during the fiscal year ended December 31, 2024 was due to an increase in GPV. The increase in hardware and professional services costs during the fiscal year ended December 31, 2024 was primarily attributable to an increase in employee-related costs.
Costs of Revenue Year Ended December 31, Change (dollars in millions) 2023 2022 Amount % Subscription services $ 166 $ 112 $ 54 48 % Financial technology solutions 2,503 1,792 711 40 % Hardware and professional services 357 311 46 15 % Amortization of acquired intangible assets 5 5 — — % Total costs of revenue $ 3,031 $ 2,220 $ 811 37 % The increase in subscription services costs during the year ended December 31, 2023 was primarily attributable to an increase in employee-related costs.
Costs of Revenue Year Ended December 31, Change (dollars in millions) 2024 2023 Amount % Subscription services $ 219 $ 166 $ 53 32 % Financial technology solutions 3,175 2,503 672 27 % Hardware and professional services 371 357 14 4 % Amortization of acquired intangible assets 5 5 — — % Total costs of revenue $ 3,770 $ 3,031 $ 739 24 % The increase in subscription services costs during the fiscal year ended December 31, 2024 was primarily attributable to an increase in employee-related costs.
Employee-related costs consist of salaries, benefits, bonuses, and stock-based compensation expense. Allocated overhead includes certain facilities costs, depreciation expense, and amortization costs associated with internally developed software and acquired intangible assets. Operating Expenses Our operating expenses consist of the following: Sales and marketing.
Allocated overhead includes certain facilities costs, depreciation expense, and amortization costs associated with internally developed software and acquired intangible assets. Operating Expenses Our operating expenses consist of the following: Sales and marketing. Sales and marketing expenses consist primarily of employee-related costs incurred to acquire new customers and increase product adoption across our existing customer base.
Revenue Year Ended December 31, Change (dollars in millions) 2023 2022 Amount % Subscription services $ 500 $ 324 $ 176 54 % Financial technology solutions 3,189 2,268 921 41 % Hardware and professional services 176 139 37 27 % Total revenue $ 3,865 $ 2,731 $ 1,134 42 % The increase in subscription services revenue during the year ended December 31, 2023 was attributed to growth in Locations on the Toast platform and the continued increase in products adopted by customers.
Revenue Year Ended December 31, Change (dollars in millions) 2024 2023 Amount % Subscription services $ 706 $ 500 $ 206 41 % Financial technology solutions 4,053 3,189 864 27 % Hardware and professional services 201 176 25 14 % Total revenue $ 4,960 $ 3,865 $ 1,095 28 % The increase in subscription services revenue during the fiscal year ended December 31, 2024 was attributed to growth in Locations on the Toast platform and the continued increase in product adoption.
To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations, and cash flows will be affected. 81 Table of Contents We believe that the critical accounting estimates summarized below involve a greater degree of judgment and complexity.
Although we believe that our estimates and the assumptions supporting our assessments are reasonable, actual results could differ materially from our estimates and assumptions. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations, and cash flows will be affected.
Hardware and professional services revenue also includes fees charged to customers for professional services which includes installation services, including business process mapping, configuration, and training. 72 Table of Contents Costs of Revenue Costs of revenue consists of expenses that are directly related or closely correlated to revenue generation, including, but not limited to, employee-related costs for customer support and certain operational roles as well as allocated overhead.
Costs of Revenue Costs of revenue consists of expenses that are directly related or closely correlated to revenue generation, including, but not limited to, employee-related costs for customer support and certain operational roles as well as allocated overhead. Employee-related costs consist of salaries, benefits, bonuses, and stock-based compensation expense.
Research and Development Year Ended December 31, Change (dollars in millions) 2023 2022 Amount % Research and development $ 358 $ 282 $ 76 27 % The increase in research and development expenses during the year ended December 31, 2023 was primarily attributable to an increase in employee-related costs of $67 million.
Operating Expenses Sales and Marketing Year Ended December 31, Change (dollars in millions) 2024 2023 Amount % Sales and marketing $ 470 $ 401 $ 69 17 % The increase in sales and marketing expenses during the fiscal year ended December 31, 2024 was primarily attributable to an increase in employee-related costs. 69 T able of Contents Research and Development Year Ended December 31, Change (dollars in millions) 2024 2023 Amount % Research and development $ 351 $ 358 $ (7) (2) % Research and development expenses remained approximately flat during the fiscal year ended December 31, 2024.
As of December 31, 2023, approximately 106,000 Locations, an increase of 34% year over year, processing approximately $126 billion of gross payment volume in the trailing 12 months, partnered with Toast to optimize operations, increase sales, engage guests, and maintain happy employees.
As of December 31, 2024, approximately 134,000 Locations, an increase of 26% year over year, processing approximately $159 billion of gross payment volume in the trailing 12 months, partnered with Toast to optimize operations, increase sales, engage guests, and maintain happy employees. 65 T able of Contents Seasonality We experience seasonality in our financial technology solutions revenue, which is largely driven by the level of Gross Payment Volume, or GPV, processed through our platform.
Year Ended December 31, (in millions) 2023 2022 2021 Revenue: Subscription services $ 500 $ 324 $ 169 Financial technology solutions 3,189 2,268 1,406 Costs of Revenue: Subscription services 166 112 63 Financial technology solutions 2,503 1,792 1,120 Subscription Services and Financial Technology Solutions Gross Profit (GAAP) $ 1,020 $ 688 $ 392 Year Ended December 31, (in millions) 2023 2022 2021 (1) Subscription Services and Financial Technology Solutions Gross Profit (GAAP) $ 1,020 $ 688 $ 392 Stock-based compensation expense and related payroll tax 20 13 5 Depreciation and amortization 17 10 9 Non-GAAP Subscription Services and Financial Technology Solutions Gross Profit (Non-GAAP) $ 1,057 $ 711 $ 406 (1) In prior periods, Non-GAAP Subscription Services and Financial Technology Solutions Gross Profit was not a key non-GAAP financial measure. 78 Table of Contents Net Cash Provided by (Used in) operating activities (GAAP) and Free Cash Flow (Non-GAAP) Free cash flow is defined as net cash provided by (used in) operating activities reduced by purchases of property and equipment and capitalization of internal-use software costs (referred to as capital expenditures).
Year Ended December 31, (in millions) 2024 2023 2022 Revenue: Subscription services $ 706 $ 500 $ 324 Financial technology solutions 4,053 3,189 2,268 Costs of Revenue: Subscription services 219 166 112 Financial technology solutions 3,175 2,503 1,792 Subscription services and financial technology solutions gross profit (GAAP) $ 1,365 $ 1,020 $ 688 73 T able of Contents Year Ended December 31, (in millions) 2024 2023 2022 (1) Subscription services and financial technology solutions gross profit (GAAP) $ 1,365 $ 1,020 $ 688 Stock-based compensation expense and related payroll tax 20 20 13 Depreciation and amortization 32 17 10 Non-GAAP subscription services and financial technology solutions gross profit (Non-GAAP) $ 1,417 $ 1,057 $ 711 (1) For the fiscal year ended December 31, 2022, non-GAAP subscription services and financial technology solutions gross profit was not a key non-GAAP financial measure.
The following table presents a reconciliation of net cash provided by (used in) operating activities to the free cash flow for each of the periods presented: Year Ended December 31, 2023 2022 (in millions) Net cash provided by (used in) operating activities $ 135 $ (156) Capital expenditures (42) (33) Free cash flow $ 93 $ (189) LIQUIDITY AND CAPITAL RESOURCES Upon completion of the IPO, we received net proceeds of $950 million after deducting underwriting discounts and commissions and invested them into interest-generating marketable securities and money market accounts.
The following table presents a reconciliation of net cash provided by operating activities to the free cash flow for each of the periods presented: Year Ended December 31, (in millions) 2024 2023 Net cash provided by operating activities $ 360 $ 135 Capital expenditures (54) (42) Free cash flow $ 306 $ 93 LIQUIDITY AND CAPITAL RESOURCES Our principal sources of liquidity are cash and cash equivalents and marketable securities.
During the year ended December 31, 2023, the change in net cash provided by (used in) operating activities as compared to the year ended December 31, 2022, was driven by a lower net loss, an increase in non-cash adjustments, primarily related to stock-based compensation expense, amortization of deferred contract acquisition costs, and credit loss expenses, and favorable changes in operating assets and liabilities.
During the fiscal year ended December 31, 2024, the increase in net cash provided by operating activities as compared to the fiscal year ended December 31, 2023, was driven by net income of $19 million during the fiscal year ended December 31, 2024 as compared to a net loss of $246 million during the same period last year, an increase in non-cash adjustments, primarily attributable to the fair value remeasurement of our warrant liability and increased amortization of deferred contract acquisition costs.
GPV is a key measure of the scale of our platform, which in turn drives our financial performance.
Gross Payment Volume (GPV) Gross Payment Volume represents the sum of total dollars processed through the Toast payments platform across Toast Processing Locations in a given period. GPV is a key measure of the scale of our platform, which in turn drives our financial performance.
There were no impairments of acquired intangible assets through business combinations recognized during the years ended December 31, 2023 and 2022. The fair value of assets acquired and liabilities assumed related to our most recent acquisitions is further described in Note 9, "Business Combinations" included in this Annual Report on Form 10-K in “Notes to Consolidated Financial Statements”.
The fair value of assets acquired and liabilities assumed related to our most recent acquisitions is further described in Note 17, "Business Combinations" included in this Annual Report on Form 10-K in “Notes to Consolidated Financial Statements”. 77 T able of Contents Stock-Based Compensation Expense We use the Black-Scholes option-pricing model to determine the estimated fair value of stock option awards.
See Note 18, “Subsequent Events (unaudited)" included in this Annual Report on Form 10-K in “Notes to Consolidated Financial Statements”. • As of December 31, 2023, our non-cancelable purchase obligations to hardware suppliers totaled $84 million, all of which is due within the next 12 months. • As of December 31, 2023, operating lease commitments totaled $51 million, of which $13 million is due in 2024 and $38 million is due thereafter.
Stock-Based Compensation" included in this Annual Report on Form 10-K in “Notes to Consolidated Financial Statements.” Other Capital Requirements Recent and expected material cash and other capital requirements, in addition to the above also include the following: • As of December 31, 2024, our non-cancellable purchase obligations to hardware suppliers totaled $65 million, all of which is due within the next 12 months. • As of December 31, 2024, our non-cancellable contractual commitments with our cloud service providers and other vendors totaled $185 million of which $69 million is due within the next 12 months and $116 million thereafter. • As of December 31, 2024, operating lease commitments totaled $39 million, of which $12 million is due in 2025 and $27 million is due thereafter.
General and Administrative Year Ended December 31, Change (dollars in millions) 2023 2022 Amount % General and administrative $ 362 $ 294 $ 68 23 % The increase in general and administrative expenses during the year ended December 31, 2023 was primarily attributable to an increase in bad debt and credit related expenses of $30 million driven by growth in our Toast Capital product offering, an increase in employee-related costs of $28 million, and $12 million, net, in lease termination expenses related to our corporate headquarters in Boston, MA.
General and Administrative Year Ended December 31, Change (dollars in millions) 2024 2023 Amount % General and administrative $ 307 $ 362 $ (55) (15) % The decrease in general and administrative expenses during the fiscal year ended December 31, 2024 was primarily driven by a decrease in employee-related costs of $30 million and a decrease in lease termination expenses of $9 million.
Sales and marketing expenses consist primarily of employee-related costs incurred to acquire new customers and increase product adoption across our existing customer base. Marketing expenses also include fees incurred to generate demand through various advertising channels. Research and development.
Marketing expenses also include fees incurred to generate demand through various advertising channels. Research and development.
Accordingly, these are the estimates and policies we believe are the most critical in fully understanding and evaluating our financial condition and results of operations. For further information on our critical accounting estimates and policies summarized below, refer to Note 2, "Summary of Significant Accounting Policies" included in this Annual Report on Form 10-K in “Notes to Consolidated Financial Statements”.
We believe that the critical accounting estimates summarized below involve a greater degree of judgment and complexity. Accordingly, these are the estimates and policies we believe are the most critical in fully understanding and evaluating our financial condition and results of operations.
See Note 8, "Debt" to our Consolidated Financial Statements included in “Notes to Consolidated Financial Statements” included in this Annual Report on Form 10-K for further information.
As of December 31, 2024, there were no borrowings outstanding on the 2021 Facility and outstanding letters of credit totaled $5 million. As of December 31, 2024, our total available borrowing capacity under the 2021 Facility was $325 million. See Note 7, "Debt" included in this Annual Report on Form 10-K in “Notes to Consolidated Financial Statements” for further information.
Key Business Metrics Year Ended December 31, (dollars in billions) 2023 2022 % Growth Gross Payment Volume (GPV) $ 126.1 $ 91.7 38 % As of December 31, (dollars in millions) 2023 2022 % Growth Annualized Recurring Run-Rate (ARR) $ 1,218 $ 901 35 % As of December 31, 2023 2022 % Change Net Retention Rate (NRR) 111 % 118 % (7) % Gross Payment Volume (GPV) 1 Gross Payment Volume represents the sum of total dollars processed through the Toast payments platform across Toast Processing Locations in a given period.
Key Business Metrics Year Ended December 31, (dollars in billions) 2024 2023 % Growth Gross Payment Volume (GPV)* $ 159.1 $ 126.1 26 % As of December 31, (dollars in millions) 2024 2023 % Growth Total Annualized Recurring Run-Rate (ARR)* $ 1,626 $ 1,218 34 % *: Certain percentages may not foot due to rounding.
Other Income (Expenses) Our other income and (expenses) consist of the following: Interest income (expense), net. Consists of interest earned from cash held in money market accounts, interest earned on our marketable securities, offset by interest incurred on our convertible notes, which were issued in June 2020 and repaid in June 2021. Change in fair value of warrant liability.
Restructuring expenses consist of personnel-related costs, including employee transition and severance payments, employee benefits, and related facilitation costs. Other Income (Expenses) Our other income (expenses) consist of the following: 67 T able of Contents Interest income, net. Consists primarily of interest earned on our cash and cash equivalents and marketable securities. Change in fair value of warrant liability.
Components of Results of Operations Revenue We principally generate revenue from: (1) subscription services, (2) financial technology solutions, and (3) hardware and professional services. Subscription services. Consists primarily of fees charged to customers for access to our software applications, generally over a term ranging from 12 to 36 months.
Further, ARR is not a forecast of future revenue and investors should not place undue reliance on ARR as an indicator of our future or expected results. 66 T able of Contents Components of Results of Operations Revenue We principally generate revenue from: (1) subscription services, (2) financial technology solutions, and (3) hardware and professional services. Subscription services.
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This section provides an overview and analysis of our financial results for the year ended December 31, 2023 compared to the year ended December 31, 2022 and for the year ended December 31, 2022 compared to the year ended December 31, 2021. • Liquidity and Capital Resources .
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Discussions related to the fiscal year ended December 31, 2022 and year-over-year comparisons between the fiscal years ended December 31, 2023 and 2022 are included in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on February 27, 2024, and incorporated herein by reference. • Liquidity and Capital Resources .
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Since our founding, we have translated our love for restaurants into a commitment to innovation and digital transformation for the restaurant industry.
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Hardware and professional services revenue also includes fees charged to customers for professional services which includes installation services, including business process mapping, configuration, and training.
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As we have expanded our platform, launched new products, and added new partners over time, we have rapidly grown the number of Locations on the Toast platform. 70 Table of Contents Seasonality We experience seasonality in our financial technology solutions revenue, which is largely driven by the level of Gross Payment Volume, or GPV, processed through our platform.
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Restructuring Expenses Year Ended December 31, Change (dollars in millions) 2024 2023 Amount % Restructuring expenses $ 46 $ — $ 46 N/M N/M - Not meaningful Restructuring expenses included restructuring actions to adjust our cost structure and real estate footprint in 2024. See Note 12 to our consolidated financial statements for further information.
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Net Retention Rate (NRR) To calculate our Net Retention Rate, or NRR, we first identify a cohort of customers, or the Base Customers, in a particular month, or the Base Month.
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Interest Income, net Year Ended December 31, Change (dollars in millions) 2024 2023 Amount % Interest income, net $ 42 $ 37 $ 5 14 % Interest income, net, increased by $5 million during the fiscal year ended December 31, 2024 compared to the prior fiscal year, primarily driven by increased cash and cash equivalent balances.
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For this purpose, we do not consider a customer as a Base Customer unless there is at least one location live on the Toast platform for the entirety of the Base Month.
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Change in Fair Value of Warrant Liability Year Ended December 31, Change (dollars in millions) 2024 2023 Amount % Change in fair value of warrant liability $ (49) $ 3 $ (52) (1733) % The change in fair value of the warrant liability during the fiscal year ended December 31, 2024 was attributable to an increase in our stock price and a reduction of outstanding warrants primarily due to a warrant repurchase of 5 million shares of Class B common stock in July 2024, or the Warrant Repurchase.
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We then divide MRR for the Base Customers in the same month of the subsequent year, or the Comparison Month, by MRR in the Base Month to derive a monthly NRR.
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See Note 3 to our consolidated financial statements for further information. 70 T able of Contents Other income, net Year Ended December 31, Change (dollars in millions) 2024 2023 Amount % Other income, net $ 13 $ 3 $ 10 333 % The gain recognized in other income, net, for the fiscal year ended December 31, 2024 was primarily attributable to the Warrant Repurchase.
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MRR in the Comparison Month includes the impact of any churn or contraction of the Base Customers, and by definition does not include any customers added to the Toast platform between the Base Month and Comparison Month. We measure the annual NRR by taking a weighted average of the monthly NRR over the trailing twelve months.
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See Note 3 to our consolidated financial statements for further information. 71 T able of Contents Non-GAAP Financial Measures We use certain non-GAAP financial measures described below to supplement our consolidated financial statements prepared and presented in accordance with GAAP and to understand and evaluate our core operating performance.
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The increase in hardware and professional services costs during the year ended December 31, 2023 was attributable to higher hardware shipment volume as a result of growth in Locations and higher employee related costs, partially offset by lower hardware freight costs.
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Subscription Services and Financial Technology Solutions Gross Profit (GAAP) and Non-GAAP Subscription Services and Financial Technology Solutions Gross Profit (Non-GAAP) Non-GAAP Subscription Services and Financial Technology Solutions Gross Profit is defined as subscription services gross profit and financial technology solutions gross profit, adjusted to exclude stock-based compensation expense and related payroll tax expense, and depreciation and amortization expense.
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We utilize our hardware and professional services as customer acquisition tools and price them competitively to reduce barriers to entry for new Locations. 74 Table of Contents Operating Expenses Sales and Marketing Year Ended December 31, Change (dollars in millions) 2023 2022 Amount % Sales and marketing $ 401 $ 319 $ 82 26 % The increase in sales and marketing expenses during the year ended December 31, 2023 was primarily attributable to an increase in employee-related costs of $71 million.
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Net Cash Provided by (Used in) operating activities (GAAP) and Free Cash Flow (Non-GAAP) Free cash flow is defined as net cash provided by (used in) operating activities reduced by purchases of property and equipment and capitalization of internal-use software costs (referred to as capital expenditures).
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Restructuring Plan In February 2024, we announced a restructuring plan, or the Restructuring Plan, designed to promote overall operating expense efficiency, including a reduction in force and certain other actions to reorganize our facilities and operations.
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(2) Excludes $87 million of cash held on behalf of customers and $55 million of restricted cash. 74 T able of Contents Year Ended December 31, (in millions) 2024 2023 Net cash provided by operating activities $ 360 $ 135 Net cash used in investing activities (39) (86) Net cash provided by financing activities 18 63 Effect of exchange rate changes on cash and cash equivalents and restricted cash (1) — Net increase in cash, cash equivalents and restricted cash $ 338 $ 112 Cash, Cash Equivalents and Marketable Securities The net increase in cash, cash equivalents and marketable securities was primarily due to increases from cash provided by operating activities from the fiscal year ended December 31, 2024 compared to the previous year.
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As part of this Restructuring Plan, we expect to incur restructuring and restructuring-related charges of approximately $45 to $55 million, primarily related to severance and severance related costs, and certain other costs related to facilities.
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The decrease in net cash used in investing activities during the fiscal year ended December 31, 2024, as compared to the fiscal year ended December 31, 2023, was primarily driven by net cash inflows from marketable securities as compared to net cash outflows from marketable securities during last year, partially offset by an increase in capital expenditures.
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We expect to complete the Restructuring Plan and incur all related charges by the end of fiscal year 2024 and expect to incur substantially all of these charges in the first quarter of fiscal year 2024.
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The decrease in net cash provided by financing activities during the fiscal year ended December 31, 2024, as compared to the same period last year, was primarily driven by cash outflows related to the Warrant Repurchase and share repurchases, partially offset by an increase in cash inflows from the proceeds from the issuance of common stock.
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Although we expect certain cost savings in the near-term resulting from the Restructuring Plan, and a reduction in the rate of growth in our operating expenses, as compared to comparative periods, we still expect to see a continued increase in overall total operating expenses.
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The 2021 Facility is subject to a minimum liquidity covenant of $250 million, subject to certain additional customary restrictive covenants in connection with the February 2024 share repurchase program. We were in compliance with all financial covenants as of December 31, 2024.
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Interest Income (expense), net Year Ended December 31, Change (dollars in millions) 2023 2022 Amount % Interest income $ 37 $ 11 $ 26 N/M N/M - Not meaningful The increase in interest income during the year ended December 31, 2023 was attributable to higher interest rates on our investments in marketable securities. 75 Table of Contents Change in Fair Value of Warrant Liability Year Ended December 31, Change (dollars in millions) 2023 2022 Amount % Change in fair value of warrant liability $ 3 $ 95 $ (92) (97) % The decrease in the change in fair value of warrant liability during the year ended December 31, 2023 was attributable to the change in our stock price from the beginning of the period to the end of period in 2023 when compared to 2022. 76 Table of Contents Non-GAAP Financial Measures We use certain non-GAAP financial measures described below to supplement our consolidated financial statements prepared and presented in accordance with GAAP and to understand and evaluate our core operating performance.
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For further information see "Note 3 . Financial Instruments" , “Note 9. Common Stock" and "Note 10.
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This was partially offset by $42 million in cash outflows related to capital expenditures in the period.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeDuring the years ended December 31, 2023, 2022, and 2021, we had no customers individually that accounted for more than 10% of our total revenue. No customers individually accounted for more than 10% of our total receivables at December 31, 2023 and 2022.
Biggest changeThis risk is mitigated due to our diverse customer base, dispersed over various geographic regions. During the fiscal years ended December 31, 2024, 2023, and 2022, we had no customers individually that accounted for more than 10% of our total revenue. No customers individually accounted for more than 10% of our total receivables at December 31, 2024 and 2023.
The primary objective of our investment activities is to preserve capital and meet liquidity requirements without significantly increasing risk. We do not enter into investments for speculative purposes. Based on our investment portfolio balance as of December 31, 2023, a hypothetical 100 basis point increase or decrease in interest rates would not have materially affected our financial position.
The primary objective of our investment activities is to preserve capital and meet liquidity requirements without significantly increasing risk. We do not enter into investments for speculative purposes. Based on our investment portfolio balance as of December 31, 2024, a hypothetical 100 basis point increase or decrease in interest rates would not have materially affected our financial position.
While it is difficult to accurately measure the impact of inflation due to the lack of precise estimates, we believe the effects of inflation, if any, on our results of operations and financial condition have been immaterial. We cannot assure you our business will not be affected in the future by inflation. 83 Table of Contents
While it is difficult to accurately measure the impact of inflation due to the lack of precise estimates, we believe the effects of inflation, if any, on our results of operations and financial condition have been immaterial. We cannot assure you our business will not be affected in the future by inflation. 79 T able of Contents
Changes in interest rates affect the interest earned on our cash and cash equivalents and marketable securities, and the fair value of those securities. We had cash and cash equivalents of $605 million and marketable securities of $519 million as of December 31, 2023.
Changes in interest rates affect the interest earned on our cash and cash equivalents and marketable securities, and the fair value of those securities. We had cash and cash equivalents of $903 million and marketable securities of $514 million as of December 31, 2024.
To date, foreign currency transaction gains and losses have not been material to our results of operations, and we have not engaged in any foreign currency hedging transactions. Credit Risk We are exposed to credit risk on accounts receivable and our loan servicing activities. This risk is mitigated due to our diverse customer base, dispersed over various geographic regions.
To date, foreign currency transaction gains and losses have not been material to our results of operations, and we have not engaged in any foreign currency hedging transactions. 78 T able of Contents Credit Risk We are exposed to credit risk on accounts receivable and our loan servicing activities.

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