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What changed in Toast, Inc.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of Toast, Inc.'s 2024 and 2025 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 2025 report.

+283 added−269 removedSource: 10-K (2026-02-18) vs 10-K (2025-02-26)

Top changes in Toast, Inc.'s 2025 10-K

283 paragraphs added · 269 removed · 230 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

54 edited+24 added−11 removed77 unchanged
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.
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.
We leverage our extensive on-the-ground experience to provide a reliable payments experience that is resilient to issues with restaurants’ networks or internet service providers as well as Toast’s own cloud platform. • Flexible omni-channel capabilities . Toast provides in-store, digital, and partner payment capabilities.
We leverage our extensive on-the-ground experience to provide a reliable payments experience that is resilient to issues with customers’ networks or internet service providers as well as Toast’s own cloud platform. • Flexible omni-channel capabilities. Toast provides in-store, digital, and partner payment capabilities.
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.
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. • Cellular backup.
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.
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 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.
We believe that the scale of our partner ecosystem provides additional visibility into what products would be most valuable to our customers. 10 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.
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.
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 Table 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.
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 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 our customers, and expand our platform outside the United States and with different types of customers.
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.
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 Table 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 the acceptance of credit cards and debit cards by our customers, and our ability to explore and offer certain other products.
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.
We enable operators to better manage costs and spend less time on administrative tasks - allowing them to focus more on their guests and teams. 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.
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.
Features within our marketing products, such as our writing assistant powered by AI, custom templates and one-click email campaigns, are designed to help operators save time on crafting marketing strategies.
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.
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 or phone.
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
Other trademarks and trade names referred to in this Annual Report on Form 10-K are the property of their respective owners. 17 Table of Contents
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.
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, 2025, we had approximately 6,500 employees worldwide.
What was once primarily an on-site experience with antiquated solutions is now becoming an omnichannel experience with restaurants employing technology to enable a range of additional service models, including curbside pick-up, delivery, wholesale, catering, and retail. Over the last several years, consumer preference towards omnichannel dining options has accelerated.
What was once primarily an on-site experience with antiquated solutions is now becoming an omnichannel experience with operators employing technology to enable a range of additional service models, including curbside pick-up, delivery, wholesale, and catering. Over the last several years, consumer preference towards omnichannel commerce and digital engagement options has accelerated.
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.
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.
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.
We are committed to supporting efforts to minimize 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.
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.
Our Market Restaurants and food and beverage retailers are highly diverse and complex and generally operate with low margins, high employee turnover, highly perishable products, and complex regulations. At the same time, these businesses operate in a dynamic environment with changing input costs, labor constraints, evolving consumer preferences, and the imperative to utilize technology and data to innovate.
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.
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.
State Licensing Requirements Certain of our payment technology solutions are or may become subject to state money transmitter or payroll processor laws and regulations. TPS is licensed as a money transmitter in most states.
State Licensing Requirements Certain of our payment technology solutions are or may become subject to state money transmitter or payroll processor laws and regulations. TPS is licensed as a money transmitter in most states in connection with certain payroll processing services we provide.
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.
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, 2025, we have 67 U.S. patent applications allowed/granted, and in addition we have 10 U.S. patent applications pending. Our issued patents are estimated to expire between 2034 and 2044.
Legislators and regulators at the state and federal level are continuing to propose new requirements that may, if passed, deviate from or exceed the requirements of the laws and regulations that already apply to our business.
Legislators and regulators at the state and federal level are continuing to propose new requirements, including layering requirements related to AI over existing privacy regulations, that may, if passed, deviate from or exceed the requirements of the laws and regulations that already apply to our business.
Our platform is designed to be stable and secure, and provides our individual product teams common capabilities, shared services, and reusable components to build new products efficiently. Our digital technology platform includes: Software, cloud-based services, and partner ecosystem • Reliable cloud services .
Our Technology Our proprietary technology underpins our products to provide a streamlined, integrated customer experience. Our platform is designed to be stable and secure, and provides our individual product teams common capabilities, shared services, and reusable components to build new products efficiently. Our digital technology platform includes: Software, cloud-based services, and partner ecosystem • Reliable cloud services .
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 .
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.
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.
Marketing Toast’s marketing products provide simple, integrated solutions to deliver targeted email and SMS campaigns, reach new guests with advertising campaigns across third-party digital channels, build loyalty programs, offer gift cards, and take reservations to drive further engagement with guests.
Nacha is a self-regulatory organization which administers and facilitates private-sector operating rules for ACH payments and defines the roles and responsibilities of financial institutions and other ACH network participants.
We are also subject to the operating rules of Nacha, formerly the National Automated Clearing House Association. Nacha is a self-regulatory organization which administers and facilitates private-sector operating rules for ACH payments and defines the roles and responsibilities of financial institutions and other ACH network participants.
Our scheduling products facilitate simple shift scheduling, shift swapping and team communication to keep the whole team in sync. Vendor Management Toast’s vendor management offerings are built to help operators make more informed, data-driven decisions by integrating key data and automating processes to provide actionable insights across the back office.
Vendor Management Toast’s vendor management offerings are built to help operators make more informed, data-driven decisions by integrating key data and automating processes to provide actionable insights across the back office.
State advertising, loan brokering, loan servicing, and debt collection laws may apply to the marketing and loan administration services we provide to our bank partner that makes the loans facilitated by Toast Capital. FTC Act and Unfair and Deceptive Acts and Practices Section 5 of the Federal Trade Commission Act, or FTC Act, prohibits unfair or deceptive acts or practices.
State advertising, loan brokering, loan servicing, and debt collection laws may apply to the marketing and loan administration services we provide to our bank partner that makes the loans facilitated by Toast Capital.
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.
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. • Fuel efficient location growth in our core U.S. market. Despite our rapid growth and scale, we estimate that U.S. restaurant locations on our platform account for approximately 20% of the U.S. restaurant market.
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.
We also help tackle rising daily payment processing costs by offering automated, industry compliant credit card surcharging to help eligible customers offset their card processing fees. 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 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.
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 8 Table of Contents businesses. In addition to Toast Capital, we also offer access to a number of other financial technology solutions.
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.
Our sales team consists of an acquisition team that is focused on new location growth and is organized by customer size (i.e., number of locations per customer), type, and geography. The acquisition team is complemented by a growth team that focuses on expansion into the install base.
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.
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. Our scheduling products facilitate simple shift scheduling, shift swapping and team communication to keep the whole team in sync.
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 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. We believe that having a diverse and inclusive workforce is a strategic enabler to our business success.
Our goal is to create a culture where all Toasters can thrive and our strategy is rooted in four key principles: we believe that great talent is everywhere; difference enables innovation; to reach our customers, we must understand them; and we want to be the best place to work for our Toasters.
Our goal is to create a culture where all Toasters can thrive and our strategy is rooted in four key beliefs: great talent is everywhere; difference enables innovation; to reach our customers, we must understand them; and we want to be the best place to work for our Toasters. 12 Table of Contents Corporate Social Responsibility At Toast, we are committed to enriching the food experience for all and harnessing our people, products, and philanthropy to maximize our positive impact on the world.
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.
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 an Easy Pay commercial lease, Toast customers can get up and running quickly while minimizing their upfront costs, paying for hardware and onboarding fees generally through a portion of their daily transactions. We also help tackle rising daily payment processing costs by offering automated, industry compliant credit card surcharging to help eligible customers offset their card processing fees.
With an Easy Pay commercial lease, Toast customers can get up and running quickly while minimizing their upfront costs, such as hardware and onboarding fees, by making lease payments generally through a portion of their daily transactions.
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.
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. In addition, we pay interchange fees to the financial institutions and payment processors that process card payments.
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.
Sales and Marketing The food and beverage industry is a local industry. 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.
Research and Development Our product development strategy is based on typical inputs such as market and user research, strategy planning, and iterative financial analysis, but it is first and foremost based around our customer obsession and mission of empowering the restaurant community to delight guests, do what they love, and thrive.
Our development process incorporates insights from market and user research, strategic planning, and iterative financial analysis, but it is first and foremost driven by our customer obsession and our mission to empower the restaurant and food and beverage retail community to delight their guests, do what they love, and thrive.
Online 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’s Websites and Branded App products aim to simplify building and managing a restaurant’s digital presence with templates and real-time menu updates integrated with the POS system.
Toast’s Websites and Branded App products aim to simplify building and managing a restaurant’s digital presence with templates and real-time menu updates integrated with the POS system.
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.
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. This capability allows customers to continue to place orders, send orders to Kitchen Display Systems, print tickets and receipts, and take credit card payments.
We have seen restaurants expanding into new service models in recent years, allowing guests to choose the type of service that best suits them.
As diversity grows in how guests order, where guests transact, and the means guests use to pay, operators must constantly adapt to support these trends. We have seen operators expanding into new service models in recent years, allowing guests to choose the type of service that best suits them.
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.
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. As Toast continues to grow, so does the importance of brand recognition and our investments into strengthening it.
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.
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. We therefore believe there is a substantial opportunity to grow our location footprint.
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.
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 to support the operational needs of restaurants and food and beverage retailers across a range of formats, sizes, and stages of growth.
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 .
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. Toast is a PCI-DSS compliant Level 1 Service Provider.
With restaurants operating in an increasingly dynamic environment, it is critical that we provide our customers with the tools they need to drive revenue and best serve their guests. As diversity grows in how guests order, where guests eat, and the means guests use to pay, restaurants must constantly adapt to support these trends.
With food service and retail businesses of varying sizes - from small and mid-sized operators to larger, multi-location and enterprise customers- operating in an increasingly dynamic environment, it is critical that we provide our customers with the tools they need to drive revenue and best serve their guests.
The acquisition team is complemented by a customer growth team that focuses on expansion into the install base. To generate and capture demand we invest heavily in the primary discovery channels for restaurant and food and beverage retail operators.
To generate and capture demand we invest heavily in the primary discovery channels for restaurant and food and beverage retail operators. We combine our demand generation efforts with pricing and packaging that is designed to increase platform adoption and simplify the buying process for operators.
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.
Toast.org, our social impact arm, is focused on solving critical issues in the food ecosystem that impact communities and the planet.
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 .
In offline mode, credit card information is securely encrypted and stored on the Toast device until it regains connection. • Partner APIs . Toast has curated a portfolio of over 200 technology partners that utilize Toast APIs to deliver a broad range of specialized solutions.
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.
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.
We also announced a 2-year, $500,000 partnership with C-CAP, a national nonprofit organization providing culinary training and career readiness skills primarily to underserved middle and high school students. Environmental, Social, and Governance, or ESG, matters including diversity, social and climate-related matters, are guided by our ESG roadmap, with oversight from the Nominating and Corporate Governance Committee of our Board.
Our support of culinary training programs expanded to include the provision of donated Toast systems for students to train on. Environmental, Social, and Governance, or ESG, matters including diversity, social and climate-related matters, are guided by our corporate social responsibility executive committee and overseen by the Nominating and Corporate Governance Committee of our Board.
We believe strongly that this customer obsession and innovation on their behalf is the best long-term product strategy to help our customers outperform, and this strategy drives both the products we build and the partnerships we create within the restaurant ecosystem. We organize our team with a full-stack development model, integrating product management, engineering, analytics, data science, and design.
We believe this focus on solving real operational challenges for our customers is fundamental to building durable products and driving long-term platform value. Our research and development teams operate on a full-stack development model, organized into cross-functional groups with end-to-end responsibility across product management, design, engineering, analytics, and data science.
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.
This brand recognition will help continue to drive growth in the restaurant and retail community and increase referrals. Research and Development Our product development strategy is grounded in deep customer understanding and focused on delivering reliable, scalable capabilities that address the critical operational workflows of restaurants and food and beverage retailers.
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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 Android-based software powers our single platform of vertically integrated solutions, and combined with our purpose-built hardware and integrated payments solutions, we deliver a unified system that supports daily operations, employee workflows, and guest engagement.
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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.
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Our platform is designed to serve as a central operating system for our customers’ businesses, with solutions that span point-of-sale, digital ordering and delivery, labor and workforce management, inventory and supply chain tools, marketing and loyalty, financial management, and related services.
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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.
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By offering these solutions on a single, integrated platform, we enable customers to manage operations more efficiently and to adopt additional capabilities as their businesses grow in scale and complexity. Designed to work together, our solutions deliver increasing value as customers adopt more of the platform.
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We therefore believe there is a substantial opportunity to grow our location footprint.
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For example, customers that use our digital ordering solutions can connect those orders directly with our marketing and loyalty tools, allowing them to promote offers to returning guests, encourage repeat visits, and 6 Table of Contents drive more orders through their own digital channels, which can help customers save on third-party commissions and deliver incremental margins.
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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.
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We continue to enhance the capabilities of our platform and expand its applicability across use cases, while maintaining a focus on reliability, scalability, and security. Our approach emphasizes delivering operational outcomes for customers through integrated workflows, data-driven insights, and ongoing innovation across the platform.
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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.
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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.
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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.
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Toast IQ Toast IQ is a conversational artificial intelligence, or AI, assistant built into our platform that uses real-time and historical data from our customers’ operations to help surface actionable business insights and enable operators to ask questions in natural language and take actions directly within the Toast system.
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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.
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Toast IQ is intended to help operators identify trends, make informed decisions, and streamline routine operational workflows through data-driven intelligence and integrated platform actions.
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We made new investments through product innovations and philanthropic partnerships to address wasteful foodservice packaging - focused on keeping costs for operators down and single-use plastic out of the waste stream - while enabling a reusable economy.
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In addition, certain marketing products enable operators to create and manage advertising campaigns designed to reach new guests across third-party digital channels, helping to extend their visibility beyond existing customers. Online 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.
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Additionally, state employment and payroll regulations impose regulations on the use of payroll cards to disburse wages and other compensation. Further, proposals to adopt or change the statutes or regulations affecting on-demand pay services, such as PayOut, or the issuance of agency guidance related thereto, may periodically be promulgated by federal or state legislatures and government agencies.
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With our POS integrations, restaurants can streamline order intake, eliminate the need for third-party tablets, and seamlessly sync menus. 7 Table of Contents Team Management Toast’s payroll and team management products offer a centralized hub that streamlines the employee onboarding, management, and payroll process.
Removed
If enacted or adopted, those proposals or issuances could affect PayOut’s operating environment in substantial and unpredictable ways.
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We provide optional cellular backup in Toast Go® 3 handhelds that allows seamless online operation including payments, kitchen syncing, and ticket printing when handhelds move beyond 9 Table of Contents Wi-Fi. We provide optional cellular backup in routers to provide redundancy when our customers’ internet service is disrupted.
Added
This structure enables teams to move quickly, make informed trade-offs, and deliver integrated solutions that align closely with customer needs. Our platform architecture provides shared services, common capabilities, and reusable components that allow product teams to build and scale new functionality efficiently while maintaining reliability, security, and consistency across the platform.
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Our research and development personnel are distributed across North America, Europe, and Asia, enabling us to access global talent and support a growing and increasingly diverse customer base. Our teams include professionals with expertise across product management, user experience design, software engineering, data 11 Table of Contents science, and quality assurance.
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This global footprint supports both the ongoing enhancement of our existing products and the development of new capabilities that extend the value of our platform over time. Competition The market is competitive and evolving rapidly.
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In 2025, Toast.org commitments focused on addressing hunger and food insecurity, and supporting the next generation of industry leaders through culinary training programs. We announced a $5 million, five-year commitment to address hunger and food insecurity globally, making grants to hunger-relief organizations as well as directly to U.S. restaurants fighting hunger in their local communities.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeWe 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.
Biggest changeWe expect the competitive landscape in the hospitality 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. 36 Table of Contents Certain competitors could use strong or dominant positions in one or more markets to gain a competitive advantage against us, such as by integrating competing platforms or features into products they control, including search engines, web browsers, mobile device operating systems, or social networks; by making acquisitions; or by making access to our platform more difficult.
Many of the key components used to manufacture our products, such as our customer-facing displays, come from limited or single sources of supply, and therefore a disruption with one manufacturer in our supply chain may have an adverse effect on other aspects of our supply chain and may disrupt our ability to effectively and timely deliver our hardware products.
Many of the key components used to manufacture our hardware products, such as our customer-facing displays, come from limited or single sources of supply, and therefore a disruption with one manufacturer in our supply chain may have an adverse effect on other aspects of our supply chain and may disrupt our ability to effectively and timely deliver our hardware products.
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.
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; 57 Table of Contents • 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.
That true lender status determines various elements of the structure of the loan program, including that we do not hold licenses required solely for being the party that makes loans to our customers, and loans facilitated through the Toast Capital platform may involve pricing and payment structures permissible at origination because the lender is a bank, and/or the disclosures provided to borrowers are accurate and compliant in reliance of the status of the lender as a bank.
That true lender status determines various elements of the structure of the loan program, including that we do not hold licenses required solely for being the party that makes loans to our customers, and loans facilitated through the Toast Capital platform may involve pricing and payment structures permissible at origination because the lender is a bank, and/or the disclosures provided to borrowers are accurate and compliant in reliance on the status of the lender as a bank.
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.
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 increases, reductions, discontinuances or other changes to our share repurchase program and the 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; 55 Table of Contents • 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; • 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.
There can be no assurance that we will be able to obtain or maintain any such licenses in all of states where we offer transaction processing services, and, even if we were able to do so, there could be substantial costs and potential product changes involved in maintaining such licenses, which could have a material adverse effect on our business.
There can be no assurance that we will be able to obtain or maintain any such licenses in all states where we offer transaction processing services, and, even if we were able to do so, there could be substantial costs and potential product changes involved in maintaining such licenses, which could have a material adverse effect on our business.
Finally, if our partners or the financial institution in which we hold these funds suffers any kind of insolvency or liquidity event, fails to have adequate controls or to deliver their services in a timely manner, we may at times experience losses with limited ability to recoup loss or to directly strengthen relevant controls.
Finally, if our partners or the financial institution in which we hold these funds suffers any kind of insolvency or liquidity event, fails to have adequate controls or to deliver their services in a timely manner, we may at times experience losses with limited ability to recoup losses or to directly strengthen relevant controls.
The long-term potential of our business may be adversely affected if we are unable to expand our business successfully into these sub-markets. Our business also depends on retaining our existing customers. Our business is subscription-based, and contract terms for our SaaS products generally range from 12 to 36 months.
The long-term potential of our business may be adversely affected if we are unable to expand our business successfully into these sub-markets. Our business also depends on retaining our existing customers. Our business is primarily subscription-based, and contract terms for our SaaS products generally range from 12 to 36 months.
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.
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. For example, Toast Capital’s bank partner offers qualified Toast customers working capital loans in accordance with credit policies established by our bank partner.
If we, or our licensed personnel, apply for new licenses, we may become subject to additional licensing requirements, which we may not be in compliance with at all times. Importantly, we provide our financial technology solutions in a constantly changing legal and regulatory environment.
If we, or our licensed personnel, apply for new licenses, we may become subject to additional licensing requirements, which we may not be in compliance with at all times. We provide our financial technology solutions in a constantly changing legal and regulatory environment.
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.
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 regulations, 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.
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.
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 Table of Contents SMBs are also typically more susceptible to the adverse effects of policy changes and macroeconomic conditions including those caused by fluctuating inflation levels and interest rates.
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.
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 Table 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.
As AI technologies, including generative AI models, develop rapidly, threat actors are using these technologies to create new attack methods that are increasingly automated, targeted, and coordinated and more difficult to defend against.
As AI technologies, including generative AI models, develop rapidly, threat actors are using these technologies to create new attack methods that are increasingly automated, targeted, and coordinated and more difficult to detect and defend against.
It is possible that these laws may be interpreted and applied in a manner that is inconsistent with our existing data management practices or the features of our services and platform capabilities.
It is possible that these laws may be interpreted and applied in a manner that is inconsistent with our existing data practices or the features of our services and platform capabilities.
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.
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 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.
Given the uncertainty and instability of global economic and political environment, we cannot predict how, the duration of and the extent to which our operations and financial results may be affected.
Given the uncertainty and instability of global economic and political environment, we cannot predict how, the duration of, or the extent to which our operations and financial results may be affected.
If we were to be determined the “true lender” of loans facilitated through the Toast Capital platform, we could face penalties and/or loans facilitated through the Toast Capital platform may be or become void, voidable, or otherwise impaired in a manner that may have adverse effects on our operations (either directly or as a result of an adverse impact on our relationship with our bank partner). 45 T able of Contents There have been no formal proceedings against us or indications of any proceedings against us to date, but there can be no assurance that state agencies or regulators will not make assertions with respect to the loans facilitated by our platform in the future.
If we were to be determined the “true lender” of loans facilitated through the Toast Capital platform, we could face penalties and/or loans facilitated through the Toast Capital platform may be or become void, voidable, or otherwise impaired in a manner that may have adverse effects on our operations (either directly or as a result of an adverse impact on our relationship with our bank partner). 45 Table of Contents There have been no formal proceedings against us or indications of any proceedings against us to date, but there can be no assurance that state agencies or regulators will not make assertions with respect to the loans facilitated by our platform in the future.
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.
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 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.
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.
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 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.
Moreover, an increasing number of states have considered or adopted laws or administrative practices that attempt to impose obligations for online marketplaces, payment service providers, and other intermediaries. These obligations may require us to collect and remit taxes on the merchant customers behalf and take on additional reporting and record-keeping obligations.
Moreover, an increasing number of states have considered or adopted laws or administrative practices that attempt to impose obligations for online marketplaces, payment service providers, and other intermediaries. These obligations may require us to collect and remit taxes on the merchant customers’ behalf and take on additional reporting and record-keeping obligations.
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.
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 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.
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.
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 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.
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.
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 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.
These rules and regulations have and will increase our legal and financial compliance costs and have and will make some activities more difficult, time-consuming, and costly, although we are currently unable to estimate these costs with any degree of certainty. 60 T able of Contents As a public company subject to enhanced rules and regulations, it is also more expensive for us to obtain directors and officers liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage.
These rules and regulations have and will increase our legal and financial compliance costs and have and will make some activities more difficult, time-consuming, and costly, although we are currently unable to estimate these costs with any degree of certainty. 60 Table of Contents As a public company subject to enhanced rules and regulations, it is also more expensive for us to obtain directors and officers liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage.
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.
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.
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.
We derive, and expect to continue to derive, a majority of our revenue and cash inflows from our integrated cloud-based 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.
Cyber incidents have been increasing in sophistication and frequency and can include third parties gaining access to employee or guest information using stolen or inferred credentials, computer malware, viruses, spamming, phishing attacks, ransomware, card skimming code, and other deliberate attacks and attempts to gain unauthorized access.
Cyber incidents have been increasing in sophistication and frequency and can include third parties gaining access to employee or guest information using stolen or inferred credentials, computer malware, viruses, spamming, phishing attacks, ransomware, card skimming code, social engineering, and other deliberate attacks and attempts to gain unauthorized access.
The market for qualified personnel is competitive, and we may not succeed in recruiting additional personnel or may fail to effectively replace current personnel who depart with qualified or effective successors. Our effort to retain and develop personnel may also result in significant additional expenses, which could adversely affect our profitability.
The market for qualified personnel is competitive, and we may not succeed in recruiting additional personnel or may fail to effectively replace current personnel who depart with qualified or effective successors. Our efforts to retain and develop personnel may also result in significant additional expenses, which could adversely affect our profitability.
If we are unable to comply with the rules or laws of new jurisdictions in which we conduct business, our business or reputation may be adversely affected. 44 T able of Contents Our relationship with our bank partner that makes loans to our customers may subject us to regulation as a service provider or a lender, and loans found to be made in violation of applicable law may be unenforceable, which could damage our commercial relationships and adversely affect our business and results of operations.
If we are unable to comply with the rules or laws of new jurisdictions in which we conduct business, our business or reputation may be adversely affected. 44 Table of Contents Our relationship with our bank partner that makes loans to our customers may subject us to regulation as a service provider or a lender, and loans found to be made in violation of applicable law may be unenforceable, which could damage our commercial relationships and adversely affect our business and results of operations.
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.
Of the federal NOLs, $843 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.
As a result, we may be required to adjust our prices and product offerings for certain customers, which could adversely affect our revenue, gross margin, profitability, financial position, and cash flow. 22 T able of Contents We are subject to risks associated with certain financial products we offer and our handling of customer funds, including counterparty risk with key partners, the ability of our customers to pay their obligations, and the risk of fraud.
As a result, we may be required to adjust our prices and product offerings for certain customers, which could adversely affect our revenue, gross margin, profitability, financial position, and cash flow. 22 Table of Contents We are subject to risks associated with certain financial products we offer and our handling of customer funds, including counterparty risk with key partners, the ability of our customers to pay their obligations, and the risk of fraud.
Threats to third-party systems can originate from human error, fraud, or malice on the part of employees or third parties, or simply from accidental technological failure, and/or computer viruses and other malware that can be distributed and infiltrate systems of third parties on whom we rely.
Threats to third-party systems can originate from human error, social engineering, fraud, or malice on the part of employees or third parties, or simply from accidental technological failure, and/or computer viruses and other malware that can be distributed and infiltrate systems of third parties on whom we rely.
While the Delaware Supreme Court ruled other state courts have upheld the validity of federal forum selection provisions purporting to require claims under the Securities Act be brought in federal court, there is uncertainty as to whether other courts will enforce our Federal Forum Provision.
While the Delaware Supreme Court and other state courts have upheld the validity of federal forum selection provisions purporting to require claims under the Securities Act be brought in federal court, there is uncertainty as to whether other courts will enforce our Federal Forum Provision.
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.
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 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.
Any such regulatory developments could result in uncertainty about and changes in the ways such regulations apply to us, and may require additional resources to ensure our continued compliance. 43 T able of Contents Our subsidiary, TPS, holds money transmitter licenses or similar authorizations in multiple states where they may be required in order for us to offer our payroll processing products.
Any such regulatory developments could result in uncertainty about and changes in the ways such regulations apply to us, and may require additional resources to ensure our continued compliance. 43 Table of Contents Our subsidiary, TPS, holds money transmitter licenses or similar authorizations in multiple states where they may be required in order for us to offer our payroll processing products.
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.
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 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.
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.
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 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.
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.
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 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.
In some states, the factor rate of some loans facilitated through the Toast Capital platform, if considered interest, may exceed the maximum interest rate permitted from time to time for loans made by non-bank lenders to borrowers located in such states.
In some states, the fee of some loans facilitated through the Toast Capital platform, if considered interest, may exceed the maximum interest rate permitted from time to time for loans made by non-bank lenders to borrowers located in such states.
Should we fail to address these requirements, or should these new solutions, or new regulations or interpretations of existing regulations, impose requirements on us that are impractical or that we cannot satisfy, the future growth and success of our financial business may be materially and adversely affected. 23 T able of Contents Our business also handles payroll processing administration for a number of our customers.
Should we fail to address these requirements, or should these new solutions, or new regulations or interpretations of existing regulations, impose requirements on us that are impractical or that we cannot satisfy, the future growth and success of our financial business may be materially and adversely affected. 23 Table of Contents Our business also handles payroll processing administration for a number of our customers.
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.
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 Table of Contents We cannot predict the effect our dual-class structure may have on the market price of our Class A common stock.
While we select third parties to which we transfer data carefully, we do not control their actions, and these third parties may experience breaches that result in unauthorized access of data and information stored with them despite these contractual requirements and the security measures these third parties employ. 28 T able of Contents If any security breach involving our systems or the systems of third parties that store or process our data or significant denial-of-service attacks or other cyber attack occurs or is believed to have occurred, our reputation and brand could be damaged, we could be required to expend significant capital and other resources to alleviate problems caused by such actual or perceived breaches or attacks and remediate our systems.
While we select third parties to which we transfer data carefully, we do not control their actions, and these third parties may experience breaches that result in unauthorized access of data and information stored with them despite these contractual requirements and the security measures these third parties employ. 29 Table of Contents If any security breach involving our systems or the systems of third parties that store or process our data or significant denial-of-service attacks or other cyber attack occurs or is believed to have occurred, our reputation and brand could be damaged, we could be required to expend significant capital and other resources to alleviate problems caused by such actual or perceived breaches or attacks and remediate our systems.
We may not experience the same levels of success with respect to our customer acquisition strategies as seen in prior periods, and if the costs associated with acquiring new customers materially rises in the future, our expenses may rise significantly. 18 T able of Contents In addition, while a majority of our current customer base consists of small- and medium-sized businesses, or SMBs, we continue to pursue customer growth within the enterprise and mid-market segments of the restaurant market, as well as among SMBs.
We may not experience the same levels of success with respect to our customer acquisition strategies as seen in prior periods, and if the costs associated with acquiring new customers materially rise in the future, our expenses may rise significantly. 18 Table of Contents In addition, while a majority of our current customer base consists of small- and medium-sized businesses, or SMBs, we continue to pursue customer growth within the enterprise and mid-market segments of the restaurant market, as well as among SMBs.
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.
Any of these events could adversely affect our ability to increase our revenue. 41 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.
We also rely on certain suppliers located internationally as part of our supply chain, and the supply risks described above may similarly apply to or be more pronounced in respect of those international suppliers. For example, we have several long-term contracts with companies based in China and other parts of Asia.
We also rely on certain suppliers located internationally as part of our supply chain, and the supply risks described above may similarly apply to or be more pronounced in respect of those international suppliers. For example, we have several long-term contracts with companies based in Asia.
The continual improvement and enhancement of our platform requires significant investment, and we may not have the resources to make such investment. 30 T able of Contents If we are unable to successfully develop new products or services, enhance the functionality, performance, reliability, design, security, and scalability of our platform in a manner that responds to our customers’ and their guests’ evolving needs, or gain market acceptance of our new products and services, or if our estimates regarding the total addressable market and the portion of such total addressable market which we expect to capture for new products and/or enhancements prove inaccurate, our business and operating results will be harmed.
The continual improvement and enhancement of our platform requires significant investment, and we may not have the resources to make such investment. 31 Table of Contents If we are unable to successfully develop new products or services, enhance the functionality, performance, reliability, design, security, and scalability of our platform in a manner that responds to our customers’ and their guests’ evolving needs, or gain market acceptance of our new products and services, or if our estimates regarding the total addressable market and the portion of such total addressable market which we expect to capture for new products and/or enhancements prove inaccurate, our business and operating results will be harmed.
For example, our manufacturers may experience temporary or permanent disruptions in their manufacturing operations due to equipment breakdowns, labor strikes or shortages, natural disasters, disease outbreaks, civil unrest, hostilities or wars, component or material shortages, cost increases, acquisitions, insolvency, changes in legal or regulatory requirements, or other similar problems.
Additionally, our manufacturers may experience temporary or permanent disruptions in their manufacturing operations due to equipment breakdowns, labor strikes or shortages, natural disasters, disease outbreaks, civil unrest, hostilities or wars, component or material shortages, cost increases, acquisitions, insolvency, changes in legal or regulatory requirements, or other similar problems.
Any increase in our tax rate could reduce our profitability or, in some cases, deepen our losses. 50 T able of Contents Our future tax rates could be influenced by modifications in accounting standards or alterations in tax laws at the federal, state, or international levels, as well as new tax rulings. The U.S.
Any increase in our tax rate could reduce our profitability or, in some cases, deepen our losses. 50 Table of Contents Our future tax rates could be influenced by modifications in accounting standards or alterations in tax laws at the federal, state, or international levels, as well as new tax rulings. The U.S.
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.
Any of these results could harm our business, financial condition, and results of operations. 53 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.
In addition, the lenders would have the right to proceed against the collateral in which we granted a security interest to them, which consists of substantially all our assets. Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.
In addition, the lenders would have the right to proceed against the collateral in which we granted a security interest to them, which consists of substantially all our assets. 33 Table of Contents Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.
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.
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.
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.
Further, these agreements do not prevent our competitors from independently developing technologies that are substantially equivalent or superior to our products. 52 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.
Any determination that we are in fact required to be licensed in a state that we have not already had a license may require substantial expenditures of time and money and could lead to liability in the nature of penalties or fines, costs, legal fees, reputational damage, or other negative consequences as well as cause us to be required to cease operations in some of the states we service, which would result have a material adverse effect on our business, financial condition, results of operations, and reputation.
Any determination that we are in fact required to be licensed in a state where we do not already hold a license may require substantial expenditures of time and money and could lead to liability in the nature of penalties or fines, costs, legal fees, reputational damage, or other negative consequences as well as cause us to be required to cease operations in some of the states we service, which would have a material adverse effect on our business, financial condition, results of operations, and reputation.
If the perceived value of our equity awards declines, it may adversely affect our ability to attract and retain highly qualified employees. 25 T able of Contents We are also substantially dependent on our direct sales force to obtain new customers and increase sales to existing customers.
If the perceived value of our equity awards declines, it may adversely affect our ability to attract and retain highly qualified employees. 25 Table of Contents We are also substantially dependent on our direct sales force to obtain new customers and increase sales to existing customers.
Our offering of stored value cards, gift cards and electronic gift certificates may also trigger various federal and state laws and regulations. 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.
In addition, our offering of stored value cards, gift cards and electronic gift certificates may trigger various federal and state laws and regulations. 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.
We rely on third-party payment processors to facilitate payments made by guests and payments made to customers on our platform. While we may continue to seek payment processing relationships with additional payment processors from time to time, we expect to continue to rely on a limited number of payment processors for the foreseeable future.
We rely on third-party payment processors to process and settle payments made by guests and payments made to customers on our platform. While we may continue to seek payment processing relationships with additional payment processors from time to time, we expect to continue to rely on a limited number of payment processors for the foreseeable future.
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.
Additionally, if customers try to pass along increased operating costs by raising prices 39 Table of Contents for their guests, order volume may decline, which we expect would adversely affect our financial condition and results of operations. We depend upon third parties to manufacture our hardware products and to supply key components necessary to manufacture our hardware products.
Consequently, at any given time, we may be advancing funds on behalf of customers or holding or directing funds of customers, while payroll payments are being processed.
Consequently, at any given time, we may be disbursing funds on behalf of customers, or holding or directing funds of customers, while payroll payments are being processed.
We currently host our platform and support our operations on multiple data centers provided by Amazon Web Services, or AWS, a third-party provider of cloud infrastructure services. We do not have control over the operations of the facilities of AWS that we use.
We currently host our platform and support our operations on multiple data centers provided by AWS, a third-party provider of cloud infrastructure services. We do not have control over the operations of the facilities of AWS that we use.
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.
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. Moreover, while U.S.
Additionally, we periodically conduct audits and self-assessments to verify our compliance with Nacha Rules. If an audit or self-assessment under Nacha Rules identifies any deficiencies that we need to remediate, the remediation efforts may distract our management team and other staff and be expensive and time consuming.
Additionally, we periodically conduct audits and self-assessments to verify our compliance with Nacha Rules. If an audit or self-assessment under Nacha Rules identifies any deficiencies that we need to remediate, 38 Table of Contents the remediation efforts may distract our management team and other staff and be expensive and time consuming.
Further, we rely on the ability of subsequent holders to continue charging such factor rate and payment structures and to enforce other contractual terms of the loans that are permissible under federal banking laws following the acquisition of the loans.
Further, we rely on the ability of subsequent holders to continue charging such fee and payment structures and to enforce other contractual terms of the loans that are permissible under federal banking laws following the acquisition of the loans.
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.
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 but not limited to descriptions of certain security measures we employ or such features embedded within our products.
There can be no assurance that we will be able to obtain any such licenses, and, even if we are able to do so, we could be required to make products and services changes in order to obtain and maintain such licenses, which could have a material and adverse effect on our business.
There can be no assurance that we will be able to obtain any such licenses, and, even if we are able to do so, we could be required to make product and service changes in order to obtain and maintain such licenses, which could have a material and adverse effect on our business.
When establishing the factor rate and payment structures that are charged to borrowers on loans we market and service, our bank partner relies on certain authority under federal law to export the interest requirements of the state where the bank is located to borrowers located in other states.
When establishing the fixed fee and payment structures that are charged to borrowers on loans we market and service, our bank partner relies on certain authority under federal law to export the interest requirements of the state where the bank is located to borrowers located in other states.
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.
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. 30 Table of Contents From time to time, we may experience limited periods of server downtime due to server failure or other technical difficulties.
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.
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 partners, and our bank partners could terminate their relationship with us. We intend to continue to explore additional financial or other solutions to offer to our customers.
Under our agreement with our bank partner, on a monthly basis, we are obligated to purchase loans made in a particular quarter that have been (or are scheduled to be) charged off, are otherwise non-performing, or do not satisfy our bank partner’s credit policy, unless such purchase would cause the principal amount of such purchased loans to exceed 15% of the original principal amount of loans made in the applicable quarter.
Our agreement with our bank partner that originates loans requires us to, on a monthly basis, purchase loans made in a particular quarter that have been (or are scheduled to be) charged off, are otherwise non-performing, or do not satisfy our bank partner’s credit policy, unless such purchase would cause the principal amount of such purchased loans to exceed 15% of the original principal amount of loans made in the applicable quarter.
A decline in macroeconomic conditions could increase the risk of non-payment or fraud and could also lead to a decrease in the number of customers eligible for loans or financing.
Macroeconomic declines could also increase the risk of non-payment or fraud and lead to a decrease in the number of customers eligible for loans or financing.
Furthermore, the integration of third-party AI models, including Large Language Models, within our products and services may rely, in part, on certain safeguards implemented by the third-party developers of the underlying AI models, including those related to the accuracy, bias, and other variables of the data, and these safeguards may be insufficient.
Furthermore, the integration of third-party AI models, including Large Language Models, within our products and services may rely, in part, on certain safeguards implemented by the third-party developers of the underlying AI models, including those related to the accuracy, bias, and other variables of the data, and these safeguards may be insufficient. In addition, AI may present evolving ethical issues.
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.
We must also comply with any applicable laws related to lending, loan brokering, loan servicing, debt collection, payroll processing, on-demand pay, insurance, anti-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.
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.
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.
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 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, 2025 and 2024, our revenue was $6,153 million and $4,960 million, respectively, representing a 24% growth rate.
Increases in Payment Network fees or new regulations could negatively affect our earnings. The Payment Network Rules are set by their boards, which may be influenced by card issuers, and some of those issuers are our competitors with respect to these processing services. Many banks directly or indirectly sell processing services to customers in direct competition with us.
The Payment Network Rules are set by their boards, which may be influenced by card issuers, and some of those issuers are our competitors with respect to these processing services. Many banks directly or indirectly sell processing services to customers in direct competition with us.
Issues and claims relating to these contracts and business arrangements may require us to bring a claim in China or another jurisdiction in Asia, which may be difficult and expensive to arbitrate, litigate, enforce, or otherwise resolve. In addition, there is uncertainty as to whether the courts in these international jurisdictions would recognize or enforce judgments of U.S. courts.
Issues and claims relating to these contracts and business arrangements may require us to bring a claim in a jurisdiction where it may be difficult and expensive to arbitrate, litigate, enforce, or otherwise resolve. In addition, there is uncertainty as to 40 Table of Contents whether the courts in these international jurisdictions would recognize or enforce judgments of U.S. courts.
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.
Any litigation in international jurisdictions may be protracted and result in substantial costs and diversion of resources and management attention. 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.
We generally sell subscriptions to our platform together with our payment services. Except for a small number of enterprise brands, customers are unable to subscribe to our platform without also subscribing to our payment services.
We generally sell subscriptions to our platform together with our payment services. Except for a small subset of our customers, businesses are unable to subscribe to our platform without also subscribing to our payment services.
As of December 31, 2024, we had 81 million shares of Class B common stock outstanding, representing approximately 60% of the voting power of our outstanding capital stock; our 5% stockholders, directors, executive officers, and their affiliates beneficially owned in the aggregate approximately 45% of the voting power of our outstanding capital stock .
As of December 31, 2025, we had 66 million shares of Class B common stock outstanding, representing approximately 55% of the voting power of our outstanding capital stock; our 5% stockholders, directors, executive officers, and their affiliates beneficially owned in the aggregate approximately 55% of the voting power of our outstanding capital stock.
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, seasonality may cause fluctuations in our financial results, and other trends that develop may similarly impact our results of operations. 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. We have published ESG initiatives, goals, and commitments.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeManagement 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.
Biggest changeManagement 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 assess the effectiveness of our overall cybersecurity and compliance programs.
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.
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 awareness training which is required for all employees during onboarding and annually thereafter, and we conduct regular phishing simulations.
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.
Our CISO also oversees the cybersecurity incident response team and is responsible for updating our Board on 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 reviews and contributes to the cybersecurity risk reporting that is provided to the Audit Committee of our Board on a quarterly basis. The quarterly updates include cybersecurity risk assessment results, which include risks associated with the use of third-party service providers, and cover efforts to mitigate previously identified risks.
Our CISO reviews and contributes to the cybersecurity risk reporting that is provided to the Audit Committee of our Board on a quarterly basis. The quarterly updates include cybersecurity risk assessment results, which 61 Table of Contents include risks associated with the use of third-party service providers, and cover efforts to mitigate previously identified risks.
Added
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.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeData 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
Biggest changeThe returns shown are based on historical results and are not intended to suggest future performance. 63 Table of Contents Recent Sales of Unregistered Securities None.
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.
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, 2025.
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.
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, 2025, there were 49 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 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.
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.
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.
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.
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.
Our Class B common stock is neither listed nor traded. Holders of Record 62 Table of Contents As of December 31, 2025, there were 202 holders of record of our Class A common stock.
Added
Issuer Purchases of Equity Securities Our purchases of our common stock in the fourth quarter of fiscal year 2025 were: Period Total Number of Shares Purchased Average Price Paid Per Share (1) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (2) (in thousands) (in thousands) (in millions) October 1, 2025 to October 31, 2025 347 $ 36.03 347 $ 126 November 1, 2025 to November 30, 2025 541 $ 33.78 541 $ 108 December 1, 2025 to December 31, 2025 624 $ 34.99 624 $ 87 Total 1,512 1,512 (1) Average Price Paid Per Share excludes cash paid for commissions.
Added
(2) On February 15, 2024, we announced the authorization of a share repurchase program for the repurchase of shares in our Class A common stock, in an aggregate amount of up to $250 million. In February 2026, our board of directors authorized an increase of $500 million to our share repurchase program.
Added
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. Item 6. [Reserved] 64 Table of Contents

Item 7. Management's Discussion & Analysis

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

39 edited+5 added−17 removed53 unchanged
Biggest changeInterest 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.
Biggest changeInterest Income, net Year Ended December 31, Change (dollars in millions) 2025 2024 Amount % Interest income, net $ 51 $ 42 $ 9 14 % Interest income, net, increased by $9 million during the fiscal year ended December 31, 2025 compared to the prior fiscal year, primarily driven by increased cash and cash equivalent and marketable securities balances. 70 Table of Contents Change in Fair Value of Warrant Liability Year Ended December 31, Change (dollars in millions) 2025 2024 Amount % Change in fair value of warrant liability $ 3 $ (49) $ 52 (106) % The change in fair value of the warrant liability during the fiscal year ended December 31, 2025 was primarily driven by a decrease in our stock price, as the number of outstanding warrants remained unchanged during the period.
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.
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, 2025 compared to the fiscal year ended December 31, 2024.
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.
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 Table of Contents CRITICAL ACCOUNTING POLICIES AND ESTIMATES The preparation of financial statements in conformity with GAAP requires us to make certain estimates and assumptions.
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.
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 Table 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.
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.
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 Table 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.
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 .
Discussions related to the fiscal year ended December 31, 2023 and year-over-year comparisons between the fiscal years ended December 31, 2024 and 2023 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, 2024, filed with the SEC on February 26, 2025, and incorporated herein by reference. • Liquidity and Capital Resources .
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.
Discussions related to the fiscal year ended December 31, 2023 and year-over-year comparisons between the fiscal years ended December 31, 2024 and 2023 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, 2024, filed with the SEC on February 26, 2025, 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. 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 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 Table of Contents RESULTS OF OPERATIONS The following section discusses the fiscal years ended December 31, 2025 and 2024 and provides a year-over-year comparison between fiscal years ended December 31, 2025 and 2024.
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.
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) 2025 2024 Net cash provided by operating activities $ 661 $ 360 Capital expenditures (53) (54) Free cash flow $ 608 $ 306 LIQUIDITY AND CAPITAL RESOURCES Our principal sources of liquidity are cash and cash equivalents and marketable securities.
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.
As of December 31, 2025, approximately 164,000 Locations, an increase of 22% year over year, processing approximately $195 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 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.
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.
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.
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.
The decrease in net cash provided by financing activities during the fiscal year ended December 31, 2025, as compared to the same period last year, was primarily driven by cash outflows related share repurchases and payments of debt issuance costs, partially offset by cash inflows from the proceeds from the issuance of common stock.
Share Repurchase Program In February 2024, we announced the authorization of a share repurchase program for the repurchase of shares of our Class A common stock, in an aggregate amount of up to $250 million.
Share Repurchase Program In February 2024, we announced the authorization of a share repurchase program for the repurchase of shares of our Class A common stock, in an aggregate amount of up to $250 million. In February 2026, our board of directors authorized an increase of $500 million to our share repurchase program.
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.
As of December 31, 2025 our fully diluted share count was as follows: Year Ended December 31, 2025 (1) (shares in millions) Class A and B common stock issued and outstanding 589 Options to purchase Class A common stock and Class B common stock 21 Unvested restricted stock units 15 Warrants to purchase Class B common stock 1 Shares reserved for charitable donations 3 Total fully diluted share count 629 (1) Share amounts presented above do not give effect to potential repurchases of common stock under the treasury stock method.
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.
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 Table of Contents The following table reflects the reconciliation of net income to Adjusted EBITDA for each of the periods presented: Year Ended December 31, (in millions) 2025 2024 Net income $ 342 $ 19 Stock-based compensation expense and related payroll tax 255 256 Depreciation and amortization 67 46 Interest income, net (51) (42) Gain on warrant extinguishment — (14) Change in fair value of warrant liability (3) 49 Termination of leases 1 5 Stock-based charitable contribution expense 6 5 Restructuring and restructuring related expenses (1) 12 46 Income tax expense 4 3 Adjusted EBITDA $ 633 $ 373 (1) Restructuring and restructuring-related expenses for the fiscal years ended December 31, 2025 and 2024 include $9 million and $32 million of severance benefits, $3 million and $12 million of stock-based compensation expense and $— million and $2 million of accelerated amortization related to facilities, respectively.
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.
The increase in net cash used in investing activities during the fiscal year ended December 31, 2025, as compared to the fiscal year ended December 31, 2024, was primarily driven by net cash outflows from marketable securities as compared to net cash inflows from marketable securities during last year.
(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.
(2) Excludes $123 million of cash held on behalf of customers and $59 million of restricted cash. 74 Table of Contents Year Ended December 31, (in millions) 2025 2024 Net cash provided by operating activities $ 661 $ 360 Net cash (used in) investing activities (172) (39) Net cash provided by financing activities 7 18 Effect of exchange rate changes on cash and cash equivalents and restricted cash 2 (1) Net increase in cash, cash equivalents, cash held on behalf of customers and restricted cash $ 498 $ 338 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, 2025 compared to the previous year.
The 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.
The following tables present selected financial information related to our liquidity: Year Ended December 31, (in millions) 2025 (1) 2024 (2) Cash and cash equivalents $ 1,353 $ 903 Marketable securities 638 514 Cash and cash equivalents and marketable securities $ 1,991 $ 1,417 Available credit facility $ 347 $ 325 Total $ 2,338 $ 1,742 (1) Excludes $159 million of cash held on behalf of customers and $71 million of restricted cash.
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.
Recent Accounting Pronouncements Refer to the sections titled “Recent Accounting Pronouncements” in Note 2, “Summary of Significant Accounting Policies” 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 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.
The increase in financial technology solutions revenue during the fiscal year ended December 31, 2025 was primarily attributable to the increase in Locations on the Toast platform.
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.
As of December 31, 2025, there were no borrowings outstanding on the 2021 Facility and outstanding letters of credit totaled $3 million. As of December 31, 2025, our total available borrowing capacity under the 2021 Facility was $347 million. See Note 6, "Debt" of the Notes to the Consolidated Financial Statements for further information.
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 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.
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.
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, 2025, our non-cancellable purchase obligations to hardware suppliers totaled $106 million, all of which is due within the next 12 months. • As of December 31, 2025, our non-cancellable contractual commitments with our cloud service providers and other vendors totaled $157 million of which $90 million is due within the next 12 months and $67 million thereafter.
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.
Revenue Year Ended December 31, Change (dollars in millions) 2025 2024 Amount % Subscription services $ 936 $ 706 $ 230 33 % Financial technology solutions 5,037 4,053 984 24 % Hardware and professional services 180 201 (21) (10) % Total revenue $ 6,153 $ 4,960 $ 1,193 24 % The increase in subscription services revenue during the fiscal year ended December 31, 2025 was attributed to growth in Locations on the Toast platform and the continued increase in product adoption.
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.
Research and Development Year Ended December 31, Change (dollars in millions) 2025 2024 Amount % Research and development $ 374 $ 351 $ 23 7 % The increase in research and development expenses during the fiscal year ended December 31, 2025 was primarily attributable to an increase in employee-related costs.
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.
During the fiscal year ended December 31, 2025, the increase in net cash provided by operating activities as compared to the fiscal year ended December 31, 2024, was primarily driven by net income of $342 million during the fiscal year ended December 31, 2025 as compared to a net income of $19 million during the same period last year.
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.
See Note 17, “Subsequent Events (unaudited)" of the Notes to the Consolidated Financial Statements for further information. 75 Table 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.
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.
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. To calculate this metric, we first calculate recurring run-rate on a monthly basis.
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.
Costs of Revenue Year Ended December 31, Change (dollars in millions) 2025 2024 Amount % Subscription services $ 264 $ 219 $ 45 21 % Financial technology solutions 3,891 3,175 716 23 % Hardware and professional services 400 371 29 8 % Amortization of acquired intangible assets 5 5 — — % Total costs of revenue $ 4,560 $ 3,770 $ 790 21 % The increase in subscription services costs during the fiscal year ended December 31, 2025 was primarily driven by a $22 million increase in amortization of capitalized software and a $15 million increase in employee-related costs.
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.
This increase was partially offset by a higher use of cash for working capital primarily driven by increases in accrued expenses and other current liabilities due to the timing of payments.
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.
Year Ended December 31, (in millions) 2025 2024 2023 Revenue: Subscription services $ 936 $ 706 $ 500 Financial technology solutions 5,037 4,053 3,189 Costs of Revenue: Subscription services 264 219 166 Financial technology solutions 3,891 3,175 2,503 Subscription services and financial technology solutions gross profit (GAAP) $ 1,818 $ 1,365 $ 1,020 73 Table of Contents Year Ended December 31, (in millions) 2025 2024 2023 Subscription services and financial technology solutions gross profit (GAAP) $ 1,818 $ 1,365 $ 1,020 Stock-based compensation expense and related payroll tax 16 20 20 Depreciation and amortization 53 32 17 Non-GAAP subscription services and financial technology solutions gross profit (Non-GAAP) $ 1,887 $ 1,417 $ 1,057 Net Cash Provided by 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).
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.
Key Business Metrics Year Ended December 31, (dollars in billions) 2025 2024 % Growth Gross Payment Volume (GPV) $ 195.1 $ 159.1 23 % As of December 31, (dollars in millions) 2025 2024 % Growth Total Annualized Recurring Run-Rate (ARR) $ 2,047 $ 1,626 26 % 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.
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.
General and Administrative Year Ended December 31, Change (dollars in millions) 2025 2024 Amount % General and administrative $ 344 $ 307 $ 37 12 % The increase in general and administrative expenses during the fiscal year ended December 31, 2025 was primarily driven by an increase in bad debt expense.
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.
In addition to the above material cash requirements, we also recognize liabilities associated with financial guarantees related to loan purchase activities. Such activities are further described within Note 2, "Summary of Significant Accounting Policies" and Note 15, "Commitments and Contingencies" of the Notes to the Consolidated Financial Statements for further information.
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.
The increase in financial technology solutions costs during the fiscal year ended December 31, 2025 was due to an increase in GPV. 69 Table of Contents Operating Expenses Sales and Marketing Year Ended December 31, Change (dollars in millions) 2025 2024 Amount % Sales and marketing $ 571 $ 470 $ 101 21 % The increase in sales and marketing expenses during the fiscal year ended December 31, 2025 was primarily driven by a $64 million increase in employee-related costs and a $24 million increase in marketing expenses.
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.
Other income, net Year Ended December 31, Change (dollars in millions) 2025 2024 Amount % Other income, net $ — $ 13 $ (13) (100) % The gain recognized in other income, net, for the fiscal year ended December 31, 2024 was primarily attributable to the one-time extinguishment gain of the warrant liabilities in connection with the Warrant Repurchase in July 2024. 71 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.
For further information see "Note 3 . Financial Instruments" , “Note 9. Common Stock" and "Note 10.
For further information see Note 3, “Financial Instruments" , Note 8, “Common Stock", and Note 9, “Stock-Based Compensation" of the Notes to the Consolidated Financial Statements for further information.
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.
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 the Notes to Consolidated Financial Statements.
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.
The prior year balance included 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. See Note 3, “Financial Instruments” of the Notes to the Consolidated Financial Statements for further information.
Removed
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.
Added
GPV is a key measure of the scale of our platform, which in turn drives our financial performance. As our customers generate more sales and therefore more GPV, we generally see higher financial technology solutions revenue.
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To calculate this metric, we first calculate recurring run-rate on a monthly basis.
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Restructuring Expenses Year Ended December 31, Change (dollars in millions) 2025 2024 Amount % Restructuring expenses $ 12 $ 46 $ (34) (74) % The decrease in restructuring expenses during the fiscal year ended December 31, 2025 was driven by significant restructuring and restructuring-related expenses incurred during fiscal year ended December 31, 2024 as part of the February 2024 Restructuring Plan.
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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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See Note 11, “Restructuring Plan” of the Notes to the Consolidated Financial Statements for further information.
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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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On May 6, 2025, we amended and restated our 2021 Facility to increase the available revolving commitments from $330 million to $350 million and to extend the term of the 2021 Facility to May 6, 2030. We were in compliance with all financial covenants as of December 31, 2025.
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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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We expect continued utilization of our available cash resources to support our ongoing business operations.
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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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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.
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Business Combinations The acquisition purchase price is allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values on the acquisition dates. When determining the fair value of assets acquired and liabilities assumed, we make significant estimates and assumptions, especially with respect to intangible assets.
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Valuation techniques generally consist of the market approach, income approach and/or cost approach. An estimate of fair value can be affected by many assumptions that require significant judgment.
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For example, the income approach and/or cost approach generally requires us to use assumptions to estimate future cash flows including those related to revenue and expense, long-term growth rates, discount rates, future tax rates and assumptions related to the time, cost and effort to recreate the technology acquired.
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Such assumptions are inherently uncertain and unpredictable and can differ from actual future events. Our estimate of the fair value of certain assets may differ materially from that determined by others who use different assumptions or utilize different business models and from the future cash flows actually realized.
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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.
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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.
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The expected volatility of stock options is based upon the weighted-average historical volatility of our Class A common stock and the average historical volatility of a number of publicly traded companies in a similar industry.
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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.
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We will continue to use judgment in evaluating the expected volatility, expected term and forfeiture rate utilized in our stock-based compensation expense calculation for stock option awards on a prospective basis.
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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.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeThe 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.
Biggest changeWe do not enter into investments for speculative purposes. 77 Table of Contents Based on our investment portfolio balance as of December 31, 2025, 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. 79 T able 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. 78 Table 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 $903 million and marketable securities of $514 million as of December 31, 2024.
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 $1,353 million and marketable securities of $638 million as of December 31, 2025.
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.
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.
This 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.
During the fiscal years ended December 31, 2025, 2024, and 2023, 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, 2025 and 2024.
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The primary objective of our investment activities is to preserve capital and meet liquidity requirements without significantly increasing risk.

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