|
|
|
|
|
| % | | |
| 206 | | | 41 | % | | |
| | 27 | % | | |
| | 14 | % | | |
| | | | | | | | | | | |
| 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.
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.
Costs of Revenue
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
| % | | |
| 53 | | | 32 | % | | |
| | 27 | % | | |
| | 4 | % | | |
| | | | | | | | | | | |
| | — | % | | |
| 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.
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.
Operating Expenses
Sales and Marketing
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.
Research and Development
Research and development expenses remained approximately flat during the fiscal year ended December 31, 2024.
General and Administrative
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.
Restructuring Expenses
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
| % | | |
| 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.
Interest Income, net
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.
Change in Fair Value of Warrant Liability
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. See Note 3 to our consolidated financial statements for further information.
Other income, net
The gain recognized in other income, net, for the fiscal year ended December 31, 2024 was primarily attributable to the Warrant Repurchase. See Note 3 to our consolidated financial statements for further information.
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. These non-GAAP financial measures, which may be different than similarly titled measures used by other companies, are presented to enhance investors’ overall understanding of our financial performance and should not be considered substitutes for, or superior to, the financial information prepared and presented in accordance with GAAP.
We believe that these non-GAAP financial measures provide useful information about our financial performance, enhance the overall understanding of our past performance and future prospects, and allow for greater transparency with respect to important metrics used by our management for financial and operational decision-making. We are presenting these non-GAAP metrics to provide investors insight to the information used by our management to evaluate our business and financial performance. We believe that these measures provide investors increased comparability of our core financial performance over multiple periods with other companies in our industry.
Net Income (Loss) (GAAP) and Adjusted EBITDA (Non-GAAP)
Adjusted EBITDA is defined as net income (loss), adjusted to exclude stock-based compensation expense and related payroll tax expense, depreciation and amortization expense, interest income, net, income taxes and certain other items that are not considered to reflect our operating activities and performance within the ordinary course of business, such as restructuring and restructuring-related expenses, acquisition expenses, fair value adjustments on warrant liabilities, expenses related to early termination of leases (which includes associated asset impairments) and stock-based charitable contribution expense, as applicable. We have provided below a reconciliation of net income (loss), the most directly comparable GAAP financial measure, to Adjusted EBITDA.
We believe Adjusted EBITDA is useful for investors in comparing our financial performance to other companies and from period to period. Adjusted EBITDA is widely used by investors and securities analysts to measure a company’s operating performance without regard to items such as depreciation and amortization, interest expense, and interest income, which can vary substantially from company to company depending on their financing and capital structures and the method by which their assets were acquired. In addition, Adjusted EBITDA eliminates the impact of certain items that may obscure trends in the underlying performance of our business. Adjusted EBITDA also has limitations as an analytical tool, and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. For example, although depreciation expense is a non-cash charge, the assets being depreciated may have to be replaced in the future, and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new asset acquisitions. In addition, Adjusted EBITDA excludes stock-based compensation expense, which has been, and will continue to be for the foreseeable future, a significant recurring expense for our business and an important part of our compensation strategy. Adjusted EBITDA also does not reflect changes in, or cash requirements for, our working capital needs; interest expense, or the cash requirements necessary to service interest or principal payments on our debt, which reduces the cash available to us; or tax payments that may represent a reduction in cash available to us. 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.
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.
Subscription Services and Financial Technology Solutions Gross Profit (GAAP) and Non-GAAP Subscription Services and Financial Technology Solutions Gross Profit (Non-GAAP)
Non-GAAP Subscription Services and Financial Technology Solutions Gross Profit is defined as subscription services gross profit and financial technology solutions gross profit, adjusted to exclude stock-based compensation expense and related payroll tax expense, and depreciation and amortization expense. We believe this non-GAAP measure is useful to view the resulting figures excluding the aforementioned non-cash charges because the amount of such expenses in any specific period may not directly correlate to the underlying performance of our business operations and such amounts vary substantially from company to company depending on their financing and capital structures and the method by which their assets were acquired. We have provided below a reconciliation of Subscription Services and Financial Technology Solutions Gross Profit, the most directly comparable GAAP financial measure, to Non-GAAP Subscription Services and Financial Technology Solutions Gross Profit.
| | | | | | | | | | | | | | | | | |
| 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 | |
| | | | | | | | | | | | | | | | | |
| 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.
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). We believe that free cash flow is a meaningful indicator of our sources of liquidity and capital requirements that provides information to management and investors in evaluating the cash flow trends of our business. Once our business needs and obligations are met, cash can be used to maintain a strong balance sheet and invest in future growth.
Free cash flow has limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. Other companies may calculate free cash flow or similarly titled non-GAAP measures differently, which could reduce the usefulness of free cash flow as a tool for comparison. In addition, free cash flow does not reflect mandatory debt service and other non-discretionary expenditures that are required to be made under contractual commitments and does not represent the total increase or decrease in our cash balance for any given period.
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. We also have access to external sources of liquidity through a credit facility as further described below. 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.(2) Excludes $87 million of cash held on behalf of customers and $55 million of restricted cash.
| | | | | | | | | | | |
| 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. 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. 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.
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 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.
Debt
During 2021 we entered into a senior secured credit facility, or the 2021 Facility, which we subsequently amended on March 2, 2023 to replace the London Interbank Offered Rate, or LIBOR, with the Secured Overnight Financing Rate, or SOFR. The 2021 Facility is subject to a minimum liquidity covenant of $250 million, 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. 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.
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. 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.
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 of December 31, 2024 our fully diluted share count was as follows:
| | | | | | | |
| Year Ended December 31, 2024 (1) |
(shares in millions) |
Class A and B common stock issued and outstanding | 572 | | | |
Options to purchase Class A common stock and Class B common stock | 28 | | | |
| Unvested restricted stock units | 22 | | | |
| Warrants to purchase Class B common stock | 1 | | | |
| | | |
| | | |
Shares reserved for charitable donations | 4 | | | |
| | | |
| | | |
Total fully diluted share count | 627 | | | |
(1) Share amounts presented above do not give effect to potential repurchases of common stock under the treasury stock method.
For further information see "Note 3. Financial Instruments", “Note 9. Common Stock" and "Note 10. 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. 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. 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. To the extent applicable, material changes in the mix and relative cost of such resources, or changes considered necessary to understand our liquidity and financial condition, may also be reflected in our discussion on the results of operations, disclosed within “Results of Operations” under Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations” within this Annual Report on Form 10-K.
We believe that our existing cash and cash equivalents, along with our available borrowing capacity under our credit facility, will be sufficient to meet our working capital needs for at least the next 12 months, including planned capital expenditures, strategic transactions, and investment commitments that we may enter into from time to time. Our future capital requirements and the adequacy of available funds will depend on many factors, including those set forth under Part I, Item 1A, "Risk Factors” in this Annual Report on Form 10-K.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of financial statements in conformity with GAAP requires us to make certain estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the balance sheet date, as well as reported amounts of revenue and expenses during the reporting period. We base our estimates on historical and anticipated results and trends and on various other assumptions that we believe are reasonable under the circumstances, including assumptions as to future events. By their nature, estimates are inherently subject to a degree of uncertainty. Although we believe that our estimates and the assumptions supporting our assessments are reasonable, actual results could differ materially from our estimates and assumptions. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations, and cash flows will be affected.
We believe that the critical accounting estimates summarized below involve a greater degree of judgment and complexity. Accordingly, these are the estimates and policies we believe are the most critical in fully understanding and evaluating our financial condition and results of operations. 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. Determining whether to recognize revenue on a gross or net basis requires judgment in evaluating whether we are the principal or agent in contracts with customers. We have concluded that we are the principal in providing a managed payment solution. Substantially all of our financial technology solutions revenue relates to our managed payment solution.
Our contracts often include promises to transfer multiple products and services to a customer. Determining whether products and services are considered distinct performance obligations that should be accounted for separately as opposed to being combined may require judgment. 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.
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. 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. 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. 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. 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”.
Stock-Based Compensation Expense
We use the Black-Scholes option-pricing model to determine the estimated fair value of stock option awards. We have limited historical stock option activity and therefore estimate the expected term of stock options granted using the simplified method, which represents the average of the contractual term of the stock option and its weighted-average vesting period. 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. We also estimate a forfeiture rate to calculate the stock-based compensation expense for options and restricted stock units, or RSUs, based on an analysis of actual historical experience and expected employee attrition rates.
We 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. 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. 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.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
We have operations in North America, Europe and Asia, and we are exposed to market risks in the ordinary course of our business. These risks primarily include interest rate and foreign currency exchange risks.
Interest Rate Sensitivity
We are exposed to interest rate risk related primarily to our investment portfolio. 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. Our cash and cash equivalents are held primarily in cash deposits and money market funds, and the securities are considered investment-grade debt securities and classified as available-for-sale. The securities are recorded at fair value in the Consolidated Balance Sheets with unrealized gains or losses, net of tax, reported as a separate component of stockholders’ equity within accumulated other comprehensive loss. The primary objective of our investment activities is to preserve capital and meet liquidity requirements without significantly increasing risk. We do not enter into investments for speculative purposes.
Based on our investment portfolio balance as of December 31, 2024, a hypothetical 100 basis point increase or decrease in interest rates would not have materially affected our financial position. We do not expect that any change in prevailing interest rates will have a material impact on our results of operations.
Foreign Currency Risk
Most of our sales and operating expenses are denominated in U.S. dollars, and therefore, neither our revenue nor operating expenses are currently subject to significant foreign currency risk. A portion of our operating expenses are denominated in Euros, Canadian dollars, Indian rupees and other currencies and may be subject to fluctuations due to changes in foreign currency exchange rates and result in transaction gains and losses that we may need to recognize in our results of operations. 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. 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. We maintain provisions for potential credit losses and evaluate on an ongoing basis the solvency of our customers and the impact of current and future conditions to determine if additional allowances for credit losses need to be recorded.
Inflation Risk
Our results of operations and financial condition are presented based on historical cost. 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.
Item 8. Financial Statements and Supplementary Data
Index to Consolidated Financial Statements
| | | | | |
| Page |
| |
| Consolidated Financial Statements | |
| |
| |
| |
| |
| |
| |
|
|
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Toast, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Toast, Inc. (the Company) as of December 31, 2024 and 2023, the related consolidated statements of operations, comprehensive income (loss), stockholders' equity and cash flows for each of the three years in the period ended December 31, 2024, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 26, 2025 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates.
| | | | | | | | |
| | Valuation of Toast Capital Contingent Liability for Expected Credit Losses |
| | |
| Description of the Matter | | As of December 31, 2024, the contingent liability for expected credit losses related to loan servicing activities through the Toast Capital loan program was $29 million. As discussed in Notes 2 and 4 to the consolidated financial statements, the Company records a contingent liability for expected credit losses accounted for under ASC 326 related to the Company’s contingent obligation to purchase ineligible loans. Management’s measurement of the contingent liability for expected credit losses is based on historical lifetime loss data, as well as macroeconomic forecasts, as applicable, applied to the loan portfolio.
Auditing the Company’s contingent liability for expected credit losses involved a high degree of complexity in evaluating loss severity estimates and subjectivity in evaluating management’s measurement of their expected loss forecasts used during the applicable period. |
| | |
| How We Addressed the Matter in Our Audit | | Our audit procedures included, among others, an evaluation of the key assumptions used in the calculation of the contingent liability for credit losses, including model estimates and qualitative factor adjustments, and whether the recorded contingent liability for credit losses appropriately reflects expected credit losses on the loan portfolio. We reviewed historical loss statistics, subsequent events and transactions and considered whether they corroborate or contradict the Company’s measurement of the contingent liability for credit losses.
To test the expected loss forecasting models, with the support of valuation specialists, we evaluated the model methodology and replicated a sample of models. We also tested the appropriateness of key inputs used in these models by agreeing a sample of inputs to supporting information and tested the completeness and accuracy of the underlying data used by the Company. Our testing procedures over the key assumptions included, among others, comparing forecasted losses and default probabilities to historical trends, while also considering changes in the Company’s loan portfolio. We performed sensitivity analyses over the key assumptions to evaluate the change in the contingent liability resulting from changes in the assumptions.
|
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2019.
Boston, Massachusetts
February 26, 2025
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Toast, Inc.
Opinion on Internal Control Over Financial Reporting
We have audited Toast Inc.’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Toast, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2024 and 2023, the related consolidated statements of operations, comprehensive income (loss), stockholders' equity and cash flows for each of the three years in the period ended December 31, 2024 and the related notes and our report dated February 26, 2025 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 26, 2025
TOAST, INC.
CONSOLIDATED BALANCE SHEETS
(in millions, except for number of shares and par value)
| | | | | | | | | | | |
| December 31, |
| 2024 | | 2023 |
| Assets: | | | |
| Current Assets: | | | |
| |
| Cash and cash equivalents | $ | | | | $ | | |
| Marketable securities | | | | | |
| Accounts receivable, net | | | | | |
| Inventories, net | | | | | |
| |
| Other current assets | | | | | |
| Total current assets | | | | | |
| |
| Property and equipment, net | | | | | |
| Operating lease right-of-use assets | | | | | |
| Intangible assets, net | | | | | |
| Goodwill | | | | | |
| Restricted cash | | | | | |
| |
| |
| Other non-current assets | | | | | |
| Total non-current assets | | | | | |
| Total assets | $ | | | | $ | | |
| Liabilities and Stockholders’ Equity: | | | |
| Current liabilities: | | | |
| Accounts payable | $ | | | | $ | | |
| |
| Deferred revenue | | | | | |
| Accrued expenses and other current liabilities | | | | | |
| Total current liabilities | | | | | |
| |
| |
| |
| Warrants to purchase common stock | | | | | |
| |
| Operating lease liabilities, non-current | | | | | |
| |
| Other long-term liabilities | | | | | |
| Total liabilities | | | | | |
Commitments and Contingencies (Note 16) | | | |
| |
| Stockholders’ Equity: | | | |
Preferred stock - par value $; million shares authorized, shares issued or outstanding | | | | | |
| |
Common stock, $ par value: Class A - million shares authorized; million and million shares issued and outstanding as of December 31, 2024 and 2023, respectively; Class B - million shares authorized; million and million shares issued and outstanding as of December 31, 2024 and 2023, respectively | | | | | |
| |
| |
| Accumulated other comprehensive loss | () | | | | |
| Additional paid-in capital | | | | | |
| Accumulated deficit | () | | | () | |
| Total stockholders’ equity | | | | | |
| Total liabilities and stockholders’ equity | $ | | | | $ | | |
The accompanying notes are an integral part of these consolidated financial statements.
TOAST, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share amounts)
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| 2024 | | 2023 | | 2022 |
| Revenue: | | | | | |
| Subscription services | $ | | | | $ | | | | $ | | |
| Financial technology solutions | | | | | | | | |
| Hardware and professional services | | | | | | | | |
| | | |
| Total revenue | | | | | | | | |
| Costs of revenue: | | | | | |
| Subscription services | | | | | | | | |
| Financial technology solutions | | | | | | | | |
| Hardware and professional services | | | | | | | | |
| | | |
| Amortization of acquired intangible assets | | | | | | | | |
| Total costs of revenue | | | | | | | | |
| Gross profit | | | | | | | | |
| Operating expenses: | | | | | |
| Sales and marketing | | | | | | | | |
| Research and development | | | | | | | | |
| General and administrative | | | | | | | | |
| Restructuring expenses | | | | | | | | |
| Total operating expenses | | | | | | | | |
Income (loss) from operations | | | | () | | | () | |
| Other income (expenses): | | | | | |
| Interest income, net | | | | | | | | |
| | | |
| Change in fair value of warrant liability | () | | | | | | | |
| | | |
| | | |
| Other income, net | | | | | | | | |
| Income (loss) before income taxes | | | | () | | | () | |
| Income tax (expense) benefit | () | | | () | | | | |
| Net income (loss) | $ | | | | $ | () | | | $ | () | |
| | | |
| | | |
| Net income (loss) per share attributable to common stockholders: | | | | | |
| Basic | $ | | | | $ | () | | | $ | () | |
| Diluted | $ | | | | $ | () | | | $ | () | |
| Weighted-average shares used in computing net income (loss) per share: | | | | | |
| Basic | | | | | | | | |
| Diluted | | | | | | | | |
The accompanying notes are an integral part of these consolidated financial statements.
TOAST, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in millions)
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| 2024 | | 2023 | | 2022 |
Net income (loss) | $ | | | | $ | () | | | $ | () | |
| Other comprehensive income (loss): | | | | | |
Unrealized gains (losses) on marketable securities, net of tax effect of $ | | | | | | | () | |
| Currency translation adjustments | () | | | | | | | |
Total other comprehensive income (loss) | () | | | | | | () | |
Comprehensive income (loss) | $ | | | | $ | () | | | $ | () | |
| | | |
| — | | | — | | | | |
| | | | | | | | | | | | | | | | | |
| | — | | | — | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
) | | | — | | | | |
| | | | | | | | | | | | | | | | | |
| | | | $ | () | | | $ | () | | | $ | | |
The accompanying notes are an integral part of these consolidated financial statements.
TOAST, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| 2024 | | 2023 | | 2022 |
| Cash flows from operating activities: | | | | | |
Net income (loss) | $ | | | | $ | () | | | $ | () | |
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | | | | | |
| Depreciation and amortization | | | | | | | | |
| Stock-based compensation expense | | | | | | | | |
| Amortization of deferred contract acquisition costs | | | | | | | | |
| | | |
| Change in fair value of warrant liability | | | | () | | | () | |
| | | |
| | | |
| Credit loss expense | | | | | | | | |
| | | |
| Stock-based charitable contribution expense | | | | | | | | |
| Asset impairments | | | | | | | | |
| Gain on warrant extinguishment | () | | | | | | | |
| Other non-cash items | () | | | () | | | | |
| Changes in operating assets and liabilities: | | | | | |
| Accounts receivable, net | () | | | () | | | () | |
| | | |
| | | |
| Other current assets | () | | | () | | | () | |
| Deferred contract acquisition costs | () | | | () | | | () | |
| Inventories, net | | | | () | | | () | |
| | | |
| Accounts payable | | | | | | | () | |
| Accrued expenses and other current liabilities | | | | | | | | |
| Deferred revenue | | | | () | | | () | |
| Operating lease right-of-use assets and operating lease liabilities, net | () | | | | | | | |
| Other assets and liabilities | () | | | () | | | () | |
| Net cash provided by (used in) operating activities | | | | | | | () | |
| Cash flows from investing activities: | | | | | |
| Cash paid for acquisition, net of cash acquired | | | | () | | | () | |
| | | |
| Capital expenditures | () | | | () | | | () | |
| | | |
| Purchases of marketable securities | () | | | () | | | () | |
| Proceeds from the sale of marketable securities | | | | | | | | |
| Maturities of marketable securities | | | | | | | | |
| Other investing activities | | | | () | | | | |
| Net cash used in investing activities | () | | | () | | | () | |
| Cash flows from financing activities: | | | | | |
| Proceeds from issuance of common stock | | | | | | | | |
| Change in customer funds obligations, net | | | | | | | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| Warrant repurchase | () | | | | | | | |
| Repurchases of Class A common stock | () | | | | | | | |
| Other financing activities | | | | | | | () | |
| Net cash provided by financing activities | | | | | | | | |
Effect of exchange rate changes on cash and cash equivalents and restricted cash | () | | | | | | | |
| Net increase (decrease) in cash, cash equivalents, cash held on behalf of customers and restricted cash | | | | | | | () | |
| Cash, cash equivalents, cash held on behalf of customers and restricted cash at beginning of period | | | | | | | | |
| Cash, cash equivalents, cash held on behalf of customers and restricted cash at end of period | $ | | | | $ | | | | $ | | |
| | | |
| Reconciliation of cash, cash equivalents, cash held on behalf of customers and restricted cash | | | | | |
| Cash and cash equivalents | $ | | | | $ | | | | $ | | |
| Cash held on behalf of customers | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Restricted cash | | | | | | | | |
| Total cash, cash equivalents, cash held on behalf of customers and restricted cash | $ | | | | $ | | | | $ | | |
| Supplemental disclosure of cash flow information | | | | | |
| | | |
| Cash paid for income taxes | $ | | | | $ | | | | $ | | |
| Supplemental disclosure of non-cash investing and financing activities: | | | | | |
| | | |
| Stock-based compensation included in capitalized software | $ | | | | $ | | | | $ | | |
Cash paid for amounts included in the measurement of lease liabilities | $ | | | | $ | | | | $ | | |
Right-of-use assets obtained in exchange for new operating lease liabilities / (reduction) of lease liabilities from lease terminations and modifications | $ | | | | $ | () | | | $ | | |
| Issuance of Class B common stock upon exercise of common stock warrants | $ | | | | $ | | | | $ | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
The accompanying notes are an integral part of these consolidated financial statements.
TOAST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Risks and Uncertainties
We are subject to a number of risks and uncertainties, including geopolitical events, presidential elections and transitions, natural disasters, public health concerns or epidemics, and macroeconomic conditions, such as changes in inflation and interest rates, which may also impact consumer behavior, the restaurant industry, and our business.
Fair Value Measurements
Concentration of Credit Risk and Significant Customers
During the fiscal years ended December 31, 2024, 2023, and 2022, we had no customers that individually accounted for more than 10% of our total revenue and no customers that individually accounted for more than 10% of our total accounts receivable as of December 31, 2024 or 2023.
Segment Information
Revenue Recognition
to months.
Financial Technology Solutions
Financial technology solutions revenue includes transaction-based payment processing services for customers who are charged a transaction fee for payment-processing. This transaction fee is generally calculated as a percentage of the total transaction amount processed plus a fixed per-transaction fee, which is earned as transactions are authorized and submitted for processing. We incur costs of interchange and network assessment fees, processing fees, and bank settlement fees to the third-party payment processors and financial institutions involved in settlement, which are recorded as costs of revenues. We satisfy our payment processing performance obligations and recognize the transaction fees as revenue upon authorization by the issuing bank and submission for processing. The transaction fees collected are recognized as revenue on a gross basis as we are the principal in the delivery of the managed payments solutions to the customers.
We have concluded that we are the principal in this performance obligation to provide a managed payment solution because we control the payment processing services before the customer receives them, perform authorization and fraud check procedures prior to submitting transactions for processing in the payment network, have sole discretion over which third-party acquiring payment processors we will use and are generally ultimately responsible to the customers for amounts owed if those acquiring payment processors do not fulfill their obligations. We generally have full discretion in setting prices charged to the customers. Additionally, we are obligated to comply with certain payment card network operating rules and contractual obligations under the terms of our registration as a payment facilitator and as a master merchant under our third-party acquiring payment processor agreements, which make us liable for the costs of processing the transactions for our customers and chargebacks and other financial losses if such amounts cannot be recovered from the restaurant.
Financial technology solutions revenue is recorded net of refunds and reversals initiated by the restaurant and is recognized upon authorization by the issuing bank and submission for processing.
Financial technology solutions revenue also includes fees earned from marketing and servicing loans to customers through our wholly-owned subsidiary, Toast Capital, that are originated by a third-party banking partner. In these arrangements, Toast Capital’s bank partner originates all loans, and Toast Capital then services the loans using Toast’s payments infrastructure to remit a fixed percentage of daily sales to our bank partner until the loan is repaid. Toast Capital earns fees for the underwriting and marketing of loans, which are recognized upon origination of the loan, and loan servicing fees, based on a percentage of each outstanding loan, which are recognized as servicing revenue as the servicing is delivered in accordance with ASC 860, Transfers and Servicing. Servicing revenue is adjusted for the amortization of servicing rights carried at amortized cost, included within other current assets. The marketing and facilitation fees earned upon execution of these loan agreements with its customers are recognized as revenue on a gross basis.
Cash, Cash Equivalents, Cash Held on Behalf of Customers and Restricted Cash
Marketable Securities
Accounts Receivable, net
Inventory
Assets and Liabilities Recorded with Loan Servicing Activities
thousand dollars, and loan repayment occurs automatically through a fixed percentage of every payment transaction processed on Toast’s platform.
Under the terms of our agreement with our industrial bank partner, we are obligated to purchase certain loans originated by our industrial banking partner in cases where the customer’s payments on the loan are missing or delayed for a defined period of time, and the loan is considered defaulted or delinquent (ineligible). Our obligation is limited to a specified percentage of the total loans originated, measured on a quarterly basis. The loan purchase, net of expected recoveries, reduces our potential liability with respect to the quarterly cohort of loans from which the ineligible loan originated. Refer to Note 2, "Summary of Significant Accounting Policies", "Acquired Loans Receivable, Net" for information on our accounting for purchased loans.
This obligation represents a financial guarantee with two aspects: a contingent liability accounted for under ASC 326 related to our contingent obligation to purchase ineligible loans, and a non-contingent liability accounted for under ASC 460, Guarantees, or ASC 460, related to our obligation to stand-ready to perform under the obligation, both of which are included in accrued expenses and other current liabilities in the Consolidated Balance Sheets. We measure a contingent liability for expected credit losses which is based on historical lifetime loss data, as well as macroeconomic forecasts as applicable, applied to the loan portfolio. Probability of default curves are generated using historical default data for portfolios of guaranteed loans with similar risk characteristics. Loss severity estimates are generated using historical collections data for the loans purchased by us. Additionally, we may apply macroeconomic factors, such as forecasted trends in unemployment rates, which are sourced externally, using a single scenario that we believe is most appropriate to the economic conditions applicable to a particular period. Projected loss rates, inclusive of historical loss data and macroeconomic factors, are applied to the outstanding principal amounts of the guaranteed loans. We may also include qualitative adjustments that incorporate incremental information not captured in the quantitative estimates of its current expected credit losses. The expected term of the loans guaranteed by us typically range from 90 to 360 days, and the reasonable and supportable forecast period we have included in our projected loss rates is approximately 12 months based on externally sourced data.
Please refer to Note 4, “Loan Servicing Activities and Acquired Loans Receivable, Net” for additional information on the liabilities related to the financial guarantees.
Acquired Loans Receivable, net
Deferred Contract Acquisition Costs
. The period of benefit for commissions paid for the acquisition of initial subscription services is determined by taking into consideration the initial estimated customer life and the technological life of our subscription services platform and related significant features. We adjust the carrying value of the deferred commissions assets periodically to account for customer churn, which occurs when customers have ceased operations or otherwise discontinued using our subscription services and financial technology solutions. Amortization expense is included in sales and marketing expenses in the Consolidated Statements of Operations.
Property and Equipment
years
| Office furniture and fixtures | years |
| Tooling and equipment | - years |
| Capitalized software | years |
Business Combinations and Goodwill
reporting unit and test goodwill for impairment at least annually in the fourth quarter or more frequently if indicators of potential impairment exist. If the carrying value of the reporting unit exceeds its fair value, an impairment loss is recognized for the excess of the carrying value of the reporting unit over its fair value. There were goodwill impairment losses recognized during the fiscal years ended December 31, 2024, 2023, and 2022. Based on our quantitative goodwill impairment test, the reporting unit’s fair value significantly exceeded its carrying value at December 31, 2024.
- years
| Customer acquired intangible assets | - years |
See Note 8, "Other Balance Sheet Information" for additional information related to property and equipment impairments.
Deferred Revenue
Costs of Revenue
Stock-Based Compensation Expense
.
The Amended and Restated 2014 Stock Incentive Plan, as amended, or the 2014 Plan, allows for early exercise of all granted options, before vesting requirements have been satisfied. Shares acquired through the early exercise of options which have not vested at the time of an employee’s termination may be purchased by us at the lower of the original exercise price or the then current fair value.
Advertising Costs
Advertising expense for the fiscal years ended December 31, 2024, 2023, and 2022, was $ million, $ million, and $ million, respectively, and is included in sales and marketing expense in the accompanying Consolidated Statements of Operations.
Income Taxes
-to-one basis when computing net income (loss) per share attributable to common stockholders. As a result, basic and diluted net income (loss) per share of Class A common stock and Class B common stock are equivalent.
We compute net income (loss) per common share based on the two-class method required for multiple classes of common stock and participating securities. The two-class method requires income (loss) available to common stockholders for the period to be allocated between multiple classes of common stock and participating securities based upon their respective rights to receive dividends as if all income (loss) for the period had been distributed.
Recent Accounting Pronouncements
| | $ | | | | $ | | | | $ | | |
| Commercial paper | | | | | | | | | | | |
| Certificates of deposit | | | | | | | | | | | |
| Corporate bonds | | | | | | | | | | | |
| U.S. government agency securities | | | | | | | | | | | |
| Treasury bonds | | | | | | | | | | | |
| Asset-backed securities | | | | | | | | | | | |
| $ | | | | $ | | | | $ | | | | $ | | |
| Liabilities: | | | | | | | |
| Warrants to purchase common stock | $ | | | | $ | | | | $ | | | | $ | | |
| | | | | |
| | | | | |
| $ | | | | $ | | | | $ | | | | $ | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2023 |
| Level 1 | | Level 2 | | Level 3 | | Total |
| Assets: | | | | | | | |
| Money market funds | $ | | | | $ | | | | $ | | | | $ | | |
| Commercial paper | | | | | | | | | | | |
| Certificates of deposit | | | | | | | | | | | |
| Corporate bonds | | | | | | | | | | | |
| U.S. government agency securities | | | | | | | | | | | |
| Treasury bonds | | | | | | | | | | | |
| Asset-backed securities | | | | | | | | | | | |
| $ | | | | $ | | | | $ | | | | $ | | |
| Liabilities: | | | | | | | |
| Warrants to purchase common stock | $ | | | | $ | | | | $ | | | | $ | | |
| | | | | |
| $ | | | | $ | | | | $ | | | | $ | | |
During the fiscal years ended December 31, 2024 and 2023, there were no transfers amongst Level 1, Level 2 and Level 3.
We did not recognize any credit losses or non-credit-related impairments related to our available-for-sale marketable debt securities for the years ended December 31, 2024, 2023, and 2022. All unrealized losses were immaterial and recognized in other comprehensive income (loss).
| | $ | | | | Certificates of deposit | | | | | |
| Corporate bonds | | | | | |
| U.S. government agency securities | | | | | |
| Treasury bonds | | | | | |
| Asset-backed securities | | | | | |
| Total | $ | | | | $ | | |
Marketable Securities
| | Due after 1 year through 5 years | | |
| Due after 5 years and thereafter | | |
| Total marketable securities | $ | | |
Valuation of Warrants to Purchase Common Stock
The fair value of the warrants was determined using the Black-Scholes option-pricing model.
% | | | % | | Contractual term (in years) | | | |
| Expected volatility | | % | | | % |
| Expected dividend yield | | % | | | % |
| Exercise price per share | $ | | | | $ | | |
| |
|
Change in fair value | () | |
| Settlement | () | |
|
Balance as of December 31, 2023 | | |
| Change in fair value | | |
Warrant extinguishment | () | |
Settlement | () | |
Balance as of December 31, 2024 | $ | | |
On July 3, 2024, we repurchased a warrant, or the Warrant, to purchase million shares of our Class B common stock for an aggregate purchase price of $ million, or the Warrant Repurchase. The Warrant was canceled and is longer outstanding. Immediately prior to the Warrant Repurchase, we recognized a remeasurement gain of $ million within “Change in fair value of warrant liability” in the Consolidated Statements of Operations for the fiscal year ended December 31, 2024. Upon the Warrant Repurchase, we also recognized a gain on the extinguishment of the Warrant of $ million within “Other income, net” in the Consolidated Statements of Operations for the fiscal year ended December 31, 2024.
As of December 31, 2024 and 2023, the maximum number of shares of our class B common stock that could be required to be issued upon the exercise of outstanding warrants was million and million, respectively.
| | $ | | | | |
|
)| | | | $ | | |
| | | | | | | | | | | | | | | | | |
| As of December 31, 2023 |
| Technology Assets | | Customer Assets | | Total |
| Gross carrying amount | $ | | | | $ | | | | $ | | |
| Accumulated amortization | () | | | () | | | () | |
| Intangible assets, net | $ | | | | $ | | | | $ | | |
| | 2026 | | |
| 2027 | | |
| 2028 | | |
| 2029 | | |
| Thereafter | | |
Total | $ | | |
| | $ | | | | $ | | | Variable lease expense | | | | | | | | |
| | | |
| | | |
Total | $ | | | | $ | | | | $ | | |
Operating lease expense reflects the non-cash amortization of right-of-use-assets recorded within operating lease right-of-use assets and operating lease liabilities, net on Consolidated Statements of Operations.
million and $ million as of December 31, 2024 and 2023, respectively.
| | Weighted-average discount rate | | % | | | % |
|
| 2026 | | |
| 2027 | | |
| 2028 | | |
| 2029 | | |
| Thereafter | | |
| Total future minimum lease payments | | |
| Less: Imputed interest | | |
| Present value of future minimum lease payments | $ | | |
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. As of December 31, 2024, there were borrowings outstanding on the 2021 Facility and outstanding letters of credit totaled $ million. As of December 31, 2024, our total available borrowing capacity under the 2021 Facility was $ million.
| | $ | | | | Unbilled receivables | | | | | |
| Less: Allowance for credit losses | () | | | () | |
| Accounts receivable, net | $ | | | | $ | | |
) | | $ | () | | | | |
| Additions | | () | | | () | |
| Write offs | | | | | | |
| Ending balance | | $ | () | | | $ | () | |
| | $ | | | | Deferred contract acquisition costs, current (Note 11) | | | | | |
| Other | | | | | |
Total other current assets | $ | | | | $ | | |
| | $ | | | | Computer equipment | | | | | |
| Leasehold improvements | | | | | |
| Tooling and equipment | | | | | |
| Furniture and fixtures | | | | | |
| Construction in process | | | | | |
Property and equipment, gross | | | | | |
| Less: Accumulated depreciation and amortization | () | | | () | |
Property and equipment, net | $ | | | | $ | | |
Depreciation and amortization expense, which excludes amortization expense related to capitalized software, for the fiscal years ended December 31, 2024, 2023, and 2022, was $ million, $ million, and $ million, respectively. For the fiscal years ended December 31, 2024, 2023, and 2022, impairment expense was $ million, $ million and $ million, respectively.
During the fiscal years ended December 31, 2024 and 2023, we capitalized $ million and $ million, respectively, in software and website development costs. As of December 31, 2024 and 2023, property and equipment, net in the Consolidated Balance Sheets included unamortized software and website development costs of $ million and $ million, respectively. Amortization expense attributable to capitalized software and website development costs was $ million, $ million, and $ million, respectively, for the fiscal years ended December 31, 2024, 2023, and 2022.
| | $ | | | | Customer funds obligation | | | | | |
| Accrued expenses | | | | | |
| Accrued payroll and bonus | | | | | |
| Other liabilities | | | | | |
Total accrued expenses and other current liabilities | $ | | | | $ | | |
| | | | | | | | | | Issuance of common stock under equity plans | | | | | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Issuance of common stock, other | | | | | | | | | | | |
Repurchases of common stock | () | | | | | | | | | | |
Balance, end of period | | | | | | | | | | | |
Changes in Class B Common stock were as follows (in millions):
| | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, | | | |
| 2024 | | 2023 | | 2022 | | | |
Class B Common Stock (in shares) | | | | | | | | |
Balance, beginning of period | | | | | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Conversions to Class A common stock | () | | | () | | | () | | | | |
| | | | | | | | |
| | | | | | | | |
Balance, end of period | | | | | | | | | | | |
Each share of Class A common stock entitles the holder to vote per share and each share of Class B common stock entitles the holder to votes per share on all matters submitted to a vote of stockholders. Holders of Class A common stock and Class B common stock are entitled to receive dividends, when and if declared by our Board of Directors, or our Board.
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 $ million. The repurchase program has no expiration date, does not obligate us to acquire any particular amount of our Class A common stock, and 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.
During the fiscal year ended December 31, 2024, we repurchased $ million of Class A common stock. At December 31, 2024, approximately $ million remained authorized for repurchase under our share repurchase program.
% movement to fund our social impact initiatives through Toast.org, our social impact arm. During the fiscal year ended December 31, 2021, our Board approved reserving million shares of Class A common stock that we may, but are not obligated to, issue over a certain period to fund our social impact initiatives through Toast.org. During the fiscal years ended December 31, 2024, 2023 and 2022, we recognized stock-based charitable contribution expense of $ million, $ million and $ million, respectively, for the fair value of the donated shares. Such expenses were recorded within general and administrative expenses in the Consolidated Statements of Operations. As of December 31, 2024, million shares were reserved for future issuances for charitable donations.
| | $ | | | | $ | | |
| Sales and marketing | | | | | | | | |
| Research and development | | | | | | | | |
| General and administrative | | | | | | | | |
| Restructuring expenses | | | | | | | | |
Total stock based compensation | $ | | | | $ | | | | $ | | |
Stock-based compensation of $ million, $ million and $ million, was capitalized as software development costs for the fiscal years ended December 31, 2024, 2023, and 2022, respectively.
Stock Option and Incentive Plans
The 2021 Stock Option and Incentive Plan, or the 2021 Plan, was adopted and approved in 2021. The 2021 Plan replaced the 2014 Plan, which was initially adopted in 2014 and continues to govern outstanding equity awards granted thereunder. The 2021 Plan allows us to make equity-based and cash-based incentive awards to our officers, employees, directors, and consultants. The number of shares reserved and available for issuance under the 2021 Plan automatically increases each January 1, by % of the total outstanding number of shares of the Class A common stock and Class B common stock on the immediately preceding December 31, or such lesser number of shares as determined by the Compensation Committee of our Board. As of December 31, 2024, million shares were authorized for future issuance under the 2021 Plan.
2021 Employee Stock Purchase Plan
In 2021, our Board adopted, and our stockholders approved, the 2021 Employee Stock Purchase Plan, or ESPP. The ESPP provides that the number of shares reserved and available for issuance will automatically increase on January 1 of each year through January 1, 2031, by the lesser of: (i) million shares of our Class A common stock, (ii) % of the issued and outstanding total number of shares of Class A common stock and Class B common stock on the date immediately preceding December 31, or (iii) such lesser number of shares of Class A common stock as determined by the plan administrator of the ESPP.
As of December 31, 2024, million shares of our Class A common stock were authorized for issuance to participating employees who are allowed to purchase shares of Class A common stock at a price equal to % of its fair market value at the beginning or the end of the offering period, whichever is lower.
and a contractual life of .
% | | | % | | | % | Expected term (in years) | | | | | |
Expected volatility | | % | | | % | | | % |
Expected dividend yield | | % | | | % | | | % |
Weighted-average fair value per share of common stock | $ | | | $ | | | $ | |
Weighted-average fair value per share of options issued | $ | | | $ | | | $ | |
| $ | | | | | | | | Granted | | | | | | | | |
| Exercised | () | | | | | | | |
| Forfeited | () | | | | | | | |
Outstanding as of December 31, 2024 | | | $ | | | | | | |
| | | | | |
| | | | | |
Options vested and expected to vest as of December 31, 2024 | | | $ | | | | | | $ | | |
Options exercisable as of December 31, 2024 | | | $ | | | | | | $ | | |
The aggregate intrinsic values of options exercised was $ million, $ million, and $ million for the fiscal years ended December 31, 2024, 2023, and 2022, respectively.
As of December 31, 2024, total unrecognized stock-based compensation expense related to the options was $ million and is expected to be recognized over the remaining weighted-average service period of years.
.
| | $ | | | | Granted | | | | | |
| Vested | () | | | | |
| Forfeited | () | | | | |
Outstanding balance as of December 31, 2024 | | | | $ | | |
Expected to vest as of December 31, 2024 | | | | | |
The weighted-average grant-date fair value per share of RSUs granted during the fiscal years ended December 31, 2023 and 2022 was $ and $, respectively. The fair value of RSUs vested during the fiscal years ended December 31, 2024, 2023, and 2022 was $ million, $ million, and $ million, respectively.
As of December 31, 2024, total unrecognized stock-based compensation expense related to the RSUs was $ million and is expected to be recognized over the remaining weighted-average service period of years.
| | $ | | | | Deferred revenue, end of period | $ | | | | $ | | |
| Revenue recognized in the period from amounts included in deferred revenue at the beginning of period | $ | | | | $ | | |
Deferred revenue includes amounts classified within other long-term liabilities on our Consolidated Balance Sheets.
As of December 31, 2024, $ million of revenue is expected to be recognized from remaining performance obligations for customer contracts. We expect to recognize revenue of approximately $ million of these remaining performance obligations over the next months, with the balance recognized thereafter.
| | $ | | | Capitalization | | | | | |
Amortization | () | | | () | |
| Ending balance | $ | | | | $ | | |
million and $ million, respectively, of our current deferred contract acquisition costs were recorded within other current assets with the remaining balance recorded within other non-current assets in the accompanying Consolidated Balance Sheets.
million during the fiscal year ended December 31, 2024. These charges were recorded within restructuring expenses on our Consolidated Statements of Operations, primarily consisting of cash severance costs and the acceleration of stock-based compensation for certain terminated employees. As of December 31, 2024, we substantially completed the Restructuring Plan with immaterial remaining liabilities.
| | $ | () | | | $ | () | | | Foreign | | | | | | | | |
Income (loss) before income taxes | $ | | | | $ | () | | | $ | () | |
The components of income tax (expense) benefit for the fiscal years ended December 31, 2024, 2023, and 2022, were as follows (in millions):
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| 2024 | | 2023 | | 2022 |
Current state | $ | () | | | $ | () | | | $ | () | |
Current foreign | () | | | () | | | () | |
Current tax expense | () | | | () | | | () | |
Deferred federal | | | | | | | | |
Deferred state | | | | | | | | |
Deferred tax benefit | | | | | | | | |
Total income tax (expense) benefit | $ | () | | | $ | () | | | $ | | |
| | $ | | | | Stock-based compensation expense | | | | | |
| Credit carryforward | | | | | |
| Accrued expenses and reserves | | | | | |
| Charitable contributions | | | | | |
| Deferred revenue | | | | | |
| Depreciation | | | | | |
Capitalized R&D | | | | | |
| Lease liability | | | | | |
| Total deferred tax assets | | | | | |
| Valuation allowance | () | | | () | |
| Net deferred tax assets | | | | | |
| Deferred tax liabilities: | | | |
Depreciation | | | | () | |
| Amortization | () | | | () | |
Capitalized contract acquisition costs | () | | | () | |
Right-of-use asset | () | | | () | |
| Total deferred tax liabilities | () | | | () | |
| Net deferred tax asset (liability) | $ | | | | $ | | |
% | | | % | | | % | State tax—net of federal | () | % | | | % | | | % |
Permanent items - Other | | % | | | % | | () | % |
| Warrants | | % | | | % | | | % |
Non-deductible executive compensation | | % | | () | % | | () | % |
Non-deductible meals and entertainment | | % | | () | % | | () | % |
Research and development credits | () | % | | | % | | | % |
Stock-based compensation expense | () | % | | | % | | () | % |
Change to uncertain tax positions | | % | | | % | | | % |
Global intangible low-taxed income | () | % | | () | % | | () | % |
Other, net | () | % | | | % | | | % |
| | | |
Change in valuation allowance | | % | | () | % | | () | % |
Effective Tax Rate | | % | | () | % | | | % |
During the fiscal year ended December 31, 2024, we recorded an income tax expense of $ million, which is primarily attributable to U.S. state tax expense and the tax expense recorded on the earnings of our profitable foreign subsidiaries.
Management has evaluated the positive and negative evidence bearing upon the realizability of its net deferred tax assets and has determined that it is more likely than not that we will not recognize the benefits of our deferred tax assets and, as a result, a full valuation allowance has been retained against our net deferred tax assets as of December 31, 2024. The valuation allowance increased by $ million, $ million and $ million during the fiscal years ended December 31, 2024, 2023, and 2022, respectively, primarily due to the impact of stock-based compensation windfall tax benefits, operating losses incurred and tax credits generated during each year.
As of December 31, 2024, we had U.S. federal net operating loss carryforwards of $ million which may be able to offset future income tax liabilities. Of the federal net operating loss carryforward $ million has an indefinite carryforward period, and $ million will expire at various dates through 2037. As of December 31, 2024, we had U.S. state net operating loss carryforwards of $ million, of which $ million begin to expire in 2032 and the remaining $ million do not expire. As of December 31, 2024, we had U.S. federal tax credit carryforwards of $ million which expire between 2033 and 2044. As of December 31, 2024 we had U.S. state tax credit carryforwards of $ million which expire between 2032 and 2039.
Ownership changes, as defined in the Internal Revenue Code Section 382, could limit the amount of U.S. net operating loss and tax credit carryforwards that can be utilized annually to offset future taxable income. Generally, an ownership change occurs when the ownership percentage of 5% or greater stockholders increases by more than 50% over a three-year period. We have completed a historical ownership change analysis through 2023, and while we have experienced ownership changes in the past, none of our existing federal and state tax attributes are subject to historical limitations that are expected to materially limit our utilization. Our ability to utilize our federal and state attributes could be limited by ownership changes that may occur in the future.
| | $ | | | | $ | | | Additions for tax positions related to current period | | | | | | | | |
Additions for tax positions related to prior periods | | | | | | | | |
Lapse of statute of limitations / settlements | | | | | | | | |
Balance, end of year | $ | | | | $ | | | | $ | | |
As of December 31, 2024, the Company had gross unrecognized tax benefits of $ million, that if recognized would result in a net benefit of zero. We recognize accrued interest and penalties related to income tax matters as a component of income tax expense, neither of which are material for any of the periods presented.
We file income tax returns in the United States (federal, and various state jurisdictions), as well as various foreign jurisdictions. The federal, state and foreign income tax returns are generally subject to tax examinations for the tax years ended December 31, 2021 through December 31, 2024. To the extent we have tax attribute carryforwards, the tax years in which the attribute was generated may still be adjusted upon examination by the Internal Revenue Service, state or foreign tax authorities until utilized in a future period.
The Organization for Economic Co-operation and Development (“OECD”) introduced rules to establish a global minimum tax rate of 15 percent, commonly referred to as Pillar Two. While the U.S. has not yet adopted the Pillar Two framework into law, several countries in which we operate have enacted tax legislation based on the Pillar Two framework with certain components of the minimum tax rules effective beginning in 2024, and further rules becoming effective beginning in 2025. We have performed an initial assessment of the potential impact to income taxes as a result of Pillar Two. The assessment of the potential impact is based on the most recent tax filings, country-by-country reporting, and financial statements of affected subsidiaries. Based on the results of the assessment, we do not believe we will be subject to additional income taxes for 2024 under Pillar Two. We are continuing to evaluate and monitor the impact of the Pillar Two rules on future periods in the jurisdictions in which we operate.
As of December 31, 2024, we have not provided deferred U.S. income taxes or foreign withholding taxes on temporary differences resulting from unremitted earnings for certain non-U.S. subsidiaries, which are permanently reinvested outside of the U.S. Due to a recent launch of foreign operations that remain insignificant to our overall activities, the amount of unrecognized basis difference is not material as of December 31, 2024.
| | $ | () | | | $ | () | | Less: Gain on change in fair value of warrant liability(1) | | | | | | | | |
Net income (loss), diluted | $ | | | | $ | () | | | $ | () | |
| Denominator: | | | | | |
Weighted-average shares of common stock outstanding - basic | | | | | |
| Effect of dilutive securities: | | | | | |
| Dilutive common share equivalents included in dilutive shares | | | | | | | | |
Warrants to purchase Class B common stock(1) | | | | | | | | |
Weighted-average shares of common stock outstanding - diluted | | | | | | | | |
Net income (loss) per share, basic | $ | | | | $ | () | | | $ | () | |
Net income (loss) per share, diluted | $ | | | | $ | () | | | $ | () | |
(1) During the fiscal years ended December 31, 2023 and 2022, we recorded a gain on fair value remeasurement of our warrant liability. For purposes of computing diluted income (loss) per share, these gains were excluded from our net income (loss) and the corresponding weighted-average shares were also adjusted accordingly.
| | | | | | | Unvested restricted stock | | | | | | | | |
| Unvested restricted stock units | | | | | | | | |
| | | |
| | | |
Warrants to purchase Class B common stock (2) | | | | | | | | |
| | | |
| Total | | | | | | | | |
(2) During the fiscal year ended December 31, 2024, we recorded a loss on fair value remeasurement of our warrant liability. These warrants were excluded from the computation of diluted net income (loss) per share due to their anti-dilutive effect.
reportable segment, Toast, Inc., consisting of a comprehensive platform of software-as-a-service, or SaaS, products, financial technology solutions, including integrated payment processing, restaurant-grade hardware, and a broad ecosystem of third-party partners. We manage the business activities on a consolidated basis. The types of software and services from which we generate revenue are described under our “Revenue Recognition” policy within our “Summary of Significant Accounting Policies.”
Our chief operating decision maker, or CODM, is our Chief Executive Officer. The CODM assesses performance for the segment and decides how to allocate resources based on net income (loss) that is also reported on the Consolidated Statements of Operations as consolidated net income (loss). The CODM does not use any segment asset measures to assess performance and decide how to allocate resources.
| | $ | | | | $ | | | Segment costs of revenue(1) | () | | | () | | | () | |
Segment sales and marketing(1) | () | | | () | | | () | |
Segment research and development(1) | () | | | () | | | () | |
Segment general and administrative(1) | () | | | () | | | () | |
| Stock-based compensation and related payroll taxes | () | | | () | | | () | |
Other segment items(2) | () | | | | | | | |
| Net income (loss) | $ | | | | $ | () | | | $ | () | |
(1) These segment expenses exclude stock-based compensation and related payroll taxes. Stock-based compensation and related payroll taxes are presented separately as an additional significant segment expense. The amounts consist of both stock-based compensation (refer to Note 10. Stock-Based Compensation for tabular disclosure of amounts included within other significant segment expenses) and the corresponding payroll taxes.
(2) Other segment items include restructuring and restructuring-related expenses, interest income, net, change in fair value of warrant liability, other income, net and income tax (expense) benefit.
We have significant operations in the United States, Ireland, and India. We did not earn material revenue in any country other than the United States during the fiscal years ended December 31, 2024, 2023, and 2022.
| | $ | | | | Ireland | | | | | |
| India | | | | | |
| Other | | | | | |
| Total long-lived assets | $ | | | | $ | | |
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 $ million of which $ million is due to within the next 12 months and $ million thereafter.
Legal Proceedings
From time to time, we may be involved in legal actions arising in the ordinary course of business. Each of these matters is subject to various uncertainties, and it is possible that some of these matters may be resolved unfavorably. We establish accruals for losses that management deems to be probable and subject to reasonable estimates. As of December 31, 2024 and December 31, 2023, we do not expect any claims with a reasonably possible adverse outcome to have a material impact to us, and accordingly, have not accrued for any material claims.
% of the outstanding capital stock of Delphi Display Systems, Inc., or Delphi, a provider of digital display solutions and drive-thru technology, for a total purchase price of $ million, to extend our growing suite of products benefiting quick-service restaurants and enterprise brands.
The final purchase price was allocated to goodwill, intangible assets and other net assets of $ million, $ million and $ million, respectively. Intangible assets consisted of $ million of developed technology and $ million of customer relationships, each with estimated useful lives of years. Goodwill is deductible for tax purposes, and primarily attributable to synergies expected to arise after the acquisition.
The operating results of Delphi have been reflected in our results of operations from the date of the acquisition, but were not material to our consolidated financial statements. The purchase price allocation has been finalized with no changes made for the fiscal year ended December 31, 2024.
Sling Inc.
On July 6, 2022, we acquired % of the outstanding capital stock of Sling Inc., or Sling, an employee scheduling, communication and management solution, to expand our product portfolio in the team scheduling and communication space. The total purchase price of $ million consisted of cash payments of $ million on the acquisition date and $ million placed in escrow related to general representations, indemnities and warranties, as well as a deferred consideration of $ million. The escrow will be released between months and months following the acquisition date.
In conjunction with the acquisition, we issued shares of Class A restricted common stock to certain members of Sling management with a total fair market value of $ million. The shares vest over a service period of one to and are subject to forfeiture upon termination during the service period.
We used a market participant approach to record the assets acquired and liabilities assumed in the acquisition of Sling.
|
| Intangible assets: | |
Developed technology, useful life of years | | |
Customer relationships, useful life of years | | |
| Goodwill | | |
| Net working capital | | |
|
| Deferred tax liability | () | |
| Net assets acquired | $ | | |
The fair values of the developed technology and customer relationships intangible assets were based on Level 3 inputs using the cost and income approaches, respectively. The primary unobservable inputs were development effort and after-tax cash flows, respectively.
Goodwill, which is deductible for tax purposes, represents the excess of the consideration transferred over the fair value of the net assets acquired, and is primarily attributable to expected synergies between our operations and those Sling, as well as the assembled workforce.
The operating results of Sling have been reflected in our results of operations from the date of the acquisition, but were not material to our consolidated financial statements. The purchase price allocation has been finalized with no changes made to purchase price allocation for the fiscal years ended December 31, 2024 and 2023.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, including our Principal Executive Officer and Principal Financial Officer, have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, as of December 31, 2024. Based on this evaluation, our Principal Executive Officer and Principal Financial Officer, together with management, have concluded that, as of December 31, 2024, our disclosure controls and procedures were effective.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(e) of the Exchange Act). Management, with the participation of our Principal Executive Officer and Principal Financial Officer, has assessed the effectiveness of internal control over financial reporting as of December 31, 2024, based upon the framework in Internal Control- Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO. Based upon such evaluation under this framework, our management concluded that our internal control over financial reporting was effective as of December 31, 2024.
The effectiveness of our internal control over financial reporting as of December 31, 2024, has been audited by Ernst & Young LLP as stated in their report, which is included in Item 8 of this Annual Report on Form 10-K.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the quarter ended December 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
Inherent Limitation on the Effectiveness of Internal Control
Our management, including our Principal Executive Officer and Principal Financial Officer, do not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Due to inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
Item 9B. Other Information
, , our , into a trading plan pursuant to Rule 10b5-1 of the Exchange Act. Mr. Comparato’s Rule 10b5-1 trading plan provides for the sale from time to time of a maximum of shares of our Class A common stock and the donation from time to time of a maximum of 40,000 shares of our Class A common stock pursuant to the terms of the plan. Mr. Comparato’s Rule 10b5-1 trading plan expires on , or earlier if all transactions under the trading arrangement are completed. The trading arrangement is intended to satisfy the affirmative defense in Rule 10b5-1(c).
, , our , into a trading plan pursuant to Rule 10b5-1 of the Exchange Act. Mr. Vassil’s Rule 10b5-1 trading plan provides for the sale from time to time of a maximum of shares of our Class A common stock pursuant to the terms of the plan. Mr. Vassil’s Rule 10b5-1 trading plan expires on , or earlier if all transactions under the trading arrangement are completed. The trading arrangement is intended to satisfy the affirmative defense in Rule 10b5-1(c).
, , our , the SHFA Family Trust and the SHFA 2021 Nominee Trust, where shares held by such trusts are held indirectly by Mr. Fredette, collectively into a trading plan pursuant to Rule 10b5-1 of the Exchange Act. This trading plan provides for the sale from time to time of a maximum of shares of our Class A common stock (636,616 shares contributed by Mr. Fredette; 227,448 shares contributed by the SHFA Family Trust; and 988,865 shares contributed by the SHFA 2021 Nominee Trust), and the donation by Mr. Fredette from time to time of a maximum of shares of our Class A common stock pursuant to the terms of the plan. This trading plan expires on , or earlier if all transactions under the trading arrangement are completed. The trading arrangement is intended to satisfy the affirmative defense in Rule 10b5-1(c).
, , our , into a trading plan pursuant to Rule 10b5-1 of the Exchange Act. Ms. Gomez’s Rule 10b5-1 trading plan provides for the sale from time to time of a maximum of shares of our Class A common stock pursuant to the terms of the plan. Ms. Gomez’s Rule 10b5-1 trading plan expires on , or earlier if all transactions under the trading arrangement are completed. The trading arrangement is intended to satisfy the affirmative defense in Rule 10b5-1(c).
During the fiscal quarter ended December 31, 2024, other than described in the statements above, none of our directors or officers (as defined in Rule 16a-1(f) of the Securities Exchange Act of 1934) , or modified a Rule 10b5-1 trading arrangement or any “non-Rule 10b5-1 trading agreement” (as defined in Item 408(c) of Regulation S-K).
Item 9C. Disclosure Regarding Foreign Jurisdiction that Prevent Inspections
Not applicable.
PART III
Item 10. Directors, Executive Officers and Corporate Governance
We a stock trading policy governing the purchase, sale and other dispositions of our securities that applies to all of our directors, officers, and employees and to the Company itself. We believe our stock trading policy and procedures are reasonably designed to promote compliance with insider trading laws, rules and regulations, and listing standards applicable to the Company. A copy of our stock trading policy is filed as Exhibit 19.1 to this Form 10-K.
The information required by this item, including information about our Code of Conduct, is incorporated by reference to the definitive Proxy Statement for our 2025 Annual Meeting of Stockholders, which will be filed with the SEC, no later than 120 days after December 31, 2024.
Item 11. Executive Compensation
The information required by this item is incorporated by reference to the definitive Proxy Statement for our 2025 Annual Meeting of Stockholders, which will be filed with the SEC no later than 120 days after December 31, 2024.
Item 12. Security Ownership of Certain Beneficial Owner and Management and Related Stockholder Matters
The information required by this item is incorporated by reference to the definitive Proxy Statement for our 2025 Annual Meeting of Stockholders, which will be filed with the SEC no later than 120 days after December 31, 2024.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this item is incorporated by reference to the definitive Proxy Statement for our 2025 Annual Meeting of Stockholders, which will be filed with the SEC no later than 120 days after December 31, 2024.
Item 14. Principal Accountant Fees and Services
Our independent public accounting firm is , , PCAOB Auditor ID .
The information required by this item is incorporated by reference to the definitive Proxy Statement for our 2025 Annual Meeting of Stockholders, which will be filed with the SEC no later than 120 days after December 31, 2024.
PART IV
Item 15. Exhibits, Financial Statement Schedules
The following documents are filed as a part of this Annual Report on Form 10-K:
(a) Financial Statements
Our Consolidated Financial Statements are listed in the “Index to Consolidated Financial Statements” under Part II, Item 8 of this Annual Report on Form 10-K.
(b) Financial Statement Schedules
All financial statement schedules are omitted because the information called for is not required or shown either in the Consolidated Financial Statements or notes thereto.
(c) Exhibits
The documents listed in the exhibit index of this Annual Report on Form 10-K are incorporated by reference or are filed with this Annual Report on Form 10-K, in each case as indicated herein (numbered in accordance with Item 601 of Regulation S-K).
Item 16. Form 10-K Summary
Not applicable.
EXHIBIT INDEX
| | | | | | | | |
| Exhibit Number | Description | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | | | | | | | |
| | |
| | |
| | |
| Revolving Credit and Guaranty Agreement, dated June 8, 2021, by and among the Registrant, the guarantors party thereto, the lenders and issuing banks party thereto, and JPMorgan Chase Bank, N.A., as administrative agent (incorporated by reference to Exhibit 10.8 to the Registrant’s Registration Statement on Form S-1/A (File No. 333-259104), filed with the Securities and Exchange Commission on August 27, 2021). | |
| Amendment Agreement dated as of March 2, 2023, relating to the Revolving Credit and Guaranty Agreement, dated June 8, 2021, by and among the Registrant, the guarantors party thereto, the lenders and issuing banks party thereto, and JPMorgan Chase Bank, N.A., as administrative agent (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q, (File No. 001-40819), filed with the Securities and Exchange Commission on May 10, 2023. | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | | | | | | | |
| | |
| | |
| | |
| | |
| | |
| 101.INS* | Inline XBRL Instance Document. | |
| 101.SCH* | Inline XBRL Taxonomy Extension Schema Document. | |
| 101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |
| 101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document. | |
| 101.LAB* | Inline XBRL Taxonomy Extension Labels Linkbase Document. | |
| 101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |
| 104* | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). | |
| | | | | |
# | Indicates management contract or compensatory plan, contract or agreement. |
| * | Filed herewith. |
| ** | Furnished herewith. The certifications attached as Exhibits 32.1 and 32.2 that accompany this Annual Report on Form 10-K are deemed furnished and not filed with the SEC and are not to be incorporated by reference into any filing of the Company under the Securities Act or the Exchange Act, whether made before or after the date of this Annual Report on Form 10-K, irrespective of any general incorporation language contained in such filing. |
| † | Portions of this exhibit (indicated by asterisks) have been omitted in accordance with the rules of the Securities and Exchange Commission. |
SIGNATURES
Pursuant to requirements of Section 13 or 15(d) the Securities Exchange Act of 1934, as amended, the registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized, in Boston, Massachusetts, on February 26, 2025.
| | | | | | | | | | | |
| | TOAST, INC. |
| | | |
| | By: | /s/ Aman Narang |
| | | Aman Narang |
| | | Chief Executive Officer |
| | | (Principal Executive Officer) |
| | | |
| | By: | /s/ Elena Gomez |
| | | Elena Gomez |
| | | President, Chief Financial Officer |
| | | (Principal Financial Officer and Principal Accounting Officer) |
| |
| |
| |
| |
| |
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Aman Narang and Elena Gomez, and each of them, as his or her true and lawful attorney-in-fact and agent with full power of substitution and resubstitution, for such individual in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully for all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or the individual’s substitute, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities and Exchange Act of 1934, as amended, this report has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
| | | | | | | | | | | | | | |
| Signature | | Title | | Date |
| | | | |
/s/ Aman Narang | | Chief Executive Officer, Co-Founder, and Director | | February 26, 2025 |
Aman Narang | | |
| | | | |
| /s/ Elena Gomez | | President, Chief Financial Officer | | February 26, 2025 |
| Elena Gomez | | |
| | | | |
| | |
|
| | |
| /s/ Paul Bell | | Director | | February 26, 2025 |
| Paul Bell | | |
| | | | |
| /s/ Kent Bennett | | Director | | February 26, 2025 |
| Kent Bennett | | |
| | | | |
| /s/ Susan E. Chapman-Hughes | | Director | | February 26, 2025 |
| Susan E. Chapman-Hughes | | |
| | | | |
| /s/ Christopher P. Comparato | | Director | | February 26, 2025 |
| Christopher P. Comparato | | |
| | | | |
| /s/ Stephen Fredette | | President, Co-Founder, and Director | | February 26, 2025 |
| Stephen Fredette | | |
| | | | |
| /s/ Mark Hawkins | | Chair of the Board, Director | | February 26, 2025 |
| Mark Hawkins | | |
| | | | |
| /s/ Hilarie Koplow-McAdams | | Director | | February 26, 2025 |
| Hilarie Koplow-McAdams | | |
| | | | |
| /s/ Deval L. Patrick | | Director | | February 26, 2025 |
| Deval L. Patrick | | |
| | | | |
| /s/ David Yuan | | Director | | February 26, 2025 |
| David Yuan | | |
Similar companies
See also AUTOMATIC DATA PROCESSING INC -
Annual report 2025 (10-K 2025-06-30)
Annual report 2025 (10-Q 2025-03-31)
See also Workday, Inc. -
Annual report 2023 (10-K 2023-01-31)
Annual report 2025 (10-Q 2025-07-31)
See also Verisk Analytics, Inc. -
Annual report 2022 (10-K 2022-12-31)
Annual report 2023 (10-Q 2023-09-30)
See also Zendesk, Inc. -
Annual report 2021 (10-K/A 2021-12-31)
Annual report 2022 (10-Q 2022-09-30)
See also Globant S.A.
Open main menu