Toast, Inc. - Quarter Report: 2024 June (Form 10-Q)

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 Other long-term liabilities Total liabilities Commitments and Contingencies (Note 11); shares authorized, shares issued or outstanding

Common stock, $ par value:

Class A - shares authorized; and shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively

Class B - shares authorized; and shares issued and outstanding as of June 30, 2024 and December 31, 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 condensed consolidated financial statements.

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TOAST, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(in millions, except per share amounts)


	Three Months Ended June 30,			Six Months Ended June 30,
	2024	2023		2024		2023
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 (expense):
Interest income, net
Change in fair value of warrant liability	()	()		()		()

Other income (expense), net				()
Income (loss) before taxes		()		()		()
Income tax expense		()		()		()
Net income (loss)	$	$	()	$	()	$	()
Earnings (loss) per share attributable to common stockholders:
Basic	$	$	()	$	()	$	()
Diluted	$	$	()	$	()	$	()
Weighted-average shares used in computing earnings (loss) per share:
Basic
Diluted

The accompanying notes are an integral part of these condensed consolidated financial statements.

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TOAST, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(unaudited)

(in millions)


	Three Months Ended June 30,			Six Months Ended June 30,
	2024	2023		2024		2023
Net income (loss)	$	$	()	$	()	$	()
Other comprehensive loss:
Unrealized losses on marketable securities, net of tax effect of $		()		()

Total other comprehensive loss		()		()
Comprehensive income (loss)	$	$	()	$	()	$	()

$()$()$ — — — — )— — () $()$ $ — — — — $()$ $ — — — — )— ()() — — — — — — ))())) ) )()) ) ) ) $

The accompanying notes are an integral part of these condensed consolidated financial statements.

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TOAST, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Risks and Uncertainties

We are subject to a number of risks and uncertainties, including global events and macroeconomic conditions such as inflation and its potential impact on consumer spending, rising interest rates, global supply chain issues, and any public health concerns, which may also impact consumer behavior, the restaurant industry, and our business.

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$ $ $ Commercial paper Corporate bonds U.S. government agency securities Treasury securities 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 securities

Asset-backed securities

Liabilities:

Warrants to purchase common stock

During the six months ended June 30, 2024, there were no transfers into or out of Level 3 measurements within the fair value hierarchy.

Marketable Securities

Due after 1 year through 5 years Due after 5 years and thereafter Total marketable securities$

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% %Contractual term (in years)Expected volatility % %Expected dividend yield % %Exercise price per share$ $

Fair Value of Liabilities

()$()) ()$()

$ Other receivables Deferred contract acquisition costs Prepaid expenses Other $ $

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$ Customer funds obligation Accrued expenses Accrued payroll and bonus Contingent liability for expected credit losses Accrued commissions Operating lease liability Other $ $

Deferred revenue, end of period Revenue recognized in the period from amounts included in deferred revenue at the beginning of period$

As of June 30, 2024, approximately $ million of revenue is expected to be recognized from remaining performance obligations for customer contracts. We expect to recognize revenue of approximately $ million from these remaining performance obligations over the next months, with the balance recognized thereafter.

)

Amortization expense attributable to deferred contract acquisition costs was $ million for the six months ended June 30, 2023.

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Issuance of common stock under equity plans Repurchases of common stock()Balance, end of period

Stock-Based Compensation

$ $ $ Sales and marketing Research and development General and administrative Restructuring expenses $ $ $ $ $ $

Stock-based compensation of $ million and $ million, respectively, was capitalized as software development costs for the three and six months ended June 30, 2024. Stock-based compensation of $ million and $ million, respectively, was capitalized as software development costs for the three and six months ended June 30, 2023.

Stock Options

$ Granted Exercised() Forfeited()

Outstanding as of June 30, 2024

Options vested and expected to vest as of June 30, 2024

$ $

The aggregate intrinsic values of options exercised was $ million and $ million, respectively, during the three and six months ended June 30, 2024.

As of June 30, 2024, total unrecognized stock-based compensation expense related to option awards was $ million and is expected to be recognized over the remaining weighted-average service period of years.

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$ Granted $ Vested()$ Forfeited()$

Outstanding balance as of June 30, 2024

Expected to vest, as of June 30, 2024

The fair value of RSUs vested during the three and six months ended June 30, 2024 was $ million and $ million, respectively.

As of June 30, 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.

Share Repurchase Program

In February 2024, we announced the authorization of a share repurchase program for the repurchase of shares in our Class A common stock, in an aggregate amount of up to $ 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.

During the three and six months ended June 30, 2024, we repurchased $ million and $ million, respectively, in Class A common stock. At June 30, 2024, approximately $ million remained authorized for repurchase under our share repurchase program.

million and $ million, respectively, during the three and six months ended June 30, 2024. These charges were recorded within restructuring expenses on our Condensed Consolidated Statements of Operations, primarily consisting of cash severance costs and the acceleration of stock-based compensation for certain terminated employees. As of June 30, 2024, accrued restructuring expenses were immaterial. We expect total costs of up to approximately $ million to be incurred in connection with this Restructuring Plan and for the costs to be fully captured by the end of fiscal year 2024.

% and ()% for the three months ended June 30, 2024 and 2023, respectively, and was ()% and ()% for the six months ended June 30, 2024 and 2023, respectively. The effective tax rate for each period differs from the statutory rate primarily as a result of having a full valuation allowance maintained against our deferred tax assets, along with the release of a portion of our valuation allowance in the six months ended June 30, 2023 as a result of an acquisition.

million and $ million for the three months ended June 30, 2024 and 2023, respectively, and $ million and $ million for the six months ended June 30, 2024 and 2023, respectively. million.

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10.

-to-one basis when computing earnings (loss) per share. As a result, basic and diluted earnings (loss) per share of Class A common stock and Class B common stock are equivalent.

During the three and six months ended June 30, 2024 and June 30, 2023, we recorded a loss on fair value remeasurement of our warrant liability, which was excluded from the calculation of diluted earnings per share due to its anti-dilutive effect.

$()$()$()Less: Gain on change in fair value of warrant liabilities Net income (loss), diluted$ $()$()$()Denominator:Weighted-average shares of common stock outstanding—basic Dilutive common share equivalents included in dilutive shares Weighted-average shares of common stock outstanding—diluted Earnings (loss) per share, basic$ $()$()$()Earnings (loss) per share, diluted$ $()$()$() Unvested restricted stock Unvested restricted stock units

Warrants to purchase Class B common stock

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11.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of our financial condition and results of operations together with the unaudited condensed consolidated financial statements, and the related notes that are included elsewhere in this Quarterly Report on Form 10-Q, and with our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023. Some of the information contained in this discussion and analysis, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks, uncertainties, and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under the section titled “Special Note Regarding Forward-Looking Statements” and Item 1A. Risk Factors included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 and in this Quarterly Report on Form 10-Q, if applicable. Our historical results are not necessarily indicative of the results that may be expected for any period in the future.

Overview

Toast is a cloud-based, all-in-one digital technology platform purpose-built for the entire restaurant community. We provide a comprehensive platform of software-as-a-service, or SaaS, products and financial technology solutions, including integrated payment processing, restaurant-grade hardware, and a broad ecosystem of third-party partners. We serve as the restaurant operating system, connecting front of house and back of house operations across service models including dine-in, takeout, delivery, catering, and retail.

We define a live location, or Location, as a unique location that has used Toast Point of Sale, or POS, to record transaction volumes above a minimum threshold, and has not been marked as a churned location as of the date of determination. A Location can use Toast payment services, which we refer to as a Toast Processing Location, or for select enterprise customers, not use Toast’s payment services, which we refer to as a Non-Toast Processing Location. Customers of legacy solutions provided by companies that we have acquired that do not use Toast POS, are not included in our Location count.

As of June 30, 2024, approximately 120,000 Locations, an increase of 29% year over year, processing approximately $143 billion of gross payment volume in the trailing 12 months, partnered with Toast to optimize operations, increase sales, engage guests, and maintain happy employees.

Since our founding, we have translated our love for restaurants into a commitment to innovation and digital transformation for the restaurant industry. As we have expanded our platform, launched new products, and added new partners over time, we have rapidly grown the number of restaurant Locations on the Toast platform.

Seasonality

We experience seasonality in our financial technology solutions revenue, which is largely driven by the level of Gross Payment Volume, or GPV, processed through our platform. For example, customers typically have greater sales during the warmer months, though this effect varies regionally, and customer sales can be impacted by seasonal needs of our customers (which may also impact the total number of Toast Processing Locations in such a period that contributes to our GPV). As a result, our financial technology solutions revenue per Toast Processing Location has historically been stronger in the second and third quarters. We believe that financial technology solutions revenue from both existing and potential future products will continue to represent a significant proportion of our overall revenue mix, and seasonality will continue to impact our results of operations.

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Key Business Metrics

We use the following key business metrics to help us evaluate our business, identify trends affecting our business, formulate business plans, and make strategic decisions:


	Three Months Ended June 30,						Six Months Ended June 30,
(dollars in billions)	2024		2023		% Growth		2024		2023		% Growth
Gross Payment Volume (GPV)(1)	$	40.5	$	32.1	26	%	$	75.2	$	58.8	28	%


	As of June 30,
(dollars in millions)	2024		2023		% Growth
Annualized Recurring Run-Rate (ARR)	$	1,473	$	1,140	29	%

Gross Payment Volume (GPV)(1)

Gross Payment Volume represents the sum of total dollars processed through the Toast payments platform across Toast Processing Locations in a given period. GPV is a key measure of the scale of our platform, which in turn drives our financial performance. As our customers generate more sales and therefore more GPV, we generally see higher financial technology solutions revenue.

_________________

(1) Please note that numbers may not tie due to rounding to the nearest hundred million.

Annualized Recurring Run-Rate (ARR)

We monitor Annualized Recurring Run-Rate as a key operational measure of the scale of our subscription and payment processing services for both new and existing customers. To calculate this metric, we first calculate recurring run-rate on a monthly basis. Monthly Recurring Run-Rate, or MRR, is measured on the final day of each month as the sum of (i) our monthly billings of subscription services fees, which we refer to as the subscription component of MRR, and (ii) our in-month adjusted payments services fees, exclusive of estimated transaction-based costs, which we refer to as the payments component of MRR. MRR does not include fees derived from Toast Capital or related costs. MRR is also not burdened by the impact of SaaS credits offered. The MRR calculation includes all locations on the Toast platform and locations on legacy solutions, which have a negligible impact on ARR.

ARR is determined by taking the sum of (i) twelve times the subscription component of MRR and (ii) four times the trailing-three-month cumulative payments component of MRR. We believe this approach provides an indication of our scale, while also controlling for short-term fluctuations in payments volume. Our ARR may decline or fluctuate as a result of a number of factors, including customers’ satisfaction with our platform, pricing, competitive offerings, economic conditions, or overall changes in our customers’ and their guests’ spending levels. ARR is an operational measure, does not reflect our revenue or gross profit determined in accordance with U.S. Generally Accepted Accounting Principles, or GAAP, and should be viewed independently of, and not combined with or substituted for, our revenue, gross profit, and other financial information determined in accordance with GAAP. Further, ARR is not a forecast of future revenue and investors should not place undue reliance on ARR as an indicator of our future or expected results.

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Results of Operations

Revenue


	Three Months Ended June 30,				Change				Six Months Ended June 30,				Change
(dollars in millions)	2024		2023		Amount		%		2024		2023		Amount		%
Subscription services	$	166	$	121	$	45	37	%	$	318	$	227	$	91	40	%
Financial technology solutions	1,023		808		215		27	%	1,896		1,482		414		28	%
Hardware and professional services	53		49		4		8	%	104		88		16		18	%

Total revenue	$	1,242	$	978	$	264	27	%	$	2,318	$	1,797	$	521	29	%

The increase in subscription services revenue during the three and six months ended June 30, 2024 was attributable to growth in restaurant Locations on the Toast platform and the continued increase in product adoption.

The increase in financial technology solutions revenue during the three and six months ended June 30, 2024 was attributable to the increase in restaurant Locations on the Toast platform.

Costs of Revenue


	Three Months Ended June 30,				Change				Six Months Ended June 30,				Change
(dollars in millions)	2024		2023		Amount		%		2024		2023		Amount		%
Subscription services	$	53	$	39	$	14	36	%	$	103	$	75	$	28	37	%
Financial technology solutions	806		631		175		28	%	1,488		1,155		333		29	%
Hardware and professional services	96		99		(3)		(3)	%	188		183		5		3	%

Amortization of acquired intangible assets	$	1	$	1	$	—	—	%	2		2		—		—	%
Total costs of revenue	$	956	$	770	$	186	24	%	$	1,781	$	1,415	$	366	26	%

The increase in subscription services costs during the three and six months ended June 30, 2024 was attributable to an increase in employee-related costs.

The increase in financial technology solutions costs during the three and six months ended June 30, 2024 was due to an increase in GPV.

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Operating Expenses

Sales and Marketing


	Three Months Ended June 30,				Change				Six Months Ended June 30,				Change
(dollars in millions)	2024		2023		Amount		%		2024		2023		Amount		%
Sales and marketing	$	115	$	100	$	15	15	%	$	222	$	199	$	23	12	%

The increase in sales and marketing expenses during the three and six months ended June 30, 2024 was attributable to an increase in employee-related costs.

Research and Development


	Three Months Ended June 30,				Change				Six Months Ended June 30,				Change
(dollars in millions)	2024		2023		Amount		%		2024		2023		Amount		%
Research and development	$	87	$	92	$	(5)	(5)	%	$	169	$	177	$	(8)	(5)	%

The decrease in research and development expenses during the three and six months June 30, 2024 was attributable to a decrease in employee-related costs.

General and Administrative


	Three Months Ended June 30,				Change				Six Months Ended June 30,				Change
(dollars in millions)	2024		2023		Amount		%		2024		2023		Amount		%
General and administrative	$	75	$	96	$	(21)	(22)	%	$	149	$	179	$	(30)	(17)	%

The decrease in general and administrative expenses during the three and six months ended June 30, 2024 was attributable to a decrease in employee-related costs of $8 million and $12 million, respectively, and a decrease of $11 million in lease termination expenses during both the three and six months ended June 30, 2024.

Restructuring Expenses


	Three Months Ended June 30,				Change			Six Months Ended June 30,			Change
(dollars in millions)	2024		2023		Amount		%	2024		2023	Amount		%
Restructuring expenses	$	4	$	—	$	4	N/M	$	46	—	$	46	N/M
N/M - Not meaningful

Restructuring expenses included restructuring and restructuring-related expenses incurred as part of the February 2024 Restructuring Plan, substantially all of which relates to severance benefits of approximately $1 million and $32 million, respectively, during the three and six months ended June 30, 2024 and approximately $2 million and $12 million, respectively, of expense related to the acceleration of stock-based compensation for terminated employees during the three and six months ended June 30, 2024.

Interest Income, Net


	Three Months Ended June 30,				Change				Six Months Ended June 30,				Change
(dollars in millions)	2024		2023		Amount		%		2024		2023		Amount		%
Interest income, net	$	10	$	9	$	1	11	%	$	20	$	17	$	3	18	%

The increase in interest income, net during the three and six months ended June 30, 2024 was attributable to higher interest income generated on our financial instruments.

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Change in Fair Value of Warrant Liability


	Three Months Ended June 30,				Change				Six Months Ended June 30,				Change
(dollars in millions)	2024		2023		Amount		%		2024		2023		Amount		%
Change in fair value of warrant liability	$	(1)	$	(26)	$	25	(96)	%	$	(37)	$	(23)	$	(14)	61	%

The change in fair value of warrant liability for the three and six months ended June 30, 2024 was attributable to an increase in the value of the common stock underlying the outstanding warrants at the end of period compared to the beginning of the period.

Non-GAAP Financial Measures

We use certain non-GAAP financial measures described below to supplement our condensed consolidated financial statements, which are 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 (expense) net, income taxes and certain other items that are not considered to reflect our operating activities and performance within the ordinary course of business, such as restructuring and restructuring-related expenses, acquisition expenses, fair value adjustments on warrant liabilities, expenses related to early termination of leases (which includes associated asset impairments) and stock-based charitable contribution expense, as applicable. 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.

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The following table reflects the reconciliation of net income (loss) to Adjusted EBITDA for each of the periods presented:


	Three Months Ended June 30,				Six Months Ended June 30,
(in millions)	2024		2023		2024		2023
Net income (loss)	$	14	$	(98)	$	(69)	$	(179)
Stock-based compensation expense and related payroll tax	70		74		130		141
Depreciation and amortization	11		8		20		14
Interest income, net	(10)		(9)		(20)		(17)


Change in fair value of warrant liability	1		26		37		23

Termination of leases	2		13		2		13


Restructuring and restructuring-related expenses(1)	4		—		46		—
Acquisition expenses	—		—		—		1
Income tax expense	—		1		2		1
Adjusted EBITDA	$	92	$	15	$	148	$	(3)

(1) Restructuring and restructuring-related expenses for the three and six months ended June 30, 2024 include $1 million and $32 million, respectively, of severance benefits, $2 million and $12 million, respectively, of stock-based compensation expense, and $1 million and $2 million, respectively, of accelerated depreciation 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 for each of the periods presented.


	Three Months Ended June 30,				Six Months Ended June 30,
(in millions)	2024		2023		2024		2023
Revenue:
Subscription services	$	166	$	121	318		$	227
Financial technology solutions	1,023		808		1,896		1,482
Costs of Revenue:
Subscription services	53		39		103		75
Financial technology solutions	806		631		1,488		1,155
Subscription Services and Financial Technology Solutions Gross Profit (GAAP)	$	330	$	259	$	623	$	479

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	Three Months Ended June 30,				Six Months Ended June 30,
(in millions)	2024		2023		2024		2023
Subscription Services and Financial Technology Solutions Gross Profit (GAAP)	$	330	$	259	$	623	$	479
Stock-based compensation expense and related payroll tax	6		4		10		9
Depreciation and amortization	8		4		14		7
Non-GAAP Subscription Services and Financial Technology Solutions Gross Profit (Non-GAAP)	$	344	$	267	$	647	$	495

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 (collectively 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 (used in) operating activities to free cash flow for each of the periods presented:


	Six Months Ended June 30,
(in millions)	2024		2023
Net cash provided by (used in) operating activities	$	104	$	(5)
Capital expenditures	(29)		(21)
Free cash flow	$	75	$	(26)

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:



(in millions)	June 30, 2024 (1)		December 31, 2023 (2)
Cash and cash equivalents	$	691	$	605
Marketable securities	528		519
Cash and cash equivalents and marketable securities	$	1,219	$	1,124
Available credit facility	$	330	$	330
Total	$	1,549	$	1,454

(1) Excludes $115 million of cash held on behalf of customers and $58 million of restricted cash.

(2) Excludes $87 million of cash held on behalf of customers and $55 million of restricted cash.

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	Six Months Ended June 30,
(in millions)	2024		2023
Net cash provided by (used in) operating activities	$	104	$	(5)
Net cash used in investing activities	(33)		(54)
Net cash provided by financing activities	47		46
Net increase (decrease) in cash, cash equivalents, cash held on behalf of customers and restricted cash	$	118	$	(13)

Cash, cash equivalents and marketable securities

The net increase in cash, cash equivalents and marketable securities was primarily due to cash provided by operating activities of $101 million (which excludes changes in the balance of restricted cash) and proceeds of $55 million generated from the issuance of common stock. This was partially offset by $36 million in cash outflows related to share repurchases and $29 million in cash outflows related to capital expenditures. Cash generated from operating activities was impacted by our net loss of $(69) million, which includes restructuring and restructuring-related expenses of $46 million and a use of cash for working capital, primarily driven by higher deferred contract acquisition costs, resulting, in part, from continued growth in Locations.

During the six months ended June 30, 2024, the change in net cash provided by (used in) operating activities as compared the six months ended June 30, 2023, was driven by a lower net loss and an increase in non-cash adjustments, which was attributable to amortization of deferred contract acquisition costs and the loss recognized on the change in fair value of our warrant liability, driven by an increase in our stock price. This was partially offset by cash severance charges paid in connection with the February 2024 Restructuring Plan and a higher use of cash for working capital. The decrease in net cash used in investing activities during the six months ended June 30, 2024 was driven by a decrease in cash outflows related to our marketable securities, partially offset by an increase in cash outflows related to capital expenditures. While net cash provided by financing activities during the six months ended June 30, 2024 remained materially consistent, there was an increase in cash inflows from the proceeds from the issuance of common stock, offset by cash outflows related to share repurchases.

We do not anticipate any material changes, or material changes in trends, related to our net working capital requirements, liquidity or cash flows in the near term, other than for items disclosed within this Quarterly Report on Form 10-Q and our 2023 Annual Report on Form 10-K.

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 LIBOR with 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. As of June 30, 2024 and December 31, 2023, total available funds under the 2021 Facility were $330 million and no amounts were drawn or outstanding. In addition, as of June 30, 2024 and December 31, 2023, there were $5 million in letters of credit outstanding.

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. During the six months ended June 30, 2024, we repurchased 1 million shares of our Class A common stock for an aggregate amount of $36 million.

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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 units, 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 June 30, 2024 our fully diluted share count was as follows:


(shares) (in millions)			June 30, 2024 (1)
Class A and B common stock issued and outstanding			560
Options to purchase Class A common stock and Class B common stock			36
Unvested restricted stock units			28
Warrants to purchase Class B common stock (2)			7
Shares reserved for charitable donations			4

Total fully diluted share count			635

(1) Share amounts presented above do not give effect to potential repurchases of common stock under the treasury stock method.

(2) On July 3, 2024, we repurchased a warrant, or the Warrant, to purchase 5 million shares of our Class B common stock for an aggregate purchase price of $60 million. The Warrant was cancelled upon repurchase and is no longer outstanding.

For further information see Note 7, “Stockholders’ Equity" and Note 10, “Earnings or Loss Per Share Attributable to Common Stockholders” included in this Quarterly Report on Form 10-Q in “Notes to Condensed Consolidated Financial Statements”.

Other Capital Requirements

Expected working and other capital requirements are described in our 2023 Annual Report on Form 10-K in “Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations.” At June 30, 2024, other than for the changes disclosed in the “Notes to Condensed Consolidated Financial Statements” and “Liquidity and Capital Resources” in this Quarterly Report, there have been no other material changes to our expected working and other capital requirements described in our 2023 Annual Report on Form 10-K and 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.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to financial market risks, including changes in interest rates and foreign currency exchange rates, as well as credit risk on accounts receivable and our loan servicing activities. Our exposure to market and credit risk has not changed materially since the presentation set forth in Part II, Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 27, 2024.

Item 4. 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 the design and operation 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 the end of the period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were effective as of June 30, 2024, the end of the period covered by this Quarterly Report on Form 10-Q, to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and (ii) accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

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Changes in Internal Control Over Financial Reporting

There were no changes to our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended June 30, 2024, that have materially affected, or are reasonably likely to materially affect, our internal control 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.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings

We are not currently a party to any litigation or claims that, if determined adversely to us, would have a material adverse effect on our business operating results, financial condition, or cash flows. We are, from time to time, party to litigation and subject to claims in the ordinary course of business. Regardless of the outcome, litigation can have an adverse impact on us because of the defense and settlement costs, diversion of management resources, and other factors.

Item 1A. Risk Factors

There have been no material changes from the risk factors set forth in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023. Our business, operations, and financial results are subject to various risks and uncertainties that could materially adversely affect our business, results of operations, financial condition, and the trading price of our Class A common stock. You should carefully read and consider the risks and uncertainties included in the Annual Report, together with all of the other information in the Annual Report and this Quarterly Report on Form 10-Q, including the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our condensed consolidated financial statements and related notes, and other documents that we file with the SEC. The risks and uncertainties described in these reports may not be the only ones we face. The factors discussed in these reports, among others, could cause our actual results to differ materially from historical results and those expressed in forward-looking statements made by us or on our behalf in filings with the SEC, press releases, communications with investors, and oral statements.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(a) Unregistered Sales of Equity Securities

None.

Our purchases of our common stock in the second quarter of fiscal year 2024 were:


Period	Total Number of Shares Purchased	Average Price Paid Per Share (1)		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (2)
	(in thousands)			(in thousands)	(in millions)
April 1, 2024 to April 30, 2024	265	$	22.99	265	240
May 1, 2024 to May 31, 2024	19	$	22.98	19	239
June 1, 2024 to June 30, 2024	1,089	$	22.95	1,089	214
Total	1,373	$	22.96	1,373

(1) Average Price Paid Per Share excludes cash paid for commissions.

(2) On February 15, 2024, we announced the authorization of a share repurchase program for the repurchase of shares in our Class A common stock, in an aggregate amount of up to $250 million. The repurchase program has no expiration date, does not obligate us to acquire any particular amount of our Class A common stock, and it may be suspended at any time at our discretion.

Item 3. Defaults Upon Senior Securities

None.

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Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

, , 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 , into a trading plan pursuant to Rule 10b5-1 of the Exchange Act. Mr. Fredette’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 shares of our Class A common stock pursuant to the terms of the plan. Mr. Fredette’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 June 30, 2024, other than described in the statements above, none of our directors or officers (as defined in Rule 16a-1(f) of the Exchange Act) , 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).

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Item 6. Exhibits

The exhibits listed below are filed or incorporated by reference in this Quarterly Report on Form 10-Q.


Exhibit Number			Description
3.1			Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K (File No. 001-40819), filed with the Securities and Exchange Commission on September 27, 2021).
3.2			Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Registrant dated June 6, 2024 (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K (File No. 001-40819), filed with the Securities and Exchange Commission on June 10, 2024 ).
31.1*			Certification of the Principal Executive Officer, pursuant to Rules 13a-14(a) and 15d-14(a) under the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*			Certification of the Principal Financial Officer, pursuant to Rules 13a-14(a) and 15d-14(a) under the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**			Certification of the Principal Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**			Certification of the Principal Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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).


*			Filed herewith.
**			Furnished herewith. The certifications attached as Exhibits 32.1 and 32.2 that accompany this Quarterly Report on Form 10-Q 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 Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	TOAST, INC.
	(Registrant)

August 6, 2024	By:	/s/ Aman Narang
		Aman Narang
		Chief Executive Officer (Principal Executive Officer)

August 6, 2024	By:	/s/ Elena Gomez
		Elena Gomez
		Chief Financial Officer (Principal Financial Officer)

August 6, 2024	By:	/s/ Michael Matlock
		Michael Matlock
		Chief Accounting Officer (Principal Accounting Officer)

Toast, Inc. - Quarter Report: 2024 June (Form 10-Q)

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