Toast Inc
For the period ended Jun 30, 2024. Filed Aug 7, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 7, 2024
TOST$34.67-1.4%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-08.
0001650164-24-000177
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-07.
0001650164-24-000283
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 69 previous paragraphs and 70 current paragraphs.
44 unchanged; 24 reworded; 2 added; 1 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 17 previous and 17 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (2)
Current report
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.
Current report
(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.
Removed paragraphs (1)
Previous report
Research and development expenses remained approximately flat during the three months March 31, 2024 as compared to the three months ended March 31, 2023.
Reworded paragraphs (24)
Previous wording
As of March 31, 2024, approximately 112,000 Locations, an increase of 32% year over year, processing approximately $134 billion of gross payment volume in the trailing 12 months, partnered with Toast to optimize operations, increase sales, engage guests, and maintain happy employees.
Current wording
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.
Previous wording
We experience seasonality in our financial technology solutions revenue, which is largely driven by the level of Gross Profit 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.
Current wording
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.
Previous wording
The increase in subscription services revenue during the three months ended March 31, 2024 was attributable to growth in restaurant Locations on the Toast platform and the continued increase in product adoption.
Current wording
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.
Previous wording
The increase in financial technology solutions revenue during the three months ended March 31, 2024 was attributable to the increase in restaurant Locations on the Toast platform.
Current wording
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.
Previous wording
The increase in subscription services costs during the three months ended March 31, 2024 was attributable to an increase in employee-related costs.
Current wording
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.
Previous wording
The increase in financial technology solutions costs during the three months ended March 31, 2024 was due to an increase in GPV.
Current wording
The increase in financial technology solutions costs during the three and six months ended June 30, 2024 was due to an increase in GPV.
Previous wording
The increase in sales and marketing expenses during the three months ended March 31, 2024 was attributable to an increase in employee-related costs.
Current wording
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.
Previous wording
The decrease in general and administrative expenses during the three months ended March 31, 2024 was attributable to a decrease in employee-related costs.
Current wording
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.
Previous wording
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 $30 million and approximately $10 million of expense related to the acceleration of stock-based compensation for terminated employees.
Current wording
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.
Previous wording
The increase in interest income, net during the three months ended March 31, 2024 was attributable to higher interest income generated on our financial instruments.
Current wording
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.
Previous wording
The change in fair value of warrant liability for the three months ended March 31, 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.
Current wording
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.
Previous wording
Net Loss (GAAP) and Adjusted EBITDA (Non-GAAP)
Current wording
Net Income (Loss) (GAAP) and Adjusted EBITDA (Non-GAAP)
Previous wording
Adjusted EBITDA is defined as net (loss) income, 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 loss, the most directly comparable GAAP financial measure, to Adjusted EBITDA.
Current wording
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.
Previous wording
The following table reflects the reconciliation of net loss to Adjusted EBITDA for each of the periods presented:
Current wording
The following table reflects the reconciliation of net income (loss) to Adjusted EBITDA for each of the periods presented:
Previous wording
(1)Restructuring and restructuring-related expenses include $30 million of severance benefits, $10 million of stock-based compensation expense, and $1 million of accelerated depreciation related to facilities.
Current wording
(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.
Previous wording
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.
Current wording
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.
Previous wording
Net Cash (Used in) Provided by Operating Activities (GAAP) and Free Cash Flow (Non-GAAP)
Current wording
Net Cash Provided by (Used in) Operating Activities (GAAP) and Free Cash Flow (Non-GAAP)
Previous wording
Free cash flow is defined as net cash (used in) provided by 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.
Current wording
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.
Previous wording
The following table presents a reconciliation of net cash used in operating activities to free cash flow for each of the periods presented:
Current wording
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:
Previous wording
(1) Excludes $136 million of cash held on behalf of customers and $57 million of restricted cash
Current wording
(1) Excludes $115 million of cash held on behalf of customers and $58 million of restricted cash.
Previous wording
The net decrease in cash, cash equivalents and marketable securities was primarily due to cash used in operating activities of $22 million (which excludes changes in the balance of restricted cash) and $13 million in cash outflows related to capital expenditures. This was partially offset by proceeds of $28 million generated from the issuance of common stock. Cash used in operating activities was driven by our net loss of $83 million, which includes restructuring and restructuring-related charges of $41 million during the three months ended March 31, 2024, and a use of cash for working capital, primarily driven by higher deferred contract acquisition costs, resulting, in part, from continued growth in Locations.
Current wording
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.
Previous wording
During the three months ended March 31, 2024, the decrease in net cash used in operating activities as compared to three months ended March 31, 2023, was driven by an increase in non-cash adjustments, which was attributable to the loss recognized on the change in fair value of our warrant liability, driven by an increase in our stock price, and a higher use of cash for working capital. This was partially offset by cash severance charges paid in connection with the February 2024 Restructuring Plan. The increase in net cash provided by financing activities during the three months ended March 31, 2024 was driven by higher proceeds from the issuance of common stock related to exercises of stock options and an increase in the change in customer funds obligations held as compared to the three months ended March 31, 2023. The primary sources of cash used in investing activities remained materiality consistent during the three months ended March 31, 2024 and 2023.
Current wording
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.
Previous wording
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 three months ended March 31, 2024, we repurchased 0.2 million shares of our Class A common stock for an aggregate amount of $4 million.
Current wording
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.
Previous wording
For further information see Note 7, “Stockholders’ Equity" and Note 10, “Net Loss Per Share Attributable to Common Stockholders” included in this Quarterly Report on Form 10-Q in “Notes to Condensed Consolidated Financial Statements”.
Current wording
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”.