Toast, Inc.

1. Description of Business, Basis of Presentation, and Summary of Significant Accounting Policies

Toast, Inc. (“Toast,” “we,” or the “Company”) is a global technology platform built for restaurant and retail businesses. From the busiest local restaurants and shops to large hospitality brands, Toast helps owners and operators manage their businesses more efficiently, drive guest demand, and build lasting success. Toast integrates software, agentic AI, payments, financial technology solutions, and hardware with a broad partner ecosystem. Powering billions of purchases throughout local commerce, Toast delivers the precision and innovation required for modern restaurant and retail environments.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, or U.S. GAAP, and the rules and regulations of the Securities and Exchange Commission, or the SEC, regarding interim financial reporting.

The unaudited condensed consolidated financial statements include the Company’s accounts and the accounts of its subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. The unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly our financial position, results of operations, comprehensive income (loss), stockholders’equity, and cash flows for the interim periods, but are not necessarily indicative of the results of operations to be expected for the full year ending December 31, 2026 or any other future interim periods.

The accompanying unaudited condensed consolidated financial statements reflect the application of certain significant accounting policies as described below and elsewhere in these notes to the unaudited condensed consolidated financial statements. The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2025, or the 2025 Annual Report. As of September 30, 2026, there have been no material changes in our significant accounting policies from those that were disclosed in the Annual Report on Form 10-K, unless otherwise discussed below.

Certain reclassifications of prior period amounts were made in the current year to conform to the current period presentation. These reclassifications had no impact on the previously reported results of operations or cash flows for the periods presented.

2. Financial Instruments

The following table presents information about the Company’s financial assets and liabilities that are measured at fair value on a recurring basis and indicates the level of the fair value hierarchy used to determine such fair values (in millions):

During the nine months ended September 30, 2026 and 2025, there were no transfers into or out of Level 3 measurements within the fair value hierarchy.

The Company did not recognize any credit losses or non-credit-related impairments related to available-for-sale marketable debt securities for the nine months ended September 30, 2026 and 2025. Unrealized losses were immaterial and recognized in other comprehensive income (loss).

Marketable Securities

The fair values of the marketable securities by contractual maturities at September 30, 2026 were as follows (in millions):

Fair Value of Liabilities

The aggregate fair value of the common stock warrant liability, which is measured using Level 3 inputs, decreased from $19 million as of December 31, 2025 to $13 million as of September 30, 2026, resulting in a $6 million gain during the nine months ended September 30, 2026.

As of September 30, 2026, the maximum number of shares of the Company’s common stock that could be required to be issued upon the exercise of outstanding warrants was 1 million.

3. Loan Servicing Activities

Changes in the contingent liability for expected credit losses for the three and nine months ended September 30, 2026 and 2025 were as follows (in millions):

As of September 30, 2026 and December 31, 2025, the non-contingent stand-ready liability was $24 million and $18 million, respectively.

As of September 30, 2026 and December 31, 2025, $76 million and $71 million, respectively, were classified as restricted cash on the Condensed Consolidated Balance Sheets, representing cash held with commercial lending institutions. The restrictions are related to cash held as collateral pursuant to an agreement with the originating third-party bank for the working capital loans serviced by Toast Capital.

4. Loans Held for Investment

The Company purchases loans from its bank partner that are not delinquent at acquisition and for which the Company has the intent and ability to hold for the foreseeable future, until maturity or payoff. These loans are classified as held for investment and are included in other current assets on the Condensed Consolidated Balance Sheets. They are carried at amortized cost, net of an allowance for expected credit losses, which reflects estimated lifetime losses based on historical experience, current conditions, and reasonable and supportable forecasts. The Company recognizes income, including the effect of any premium or discount, over the life of these loans using the effective interest method.

As of September 30, 2026, loans held for investment, net, were $70 million, with an immaterial allowance for expected credit losses and interest income. There wereno loans held for investment as of December 31, 2025.

The Company analyzes loans held for investment based on the aging of unpaid principal and the historical performance of vintage cohorts. These are the primary credit quality indicators in evaluating the allowance for expected credit losses and the delinquency status of the loan portfolio. As of September 30, 2026, there were no material delinquent loans.

5. Other Balance Sheet Information

Accounts Receivable, Net (in millions)

Inventories, Net (in millions)

Other Current Assets (in millions)

Accrued Expenses and Current Liabilities (in millions)

6. Revenue from Contracts with Customers

The following table summarizes the activity in deferred revenue (in millions):

Deferred revenue, beginning of period, includes amounts classified within other long-term liabilities on our Consolidated Balance Sheets.

As of September 30, 2026, approximately $1,178 million of revenue is expected to be recognized from remaining performance obligations for customer contracts. The Company expects to recognize revenue of approximately $1,061 million from these remaining performance obligations over the next 24 months, with the balance recognized thereafter.

The following table summarizes the activity in deferred contract acquisition costs (in millions):

As of September 30, 2026, $112 million of deferred contract acquisition costs were recorded within other current assets with the remaining balance recorded within other non-current assets on the Condensed Consolidated Balance Sheet.

7. Stockholders’ Equity

Stock-Based Compensation

Stock-based compensation expenses recognized for the three and nine months ended September 30, 2026 and 2025, were as follows (in millions):

Stock Options

The following is a summary of stock option activity under the Company’s stock option plans for the nine months ended September 30, 2026:

(1) The aggregate intrinsic value was determined as the difference between the closing price of the Class A common stock on the last trading day of September 2026, or the date of exercise, as appropriate, and the exercise price, multiplied by the number of in-the-money options that would have been received by the option holders had all option holders exercised their in-the-money options at period end.

The aggregate intrinsic value of options exercised was $19 million and $70 million, respectively, during the three and nine months ended September 30, 2026.

As of September 30, 2026, total unrecognized stock-based compensation expense related to the options was $54 million and is expected to be recognized over the remaining weighted-average service period of 2.9 years.

Restricted Stock Units

The following table summarizes restricted stock units, or RSUs, activity during thenine months ended September 30, 2026:

The fair value of RSUs vested during the three and nine months ended September 30, 2026 was $60 million and $181 million, respectively.

As of September 30, 2026, total unrecognized stock-based compensation expense related to the RSUs was $343 million and is expected to be recognized over the remaining weighted-average service period of 3.0 years.

Share Repurchase Program

In February 2024, the Company announced the authorization of a share repurchase program for the repurchase of shares of Class A common stock, par value $0.000001 per share, in an aggregate amount of up to $250 million. On February 10, 2026, the Company’s board of directors approved an increase of $500 million to the previously authorized share repurchase program for the repurchase of shares of Class A common stock. The repurchase program has no expiration date, does not obligate the Company to acquire any particular amount of Class A common stock, and may be suspended at any time at the Company’s 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 September 30, 2026, the Company did not repurchase any shares of its Class A common stock. During the nine months ended September 30, 2026, the Company repurchased $486 million of its Class A common stock. As of September 30, 2026, approximately $100 million remained authorized for repurchase under the share repurchase program.

Shares Reserved for Charitable Donations

In connection with the Company’s participation in the Pledge 1% movement, during the year ended December 31, 2021, the Board approved reserving 5 million shares of Class A common stock that the Company may, but is not obligated to, issue over a certain period to fund the Company’s social impact initiatives through Toast.org. During the three and nine months ended September 30, 2026, the Company recognized stock-based charitable contribution expenses of $5 million for the fair value of the donated shares. During the three and nine months ended September 30, 2025, the Company recognized stock-based charitable contribution expenses of $6 million for the fair value of the donated shares. Such expenses were recorded within general and administrative expenses in the Condensed Consolidated Statement of Operations.

8. Income Taxes

The Company computes the provision for income taxes by applying the estimated annual effective tax rate to year-to-date income before income taxes, and adjusts for discrete items in the period in which they occur.

The income tax expense (benefit) was $7 million and $(1) million for the three months ended September 30, 2026 and 2025, respectively, and $20 million and $4 million for the nine months ended September 30, 2026 and 2025, respectively. The effective tax rate for each period differs from the statutory rate primarily due to a full valuation allowance against the Company’s U.S. net deferred tax assets, U.S. state income taxes, and foreign rate differential on profitable foreign jurisdictions.

As of September 30, 2026, the Company maintained a full valuation allowance against the U.S. net deferred tax assets as the amounts were not more-likely-than-not realizable. This determination is based on management’s evaluation of all available positive and negative evidence, such as sustainability of recent profits and forecasts of future taxable income; a portion or all of the valuation allowance could be released in the next 12 months. The timing and amount of any such release remain uncertain.

9. Earnings Per Share

Basic earnings per share is determined by dividing net income by the weighted-average shares outstanding for the period. The Company analyzes the potential dilutive effect of stock options, RSUs, the employee stock purchase plan, and warrants to purchase common stock, during periods the Company generates net income, or when income is recognized related to changes in fair value of warrant liabilities.

Class A common stock and Class B common stock share proportionately, on a per share basis, in the Company’s net income and participate equally in the dividends on common stock, if declared. The Company allocates net income attributable to common stock between the common stock classes on aone-to-one basis when computing earnings per share. As a result, basic and diluted earnings per share of Class A common stock and Class B common stock are equivalent.

The following table sets forth the calculation of earnings per share (in millions, except per share amounts):

(1)During the nine months ended September 30, 2026, the Company recorded a remeasurement gain of $6 million of the Company’s warrant liability. During the three and nine months ended September 30, 2025, the Company recorded a remeasurement gain of $7 million and$2 million, respectively, of the Company’s warrant liability. Remeasurement gains are excluded from the net income to adjust for the dilutive impact of the warrants. The Company adjusted the weighted-average shares outstanding for the incremental dilutive shares using the treasury stock method.

The following potential shares of common stock were excluded from the calculation of diluted earnings per share because their effect would have been anti-dilutive for the periods presented (in millions):

10. Segment Information

The Company hasone reportable segment. The following table sets out the Company’s measure of profit and significant segment expenses (in millions):

(1) These 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, which consists of both stock-based compensation (refer to Note 7, “Stockholders’ Equity” for tabular disclosure of amounts included within other significant segment expenses) and the corresponding payroll taxes.

(2)Other items include restructuring expenses, interest income, net, change in fair value of warrant liability, and income tax (expense) benefit.

11. Commitments and Contingencies

Purchase Commitments

As of September 30, 2026, the Company’s non-cancellable purchase obligations to hardware suppliers totaled $191 million, all of which is due within the next 12 months.

As of September 30, 2026, the Company’s non-cancellable contractual commitments with cloud service providers and other vendors totaled $95 million, of which $79 million is due within the next 12 months and $16 million thereafter.

Legal Proceedings

The Company has been cooperating with the Federal Trade Commission (the “FTC”) staff in response to a Civil Investigative Demand received in June 2025, seeking information regarding the marketing, sale, and operation of its restaurant operating systems and related customer-service offerings relative to the Federal Trade Commission Act (the "FTC Act"), the Gramm-Leach-Bliley Act, and the Restore Online Shoppers' Confidence Act ("ROSCA"). Following receipt of a draft complaint from the FTC in June 2026, the Company engaged in good-faith negotiations with the FTC, but these negotiations were unsuccessful. On October 29, 2026, the FTC, along with the states of Colorado, Florida, Illinois, Iowa, Nebraska, Oklahoma, and Utah, and the City of San Francisco and Los Angeles County, filed a complaint in the United States District Court for the Northern District of California against the Company alleging violations of Section 5 of the FTC Act, certain provisions of ROSCA, and analogous state statutes. The complaint seeks a permanent injunction, monetary relief in an unspecified amount, civil penalties, and other relief as determined by the court.

The Company strongly disagrees with the FTC's legal challenges to the Company's practices, policies, and procedures, including whether certain referenced laws apply to its type of business, and will vigorously defend its interests. However, the outcome of litigation is inherently uncertain. The defense or resolution of this matter, including any significant costs, penalties, remedies, and/or compliance requirements, could have a materially adverse impact on the Company's financial results and/or operations. At this stage, the Company is unable to estimate a reasonably possible financial loss or range of any potential financial loss, if any, as a result of this litigation.

In addition, from time to time, the Company 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. The Company establishes accruals for losses that management deems to be probable and subject to reasonable estimates. The Company does not expect any of these claims with a reasonably possible adverse outcome to have a material impact, and, accordingly, has not accrued for any material claims.