Toast

Prospectus Summary

PROSPECTUS SUMMARY This summary highlights selected information contained elsewhere in this prospectus. This summary does not contain all of the information you should consider before investing in our Class A common stock. You should read this entire prospectus carefully, including the sections titled “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Business,” and our financial statements and the related notes included elsewhere in this prospectus, before making an investment decision. Unless the context otherwise requires, all references in this prospectus to “Toast,” the “company,” “we,” “our,” “us,” or similar terms refer to Toast, Inc.

Our Mission

Our mission is to empower the restaurant community to delight their guests, do what they love, and thrive.

Overview

Toast is a cloud-based, end-to-end technology platform purpose-built for the entire restaurant community. Our platform provides a comprehensive suite 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 serve as the restaurant operating system, connecting front of house and back of house operations across dine-in, takeout, and delivery channels. As of June 30, 2021, approximately 48,000 restaurant locations across approximately 29,000 customers, processing over $38 billion of gross payment volume in the trailing 12 months, partnered with Toast to optimize operations, increase sales, engage guests, and maintain happy employees.

The restaurant industry is one of the largest, most complex, and most competitive markets in the world, with an estimated 22 million restaurant locations globally generating greater than $2.6 trillion in annual sales in 2021.¹ However, restaurants have lagged in technology adoption. Many restaurants still employ manual processes for critical tasks such as placing guest orders, coordinating kitchen operations, and managing employees. When technology is used, restaurants have historically relied on legacy systems and narrow point solutions that are not flexible, scalable, integrated, or built specifically for restaurants. These products often fail to meet evolving guest needs, which have continued to shift towards digital channels, and can be prohibitively expensive and complex for businesses with limited or no dedicated information technology staff. In addition, key data needed to optimize operations is often siloed, making it difficult to gain valuable insights.

We started Toast to address these pain points for restaurants. Since our founding, we have translated our love for restaurants into a commitment to innovation and digital transformation for the industry. Our success as a business is tightly aligned to the success of our customers. Our field-based sales team fosters relationships and generates deep local insights in their communities. In addition, our ongoing customer success efforts focus on meeting restaurants’ evolving needs through a combination of tailored onboarding, customer support, and intuitive product design.

By enabling these capabilities through a single, integrated platform, Toast improves experiences across the restaurant ecosystem:

The benefits to all stakeholders using the Toast platform create a powerful, virtuous cycle that amplifies our impact on restaurants. Guest satisfaction generates loyalty to restaurants, driving repeat sales, word-of-mouth referrals, and larger checks and tips. This promotes employee satisfaction, helping reduce turnover and motivating employees to continue to raise the bar on the guest experience. In addition, our integrated software and payments platform consolidates data on restaurant sales and operations, which enables our reporting and analytics as well as financial technology solutions, such as working capital loans, to further support our customers’ success.

We believe we are in the early stages of capturing our addressable market opportunity. Although we are a leading platform serving the restaurant industry,² as of June 30, 2021, the locations on our platform represented only about 6% of the approximately 860,000 restaurant locations in the United States.³ Similarly, our Annualized Recurring Run-Rate, or ARR, as of June 30, 2021 was only about 3% of our near-term serviceable market opportunity of approximately $15 billion. We see a significant opportunity to increase sales to both new and existing customers, further expand the usage of our platform outside the United States, and address the diverse needs of new and existing restaurant industry stakeholders.

We have grown rapidly since our founding. As of June 30, 2021, we had 47,942 locations on our platform, increasing from 33,129 and 19,891 locations as of June 30, 2020 and 2019, respectively. Our gross payment volume, or GPV, grew 17% year-over-year from $21.8 billion in the year ended December 31, 2019 to $25.4 billion in the year ended December 31, 2020, and grew 125% period-over-period from $10.4 billion in the six months ended June 30, 2020 to $23.4 billion in the six months ended June 30, 2021. We generate revenue through four main revenue streams: subscription services, financial technology solutions, hardware, and professional services. Our revenue grew 24% year-over-year from $665 million in the year ended December 31, 2019 to $823 million in the year ended December 31, 2020 and 105% period-over-period from $344 million in the six months ended June 30, 2020 to $704 million in the six months ended June 30, 2021. Our ARR grew 77% year-over-year from $184 million as of December 31, 2019 to $326 million as of December 31, 2020 and 118% period-over-period from $227 million as of June 30, 2020 to $494 million as of June 30, 2021. During the years ended December 31, 2019 and 2020, we incurred net losses of $209 million and $248 million, respectively, and generated Adjusted EBITDA of $(172) million and $(94) million, respectively. During the six months ended June 30, 2020 and 2021, we incurred net losses of $125 million and

$235 million, respectively, and generated Adjusted EBITDA of $(86) million and $14 million, respectively. See the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for additional information on our key business metrics and our non-GAAP financial measures.

These results are driven by our distinctive team of over 2,200 Toasters who are passionate about our customers and driven with purpose. Approximately two-thirds of Toasters have worked in the restaurant industry previously, enabling us to embrace a hospitality mindset and deeply understand our customers’ challenges. Our founder-led, mission-driven management team and talented employee base are committed to empowering those that power our industry and serve our local communities.

Our Industry

The restaurant industry is the one of the largest employers in the United States, with an estimate of more than 11 million people⁴ employed across approximately 860,000 restaurant locations in 2021.⁵ According to the National Restaurant Association, the restaurant industry’s share of the dollars spent on food was over 50% in 2019. U.S. restaurants generated nearly $700 billion in sales in 2020,⁶ despite the significant impact of the COVID-19 pandemic, representing approximately 3% of U.S. gross domestic product, or GDP.⁷ Restaurant sales are expected to grow to more than $1.1 trillion by 2024.⁸ The approximately 860,000 restaurant locations in the United States are highly diverse, in everything from location to type of cuisine and format to number of employees and amount of revenue. Regardless of these differences, operating a restaurant is challenging and complex. In general, restaurants operate with low margins, high employee turnover, highly perishable products, and complex regulations. At the same time, the restaurant industry, like many other sectors, is undergoing foundational changes driven by changing guest preferences and the imperative to utilize technology and data to innovate. What was once primarily an on-site experience with antiquated solutions such as pen and paper is now becoming an omnichannel experience that employs technology to enable dining in a restaurant, picking up curbside, or ordering delivery.

Consumer preference towards omnichannel dining options has further accelerated due to the COVID-19 pandemic. According to the National Restaurant Association, in 2020, 53% of adults said that purchasing food for takeout or delivery is essential to the way they live, up from 29% a decade earlier. They also found that approximately 70% of restaurant operators across service categories plan to keep some of the changes that they made to their restaurant as a result of the COVID-19 pandemic, even after the pandemic has subsided. In addition to the shift in how guests are interacting with restaurants, there has been a transformation in how guests purchase their food. Credit cards, mobile wallets, and other forms of digital payment solutions have increased in popularity among guests, who are continually seeking more efficient and seamless experiences. As the diversity of how guests order, where guests eat, and the means guests use to pay continues to grow, restaurants must constantly adapt to support these trends.

While the demand for technology adoption in restaurants has increased over recent years, the industry is still considered a laggard with one of the lowest levels of digitization across all sectors.⁹ Restaurants in the United States spent an estimated $25 billion on technology in 2019, which was less than 3% of their total sales.¹⁰ We expect the spend on technology to increase to $55 billion by 2024, closing the gap with other industries whose median technology spend as a percent of sales is approximately 5%.¹¹ Though technology has become a necessity to address the challenges facing restaurants today, it can also create further complexities. Many restaurants have adopted a complex web of disparate point solutions, each of which is meant to address narrow use cases. As a result of this fragmentation, restaurants are unable to fully realize the power of technology and their data. According to Hospitality Technology’s 2020 annual restaurant technology study, the top challenge facing technology teams, cited by 39% of respondents, was feeling held back by legacy hardware and software systems. In addition, 59% of respondents said that they plan to reduce the number of disparate technology systems to achieve their strategic objectives.

What it Takes to Thrive

Restaurants are complex businesses. In order to thrive, restaurants must continually improve operational efficiency; deliver omnichannel experiences; personalize the guest experience; recruit, train, and retain talent; collect and leverage valuable data; and gain increased access to financial services.

A restaurant’s operations are made up of a number of distinct, complex processes that must work in unison for a restaurant to run efficiently. As the return on investment of technology products becomes increasingly apparent, more restaurants have turned to industry-specific software products to improve their operations. While these point solutions solve specific use cases, restaurants are left with a new problem: large inefficiencies from not having an integrated platform that connects all areas of the restaurant.

With the proliferation of mobile devices, ordering platforms, and other new technologies, the number and variety of touchpoints between restaurants and guests continues to increase. Restaurants must take advantage of these additional touchpoints with guests to provide a seamless omnichannel experience that is economically sustainable over time.

Great restaurant experiences are rooted in providing memorable services to guests that exceed their expectations. Empowered by data and insights into guest preferences, restaurants can utilize technology to provide a more personal guest experience across all channels.

Employees are key to the guest experience. However, they often work long and intense hours, and restaurants struggle with high turnover. Employees can face high variability in the amount and timing of pay, and the focus on guest satisfaction can come at the expense of employee happiness. Similar to guest expectations, employee expectations have evolved. Employees now focus on flexible pay, access to benefits, and improved working conditions.

Coupling a comprehensive technology platform with integrated payment processing provides a unified view of data across the mission-critical aspects of a restaurant’s operations, such as order details, credit card processing, accounts payable, guest insights, and employee timesheets, which can unlock powerful insights for the restaurant operator. For example, data can be used to help set menu prices, identify best-selling items, better understand guest preferences and employee effectiveness, implement and track effectiveness of new initiatives, and bring awareness to competitive advantages or areas of weakness compared to peers.

Restaurants often operate with thin margins, resulting in a need for increased and expedited access to capital. The fundamental business model of a restaurant deals with perishable goods subject to ever-changing seasonal and consumer trends. Historically, restaurants have had limited access to financial services, such as purchase financing, short-term working capital, and long-term banking solutions. As omnichannel ordering becomes increasingly prevalent and guests continue to shift away from paying in cash, restaurants will benefit from fully-integrated software and payments products that can simplify and streamline access to their revenue and improve the availability of capital through underwriting algorithms that are tailored to restaurants’ financial needs.

Limitations of Existing Restaurant Technologies

Existing legacy and point technologies face a number of critical limitations:

Our Platform

Our platform is purpose-built to drive success for the entire restaurant community. We provide our customers with a single platform that gives them the tools and features they need to run their business across point of sale, or POS, restaurant operations, digital ordering and delivery, marketing and loyalty, and team management. This suite of software and hardware products is integrated with our financial technology solutions, which includes payment processing and other products such as those provided by Toast Capital. In addition, we provide platform services that include reporting and analytics and e-commerce capabilities for restaurants to access additional products in a self-service manner, as well as the Toast application programming interface, or API, and partner ecosystem, allowing our customers to seamlessly connect with other technology vendors.

Better Together: The Toast Ecosystem

Our platform benefits from powerful network effects, which we often highlight with the term “better together”. We believe this mantra manifests in the following ways, each driving the success of our stakeholders and, in turn, the Toast platform:

Our Competitive Strengths

We believe the key ingredients to building a leading platform for the restaurant industry and driving our continued expansion in reach and impact within the restaurant ecosystem are the following:

Why Our Stakeholders Win with Toast

Toast empowers restaurant operators to succeed in the digital age. To do so, restaurants must serve a wide range of stakeholders. We believe that when restaurant operators succeed, employees and guests also benefit, which in turn fuels rapid growth for restaurants.

Our Opportunity

The restaurant industry has lacked a clear technology category leader and has been categorized by fragmentation and historically slow adoption of technology. We are now seeing a shift in the use of technology alongside a preference for a single, integrated, digital-first technology platform, resulting in a significant opportunity for Toast. Restaurants in the United States spent an estimated $25 billion on technology in 2019, or less than 3% of their total sales.¹⁴ We expect the spend on technology to increase to $55 billion by 2024, as technology spend as a percent of restaurant sales closes the gap with other industry verticals. We believe our total addressable market, or TAM, is closely aligned with, and encompasses the vast majority of, this restaurant spend.

We estimate our current serviceable addressable market to be approximately $15 billion. We calculate this figure by adding the opportunities across our software and financial technology products. Our software addressable market is calculated by multiplying the average annual subscription revenue per location per product by the estimated number of restaurant locations in the United States. We determined the estimated number of restaurant locations in the United States to be approximately 860,000,¹⁵ which includes restaurants across all segments, given we serve restaurants of all types and sizes ranging from single-location restaurants to larger multi-location brands. The opportunity for payments recurring run-rate is calculated by multiplying the estimated non-cash restaurant sales in the United States for 2021 by our average take rate of approximately 55 basis points (measured as a percentage of GPV). Lastly, we estimate the Toast Capital opportunity by multiplying an estimated $29.5 billion of outstanding U.S. public banks’ restaurant loans as of March 31, 2020¹⁶ by the average annual interest rate on small business loans of 1.4% to 7.2%.¹⁷

We expect our market opportunity will continue to expand as we develop new solutions that address the distinct and evolving needs of a diverse market. Additionally, our current TAM does not consider the substantial opportunity to provide our products and services to international locations, which we have not pursued to date. With an estimated 22 million restaurant locations globally with greater than $2.6 trillion in revenue,¹⁸ we estimate that our global TAM is at least twice as large as the domestic opportunity, given there is nearly four times as much global spend and even more opportunity in terms of location count.

Our Growth Strategy

Our strategy is to continue to invest in areas that align with our customers’ needs and our own growth objectives. Toast both drives and benefits from the success of our customers—when restaurants grow, Toast grows through higher payments volume and increased adoption of our full platform.

Our Response to COVID-19

The COVID-19 pandemic has had a dramatic impact on the restaurant industry. As a leading platform for the restaurant industry, Toast took immediate steps to help restaurants navigate the crisis.

During the course of the pandemic, and driven by our mission to help restaurants thrive, our team of passionate Toasters accomplished the following:

Rapid acceleration of product release

To help restaurants navigate the immediate impact of the COVID-19 pandemic, we accelerated a number of planned product launches and introduced new product lines.

Advocacy for the entire restaurant industry

We also took steps during the pandemic to provide restaurants with much needed access to expense relief and operating capital, and built an advocacy program to encourage community and federal support.

We recognize that the COVID-19 pandemic continues to have a significant impact on communities across the world, and we are fully committed, as we always have been, to investing in and supporting our restaurants, their employees, and the communities they serve.

Risks Associated with Our Business

Our business is subject to numerous risks and uncertainties, including those highlighted in the section titled “Risk Factors” immediately following this prospectus summary. These risks include the following:

Channels for Disclosure of Information

Investors, the media, and others should note that, following the completion of this offering, we intend to announce material information to the public through filings with the SEC, the investor relations page on our website, press releases and public conference calls and webcasts.

The information disclosed by the foregoing channels could be deemed to be material information. As such, we encourage investors, the media, and others to follow the channels listed above and to review the information disclosed through such channels.

Any updates to the list of disclosure channels through which we will announce information will be posted on the investor relations page on our website.

Corporate Information

We were incorporated under the laws of Delaware in December 2011 under the name Opti Systems, Inc. We changed our name to Toast, Inc. in May 2012. Our principal executive offices are located at 401 Park Drive, Boston, Massachusetts 02215 and our telephone number is (617) 297-1005. Our website address is www.toasttab.com. We do not incorporate the information on or accessible through our website into this prospectus, and you should not consider any information on, or that can be accessed through, our website to be part of this prospectus. We have included our website address in this prospectus solely as an inactive textual reference.

“Toast,” our logo, and our other registered or common law trademarks, service marks, or trade names appearing in this prospectus are the property of Toast, Inc. Other trademarks and trade names referred to in this prospectus are the property of their respective owners.

Implications of Being an Emerging Growth Company

We qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, as amended, or the JOBS Act. As an emerging growth company, we may take advantage of specified reduced disclosure and other requirements that are otherwise applicable generally to public companies. These provisions include: