Business Wire | Nov 9, 2021 04:06PM EST

Toast Announces Third Quarter 2021 Financial Results

Nov. 09, 2021

BOSTON--(BUSINESS WIRE)--Nov. 09, 2021--Toast (NYSE: TOST), the all-in-one platform built for restaurants, today reported financial results for the third quarter ended September 30, 2021.

"In the third quarter, we delivered strong results across the board," said Chris Comparato, CEO, Toast. "Toast's performance is a result of our relentless focus on driving restaurant success with our all-in-one technology platform, unique go-to-market strategy and powerful business model. As restaurants invest more in technology to meet new expectations from guests, employees and partners, Toast is uniquely positioned to capture a growing share of its market opportunity."

Financial Highlights for the Third Quarter of 2021

* Revenue for the third quarter of 2021 was $486.4 million, an increase of 105% from the third quarter of 2020. * ARR as of September 30, 2021 was $543.8 million, an increase of 77% as compared to September 30, 2020. * GPV for the third quarter of 2021 was $16.5 billion, an increase of 123% from the third quarter of 2020. * Gross profit for the third quarter of 2021 was $83.3 million, an increase of 72% from the third quarter of 2020. * Non-GAAP gross profit for the third quarter of 2021 was $88.5 million, an increase of 75% from the third quarter of 2020. * Net loss for the third quarter of 2021 was $252.5 million, as compared to $62.6 million in the third quarter of 2020. * Adjusted EBITDA for the third quarter of 2021 was $(9.7) million, as compared to Adjusted EBITDA of $(0.3) million in the third quarter of 2020. * Net cash (used in) provided by operating activities for the third quarter of 2021 was $(17.2) million, as compared to $11.2 million for the third quarter of 2020. * Free Cash Flow for the third quarter of 2021 was $(21.1) million, as compared to Free Cash Flow of $0.4 million for the third quarter of 2020.

For more information on the non-GAAP financial measures and key metrics discussed in this press release, please see the sections titled "Key Business Metrics" and "Non-GAAP Financial Measures," as well as the reconciliations of non-GAAP financial measures to their nearest comparable GAAP financial measures at the end of this press release.

Outlook

For the fourth quarter ending December 31, 2021, Toast expects to report:

* Revenue in the range of $465 million to $495 million * Adjusted EBITDA in the range of $(50) million to $(40) million

For the full year ending December 31, 2021, Toast expects to report:

* Revenue in the range of $1,655 million to $1,685 million * Adjusted EBITDA in the range of $(46) million to $(36) million

The outlook provided above constitutes forward-looking information within the meaning of applicable securities laws and is based on a number of assumptions and subject to a number of risks. See cautionary note regarding "Forward-looking Statements" below.

Conference Call Information

Toast will host a live video webcast at 5:00 p.m. Eastern Time on Tuesday, November 9, 2021 to discuss the results. The live video webcast can be accessed through Toast's investor relations website at http://investors.toasttab.com. A replay of the webcast will be available for a period of 90 days after the call.

Toast has used, and intends to continue to use, its Investor Relations website ( http://investors.toasttab.com), as well as the Toast Newsroom ( https://pos.toasttab.com/news), as a means of disclosing material non-public information and for complying with its disclosure obligations under Regulation FD. Information on or that can be accessed through Toast's Investor Relations website, or that is contained in any website to which a hyperlink is provided herein is not part of this press release, and the inclusion of Toast's Investor Relations website address, and any hyperlinks are only inactive textual references.

About Toast

Toast is the all-in-one platform built for restaurants of all sizes. Toast provides a single platform of software as a service (SaaS) products and financial technology solutions that give restaurants everything they need to run their business across point of sale, operations, digital ordering and delivery, marketing and loyalty, and team management. By serving as the restaurant operating system across dine-in, takeout, and delivery channels, Toast helps restaurants streamline operations, increase revenue and deliver amazing guest experiences. For more information, visit www.toasttab.com.

Forward-looking Statements

This press release contains "forward-looking statements," within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the context of the statement and generally arise when Toast or its management is discussing its beliefs, estimates or expectations. Such statements generally include the words "believes," "plans," "intends," "targets," "may," "could," "should," "will," "expects," "estimates," "suggests," "anticipates," "outlook," "continues," or similar expressions. These statements are not historical facts or guarantees of future performance, but represent the beliefs of Toast and its management at the time the statements were made regarding future events which are subject to certain risks, uncertainties and other factors, many of which are outside Toast's control. Actual results and outcomes may differ materially from what is expressed or forecast in such forward-looking statements. Forward-looking statements include, without limitation, statements about expected financial positions or growth; results of operations; cash flows; guidance on financial results for the fourth fiscal quarter and full year of 2021; statements about future operating results; the expectations of demand for Toast's products and growth of its business; the growth rates in the markets in which Toast compete; Toast's investments in technology and infrastructure; Toast's ability to deliver innovative solutions; Toast's ability to attract and retain customers; financing plans; business strategy; operating plans; competitive positions; and growth opportunities for existing products.

The forward-looking statements contained in this release are also subject to other risks and uncertainties, including those more fully described in Toast's filings with the Securities and Exchange Commission ("SEC"), including in the sections entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations'' in the final prospectus for Toast's initial public offering filed on September 22, 2021, Toast's Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2021 that will be filed following this earnings release, and Toast's subsequent SEC filings. Toast can give no assurance that the plans, intentions, expectations or strategies as reflected in or suggested by those forward-looking statements will be attained or achieved. The forward-looking statements in this release are based on information available to Toast as of the date hereof, and Toast disclaims any obligation to update any forward-looking statements, except as required by law. These forward-looking statements should not be relied upon as representing Toast's views as of any date subsequent to the date of this press release.

TOAST, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(unaudited)

(in thousands, except share and per share amounts)

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

Revenue:

Subscription $ 45,803 $ 27,406 $ 113,844 $ 72,193 services

Financialtechnology 404,224 188,195 983,699 450,265 solutions

Hardware 31,051 18,148 80,005 48,335

Professional 5,301 3,008 12,579 9,806 services

Total revenue 486,379 236,757 1,190,127 580,599

Costs of revenue:

Subscription 18,016 10,388 41,044 29,205 services

Financialtechnology 327,235 145,945 779,111 358,402 solutions

Hardware 42,109 21,914 93,521 63,336

Professional 14,585 9,282 35,276 33,655 services

Amortizationof acquiredtechnology and 1,180 908 3,147 2,695 customerassets

Total costs of 403,125 188,437 952,099 487,293 revenue

Gross profit 83,254 48,320 238,028 93,306

Operating expenses:

Sales and 56,622 32,216 130,480 104,326 marketing

Research and 39,700 34,274 112,978 78,658 development

General and 40,633 20,481 105,095 73,558 administrative

Totaloperating 136,955 86,971 348,553 256,542 expenses

Loss from (53,701 ) (38,651 ) (110,525 ) (163,236 )operations

Other income (expense):

Interest 8 137 61 819 income

Interest (247 ) (5,661 ) (12,403 ) (6,846 )expense

Change in fairvalue of (198,389 ) (202 ) (214,881 ) 60 warrantliabilities

Change in fairvalue of - (18,208 ) (103,281 ) (18,208 )derivativeliability

Loss on debt - - (49,783 ) - extinguishment

Other income (39 ) 104 42 325 (expense), net

Loss before(provisionfor) benefit (252,368 ) (62,481 ) (490,770 ) (187,086 )from incometaxes

(Provisionfor) benefit (129 ) (127 ) 3,623 (69 )from incometaxes

Net loss $ (252,497 ) $ (62,608 ) $ (487,147 ) $ (187,155 )

Net loss pershareattributableto common $ (1.05 ) $ (0.31 ) $ (2.22 ) $ (0.94 )stockholders,basic anddiluted

Weightedaverage sharesused incomputing net 239,358,805 200,579,529 219,746,454 199,245,332 loss pershare, basicand diluted



Net loss $ (252,497 ) $ (62,608 ) $ (487,147 ) $ (187,155 )

Othercomprehensive income (loss):

Foreigncurrency (69 ) (24 ) (183 ) 5 translation

Comprehensive $ (252,566 ) $ (62,632 ) $ (487,330 ) $ (187,150 )loss

TOAST, INC.

CONSOLIDATED BALANCE SHEETS

(unaudited)

(in thousands, except share and per share amounts)

September 30, 2021

December 31, 2020

Assets:

Current assets:

Cash and cash equivalents

$

1,301,619

$

581,824

Accounts receivable, net of allowance for doubtful accounts of $2,568 and $4,438, respectively, at September 30, 2021 and December 31, 2020

52,730

32,633

Merchant cash advances and loans receivable, net of allowance for uncollectible loans of $3,668 and $4,454, respectively, at September 30, 2021 and December 31, 2020

409

872

Inventories

38,665

19,330

Costs capitalized to obtain revenue contracts, net

23,931

16,794

Prepaid expenses and other current assets

79,561

21,611

Total current assets

1,496,915

673,064

Property and equipment, net

42,381

44,111

Intangible assets

17,188

6,835

Goodwill

74,738

35,887

Restricted cash

2,694

1,214

Security deposits

806

1,633

Non-current costs capitalized to obtain revenue contracts, net

18,755

12,612

Other non-current assets

3,776

600

Total non-current assets

160,338

102,892

Total assets

$

1,657,253

$

775,956

Liabilities, Convertible Preferred Stock and Stockholders' Equity (Deficit):

Current liabilities:

Accounts payable

$

33,696

$

30,554

Current portion of deferred revenue

46,865

42,680

Accrued expenses and other current liabilities

206,218

63,172

Total current liabilities

286,779

136,406

Long-term debt, net of discount

-

171,709

Derivative liabilities

-

37,443

Warrants to purchase preferred stock

-

11,405

Warrants to purchase common stock

308,195

-

Deferred revenue, net of current portion

12,832

15,533

Deferred rent, net of current portion

16,106

18,536

Other long-term liabilities

23,867

7,007

Total long-term liabilities

361,000

261,633

Total liabilities

647,779

398,039

Commitments and contingencies

Convertible preferred stock, $0.000001 par value-no shares authorized, issued or outstanding as of September 30, 2021; 257,245,680 authorized and 253,832,025 shares issued and outstanding at December 31, 2020; total liquidation value of $849,970 at December 31, 2020.

-

848,893

Stockholders' Equity (Deficit):

Preferred stock- par value $0.000001; 100,000,000 shares authorized, no shares issued or outstanding

-

-

Common stock, $0.000001 par value- no shares authorized, issued and outstanding as of September 30, 2021; 570,000,000 shares authorized, 219,755,430 shares issued and outstanding as of December 31, 2020

-

-

Class A common stock, $0.000001 par value- 7,000,000,000 shares authorized, 25,000,000 shares issued and outstanding as of September 30, 2021; no shares authorized, issued and outstanding at December 31, 2020

-

-

Class B common stock, $0.000001 par value- 700,000,000 shares authorized, 479,406,030 shares issued and outstanding as of September 30, 2021; no shares authorized, issued and outstanding at December 31, 2020

-

-

Treasury stock, at cost- 225,000 shares outstanding at September 30, 2021 and December 31, 2020

(665

)

(665

)

Accumulated other comprehensive income

45

228

Additional paid-in capital

2,113,107

145,327

Accumulated deficit

(1,103,013

)

(615,866

)

Total stockholders' equity (deficit)

1,009,474

(470,976

)

Total liabilities, convertible preferred stock and stockholders' equity (deficit)

$

1,657,253

$

775,956

TOAST, INC.

CONSOLIDATED BALANCE SHEETS

(unaudited)

(in thousands, except share and per share amounts)

September 30, December 31, 2021 2020

Assets:

Current assets:

Cash and cash equivalents $ 1,301,619 $ 581,824

Accounts receivable, net of allowance fordoubtful accounts of $2,568 and $4,438, 52,730 32,633 respectively, at September 30, 2021 and December31, 2020

Merchant cash advances and loans receivable, netof allowance for uncollectible loans of $3,668 409 872 and $4,454, respectively, at September 30, 2021and December 31, 2020

Inventories 38,665 19,330

Costs capitalized to obtain revenue contracts, 23,931 16,794 net

Prepaid expenses and other current assets 79,561 21,611

Total current assets 1,496,915 673,064

Property and equipment, net 42,381 44,111

Intangible assets 17,188 6,835

Goodwill 74,738 35,887

Restricted cash 2,694 1,214

Security deposits 806 1,633

Non-current costs capitalized to obtain revenue 18,755 12,612 contracts, net

Other non-current assets 3,776 600

Total non-current assets 160,338 102,892

Total assets $ 1,657,253 $ 775,956

Liabilities, Convertible Preferred Stock and Stockholders' Equity (Deficit):

Current liabilities:

Accounts payable $ 33,696 $ 30,554

Current portion of deferred revenue 46,865 42,680

Accrued expenses and other current liabilities 206,218 63,172

Total current liabilities 286,779 136,406

Long-term debt, net of discount - 171,709

Derivative liabilities - 37,443

Warrants to purchase preferred stock - 11,405

Warrants to purchase common stock 308,195 -

Deferred revenue, net of current portion 12,832 15,533

Deferred rent, net of current portion 16,106 18,536

Other long-term liabilities 23,867 7,007

Total long-term liabilities 361,000 261,633

Total liabilities 647,779 398,039

Commitments and contingencies

Convertible preferred stock, $0.000001 parvalue-no shares authorized, issued or outstandingas of September 30, 2021; 257,245,680 authorized - 848,893 and 253,832,025 shares issued and outstanding atDecember 31, 2020; total liquidation value of$849,970 at December 31, 2020.

Stockholders' Equity (Deficit):

Preferred stock- par value $0.000001; 100,000,000shares authorized, no shares issued or - - outstanding

Common stock, $0.000001 par value- no sharesauthorized, issued and outstanding as ofSeptember 30, 2021; 570,000,000 shares - - authorized, 219,755,430 shares issued andoutstanding as of December 31, 2020

Class A common stock, $0.000001 par value-7,000,000,000 shares authorized, 25,000,000shares issued and outstanding as of September 30, - - 2021; no shares authorized, issued andoutstanding at December 31, 2020

Class B common stock, $0.000001 par value-700,000,000 shares authorized, 479,406,030 sharesissued and outstanding as of September 30, 2021; - - no shares authorized, issued and outstanding atDecember 31, 2020

Treasury stock, at cost- 225,000 sharesoutstanding at September 30, 2021 and December (665 ) (665 )31, 2020

Accumulated other comprehensive income 45 228

Additional paid-in capital 2,113,107 145,327

Accumulated deficit (1,103,013 ) (615,866 )

Total stockholders' equity (deficit) 1,009,474 (470,976 )

Total liabilities, convertible preferred stock $ 1,657,253 $ 775,956 and stockholders' equity (deficit)

TOAST, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)

Nine Months Ended September 30,

2021

2020

Cash flows from operating activities:

Net loss

$

(487,147

)

$

(187,155

)

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Depreciation and amortization

15,617

9,498

Stock-based compensation

95,210

58,357

Amortization of costs capitalized to obtain revenue contracts

17,596

10,818

Change in fair value of derivative liability

103,281

18,208

Change in fair value of warrant liabilities

214,881

(60

)

Change in deferred income taxes

(3,920

)

-

Loss on debt extinguishment

49,783

-

Non-cash interest on convertible notes

11,771

6,404

Other

305

256

Changes in operating assets and liabilities:

Account receivable, net

(20,083

)

(8,425

)

Factor receivable, net

153

2,568

Merchant cash advances repaid

537

8,233

Prepaid expenses and other current assets

(31,867

)

8,395

Costs capitalized to obtain revenue contracts, net

(30,876

)

(17,580

)

Inventories

(19,336

)

698

Accounts payable

8,207

(6,289

)

Accrued expenses and other current liabilities

106,306

8,276

Deferred revenue

1,484

(2,268

)

Other assets and liabilities

2,068

3,436

Net cash provided by (used in) operating activities

33,970

(86,630

)

Cash flows from investing activities:

Cash paid for acquisition, net of cash acquired

(26,142

)

-

Capitalized software

(5,712

)

(6,479

)

Purchases of property and equipment

(10,570

)

(35,385

)

Other

-

233

Net cash used in investing activities

(42,424

)

(41,631

)

Cash flows from financing activities:

Proceeds from issuance of Class A common stock upon initial public offering, net of underwriter discounts

950,360

-

Payment of deferred offering costs

(4,044

)

-

Repayments of secured borrowings

-

(8,544

)

Extinguishment of convertible notes

(244,528

)

-

Change in customer funds obligations, net

26,002

6,138

Proceeds from issuance of long-term debt

-

194,850

Proceeds from exercise of stock options

17,727

1,158

Proceeds from issuance of Series F preferred stock

-

402,368

Proceeds from exercise of restricted stock

10,397

265

Repurchase of restricted stock

-

(155

)

Repurchase of common stock

-

(275

)

Net cash provided by financing activities

755,914

595,805

Net increase in cash, cash equivalents, cash held on behalf of customers and restricted cash

747,460

467,544

Effect of exchange rate changes on cash and cash equivalents and restricted cash

(183

)

5

Cash, cash equivalents, cash held on behalf of customers and restricted cash at beginning of period

593,676

159,389

Cash, cash equivalents, cash held on behalf of customers and restricted cash at end of period

$

1,340,953

$

626,938

Reconciliation of cash, cash equivalents, cash held on behalf of customers and restricted cash

Cash and cash equivalents

$

1,301,619

$

611,907

Cash held on behalf of customers

36,640

12,853

Restricted cash

2,694

2,178

Total cash, cash equivalents, cash held on behalf of customers and restricted cash

$

1,340,953

$

626,938

Supplemental disclosures of cash flow information

Cash paid for interest

$

13,226

$

-

Non-cash items in investing and financing activities

Purchase of property and equipment included in accounts payable and accrued expenses

$

148

$

8,868

Contingent consideration included in purchase price

1,876

-

Deferred payments included in purchase price

5,357

-

Common stock issued in acquisition

14,857

-

Conversion of convertible preferred stock into Class B common stock upon initial public offering

848,893

-

Issuance of Class B common stock upon exercise of common stock warrants

43,297

-

Issuance of common stock warrants upon debt extinguishment

125,111

-

Deferred offering costs included in accounts payable and accrued expenses

2,298

-

Stock-based compensation included in capitalized software

545

-

Non-GAAP Financial Measures

In this press release, Toast refers to non-GAAP financial measures that are derived on the basis of methodologies other than in accordance with United States generally accepted accounting principles ("GAAP"). Toast uses certain non-GAAP financial measures, as described below, to understand and evaluate its 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 Toast's financial performance and should not be considered substitutes for, or superior to, the financial information prepared and presented in accordance with GAAP. Toast believes that these non-GAAP financial measures provide useful information about its financial performance, enhance the overall understanding of its past performance and future prospects, and allow for greater transparency with respect to important metrics used by Toast's management for financial and operational decision-making.

In the tables below, Toast has provided reconciliations of these non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP. These non-GAAP financial measures should not be considered substitutes for financial measures calculated in accordance with GAAP, and the financial results that Toast calculates and presents in the table in accordance with GAAP, as well as the corresponding reconciliations from those results, should be carefully evaluated.

The following are the non-GAAP financial measures referenced in this press release and presented in the tables below:

* 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, interest expense, other income (expense) net, acquisition expenses, fair value adjustments on warrant and derivative liabilities, expenses related to COVID-19 pandemic initiatives resulting from a reduction of workforce in 2020 and early termination of leases, loss on debt extinguishment, and income taxes.

* Non-GAAP Costs of Revenue are defined as costs of revenue excluding stock-based compensation expense.

* Non-GAAP Gross Profit is defined as gross profit excluding stock-based compensation expense.

* Non-GAAP Sales and Marketing Expenses are defined as sales and marketing expenses excluding stock-based compensation expense.

* Non-GAAP Research and Development Expenses are defined as research and development expenses excluding stock-based compensation expense.

* Non-GAAP General and Administrative Expenses are defined as general and administrative expenses excluding stock-based compensation expense.

* 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.

Adjusted EBITDA, Non-GAAP Costs of Revenue, Non-GAAP Gross Profit, Non-GAAP Selling and Marketing Expenses, Non-GAAP Research and Development Expenses, Non-GAAP General and Administrative Expenses, and Free Cash Flow do not purport to represent profitability and liquidity measures as defined in accordance with GAAP. These measures are provided to investors and others to improve the quarter-to-quarter and year-to-year comparability of Toast's financial results and to ensure that investors understand the information Toast uses to evaluate the performance of its businesses.

Our definitions may differ from the definitions used by other companies and therefore comparability may be limited. In addition, other companies may not publish these or similar metrics. Further, these metrics have certain limitations since they do not include the impact of certain expenses and cash flows that are reflected in our consolidated statements of comprehensive loss and consolidated statements of cash flows. Thus, our Adjusted EBITDA, Non-GAAP Costs of Revenue, Non-GAAP Gross Profit, Non-GAAP Sales and Marketing Expenses, Non-GAAP Research and Development Expenses, Non-GAAP General and Administrative Expenses, and Free Cash Flow should be considered in addition to, not as substitutes for, or in isolation from, measures prepared in accordance with GAAP.

Key Business Metrics

In addition, Toast also uses the following key business metrics to help it evaluate its business, identify trends affecting its business, formulate business plans, and make strategic decisions:

* Gross Payment Volume ("GPV") is defined as the sum of total dollars processed through the Toast payments platform across all restaurant locations in a given period. GPV is a key measure of the scale of Toast's platform, which in turn drives its financial performance. As Toast customers generate more sales and therefore more GPV, Toast generally sees higher financial technology solutions revenue. * Annualized Recurring Run-Rate ("ARR") is defined as a key operational measure of the scale of Toast's subscription and payment processing services for both new and existing customers. To calculate ARR, Toast first calculates recurring run-rate on a monthly basis. Monthly Recurring Run-Rate ("MRR") is measured on the final day of each month for all restaurant locations live on the Toast platform as the sum of (i) Toast's monthly subscription services fees, which is referred to as the subscription component of MRR, and (ii) Toast's in-month adjusted payments services fees, exclusive of estimated transaction-based costs, which is referred to as the payments component of MRR. MRR does not include fees derived from Toast Capital or related costs. 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. Toast believes this approach provides an indication of its scale, while also controlling for short-term fluctuations in payments volume. ARR may decline or fluctuate as a result of a number of factors, including customers' satisfaction with the Toast platform, pricing, competitive offerings, economic conditions, or overall changes in its customers' and their guests' spending levels. ARR is an operational measure, does not reflect Toast's revenue or gross profit determined in accordance with GAAP, and should be viewed independently of, and not combined with or substituted for, Toast's 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 Toast's future or expected results.TOAST, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)

Nine Months Ended September 30,

2021 2020

Cash flows from operating activities:

Net loss $ (487,147 ) $ (187,155 )

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Depreciation and amortization 15,617 9,498

Stock-based compensation 95,210 58,357

Amortization of costs capitalized to obtain 17,596 10,818 revenue contracts

Change in fair value of derivative liability 103,281 18,208

Change in fair value of warrant liabilities 214,881 (60 )

Change in deferred income taxes (3,920 ) -

Loss on debt extinguishment 49,783 -

Non-cash interest on convertible notes 11,771 6,404

Other 305 256

Changes in operating assets and liabilities:

Account receivable, net (20,083 ) (8,425 )

Factor receivable, net 153 2,568

Merchant cash advances repaid 537 8,233

Prepaid expenses and other current assets (31,867 ) 8,395

Costs capitalized to obtain revenue contracts, net (30,876 ) (17,580 )

Inventories (19,336 ) 698

Accounts payable 8,207 (6,289 )

Accrued expenses and other current liabilities 106,306 8,276

Deferred revenue 1,484 (2,268 )

Other assets and liabilities 2,068 3,436

Net cash provided by (used in) operating 33,970 (86,630 )activities

Cash flows from investing activities:

Cash paid for acquisition, net of cash acquired (26,142 ) -

Capitalized software (5,712 ) (6,479 )

Purchases of property and equipment (10,570 ) (35,385 )

Other - 233

Net cash used in investing activities (42,424 ) (41,631 )

Cash flows from financing activities:

Proceeds from issuance of Class A common stockupon initial public offering, net of underwriter 950,360 - discounts

Payment of deferred offering costs (4,044 ) -

Repayments of secured borrowings - (8,544 )

Extinguishment of convertible notes (244,528 ) -

Change in customer funds obligations, net 26,002 6,138

Proceeds from issuance of long-term debt - 194,850

Proceeds from exercise of stock options 17,727 1,158

Proceeds from issuance of Series F preferred stock - 402,368

Proceeds from exercise of restricted stock 10,397 265

Repurchase of restricted stock - (155 )

Repurchase of common stock - (275 )

Net cash provided by financing activities 755,914 595,805

Net increase in cash, cash equivalents, cash held 747,460 467,544 on behalf of customers and restricted cash

Effect of exchange rate changes on cash and cash (183 ) 5 equivalents and restricted cash

Cash, cash equivalents, cash held on behalf ofcustomers and restricted cash at beginning of 593,676 159,389 period

Cash, cash equivalents, cash held on behalf of $ 1,340,953 $ 626,938 customers and restricted cash at end of period

Reconciliation of cash, cash equivalents, cash held on behalf of customers and restricted cash

Cash and cash equivalents $ 1,301,619 $ 611,907

Cash held on behalf of customers 36,640 12,853

Restricted cash 2,694 2,178

Total cash, cash equivalents, cash held on behalf $ 1,340,953 $ 626,938 of customers and restricted cash

Supplemental disclosures of cash flow information

Cash paid for interest $ 13,226 $ -

Non-cash items in investing and financing activities

Purchase of property and equipment included in $ 148 $ 8,868 accounts payable and accrued expenses

Contingent consideration included in purchase 1,876 - price

Deferred payments included in purchase price 5,357 -

Common stock issued in acquisition 14,857 -

Conversion of convertible preferred stock into 848,893 - Class B common stock upon initial public offering

Issuance of Class B common stock upon exercise of 43,297 - common stock warrants

Issuance of common stock warrants upon debt 125,111 - extinguishment

Deferred offering costs included in accounts 2,298 - payable and accrued expenses

Stock-based compensation included in capitalized 545 - software

Non-GAAP Financial Measures

In this press release, Toast refers to non-GAAP financial measures that are derived on the basis of methodologies other than in accordance with United States generally accepted accounting principles ("GAAP"). Toast uses certain non-GAAP financial measures, as described below, to understand and evaluate its 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 Toast's financial performance and should not be considered substitutes for, or superior to, the financial information prepared and presented in accordance with GAAP. Toast believes that these non-GAAP financial measures provide useful information about its financial performance, enhance the overall understanding of its past performance and future prospects, and allow for greater transparency with respect to important metrics used by Toast's management for financial and operational decision-making.

In the tables below, Toast has provided reconciliations of these non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP. These non-GAAP financial measures should not be considered substitutes for financial measures calculated in accordance with GAAP, and the financial results that Toast calculates and presents in the table in accordance with GAAP, as well as the corresponding reconciliations from those results, should be carefully evaluated.

The following are the non-GAAP financial measures referenced in this press release and presented in the tables below:

* 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, interest expense, other income (expense) net, acquisition expenses, fair value adjustments on warrant and derivative liabilities, expenses related to COVID-19 pandemic initiatives resulting from a reduction of workforce in 2020 and early termination of leases, loss on debt extinguishment, and income taxes.

* Non-GAAP Costs of Revenue are defined as costs of revenue excluding stock-based compensation expense.

* Non-GAAP Gross Profit is defined as gross profit excluding stock-based compensation expense.

* Non-GAAP Sales and Marketing Expenses are defined as sales and marketing expenses excluding stock-based compensation expense.

* Non-GAAP Research and Development Expenses are defined as research and development expenses excluding stock-based compensation expense.

* Non-GAAP General and Administrative Expenses are defined as general and administrative expenses excluding stock-based compensation expense.

* 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.

Adjusted EBITDA, Non-GAAP Costs of Revenue, Non-GAAP Gross Profit, Non-GAAP Selling and Marketing Expenses, Non-GAAP Research and Development Expenses, Non-GAAP General and Administrative Expenses, and Free Cash Flow do not purport to represent profitability and liquidity measures as defined in accordance with GAAP. These measures are provided to investors and others to improve the quarter-to-quarter and year-to-year comparability of Toast's financial results and to ensure that investors understand the information Toast uses to evaluate the performance of its businesses.

Our definitions may differ from the definitions used by other companies and therefore comparability may be limited. In addition, other companies may not publish these or similar metrics. Further, these metrics have certain limitations since they do not include the impact of certain expenses and cash flows that are reflected in our consolidated statements of comprehensive loss and consolidated statements of cash flows. Thus, our Adjusted EBITDA, Non-GAAP Costs of Revenue, Non-GAAP Gross Profit, Non-GAAP Sales and Marketing Expenses, Non-GAAP Research and Development Expenses, Non-GAAP General and Administrative Expenses, and Free Cash Flow should be considered in addition to, not as substitutes for, or in isolation from, measures prepared in accordance with GAAP.

Key Business Metrics

In addition, Toast also uses the following key business metrics to help it evaluate its business, identify trends affecting its business, formulate business plans, and make strategic decisions:

* Gross Payment Volume ("GPV") is defined as the sum of total dollars processed through the Toast payments platform across all restaurant locations in a given period. GPV is a key measure of the scale of Toast's platform, which in turn drives its financial performance. As Toast customers generate more sales and therefore more GPV, Toast generally sees higher financial technology solutions revenue. * Annualized Recurring Run-Rate ("ARR") is defined as a key operational measure of the scale of Toast's subscription and payment processing services for both new and existing customers. To calculate ARR, Toast first calculates recurring run-rate on a monthly basis. Monthly Recurring Run-Rate ("MRR") is measured on the final day of each month for all restaurant locations live on the Toast platform as the sum of (i) Toast's monthly subscription services fees, which is referred to as the subscription component of MRR, and (ii) Toast's in-month adjusted payments services fees, exclusive of estimated transaction-based costs, which is referred to as the payments component of MRR. MRR does not include fees derived from Toast Capital or related costs. 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. Toast believes this approach provides an indication of its scale, while also controlling for short-term fluctuations in payments volume. ARR may decline or fluctuate as a result of a number of factors, including customers' satisfaction with the Toast platform, pricing, competitive offerings, economic conditions, or overall changes in its customers' and their guests' spending levels. ARR is an operational measure, does not reflect Toast's revenue or gross profit determined in accordance with GAAP, and should be viewed independently of, and not combined with or substituted for, Toast's 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 Toast's future or expected results. Three Months Ended Nine Months Ended September 30, September 30,

(dollars in 2021 2020 % 2021 2020 %billions) Growth Growth

Gross Payment $ 16.5 $ 7.4 123 % $ 39.9 $ 17.8 124 %Volume (GPV)

As of September 30,

(dollars in 2021 2020 %millions) Growth

Annualized $ 543.8 $ 308.1 77 %Recurring Run-Rate

Toast, Inc.

Reconciliation from Non-GAAP to GAAP Results

(unaudited) (in thousands)

Adjusted EBITDA

Three Months Ended

September 30,

Nine Months Ended

September 30,

(dollars in thousands)

2021

2020

2021

2020

Net loss

$

(252,497

)

$

(62,608

)

$

(487,147

)

$

(187,155

)

Stock-based compensation expense and related payroll tax

36,372

36,201

97,359

58,357

Depreciation and amortization

6,673

3,118

15,617

9,498

Interest income

(8

)

(137

)

(61

)

(819

)

Interest expense

247

5,661

12,403

6,846

Other (income) expense, net

39

(104

)

(42

)

(325

)

Acquisition expenses

-

-

1,113

-

Change in fair value of warrant liability

198,389

202

214,881

(60

)

Change in fair value of derivative liability

-

18,208

103,281

18,208

Reduction of workforce

-

154

-

10,127

Termination of leases

922

(1,092

)

922

(1,092

)

Loss on debt extinguishment

-

-

49,783

-

Provision for (benefit from) income taxes

129

127

(3,623

)

69

Adjusted EBITDA

$

(9,734

)

$

(270

)

$

4,486

$

(86,346

)

Non-GAAP Costs of Revenue

Three Months Ended September 30,

Nine Months Ended September 30,

(dollars in thousands)

2021

2020

2021

2020

Costs of Revenue

$

403,125

$

188,437

$

952,099

$

487,293

Stock-based compensation expense

5,270

2,250

6,523

3,169

Non-GAAP Costs of Revenue

$

397,855

$

186,187

$

945,576

$

484,124

Non-GAAP Gross Profit

Three Months Ended September 30,

Nine Months Ended September 30,

(dollars in thousands)

2021

2020

2021

2020

Gross profit

$

83,254

$

48,320

$

238,028

$

93,306

Stock-based compensation expense

5,270

2,250

6,523

3,169

Non-GAAP gross profit

$

88,524

$

50,570

$

244,551

$

96,475

Non-GAAP Sales & Marketing Expenses

Three Months Ended September 30,

Nine Months Ended September 30,

(dollars in thousands)

2021

2020

2021

2020

Sales and marketing expenses

$

56,622

$

32,216

$

130,480

$

104,326

Stock-based compensation expense

10,337

7,445

13,276

9,094

Non-GAAP sales and marketing expenses

$

46,285

$

24,771

$

117,204

$

95,232

Non-GAAP Research and Development Expenses

Three Months Ended September 30,

Nine Months Ended September 30,

(dollars in thousands)

2021

2020

2021

2020

Research and development expenses

$

39,700

$

34,274

$

112,978

$

78,658

Stock-based compensation expense

8,627

17,422

35,138

19,622

Non-GAAP research and development expenses

$

31,073

$

16,852

$

77,840

$

59,036

Non-GAAP General & Administrative Expenses

Three Months Ended September 30,

Nine Months Ended September 30,

(dollars in thousands)

2021

2020

2021

2020

General and administrative expenses

$

40,633

$

20,481

$

105,095

$

73,558

Stock-based compensation expense

12,118

9,084

42,284

26,472

Non-GAAP general and administrative expenses

$

28,515

$

11,397

$

62,811

$

47,086

Free Cash Flow

Three Months Ended September 30,

Nine Months Ended September 30,

(dollars in thousands)

2021

2020

2021

2020

Net cash provided by (used in) operating activities

$

(17,248

)

$

11,189

$

33,970

$

(86,630

)

Purchases of property and equipment

(2,250

)

(8,811

)

(10,570

)

(35,385

)

Capitalized software

(1,625

)

(1,977

)

(5,712

)

(6,479

)

Free Cash Flow

$

(21,123

)

$

401

$

17,688

$

(128,494

)

TOST-FIN

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