Summary
Toast reported third quarter fiscal 2021 revenue of $486.4 million, up 105% from the prior-year quarter. Gross profit was $83.3 million, up 72%. Non-GAAP gross profit was $88.5 million, up 75%. Gross margin was 17.1%, down from the prior-year quarter. The scale metrics moved faster. Gross payment volume reached $16.5 billion, up 123%, and annualized recurring run-rate was $543.8 million as of September 30, 2021, up 77%. Toast also said customers processed over $47.6 billion of gross payment volume in the trailing 12 months on the platform. The quarter was Toast's first as a public company, after its initial public offering on September 24, 2021.
Operating loss widened to $53.7 million from the prior-year quarter. Operating margin was -11.0%, up from the prior-year quarter. Net loss was $252.5 million, and diluted EPS was -$1.05. Both figures widened from the prior-year quarter. On a year-to-date basis, revenue was $1.19 billion, up 105%, and gross profit was $238.0 million, up 155.1%. Operating loss narrowed to $110.5 million from the prior-year year-to-date period, but net loss widened to $487.1 million. Diluted EPS for the nine months was -$2.22, and that loss per share widened from the prior-year year-to-date period. Adjusted EBITDA was $(9.7) million, compared with $(0.3) million in the prior-year quarter.
Cash generation was mixed. Operating cash flow was -$17.0 million in the quarter. For the nine months ended September 30, 2021, operating cash flow was $34.0 million, up from the prior-year year-to-date period. Capital expenditures were $2.6 million in the quarter and $10.6 million for the nine months, down 70.1% from the prior-year year-to-date period. Free cash flow, a non-GAAP measure, was -$21.1 million in the quarter, compared with $0.4 million in the prior-year quarter, and $17.7 million for the nine months, compared with -$128.5 million in the prior-year year-to-date period. Deferred revenue was $59.7 million, down 7.1% from the prior-year quarter, while remaining performance obligations were $352.0 million. The company ended the quarter with a senior secured credit facility that had $330 million available for borrowings, with no amount drawn as of September 30, 2021.
Guidance points to a different cadence for the fourth quarter. For the fourth quarter ending December 31, 2021, Toast expects revenue in the range of $465 million to $495 million and Adjusted EBITDA in the range of $(50) million to $(40) million. For the full year ending December 31, 2021, the company expects revenue in the range of $1,655 million to $1,685 million and Adjusted EBITDA in the range of $(46) million to $(36) million. Management tied the outlook to assumptions about restaurant demand and its own investments, and the forecast remains subject to risks.
Risks remain tied to the pandemic and the supply chain. Toast said the COVID-19 pandemic could still affect restaurant operations and consumer behavior, and it pointed to constrained microchip supply, logistics disruptions, shipping delays, and higher shipping costs. A reversal of the card-not-present mix that helped payment revenue and gross margins in 2020 could pressure financial technology solutions results. Seasonality also matters, since financial technology solutions revenue per location has historically been stronger in the second and third quarters. Toast is investing heavily in sales and marketing, research and development, and public company infrastructure, and those costs may keep operating margins under pressure even as revenue scales. The company also faces the risk that its warrant liability will swing with its stock price, which can create large non-cash charges in future periods.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2021 | Q2 FY2021 | QoQ | Q3 FY2020 | YoY |
|---|---|---|---|---|---|
| Revenue | $486.4M | — | — | — | — |
| Gross profit | $83.3M | — | — | — | — |
| Gross margin | 17.1% | — | — | — | — |
| Research & development | $39.7M | — | — | — | — |
| Sales & marketing | $56.6M | — | — | — | — |
| General & administrative | $40.6M | — | — | — | — |
| Total operating expenses | $137.0M | — | — | — | — |
| Operating income (loss) | -$53.7M | — | — | — | — |
| Operating margin | -11.0% | — | — | — | — |
| Net income (loss) | -$252.5M | — | — | — | — |
| Net margin | -51.9% | — | — | — | — |
| Diluted EPS | -$1.05 | — | — | — | — |
Risks
The ongoing COVID-19 pandemic has adversely impacted and may continue to adversely impact business, financial condition, and results of operations; the impact is particularly acute among SMBs, which comprise the majority of the customer base, and MD&A cites semiconductor chip shortages and shipping delays among related disruptions.
Toast depends on third parties to manufacture products and supply key components, particularly semiconductor chips, and a severe global shortage could prevent it from finding alternative sources in a timely manner.
The company relies substantially on one third-party processor to facilitate guest payments and payments made on behalf of customers; failure to manage this relationship could adversely affect business, financial condition, and results of operations.
A majority of customers are small- and medium-sized businesses, which can be more difficult and costly to retain than enterprise customers, are more susceptible to economic fluctuations, and face higher business failure rates.
Operating results depend significantly on payment processing, and revenue and gross profit vary with GPV, ticket size, consumer spending, and transaction type; during the COVID-19 pandemic card-not-present and debit transactions were a larger proportion and contributed to higher gross margins, while MD&A expects credit card and card-present mix to increase in future periods.
Gross margin was 17.1% in FY2021 Q3, down 3.3 percentage points from FY2020 Q3, and MD&A notes that a future shift toward credit card and card-present transactions could pressure payment processing gross margins.
The company identified material weaknesses in internal controls over financial reporting and may identify additional material weaknesses, which could result in material misstatements or failure to meet periodic reporting obligations.
Revenue was $486.4 million in FY2021 Q3, up 105% from FY2020 Q3, but risk factors state recent revenue growth should not be considered indicative of future performance and growth rates may fluctuate due to slowing demand, competition, and SMB demand.
The markets are intensely competitive, and failure to compete effectively could harm operating results; competitors may introduce new offerings or industry standards that render Toast products obsolete.
Success depends on senior management, key technical employees, and a direct sales force; competition for qualified personnel is significant, and volatility in the trading price of Class A common stock may reduce the perceived value of equity awards used for retention.
Expansion of financial technology services requires partnerships with financial institutions, compliance with varied regulatory requirements, and new internal processes; failure or added costs could expose Toast to new business and compliance risks.
Toast closed the StratEx and xtraCHEF acquisitions and may acquire more companies or technologies; integration may divert management attention, fail to meet expectations, require additional compliance controls, or result in dilution.
The dual-class common stock structure concentrates voting control with pre-IPO stockholders, who collectively owned approximately 99.5% of voting power immediately following the IPO, limiting other stockholders' ability to influence corporate matters.
Future sales or the perception of future sales by existing stockholders after lock-up or market standoff restrictions are released could cause the market price of Class A common stock to decline and may make it harder to raise capital.
The business handles payroll processing administration and may hold or direct customer funds, creating risk of loss from employee or third-party fraud, unauthorized transactions, processing errors, or insolvency or liquidity failure of the financial institution holding the funds.
Financial technology solutions revenue is seasonal, with per-location revenue historically stronger in the second and third quarters because customers typically have greater sales in warmer months, and this seasonality will continue to impact results.
Long-term potential may depend on expanding internationally, but Toast has limited experience outside the United States and would face new regulatory requirements, established competitors, and significant additional investment.
SaaS KPIs
All quarters →Adjusted EBITDA
Free Cash Flow
Annualized Recurring Run-Rate (ARR)
Summary, forecast, risks and KPIs are extracted from Toast, Inc.'s SEC filings for Q3 FY2021 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 6, 2026.