Summary
Toast closed fiscal 2021 with rapid top-line growth and a still-negative bottom line. Revenue was $514.9 million in the fourth quarter, up 112.4% from the prior-year quarter. For the full year, revenue was $1.70 billion, up 107.2%. The demand came from restaurants adopting more of the Toast platform. Gross payment volume was $17 billion in the quarter, up 125%, and $57 billion for the full year, up 124%. Annualized recurring run-rate stood at $568 million at December 31, 2021, up 74% from a year earlier. Net retention rate was 135%, compared with 114% a year earlier. Those metrics show Toast is selling more software and payment processing to existing locations, not just adding new ones.
Profitability remains the weak spot. Gross profit was $76.0 million in the quarter, up 62.7%, but gross margin was 14.8%, down 4.5 percentage points from the prior-year quarter. The operating loss was $117.5 million, and that loss widened from the prior-year quarter. Operating margin was negative 22.8%, up 0.6 percentage points. Net income was $0.15 million in the quarter, which swung to a profit from a prior-year loss. The full-year picture was much different: net loss was $487 million, and the loss widened from the prior year. Diluted loss per share was $1.68 for the full year, a wider loss per share than the prior year. On a non-GAAP basis, Adjusted EBITDA was negative $45 million in the quarter, compared with negative $7 million in the prior-year quarter. For the full year, Adjusted EBITDA was negative $42 million, compared with negative $94 million in the prior year. Non-GAAP gross profit was $82 million in the quarter and $341 million for the full year. Heavy spending on sales and marketing, research and development, and general and administrative costs continued to outpace gross profit dollars. The company also recorded large non-cash charges tied to warrant and derivative liabilities during the year, which drove the full-year net loss.
Cash generation improved but remains thin. Operating cash flow was negative $31.97 million in the quarter, up 16.7% from the prior-year quarter because the cash use shrank. For the full year, operating cash flow was $2.00 million, up 101.6% from the prior year. Free cash flow, a non-GAAP measure, was negative $34 million in the quarter and negative $17 million for the full year. Toast ended 2021 with a sizable cash balance and $330 million available under its revolving credit facility. Deferred revenue was $56 million, down 5.1% from the prior-year quarter. Remaining performance obligations were $405 million. The company has real commitments: $315 million in purchase commitments, mostly due in 2022, and $108 million in operating lease commitments, with $22 million due in 2022 and $86 million due thereafter. The MD&A attributes higher financial technology solutions costs to higher GPV and higher hardware costs to shipment volume, freight, and product costs.
Guidance points to continued growth with deeper losses. For the first quarter ending March 31, 2022, Toast expects revenue of $469 million to $499 million and Adjusted EBITDA of negative $65 million to negative $55 million. For the full year ending December 31, 2022, the company expects revenue of $2,349 million to $2,409 million and Adjusted EBITDA of negative $240 million to negative $200 million. The forecast implies Toast will keep spending to expand its platform and customer base. Risks include the COVID-19 pandemic and new variants, labor market pressure in restaurants, supply chain constraints, competition, and the cost of operating as a public company. The company also faces the challenge of turning strong GPV and ARR growth into consistent GAAP profits and cash flow.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q4 FY2021 | Q3 FY2021 | QoQ | Q4 FY2020 | YoY |
|---|---|---|---|---|---|
| Revenue | $514.9M | $486.4M | +5.9% | — | — |
| Gross profit | $76.0M | $83.3M | -8.7% | — | — |
| Gross margin | 14.8% | 17.1% | -2.4 pp | — | — |
| Research & development | $50.0M | $39.7M | +26.0% | — | — |
| Sales & marketing | $59.5M | $56.6M | +5.1% | — | — |
| General & administrative | $83.9M | $40.6M | +106.5% | — | — |
| Total operating expenses | $193.4M | $137.0M | +41.2% | — | — |
| Operating income (loss) | -$117.5M | -$53.7M | -118.8% | — | — |
| Operating margin | -22.8% | -11.0% | -11.8 pp | — | — |
| Net income (loss) | $147.0K | -$252.5M | +100.1% | — | — |
| Net margin | 0.0% | -51.9% | +51.9 pp | — | — |
| Diluted EPS | $0.00 | -$1.05 | +$1.05 | — | — |
Risks
Rapid expansion strains business, operations, finance and accounting systems, IT and security infrastructure, and personnel. MD&A reports revenue up 107.2% year to date to $1.705B and GPV up 124% to $57.0B, increasing execution risk if controls and infrastructure do not scale.
A majority of customers are SMBs with one to ten restaurant locations, which have higher business failure rates and greater susceptibility to economic fluctuations. MD&A notes NRR of 135% and dependence on retaining and expanding this base.
COVID-19 has adversely affected SMB restaurant customers, with many required to cease or substantially diminish operations; risks include reduced demand, supply chain disruption, and restrictions on sales and marketing. MD&A states uncertainty remains, including Delta and Omicron variants, and ultimate impact cannot be predicted.
Payment processing revenue and gross profit vary by transaction type; card-not-present and debit transactions had higher margins during COVID and their share is expected to decline as card-present and credit card transactions increase. Q4 gross margin was 14.8%, down 4.5 pp versus the prior-year quarter, showing margin sensitivity to mix.
Material weaknesses were identified in controls over the financial statement close process and unusual and infrequent transactions due to rapid growth straining accounting systems and personnel. Remediation is underway but may be insufficient, risking material misstatements or failure to meet reporting obligations.
The company incurred net losses of $487 million for the year ended December 31, 2021 and had an accumulated deficit of $1,102 million as of December 31, 2021. It expects costs to increase and losses to continue while investing in growth.
Expansion of financial technology services, including Toast Capital loans, bank partnerships, and payroll, requires additional third-party arrangements and regulatory compliance processes. Financial technology solutions revenue increased 118% year to date to $1,406M, increasing exposure to new business and compliance risks.
Toast Capital is responsible for purchasing defaulted loans from its bank partner up to 15% of each quarterly loan cohort, or 30% for a limited COVID-19 program. If customers cannot repay working capital loans, credit losses could adversely affect financial results.
Recent revenue growth rate should not be considered indicative of future performance; growth may decline due to slowing demand, competition, SMB demand, regulatory requirements, and business maturation. MD&A highlights 107% year-over-year revenue growth but warns growth rate has fluctuated and will continue to fluctuate.
The market for qualified sales, technical, and management personnel is competitive, and the perceived value of equity awards may decline. Employees who received significant proceeds from equity sales may have reduced motivation to remain, potentially harming growth and execution.
The platform processes sensitive personal, payment, and payroll information, and the company has experienced security incidents in the past. Future breaches or attacks could cause data loss, litigation, regulatory action, and reputational harm.
Hardware costs increased 79% year to date to $152M due to higher shipment volume and increased freight charges and product costs. COVID-19 has disrupted supply chains and third-party partner relationships, which could pressure hardware availability and margins.
The company closed StratEx in 2019 and xtraCHEF in 2021 and may pursue more acquisitions. Integration may divert management attention, fail to realize expected benefits, and expose the company to undiscovered regulatory or legal liabilities.
SaaS KPIs
All quarters →Adjusted EBITDA
Free Cash Flow
Gross Payment Volume (GPV)
Annualized Recurring Run-Rate (ARR)
Non-GAAP Gross Profit
Summary, forecast, risks and KPIs are extracted from Toast, Inc.'s SEC filings for Q4 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.