United States securities and exchange commission logo
June 2, 2021
Brian Elworthy
General Counsel
Toast, Inc.
401 Park Drive, Suite 801
Boston, MA 02215
Re: Toast, Inc.
Draft Registration
Statement on Form S-1
Submitted May 3,
2021
CIK No. 0001650164
Dear Mr. Elworthy:
We have reviewed your draft registration statement and have the
following comments. In
some of our comments, we may ask you to provide us with information so
we may better
understand your disclosure.
Please respond to this letter by providing the requested
information and either submitting
an amended draft registration statement or publicly filing your
registration statement on
EDGAR. If you do not believe our comments apply to your facts and
circumstances or do not
believe an amendment is appropriate, please tell us why in your
response.
After reviewing the information you provide in response to these
comments and your
amended draft registration statement or filed registration statement, we
may have additional
comments.
Draft Registration Statement on Form S-1 filed May 3, 2021
Prospectus Summary, page 2
1. Please provide the
basis for your statement that you are a leading platform serving the
restaurant industry.
Clarify the criteria on which you based this statement, such as
revenue or the number
of customers or market share.
Our Opportunity, page 8
2. Please disclose the
assumptions and limitations of your serviceable addressable market
which you estimate to
be approximately $15 billion. Clarify whether the estimate
includes all
restaurants in the United States or is limited to small and medium sized
restaurants which
comprise the majority of your customers. Also, disclose the "average
Brian Elworthy
Toast, Inc.
June 2, 2021
Page 2
take rate" that you used to calculate the opportunity for
transaction-based revenue from
payments. Finally, provide context regarding your statement regarding
international
locations by disclosing the percentage of revenue currently generated
outside of the
United States.
Risk Factors
Risks Related to Our Business and Business Development, page 23
3. Please define "small- and medium- sized businesses" (SMBs) in the
context of your
customer base. Clarify whether SMBs are measured in terms of revenue,
employees,
and/or other criteria.
Risks Related to Our Partners and Other Third Parties, page 45
4. You state that you substantially rely on one third-party processor to
facilitate payments on
your platform. Please identify the payment processor and disclose the
material terms of
any contracts, including the term of the agreement and any termination
provisions.
Management's Discussion and Analysis of Financial Condition and Results of
Operations, page
84
5. You disclose the number of customers and the number of average guest
orders as of
March 2021. Please tell us what consideration you have given to
including comparative
information for prior periods.
Our Revenue Model, page 85
6. You state that Toast Capital is not a material component of your
financial technology
solutions revenue. Please specify the percentage of revenue generated
by Toast Capital
for all periods presented.
Annualized Recurring Run-Rate (ARR), page 86
7. Please explain to us the basis or rationale for ARR reflecting four
times the trailing-three
month cumulative payments component of MRR. Provide an example
computation
supporting your latest ARR metric. In addition, MRR is comprised in part
of your "in-
month adjusted payments services fees, exclusive of estimated
transaction-based costs,
which (you) refer to as the payments component of MRR." And as well,
"MRR does not
include fees derived from Toast Capital or related costs." How did you
consider this
FirstName LastNameBrian Elworthy
metric, which appears to be comprised of GAAP and non-GAAP elements, as
a
Comapany NameToast,
presentation Inc.
not requiring disclosures under Item 10(e) of Regulation
S-K?
June 2, 2021 Page 2
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Brian Elworthy
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Toast, Inc. LastNameBrian Elworthy
Comapany
June 2, 2021NameToast, Inc.
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FirstName LastName
Key Business Metrics, page 87
8. You disclose that a key factor affecting your performance is the
acquisition of new
locations. Please tell us what consideration was given in disclosing
key business metrics
such as the number of customer locations and Gross Payment Volume by
new and
existing customers for the periods presented. Additionally, you
disclose that as your
customers generate more sales and therefore more Gross Payment Volume,
you generally
see higher financial technology solutions revenue. Please tell us what
consideration was
given in quantifying and discussing operating metrics or other key
performance indicators
related to your subscription revenue and changes over the reported
periods. Refer to
Section III.B of SEC Release No. 33-8350.
Net Retention Rate (NRR), page 87
9. You state that your annual net retention rate was above 110% since
2015. To the extent
material to an understanding of any trends, please disclose the
specific annual net
retention rate for each period presented. Discuss any material changes
to the rate since
2015.
Critical Accounting Policies and Estimates
Share-Based Compensation, page 106
10. Please provide us with a breakdown of all equity awards granted to
date in fiscal 2020 and
leading up to the initial public offering including the fair value of
the underlying common
stock used to value such awards as determined by your board of
directors. To the extent
there were any significant fluctuations in the fair values from
period-to-period, please
describe for us the factors that contributed to these fluctuations,
including any intervening
events within the Company or changes in your valuation assumptions or
methodology.
Business, page 118
11. Please provide more detail regarding your partner ecosystem and
clarify whether you
generate revenue when a customer utilizes your partner ecosystem. If
material, please
disclose the amount of revenue generated by partners.
Intellectual Property, page 129
12. Please revise your intellectual property disclosure to disclose the
expiration dates for your
U.S. patents.
Principal Stockholders, page 154
13. Please disclose the natural person or persons who exercise the voting
and/or dispositive
powers with respect to the securities owned by entities such as the
entities affiliated with
TCV.
Brian Elworthy
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Toast, Inc. LastNameBrian Elworthy
Comapany
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Shares Eligible for Future Sales, page 165
14. Please disclose the exceptions to the lock-up agreements.
2. Summary of Significant Accounting Policies
Revenue Recognition, page F-9
15. You disclose that financial technology solutions revenue includes fees
for payment-
processing transactions and fees for marketing and servicing working
capital loans to
customers. Please tell us what consideration was given to
disaggregating revenue by these
categories. Refer to ASC 606-10-55-90 and 55-91.
Note 9. Stock-Based Compensation, page F-40
16. As a significant assumption, for each period presented, please
disclose the common stock
fair values used as an input in the determination of the fair value of
your stock-based
awards and options. Please refer to ASC 718-10-50-2(f)(2).
Exhibits
17. Please file your Senior Unsecured Convertible Promissory Note Purchase
Agreement as
an exhibit to the registration statement. Refer to Item 601(b)(10) of
Regulation S-K.
General
18. Please supplementally provide us with copies of all written
communications, as defined in
Rule 405 under the Securities Act, that you, or anyone authorized to
do so on your behalf,
present to potential investors in reliance on Section 5(d) of the
Securities Act, whether or
not they retain copies of the communication.
You may contact Amanda Kim, Senior Staff Accountant, at (202) 551-3241
or Craig
Wilson, Senior Advisor, at (202) 551-3226 if you have questions regarding
comments on the
financial statements and related matters. Please contact Alexandra Barone,
Staff Attorney, at
(202) 551-8816 or Jan Woo, Legal Branch Chief, at (202) 551-3453 with any other
questions.
Sincerely,
Division of
Corporation Finance
Office of
Technology
cc: Gregg Katz