Toast’s Growing Software Penetration Paves a Viable Route to Profitability by 2025

We take a positive view of Toast's strategy, which seeks to capitalize on two major tailwinds in the restaurant industry: the adoption of cloud-deployed point-of-sale systems and the uptake of technology-enabled solutions, with operators looking to improve operating efficiency as industry margins remain tighter than ever. One epiphenomenon of pandemic-induced lockdown restrictions, in our view, is a structural increase in consumer acceptance of digital channels, with restaurants increasingly needing to offer some combination of delivery integration, digital ordering, and rewards programs to meet the evolving needs of today's restaurant consumer. As the market leader in a growing vertical, heavy investments in onboarding new units, building out platform functionality, developing an ecosystem of partner application programming interfaces, or APIs, and filling holes in the platform through targeted roll-up acquisitions strike us as appropriate.