Stephen Fredette
ToastAbout Stephen Fredette
Stephen Fredette, 41, is Toast’s President, Co‑Founder, and a Class III director. He became President in January 2024, previously serving as Co‑President since December 2015 and CEO from December 2011 to February 2015; earlier he held roles at Oracle. He holds a B.S. in Chemistry from MIT. Under his leadership, Toast achieved GAAP profitability in 2024 (net income $19M), with strong top-line growth across recent years; EBITDA has improved materially since 2022. He is a non‑independent, management director with significant founder ownership and voting power (20.1%), aligning influence and incentives with long‑term value creation .
Company performance context (annual)
| Metric | FY 2022 | FY 2023 | FY 2024 |
|---|---|---|---|
| Revenues ($USD) | $2,731,000,000 | $3,865,000,000 | $4,960,000,000 |
| EBITDA ($USD) | -$360,000,000* | -$241,000,000* | $111,000,000* |
| Net Income ($USD) | -$275,000,000 | -$246,000,000 | $19,000,000 |
*Values retrieved from S&P Global.
Past Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| Toast, Inc. | President | Jan 2024–present | Led transition to GAAP profitability; continued scaling and product innovation |
| Toast, Inc. | Co‑President | Dec 2015–Dec 2023 | Co-led growth to ~134k locations and platform expansion |
| Toast, Inc. | Chief Executive Officer | Dec 2011–Feb 2015 | Early leadership through formative growth and product-market fit |
| Oracle | Various roles | Prior to Toast | Enterprise software experience foundational to Toast’s platform strategy |
External Roles
No external public company directorships for Fredette are disclosed .
Fixed Compensation
| Year | Base Salary ($) | Target Bonus % of Salary | Actual Bonus Paid ($) |
|---|---|---|---|
| 2024 | $20,000 | Not eligible | $0 |
| 2025 (approved) | $450,000 | 60% | Not disclosed |
Notes:
- Employee directors receive no additional director fees beyond officer compensation .
Performance Compensation
| Component | Metric | Weighting | Target/Threshold/Max | 2024 Company Achievement | Payout Applied |
|---|---|---|---|---|---|
| Annual Cash Bonus Plan (Company funding) | Non‑GAAP Subscription Services & FinTech Solutions Gross Profit (“RGP”) | 70% | 50% / 100% / 160% | Between Target and Maximum; 140% for RGP portion | Contributed 98% to total funding |
| Annual Cash Bonus Plan (Company funding) | Adjusted EBITDA | 30% | 75% / 100% / 125% | Exceeded Target; 125% for EBITDA portion | Contributed 38% to total funding |
| Blended Company Funding | — | — | — | Total funding 136% | — |
| Individual Bonus (Fredette) | — | — | — | Not eligible in 2024 | $0 |
2023 context (for framework evolution): ARR (70%) and Adjusted EBITDA (30%) funded at 85% overall; individual MBOs applied for other NEOs; founders not eligible for regular cash bonus in 2023 .
Equity Ownership & Alignment
Beneficial ownership and voting power (as of March 31, 2025)
| Holder | Class A Shares | Class B Shares | % of Class B | % Voting Power |
|---|---|---|---|---|
| Stephen Fredette | 4,393,637 | 25,797,670 | 32.0% | 20.1% |
Breakdown (footnote): Includes direct and trust holdings, options exercisable within 60 days (75,000 Class B and 427,396 Class A), and RSUs releasable within 60 days (16,435 Class A) .
- Anti‑hedging/anti‑pledging: Toast policy prohibits hedging and pledging of company securities; securities may not be used as collateral subject to margin calls .
- Stock ownership guidelines: Founders (Fredette and Narang) must hold the lesser of 50,000 shares or $2,500,000 in value by December 31, 2027; directors must hold 4x annual cash retainer; Fredette’s ownership far exceeds guideline levels .
Outstanding equity awards (unvested) at 12/31/2024
| Grant Year | RSUs Not Vested (#) | Options Unexercisable (#) | Option Exercise Price | Vesting Schedule |
|---|---|---|---|---|
| 2021 | 3,125 | — | — | 25% at 1‑yr, then quarterly over 3 yrs |
| 2022 | 17,605 | 95,737 | $17.38 | 16 equal quarterly installments over 4 yrs |
| 2023 | 56,975 | 171,181 | $17.33 | 16 equal quarterly installments over 4 yrs |
| 2024 | 79,119 | 145,381 | $24.65 | 16 equal quarterly installments over 4 yrs (vesting commenced 4/1/2024) |
Market value note: RSU market values in the proxy were computed at $36.45 closing price on 12/31/2024 (for aggregate RSU valuations) .
2024 equity grants (issued 3/11/2024)
| Award | Grant Date | Units (#) | Grant Value ($) | Exercise Price | Vesting |
|---|---|---|---|---|---|
| Time‑based RSUs | 3/11/2024 | 90,421 | $2,228,878 | n/a | Equal quarterly over 4 years from 4/1/2024 |
| Time‑based Options | 3/11/2024 | 166,149 | $2,422,502 | $24.65 | Equal quarterly over 4 years from 4/1/2024 |
2024 exercises and vesting
| Transaction (2024) | Shares | Value Realized ($) |
|---|---|---|
| Options exercised | 0 | $0 |
| RSUs vested | 54,426 | $1,355,346 |
Implications:
- Quarterly vesting cadence implies predictable RSU issuance; any sales must be pre‑planned under required 10b5‑1 trading plans .
Employment Terms
| Provision | Outside Change in Control | Within Change in Control (Double Trigger) |
|---|---|---|
| Cash severance | 12 months base salary; prorated target bonus for year of termination | 1.5x (12 months base salary + target bonus); prorated target bonus |
| Health continuation | 12 months employer contribution equivalent (if COBRA elected) | Up to 18 months employer contribution equivalent (earlier of eligibility with another employer or COBRA end) |
| Equity acceleration | Time‑based awards that would vest in next 12 months accelerate | Full acceleration of unvested time‑based awards; performance awards per award terms |
| Triggers | Termination without cause (outside CoC) | Termination without cause or resignation for good reason within 12 months post CoC |
| Single‑trigger vesting | Not permitted (awards assumed/continued/substituted must also require qualifying termination) | |
| Base/bonus floors (Fredette) | For severance calculation: base salary ≥ $250,000; target bonus ≥ $150,000 | |
| Clawback | SEC‑compliant clawback for incentive compensation upon financial restatement (3‑year lookback) |
Other policies:
- No 280G/4999 excise tax gross‑ups; payments reduced if it yields greater net after‑tax benefit to executive .
- No option repricing/discounting; multi‑year vesting on equity .
Board Governance
| Attribute | Status |
|---|---|
| Board class | Class III director; term ends 2027 |
| Independence | Not independent (management director) |
| Committees | No committee membership listed for Fredette |
| Attendance | In 2024, each director attended ≥75% of Board and committee meetings |
| Role separation | Chairperson (Mark Hawkins) separate from CEO; Board endorses separate roles |
| Director fees for employees | None; employee directors receive no additional compensation |
Dual‑role implications:
- As President and director, Fredette is non‑independent, but Board maintains independent oversight via separate Chair and majority independent committees (Audit/Comp/NCG), and anti‑pledging/trading controls mitigate conflicts .
Compensation Peer Group and Committee Practices
- Peer group used for 2024 decisions (selected Aug 2023; reconfirmed Jul 2024): Affirm, AppLovin, BILL, Datadog, DoorDash, Dynatrace, Etsy, HubSpot, MongoDB, Paycom, Paylocity, Procore, PTC, Shift4 Payments, The Trade Desk, Twilio, Unity, ZoomInfo, Smartsheet .
- Target percentiles: Committee uses 25th/50th/75th as reference points; no single target percentile; decisions consider role scope, performance, and internal equity .
- Consultant: Compensia retained in 2024; independence affirmed; founders required 10b5‑1 plans for planned selling .
Say‑on‑Pay & Shareholder Feedback
| Year | Say‑on‑Pay Approval |
|---|---|
| 2023 | ~98% approval |
| 2024 | ~97% approval |
Expertise & Qualifications
- Founder/operator with deep product and go‑to‑market experience; prior enterprise software exposure at Oracle .
- Led scaling across SMB and enterprise channels; product innovations (AI‑assisted marketing, benchmarking, websites, branded mobile app) and expansion to international and retail .
- Significant founder ownership and voting rights support long‑term alignment .
Compensation Structure Analysis
- Cash vs equity mix: 2024 compensation almost entirely equity (options + RSUs); cash raised in 2025 (base to $450k; 60% target bonus), increasing fixed/at‑risk cash balance .
- Shift in vehicles: Equity grants mix maintained at 60% options / 40% RSUs; options link outcomes to stock appreciation; RSUs aid retention and reduce dilution volatility .
- Governance safeguards: No single‑trigger vesting in CoC; no option repricing; clawback in place; anti‑pledging/hedging .
Risk Indicators & Red Flags
- Pledging/hedging: Prohibited; reduces misalignment risks .
- Tax gross‑ups: None for golden parachutes (shareholder‑friendly) .
- Option repricing: Not permitted .
- Related party transactions: Not indicated in the proxy for Fredette .
- Say‑on‑pay: Strong approvals (97–98%) limit governance overhang .
Equity Ownership & Alignment (additional detail)
| Policy/Practice | Details |
|---|---|
| Ownership guideline (founders) | ≤50,000 shares or $2,500,000 by 12/31/2027 |
| Deferred comp | Program applies to non‑employee directors; founders as employees not in director program |
| ESPP/401(k) | Standard employee eligibility; 401(k) match up to 50% of 6% eligible comp |
Employment Terms (restrictive covenants)
- Severance conditioned on execution/non‑revocation of release and compliance with restrictive covenants (e.g., non‑compete/non‑solicit as applicable per policy forms) .
Investment Implications
- Alignment: Founder‑level ownership and 20.1% voting power, anti‑hedging/pledging, and required 10b5‑1 plans indicate strong alignment and disciplined trading behavior .
- Near‑term supply dynamics: RSUs vest quarterly; 2024 RSU grants (90,421 units) and outstanding unvested RSUs (79,119 from 2024 grant; 56,975 from 2023) create predictable issuance; actual selling depends on 10b5‑1 plans and personal liquidity needs .
- Pay‑for‑performance: Founders were not bonus‑eligible in 2024; 2025 introduces cash incentives (60% target bonus) tied to company metrics, improving incentive balance but adding some cash cost; equity remains core .
- Change‑of‑control economics: Double‑trigger acceleration and 1.5x salary+bonus cash multiple (with base/bonus floors) are competitive yet shareholder‑conscious (no gross‑ups/single‑trigger) .
- Execution track record: 2024 GAAP profitability and sustained revenue growth strengthen compensation‑performance linkage; watch continued EBITDA progression given 2022–2024 trajectory (see table) .