10-K: Olo Inc. Reports Fiscal Year 2023 Results, Highlights Growth in Platform and Payment Volumes

Olo Inc.'s 2023 annual report showcases significant growth in gross merchandise volume and gross payment volume, alongside strategic investments in technology and personnel.

Summary

• Olo Inc. released its 10-K filing for the fiscal year ended December 31, 2023, detailing its financial performance and strategic initiatives.
• The company's gross merchandise volume (GMV) exceeded $26 billion, and gross payment volume (GPV) reached $1 billion for the year.
• Olo's customer base includes approximately 700 restaurant brands, representing about 80,000 active locations.
• The platform handles an average of more than two million orders per day, with over 85 million guests transacting on the platform in the past year.
• The company's dollar-based net revenue retention was approximately 120% for the three months ended December 31, 2023.
• Olo's platform revenue was split between subscription revenue (44.7%) and transaction revenue (55.3%) for the year ended December 31, 2023.
• The company experienced a net loss of $58.3 million for the year, compared to a net loss of $46.0 million in 2022.
• Olo is focused on expanding its platform, particularly in payments, data analytics, and on-premise dining, and is also exploring opportunities in international markets and other on-demand digital commerce verticals.

Sentiment

Score: 5

Explanation: The document presents a mixed picture. While there is strong growth in key metrics like GMV and GPV, the company also experienced a significant net loss and faces various risks and challenges. The sentiment is neutral, reflecting both positive and negative aspects of the company's performance and outlook.

Positives

• Olo's platform continues to experience significant growth in transaction volumes and customer base.
• The company's dollar-based net revenue retention indicates strong customer loyalty and expansion.
• Olo is actively investing in new product development and platform enhancements.
• The company's open SaaS platform integrates with over 300 restaurant technology solutions.
• Olo has a highly efficient go-to-market model with long-term contracts providing visibility into future financial performance.

Negatives

• Olo experienced a net loss of $58.3 million for the year ended December 31, 2023.
• The company's sales cycle has lengthened due to customer resource constraints.
• Olo's gross margin decreased to 60.9% for the year ended December 31, 2023 from 68.5% for the year ended December 31, 2022.
• The company experienced a decrease in active locations from 87,000 as of December 31, 2022 to 80,000 as of December 31, 2023.

Risks

• Olo's growth depends on attracting new customers, retaining existing ones, and increasing sales to both.
• The company faces intense competition from existing and new market entrants.
• Security breaches and cyber attacks could harm Olo's reputation and financial results.
• The company's reliance on third-party delivery service providers and aggregators poses operational risks.
• Unfavorable economic conditions or reductions in digital ordering could negatively impact Olo's business.
• The dual-class structure of Olo's common stock concentrates voting control with Class B stockholders.
• Olo may require additional capital, which may not be available on acceptable terms.
• The company's pricing decisions and models may affect its ability to attract and retain customers.

Future Outlook

Olo plans to continue investing in product innovation, expanding its customer base, and exploring new market opportunities, including international expansion and other on-demand digital commerce verticals. The company also expects to see continued growth in transaction volume and adoption of its Olo Pay module.

Management Comments

• Management uses GMV and GPV metrics to assess demand for our products.
• Management believes these metrics provide investors with useful supplemental information about the financial performance of our business, enable comparison of financial results between periods where certain items may vary independent of business performance, and allow for greater transparency with respect to key metrics used by management in operating our business.

Industry Context

The document highlights Olo's position as a leading open SaaS platform for restaurants, operating in a competitive and rapidly evolving market. The company's focus on digital ordering, delivery, and payments aligns with broader industry trends towards digital transformation and on-demand commerce. The document also notes the challenges faced by the restaurant industry, including labor shortages and economic uncertainty, which impact Olo's customers and their adoption of new technologies.

Comparison to Industry Standards

• Olo competes with various companies in the restaurant technology space, including white-label digital ordering solution providers like Paytronix Systems, Inc., and restaurant-focused POS platforms such as NCR Voyix Corporation and Toast Inc.
• The company also competes with aggregators like Grubhub and DoorDash, and custom software providers like Deloitte and Accenture.
• Olo's platform is designed to integrate with multiple POS providers, loyalty programs, payment processors, and delivery service providers, which is a common approach in the industry.
• The company's transactional SaaS model, which includes both subscription and transaction-based revenue streams, is a hybrid approach that aligns with customer success and is similar to some other players in the market.
• Olo's dollar-based net revenue retention of approximately 120% for the three months ended December 31, 2023, is a strong indicator of customer loyalty and expansion, which is a key metric for SaaS companies.

Legal Proceedings

• Olo is involved in a class action lawsuit alleging securities law violations, which has been partially dismissed but is proceeding on claims related to publicly disclosed active locations counts.
• The company is also involved in derivative lawsuits alleging breaches of fiduciary duty related to the same issues.

Related Party Transactions

• Olo provides services to companies in which some of its board members have ownership interests, generating revenue of approximately $1.5 million, $1.0 million, and $1.1 million for the years ended December 31, 2023, 2022, and 2021, respectively.

Stakeholder Impact

• Shareholders are impacted by the company's financial performance, including the net loss and stock price volatility.
• Employees are affected by the company's workforce reduction and changes in compensation.
• Customers benefit from Olo's platform and its ability to enhance their digital ordering and delivery capabilities.
• Suppliers and partners are impacted by Olo's business decisions and financial health.

Next Steps

• Olo plans to continue investing in product innovation and platform enhancements.
• The company will focus on expanding its customer base and exploring new market opportunities.
• Olo intends to further develop its Olo Pay module and other new product offerings.
• The company will continue to monitor and address cybersecurity risks and other operational challenges.

Key Dates

Keywords

SaaS, restaurant technology, digital ordering, delivery, payments, gross merchandise volume, gross payment volume, customer retention, platform, transaction revenue