10-Q: Olo Reports Q2 Revenue Growth Amidst Thoma Bravo Merger

Olo Inc. announced a definitive agreement to be acquired by Thoma Bravo for $2 billion, while reporting increased revenue but a decline in net income for the second quarter of 2025.

Summary

• Olo Inc. entered into a definitive Merger Agreement on July 3, 2025, to be acquired by Thoma Bravo, L.P. in an all-cash transaction valued at approximately $2 billion, with stockholders receiving $10.25 per share.
• Total revenue for the three months ended June 30, 2025, increased by 21.6% to $85.7 million, up from $70.5 million in the prior year period.
• Platform revenue grew 20.9% to $84.1 million, driven by increases in Olo Pay volume and higher Order revenue.
• Net income for the three months ended June 30, 2025, significantly decreased to $1.6 million, compared to $5.7 million in the same period last year.
• The company reported an operating loss of $2.7 million for the quarter, a shift from an operating income of $1.0 million in the prior year.
• Gross margin decreased to 51.2% for the quarter, down from 56.6% in the prior year period.
• Active locations increased to approximately 89,000 as of June 30, 2025, up from 82,000 as of June 30, 2024.
• Average revenue per unit (ARPU) increased to $955 for the three months ended June 30, 2025, from $852 in the prior year period.
• Dollar-based net revenue retention was 114% for the quarter ended June 30, 2025.
• Cash and cash equivalents stood at $309.3 million as of June 30, 2025.
• The company has $68.6 million of commitments available under its revolving credit facility, with no outstanding borrowings.

Sentiment

Score: 6

Explanation: The sentiment is mixed. While revenue growth and the strategic acquisition offer a clear exit for shareholders, the significant decline in net income and operating profitability, coupled with ongoing litigation and merger-related uncertainties, temper the overall positive outlook. The fixed acquisition price caps future upside for public shareholders.

Positives

• Total revenue increased by 21.6% year-over-year for the three months ended June 30, 2025, demonstrating continued top-line growth.
• Platform revenue, the primary revenue driver, grew by 20.9%, indicating strong demand for Olo's core services.
• Professional services and other revenue saw a substantial increase of 74.6%, reflecting higher demand for implementation and consulting services.
• Active locations expanded to 89,000, showing continued customer base growth.
• Average Revenue Per Unit (ARPU) increased to $955, indicating successful upsell and cross-sell of modules to existing customers.
• Dollar-based net revenue retention remained strong at 114%, demonstrating the company's ability to retain and expand revenue from existing customers.
• Net cash provided by operating activities increased to $27.4 million for the six months ended June 30, 2025, from $24.2 million in the prior year period.
• The definitive merger agreement with Thoma Bravo provides a clear, all-cash exit for shareholders at $10.25 per share, potentially offering a premium and liquidity.

Negatives

• Net income significantly declined by 72.4% to $1.6 million for the three months ended June 30, 2025, compared to $5.7 million in the prior year period.
• The company shifted from an operating income of $1.0 million in Q2 2024 to an operating loss of $2.7 million in Q2 2025.
• Gross margin decreased to 51.2% from 56.6%, primarily due to higher transaction processing costs associated with Olo Pay volume and increased amortization of capitalized internal-use software.
• General and administrative expenses increased significantly by 86.0%, largely due to increased professional services costs associated with the merger and the absence of litigation-related insurance recoveries recorded in the prior year.
• Interest income decreased by 13.5% due to a decrease in interest rates.

Risks

• The pending acquisition by Thoma Bravo introduces significant risks, including potential uncertainty in the marketplace, disruption to business operations, and challenges in attracting and retaining key personnel.
• The merger may be delayed or not completed due to factors such as failure to obtain stockholder or regulatory approvals, potential litigation, or failure to satisfy other closing conditions.
• If the merger is not completed, the stock price could decrease, investor confidence could decline, and the company may be required to pay a termination fee of $73.725 million.
• Restrictions on business activities during the pendency of the merger may prevent the company from pursuing strategic opportunities or effectively responding to competitive pressures.
• Unfavorable conditions in the industry or global economy, such as inflation, fluctuating interest rates, and shifts in consumer preferences, could adversely impact customer health and digital ordering transaction volumes.
• The company is heavily reliant on the restaurant, food, and delivery industries, making it vulnerable to downturns or shifts in these sectors.
• Increased costs of food and labor, or rising prices from DSPs and other vendors, may not be fully offset by price increases to restaurant customers, impacting profitability.
• Consolidation in the restaurant industry or loss of partners/customers could result in reduced overall spending on the platform.
• The company is subject to ongoing legal proceedings, including a consolidated derivative action alleging breaches of fiduciary duty related to past statements about the Subway relationship and active location counts, which could be costly and divert management resources.

Future Outlook

The company expects the acquisition by Thoma Bravo to close by the end of calendar year 2025, subject to customary closing conditions including stockholder and regulatory approvals. Management anticipates continued growth in multi-module penetration and digital ordering across its existing customer base, expecting average revenue per unit and net revenue retention to be greater drivers of growth than total active locations in the near term. Future investments are planned for expanding platform functionality, broadening capabilities in payments, data analytics, and on-premise dining, and enhancing brand awareness. The company also sees opportunities for international expansion and partnerships with smalland medium-sized businesses, as well as applying its platform to other commerce verticals.

Management Comments

• Management believes its open SaaS platform is purpose-built to meet the complex needs of the restaurant industry and aligns with its interests.
• The company continually invests in architectural improvements to scale its system with continued growth.
• Management expects average revenue per unit and net revenue retention to be greater drivers of growth than total active locations in the near term due to potential for further multi-module penetration and continued growth in digital ordering.
• The company intends to continue to drive new customer growth by leveraging its brand and experience, expanding sales and marketing efforts, and targeting well-capitalized, fast-growing restaurant brands.
• Future success is dependent on the ability to successfully develop, market, and sell new and existing modules to new and existing customers.
• The company plans to expand its ecosystem of third-party partners to better support customers and believes these partnerships make it a critical component for restaurant brands enhancing digital platforms.

Industry Context

The restaurant industry is characterized by complex operations, fragmented legacy technology, and a prevalence of the franchise model. Digital orders accounted for only 18% of total restaurant industry orders in 2024, indicating significant untapped potential for digital commerce. Olo positions itself as an open SaaS platform that integrates with over 400 restaurant technology solutions, aiming to unify disparate technologies and enable direct guest relationships, unlike third-party marketplaces that often own the guest data. The industry is also facing macroeconomic conditions such as inflation and rising labor costs, which can impact consumer spending on dining out and increase operational expenses for restaurants.

Comparison to Industry Standards

• The filing notes that Olo's go-to-market model differs from 'other enterprise software businesses' by generally securing exclusivity across all locations at the brand's corporate level, rather than expanding from a single location or division. This allows for module deployment across new and existing brand locations without additional sales and marketing costs.
• The company's 114% dollar-based net revenue retention is presented as a strong indicator of its ability to retain and expand customer relationships, suggesting performance in line with or exceeding healthy SaaS benchmarks.
• No specific comparable companies, projects, or detailed financial benchmarks from competitors are listed for direct comparison of financial results.

Corporate Governance

Legal Proceedings

• A class action lawsuit (Securities Class Action) against the company and certain executive officers was settled, with final approval granted on June 11, 2024, and a class distribution order entered on March 18, 2025. The company recorded a $9.0 million expense in 2023 and $10.6 million in insurance recoveries in Q2 2024 related to this settlement.
• Multiple derivative complaints (Floyd, Balleh, Giuda) against certain directors and officers, based on similar allegations as the Securities Class Action (concerning the Subway relationship and active locations counts), have been consolidated into a single action (Consolidated Derivative Action).
• A motion to dismiss the Consolidated Derivative Complaint was filed on January 16, 2025, with an opposition filed on March 3, 2025, and a reply on April 1, 2025. The hearing date for this motion, previously scheduled for September 16, 2025, was vacated in July 2025, with no new date scheduled.

Stakeholder Impact

• Shareholders: Will receive $10.25 in cash per share if the merger is completed, providing liquidity and a fixed return. However, they will forego potential long-term value as an independent company. If the merger fails, the stock price could decline.
• Employees: Face potential uncertainty regarding the Transaction, which could impact retention and productivity. The company's ability to retain and hire key personnel is a risk during the pendency of the merger.
• Customers: May experience uncertainty in the marketplace, potentially leading them to delay purchases or seek offerings from other providers. The company aims to continue supporting customers through its platform and integrations.
• Creditors: The company's credit facility was extended, and there are no outstanding borrowings, indicating stable short-term credit relations. The merger agreement includes covenants that restrict certain actions, which could impact future debt capacity or terms.
• Suppliers/Partners: The company's ability to integrate with third-party technology providers is crucial. DSPs and other vendors may raise prices due to inflation, which could impact the company's costs and potentially its ability to pass those costs to customers.

Next Steps

• The company's stockholders need to approve the Merger Agreement.
• Required regulatory approvals (e.g., Hart-Scott-Rodino Antitrust Improvements Act) must be obtained for the merger to close.
• The company will continue to operate in the ordinary course of business until the merger closes, subject to certain restrictions.
• The company will continue to evaluate the impact of the One Big Beautiful Bill Act tax reform legislation on its consolidated financial statements.
• The motion to dismiss the Consolidated Derivative Action is pending, with a vacated hearing date and no new date scheduled.

Key Dates

Recommendation

The company has entered into a definitive agreement to be acquired for $10.25 per share in cash. For existing shareholders, holding the stock until the merger closes allows them to realize this fixed cash consideration. There is limited upside beyond the offer price, and potential downside if the merger fails to close. For new investors, the attractiveness of the stock depends on the current market price relative to the $10.25 offer, which is not provided in the filing. Given the fixed acquisition price, the investment thesis shifts from operational performance to merger arbitrage and deal certainty.

Keywords

Restaurant technology, SaaS platform, Digital ordering, Food delivery, Olo Pay, Thoma Bravo, Merger and acquisition, Restaurant industry, Fintech, Software as a Service