Olo Inc

Good afternoon. My name is Alexander and I will be your conference operator today. At this time, I would like to welcome everyone to the OLO first quarter 2021 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star one on your telephone keypad. If you would like to withdraw your question, please press the pound key. I would now like to turn the call over to Mr. Brian Danube. Please go ahead.

Thank you. Good afternoon, everyone, and welcome to OLO's first quarter 2021 earnings conference call. Joining me today are Noah Glass, OLO's founder and CEO, and Peter Benavides, OLO's CFO. During our call today, some of our discussion and responses to your questions may contain forward-looking statements, which represent our beliefs and assumptions only as of the date such statements are made. These forward looking statements include, but are not limited to, statements regarding our future performance and our market opportunity, including our expected financial results for the second quarter and fiscal year 2021, expectations regarding future operating expenses, impacts and expected results from changes in our relationship with our large customers, our market opportunity and market trends, expectations regarding the impact of the COVID-19 pandemic on our business and industry, predictions on consumer ordering volumes, the growth of our customer base, customer adoption of our products, and expectations for capturing market share, and our delivery of new products or product features. We undertake no obligation to update any forward-looking statements made during this call to reflect events or circumstances after tonight. These statements are subject to risks, uncertainties, and assumptions. Should any of these risks and uncertainties materialize, or should any of these assumptions prove to be incorrect, Actual company results could differ materially from these forward-looking statements. A discussion of the risks and uncertainties related to our business contained in our final prospectus filed with the SEC on March 18, 2021, and our quarterly report on Form 10-Q for the three months ended March 31, 2021, that will be filed with the SEC following this earnings call. And our remarks during today's discussion should be considered to incorporate this information by reference. Also during this call, we will present both GAAP and non-GAAP financial measures. Reconciliation is the most directly comparable GAAP financial measures are available in our earnings release, which we issued a short while ago. This earnings release is available on the investor relations page of our website and included as exhibit in the forum AK furnished to the SEC. Finally, at times when I've prepared remarks or in response to your questions, we may offer incremental metrics to provide greater insights in the dynamics of our business or quarterly or annual results. Please be advised that this additional detail may be one time in nature, and we may or may not provide an update in the future on these metrics. I encourage you to visit our investor relations website at investors.olo.com to access our earnings release, periodic SEC reports, a webcast replay of today's call, or to learn more about OLO. With that, let me turn the call over to Noah.

Hi, everyone. Thank you for spending this time with us today. I'm Noah Glass, the founder and CEO of Olo. I'm thrilled to be with you on this call and to share my thoughts on our company, our opportunity, and our Q1 performance. Given that this is our first earnings call, I thought I'd take a moment to introduce you to Olo and what we do. Olo is a leading cloud-based on-demand commerce platform for multi-location restaurant brands. now serving over 400 restaurant brands in approximately 69,000 individual restaurant locations, and enabling them to let consumers order ahead, pay ahead, and get their food faster for takeout, delivery, and more. Our mission is to help our restaurant customers thrive by best meeting the needs of the on-demand consumer. I founded Olo over 15 years ago out of my desire to get a cup of coffee faster by ordering ahead and skipping the line instead of waiting in line at a busy coffee shop. Since then, we've experienced an incredible journey, and I want to take a few moments to share some of the building blocks of the strategy that took us from an idea in June 2005 to a public company that is today the restaurant industry's mission-critical software platform and with a mission to touch, add value to, and derive revenue from every restaurant industry transaction. Importantly, Olo is a B2B software platform, not a B2C marketplace or aggregator. As a result, many of you have likely used Ollo without knowing it when you place orders at your favorite restaurant brands. Ollo is a platform primarily enabling enterprise restaurant brands to create their direct-to-consumer applications to enable on-demand commerce. Ollo is not a consumer brand. Rather, our interests are aligned with our customers' interests to help them drive direct digital traffic first and foremost. That takes the form of enabling ordering ahead, whether that's counter pickup, curbside pickup, delivery, or these days, even tableside delivery. If you had to describe a restaurant, you'd likely describe the traditional table service model, arriving at the restaurant and being seated, reviewing a menu, placing an order with a server after a brief conversation, and then sometime later having a meal delivered to your table and eating the meal before paying and leaving. Well, that kind of experience is simply no longer representative of the majority of transactions in the restaurant industry, and that fact has been true even before the COVID-19 era. In fact, if you look at 2019 and you gauge the percentage of transactions represented by what the industry calls off-premise, that is food consumed outside the four walls of the restaurant, off-premise represented 63% of all restaurant industry transactions in the U.S., In that context, you can understand why it's so valuable for restaurants to enable a more efficient model for ordering and paying for a meal that will be consumed off premise, both for the benefit of the consumer and for the operational efficiency of the restaurant. By enabling the consumer to order ahead, pay ahead, and get their food at the restaurant without having to wait for it, the restaurant can both enrich that consumer experience and improve their operational and financial performance at the same time. This is the core capability that OLO enables and is popularized in the restaurant industry over the past 15 plus years of our operating history. The restaurant industry shift to digital ordering has resulted in a steady and exponential growth curve of restaurant adoption of digital ordering capabilities and consumer adoption of choosing to order through digital ordering versus ordering in more traditional methods like in-person or calling over the phone. The COVID-19 era pulled digital ordering adoption into the future as many restaurants had limited on-premise dining service. They have shifted their attention and consumers have shifted their use of restaurants to off-premise dining occasions. This shift and the broader interest in safety through contactless order collection has meant that digital ordering has become even more essential and has indeed become mission critical to OLO customers and the restaurant industry as a whole. Years ago, when I would speak to Team Olo about my long-term vision for our company, I would reference a milestone moment in which we achieved 51% of the sales of one of our customers. I said that moment would represent Olo becoming the majority order channel for that customer, and others would soon follow, the dawn of digital ordering primacy. We're now seeing Olo restaurant customers who are processing 100% of their transaction volume through the Olo platform. This includes takeout orders, delivery orders, marketplace orders, and even table-side orders that are typically initiated when the guest sits at a table and scans a unique QR code to identify the table where a server or runner can deliver the food. OLO's ambition has now grown from digital primacy to digital entirety, from 51% digital to 100% digital. We believe that OLO's destiny is to touch every transaction, add value to every transaction, and derive revenue from every transaction in the restaurant industry. OLO's March IPO was the manifestation of our desire to make a strong statement to our stakeholders. Olo is and always will be an independent, open software as a service or SaaS platform, providing a stable and extensible foundation for the restaurant industry and ecosystem to build upon for the long term. Olo believes in a level playing field that promotes healthy competition, which is best for the restaurant industry. Olo is committed to serving as a neutral and open platform for the long term. To that end, we're excited to reaffirm our partnerships with DoorDash and Uber Eats and celebrate over a dozen marketplace partners engaging with OLO's exclusive restaurant network through OLO Rails and a similar number of delivery service providers engaging through OLO Dispatch. We continue to focus on scaling our open SaaS platform and bringing on the best partners to add to our rich partner ecosystem of over 100 technology partners. all for the benefit of our restaurant customers. It bears repeating that our transactional SaaS business model means that more transaction volume processed through OLO leads to higher revenue for OLO, similar to other consumption-based models in SaaS. In December 2020, we celebrated the milestone of achieving OLO order number 1 billion on a cumulative basis since our founding in June 2005. It's worth noting that we process more than half of those total orders. In other words, over 500 million orders in 2020 alone. While we believe that the impact of COVID-19 has served as a tailwind for the 2020 transaction volume growth on the OLO platform, remember that the larger digital transformation of the restaurant industry has been playing out atop the OLO platform throughout our 15 plus year journey. More restaurants, more digital ordering capabilities, and more consumers adopting this new digital ordering behavior means higher transaction volume year over year and continued 120% plus net revenue retention. In Q1, we were proud to help Blumenbrands, parent to Outback Steakhouse and Carrabba's Italian Grill, replatform from their longstanding homegrown digital ordering program to Olo. This is another anchor for our conviction that OLO's enterprise-grade SaaS platform will be a compelling alternative to the CapEx and OpEx of building in-house. OLO's enterprise-grade open SaaS platform offers lower upfront costs, faster time to market, lower ongoing cost of ownership, built-in best practices from a decade and a half of experience, ongoing innovation, a broader partner ecosystem, and benchmarking against 400-plus other customers. In short, SaaS wins over homegrown software. As we discussed at length in our S1 and throughout our IPO Roadshow, we're incredibly excited about the opportunity presented by the Quick Service Restaurant, or QSR, drive-through industry engaging with on-demand commerce. The QSR segment represents both the largest number of addressable restaurant locations and the largest number of transactions per location, and therefore represents the largest pool of transactions in the restaurant industry and an exciting segment for OLO, given our transactional SaaS business model. In general, QSR brands have grown over the years through franchising, leading to disparate technology systems across franchisee operator groups and manifesting in the kind of non-homogeneous environments for which OLO was purpose-built. We further penetrated the QSR drive-through segment in Q1 with new deployments at Culver's and Crystal, as these brands embraced on-demand commerce as a new way of providing the most convenient experiences for consumers. We celebrated other notable deployments with Nando's U.S., growing our relationship with Nando's that began in Canada, and an expansion of our relationship with fine dining standard bearer Union Square Hospitality Group, whose CEO, Danny Meyer, is a member of our board of directors. Our expanded USHG relationship includes the deployment of its flagship Union Square Cafe, as well as Gramercy Tavern, Blue Smoke, and Marta. further demonstrating that on-demand commerce can play an important role for every restaurant type, even fine dining, going forward. And we're also excited about the growth of virtual brands, brands that don't have their own physical locations and instead use host kitchens or ghost kitchens to produce their food for digital-only ordering and a delivery-only service model. These virtual brands demonstrate that Ola's total addressable market is not bounded by the current number of restaurant locations. Rather, it is tied to total restaurant industry transactions. And this number is not fixed, but expanding with population growth and greater consumer preference for prepared food, off-premise consumption, and digital ordering. This quarter, we launched two additional celebrity-powered virtual brands, including Goop Kitchen and and Guy Fieri's Flavortown Kitchen. These digital-only, delivery-only virtual brands are inherently 100% digital and therefore speed Olo's path to realize our now grander ambition to touch, add value to, and derive revenue from every restaurant industry transaction. Finally, I would be remiss if I did not mention Team Olo and our Olo for Good initiative. During Q1, our team continued to work from home due to COVID-19 restrictions. OLO's workforce was built to support remote working well before COVID-19, so this has been a relatively natural transition for our team. Although we look forward to being able to gather in person again in the near future, I'm proud that our team has managed to execute on behalf of OLO and our restaurant customers from a fully remote environment. Also during Q1, we joined Pledge 1% to donate 1% of our time, equity, and product, and launched OLO for Good. Our OLO for Good efforts are focused on advancing racial, ethnic, and gender diversity, equity, and inclusion, providing relief and support for the restaurant industry and its frontline workers, and ending childhood hunger. Improving our community and our world is in OLO's DNA. We're excited to use our new status as a public company for doing even more good for our community and our industry. While we're incredibly proud to have processed over 500 million orders in 2020, we're reminded that the restaurant industry processes approximately 60 billion transactions each year. On a recent board call, one of OLO's directors asked me what inning we were in for the OLO journey. Given that we're yet to achieve 1% of restaurant industry transactions, my response was, we're just getting out of the dugout. As I constantly remind Team Olo, we have miles to go before we sleep. We'll continue to invest in our team, our customers, our community, and our partners as we feel that this is in the best long-term interest of our share owners and in line with the tenets of OLO board member Danny Meyer's philosophy of enlightened hospitality. Here at OLO, we invest in solutions that both increase our opportunity to reach new restaurants with our on-demand commerce platform and and help us to generate more value for those customers and more revenue from our platform in the form of additional average revenue per unit, or ARPU. We're thrilled to be a public company and one committed for the long term to the success of our customers and partners by adding value to their businesses, generating revenue for our business, and delivering returns for our shareholders. I've never felt more excited, more optimistic, or more purpose-driven than I do today. And I'm excited for Peter Benavides, OLO's CFO, to provide a quantitative reflection of the way I feel. Peter, over to you.