Olo Inc

Greetings. Welcome to the OLO Inc. Q4 2021 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero and your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Stephanie Dawkins, Vice President of Investor Relations. You may begin.

Thank you. Good afternoon, everyone, and welcome to OLO's fourth 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 expectations of our business, future financial results, total addressable market and growth opportunity, and guidance and strategy. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those described in our forward-looking statements, and such risks are described in our earnings press release and our risk factors included in our SEC filings including our annual report on Form 10-K for the year ended December 31, 2021. You should not rely on our forward-looking statements as predictions of future events. We undertake no obligation of updating any forward-looking statements made during this call to reflect events or circumstances after today. Also during this call, we'll present both GAAP and non-GAAP financial measures. Reconciliations to 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 is included as an exhibit in the form AK furnished to the SEC. Finally, in terms of our prepared remarks or in response to your questions, we may offer incremental metrics. 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, investor presentation, 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.

Thank you, Stephanie. Hi, everyone. Thank you for spending time with us today. 2021 was a great year for OLO. We grew annual revenues by more than 50%, expanded ARPU by 16% to more than $2,000 per year, surpassed more than $20 billion in gross merchandise value for the year, successfully completed our IPO, and closed our first strategic acquisition. We ended the year with our platform connecting approximately 79,000 active restaurant locations and more than 500 restaurant brands to more than 200 technology partners and more than 85 million consumers who have ordered over the platform this past year. Last year, our flexible, open SaaS platform helped restaurants manage through the uncertainties of the lasting COVID-19 pandemic, including location closings and reopenings, staffing shortages, and the transition to increased reliance on digital transactions by enabling digital ordering, delivery, contactless handoff, QR codes, and virtual brands. In short, our technology enabled restaurants to adapt, to do more with less. In the fourth quarter, Lyft joined Olo's dispatch network as a local white-label delivery partner. Olo Dispatch is a national fulfillment network. enabling restaurants to offer, manage, and expand direct delivery through OLO's network of multiple delivery providers while optimizing price, timing, and service quality. The addition of drivers from the list network to OLO's dispatch network not only expands delivery coverage for our restaurant brands, but also drives competitive pricing for the benefit of consumers and brands alike. This, along with expanding our relationships with Uber Eats and Waiter, adding Grubhub, and reaffirming our relationship with DoorDash in 2021, further bolstered the OLO dispatch and Rails offerings, benefiting restaurant brands by broadening channel management and increasing driver supply, leading to increased operational efficiency for brands and a better consumer experience. The unique capabilities of our two-sided networks, and OLO's comprehensive relationships with marketplaces and delivery service providers helped drive module expansion and expanded platform usage within our customer base. One example of our ability to expand relationships within brands is Papa Murphy's. Papa Murphy's, the largest cake and bake pizza company, began their relationship with OLO through the OLO ordering module. This quarter, the brand expanded their relationship to include the OLO dispatch module, enabling pizza delivery via their own website and app. Papa Murphy's take and bake pizzas are made at the store and baked at home, and traditionally have required an individual to go to the store to pick up their pizza. Enabling delivery via dispatch allows Papa Murphy's to increase digital sales and compete directly with traditional pizza delivery companies. In the fourth quarter, restaurant brands also adopted our virtual brand module as virtual brands continued to flourish. Examples include Applebee's Cosmic Wings and virtual dining concepts adding Mario's Tortas and Polly D's Italian Subs, allowing restaurants to reach new customers and maximize their revenue per square foot. Additionally, in the fourth quarter, several brands added the OLO Network module to their technology stack. Notable brands included BJ's, Fuzzy's Taco Shop, Hacienda Colorado, Jack Stack Barbecue, Miller's Ale House, Tijuana Flats, and Uncle Julio's. OLO Network provides brands the ability to grow their direct digital business through affiliate partners, such as Google Food Ordering, while owning and maintaining direct consumer relationships. Restaurant brands recognize the importance of owning commission-free direct ordering channels, and the consumer relationship is imperative to avoid being disintermediated. Our acquisition of Wisely provides brands the tools to improve their digital engagement with consumers, which will enable them to measure and grow customer lifetime value, or CLV, and drive more orders onto the OLO platform. In the few months since acquiring Wisely, we've successfully integrated on a go-to-market basis their suite of solutions, including the host module, which streamlines reservations and table management, as well as the marketing, sentiment, and customer data platform, or CDP modules, which strengthens consumer engagement. Digital-first engagement is increasingly critical for restaurant brands as the industry continues to shift toward digital. In 2021, almost 9 billion restaurant orders, or 15.1% of total industry orders, took place digitally, according to the NPD Group. The OLO platform is at the center of this digital transformation, processing more than $20 billion in total gross merchandise value, or GNV, representing an increase in digital orders completed on the OLO platform of more than 35% year over year. Throughout 2021, it became clear to us that a restaurant's business should not be bifurcated between digital or non-digital or on-premise versus off-premise. It's one business, and it should operate with one thing in mind, the consumer. Every order, every transaction, and every interaction should be customer-centric. Our emboldened ambition is to help restaurant brands more effectively satisfy the consumer by connecting the consumer's on- and off-premise transactions through digital orders and data in order to empower a known consumer experience. We seek to touch, add value to, and derive revenue from every order, striving to move from 15% of the industry's orders being digital to 100%, of the industry's 55 billion orders being digital, a concept I call digital entirety. This will empower restaurant brands to best meet the needs of the on-demand consumer. As we enter 2022, we've never been more confident in our position and more excited about our opportunity ahead. We believe that we have a 100x growth opportunity in U.S. enterprise restaurants. representing a TAM of more than $15 billion within the U.S. enterprise segment. Currently, the OLO platform offers brands the following differentiated and mission-critical solutions, ordering, network, switchboard, kiosk, and virtual brand modules, which provide on-demand digital commerce and channel optimization solutions, dispatch and rails modules, which provide delivery enablement. optimized front-of-house operations needs through our host module, which streamlines reservations and table management, and customer engagement through our marketing automation, sentiment, and customer data platform, or CDP, modules. And today, we announced general availability of OLO Pay, which will create uniform brand experiences, improving the restaurant operator and consumer experience. Just as restaurants have fragmented point-of-sale systems, they also have fragmented payment processors. And these payment processors are horizontal solutions that are not purpose-built for restaurants, nor built for digital transactions. Historically, Ollo has served as the gateway into existing payment processors. And these processors have led to suboptimal experiences for the consumer, manifesting in an elevated level of fraud chargebacks and a lack of tools for brands to fight those chargebacks. OloPay's fully integrated vertical payment solution goes beyond core credit card processing functionality and will benefit both the operator and the consumer by offering advanced fraud prevention that results in improved authorization rates for valid transactions. by supporting and allowing credit cards on file to be used at any of a brand's participating locations for the consumer, enabling Apple Pay and Google Pay, and through simplifying the ordering interface for a faster checkout. All of these features will grow and protect restaurant brands' digital business through increased basket conversion. Our vision for Odopay extends beyond the existing capabilities. Our ambition is to bring a much better user experience and optimize basket conversion of a seamless payment solution to the restaurant industry through our OLO Pay solution in borderless form, which we plan to make available later this year. One example of this experience is Shop Pay, which is an accelerated checkout that lets customers save their payments and delivery information. This can save customers time when they check out, especially if they've already opted into Shop Pay elsewhere, providing security for all merchants offering Shop Pay and enabling them to offer an improved user experience manifested in a dramatically higher basket conversion rate of 1.72x, according to Shopify studies. We believe that removing the friction typically associated with online ordering, account creation, login, and checkout is beneficial for users and for restaurants, leading to higher basket conversion and more orders. With a network of 79,000 restaurants and 85 million consumers, OLO has achieved the critical mass to unlock Shop Pay-like capabilities in the form of our borderless OLO Pay offering. We have conviction that this two-sided payment network is a win for consumers, a win for restaurants, a win for OLO. Our historical success in bringing to market platform-level innovations like Dispatch and Rails by creating two-sided networks gives us both the experience and the confidence that we can do the same with the launch of borderless OLO Pay. Restaurant brands are telling us they want to operate as one digital business. They are pulling us into payment and on-premise opportunities. And in order to accelerate the restaurant's ability to operate as one business, we must unlock on-premise solutions. That is why I'm excited to announce that OLO has signed a definitive agreement to acquire Omnivore. Omnivore powers restaurants to connect to apps and technologies that streamline operations, improve efficiency, enhance consumer experiences, and increase profitability by allowing restaurant technology partners to inject and extract data from multiple point-of-sales through one integration, unlocking the potential of restaurants' point-of-sales system through these technologies. Omnivore enables restaurant technology partners to focus on their core products rather than POS integrations. OLO plus Omnivore will allow our restaurant brands to, one, insert and extract back-of-house data through faster, easier two-way connections with technology partners via their developer-friendly POS API, further unifying disparate data and simplifying data review. Two, increase data extraction from the POS, enabling new and enhanced OLO capabilities, such as increased visibility into on-premise orders and improved OLO-powered capacity and throttling management. Three, access to features and capabilities to increase monetization of on-premise digital orders and on-premise digital card present transactions. And four, access to enhanced developer tools and increased access to key partners not already part of OLO's robust ecosystem. Ultimately, OLO plus Omnivore will allow our restaurant brands to immediately gain access to new on-premise capabilities, as well as an expanded technology partner network outside of core ordering, broadening OLO's platform capabilities. In addition, OLO's existing POS integrations will be updated with expanded functionality and be backed by a large combined team of top specialists in the industry. Omnivore is expected to increase our technology partnerships more than 50% to more than 300 partners, increasing our ability to unify and enhance the utility of disparate technologies across the restaurant industry and reaffirming our commitment to an open ecosystem of partners. I believe Olo to be the platform that restaurants will need in the future. Our all-encompassing platform will enable leading brands to better understand and serve every customer that transacts with them. leveraging the new currency for 2022, customer intelligence-enhanced, digital-first interactions. I'm extremely proud of our work in 2021, and I'm excited about the significant opportunity that lies ahead for Ollo, as our leading open SaaS platform supports restaurants and empowers the restaurant industry's digital transformation. Our emboldened ambition seeks to increase Ollo's opportunity by 100x through the following three growth opportunities. First, through focusing on the enterprise restaurant segment, we have a 4X opportunity to capture all 300,000 enterprise restaurant locations. Second, by striving to move from 15% of orders being digital to 100% of restaurant orders being digital, we have an opportunity to capture and process 6.25X more orders on our platform. as our technology will simplify restaurant capture of orders into one common digital channel, allowing brands to better understand and engage their consumers, increasing customer lifetime value. Third, the launch of OloPay enables Olo to generate 4x more revenue per order than we capture today by acting as the payment processor for our restaurants. Through higher conversion rates, improved authorization rates, and streamlined reporting, OLO Pay creates ROI-positive transactions for brands, reducing overhead and G&A costs. Altogether, 4x times 6.25x times 4x leads to a 100x opportunity and a TAM within these three core growth vectors of $16 billion. While this opportunity is large for OLO, more importantly, the efficiencies our platform will provide for leading brands are greater. And that is why I believe that leading brands will use one technology platform to understand and serve every consumer that transacts with them. Restaurants will need an open platform to own consumer relationships and leverage consumer data to prioritize channels that maximize profitability and access to the data that allows them to do one-to-one marketing. to manage orders through the front of house, and to use technology to be operationally efficient and inform every facet of their business with customer-centric data. Finally, as I typically do on earnings calls, I'll provide an update on our commitment to OLO for Good and Pledge 1%. This quarter, we continued our commitment to the Pledge 1% movement, in which OLO commits 1% of our time, product, and equity to OLO for Good initiatives. I'm excited to announce that this quarter, OLO launched its first nonprofit partner, Emma's Torch, a woman-founded restaurant which provides refugees, asylees, and survivors of human trafficking with culinary training, ESL classes, and interview preparation. As part of our product pledge, OLO is waiving fees for the fast casual restaurant's use of the OLO ordering and dispatch modules. We expect to add other nonprofit restaurants to the platform in order to use OLO as a platform for social impact and positive change for our communities. And now I'd like to turn things over to Peter Benavides, OLO's CFO, to share more details on OLO's fourth quarter performance. Peter.