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spk09: Good afternoon. My name is Ariel and I will be your conference operator today. At this time, I would like to welcome everyone to the OLO first quarter 2022 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. To join the question queue, you may press star then one on your telephone keypad. Should you need assistance during the conference call, You may signal an operator by pressing star and zero. As a reminder, the conference is being recorded. I would now like to turn the conference over to OLO's VP of Investor Relations, Ms. Stephanie Dawkus. Please go ahead.
spk10: Thank you. Good afternoon, everyone, and welcome to OLO's first quarter 2022 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, including in our SEC filings, including our annual report on Form 10-K for the year ended December 31, 2021. You should not rely on 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 8K 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.
spk05: Thank you, Stephanie. Hi, everyone. Thank you for spending time with us today. In the first quarter, OLO's revenue and profitability momentum continued. We grew revenue 18% year over year as our platform supported continued growth in active locations coming onto the platform and transaction volumes. Our ending active location count increased 19% year-over-year to approximately 82,000, and we surpassed more than 600 restaurant brands utilizing our platform. This quarter, we had success with the adoption of our customer engagement and front-of-house solutions, which expanded our platform offerings through the Wisely acquisition. Notably, Bojangles and El Pollo Loco, both QSRs, deployed our Marketing Automation and Customer Data Platform, or CDP, modules in a matter of weeks. Both brands will leverage the Marketing Automation module to provide personalized campaigns in order to increase their return on investment for marketing campaigns, as well as leverage the CDP module, which creates unified guest profiles, enabling brands to power business decisions and growth. In addition to adding several new restaurant brands to the platform this quarter, we added a new type of customer to the platform, convenience stores, or C-stores. Multi-unit C-stores represent an emerging vertical for Olo, expanding Olo's total addressable location count by an estimated 55,000 locations. And this quarter, we deployed our ordering module at Quick Trip, an enterprise C-store, enabling the brand to help its guests order ready-to-eat meals. Also in the first quarter, we took meaningful strides towards enabling digital hospitality, which we define as harnessing the power of first-party data to enable personalized and memorable guest experiences. OLO board member and legendary restaurateur Danny Meyer coaches his team members to deliver enlightened hospitality to guests and, quote, always be connecting dots to do so. With OLO's customer data platform purpose-built for the restaurant industry, we're helping to connect the dots at enterprise speed and scale, enabling digital hospitality with the ultimate ambition to make every guest feel like a regular. First quarter product advancements include, first, we expanded product use cases. using Serve, our white-label branded ordering experience, to enable on-premise ordering. Nando's, a fast casual restaurant, began utilizing Serve as its exclusive dine-in ordering system, increasing its on-premise digital orders per store by more than 600% in one year's time. And as I mentioned earlier, we showcased the extensibility of our platform by deploying our ordering module at QuickTrip. Both of these examples highlight our platform's ability to allow operators to focus on the guest experience. And from a technological standpoint, these two examples highlight our platform's ability to quickly append additional elements and features to our existing products to expand our market opportunity. Second, we grew our technology partner network by more than 100 technology partners to more than 300 providers. through our acquisition of Omnivore, which we closed on March 4th. Holo's open ecosystem, which connects to apps and technologies that streamline operations, improve efficiency, enhance the guest experience, and increase operator profitability, now encompasses additional partners in on-premise ordering, kitchen display systems, labor management, and inventory management. Third, we added a new premium feature to our offerings, introducing Sync, a simplified listing management product, which enables restaurants to provide up-to-date data that is automatically synced between OLO and more than 50 digital publishers to ensure store information is consistent no matter where guests search. Sync's ability to enable restaurants to be discoverable through local digital listings will drive increased direct orders and improve listing return on investment. Fourth, we continue to invest in enhancing the Ollo platform, adding real-time career tracking abilities, as well as adding reminder tools for operators to re-enable digital ordering. These enhancements provide restaurant operators with the ability to better manage their digital programs, improving operations as well as the guest experience. All of these advancements in our products, platform, and network are for the benefit of our customers. Ollo will continue to innovate and invest in capabilities that provide our brands with the tools to provide digital hospitality to their guests. This is our North Star and the thread that runs through Ollo's expanding product suite. And since the first quarter ended, we had a great chance to share our digital hospitality vision with our customers. A few short weeks ago, we hosted Beyond Four, our annual customer conference, which returned in person this year. Beyond4 is named to reflect Olo's mission to serve our restaurant brands, not just within, but beyond the four walls of the restaurant. At Beyond4, Oloites and Olo customers explored our platform and technologies in order to maximize the restaurant's footprint in the on-demand world and unlock digital hospitality. At the conference, our customers were excited about the ways the expanded Olo platform can solve even more of their operational challenges, expand their digital programs, increase efficiency, drive revenue, and ultimately delight their guests. Their enthusiasm during the conference further deepened my belief that digital leaders in the restaurant space will use one platform, the Olo platform, to understand and serve every guest that transacts with them. At the conference and in less than three months since launching general availability of our payment solution, we're heartened by our customers' significant interest in OloPay. And data from existing and new customers demonstrates OloPay's benefits. In a recently released testimonial, Waba Grill, a fast casual restaurant, highlighted OloPay's ability to reduce friction for their business and guests alike, mainly through PCI compliance, decreasing credit card fraud, and allowing operators to view daily orders, chargebacks, failure of payment, and reconciliation, while also creating a seamless experience for their guests that enables credit card, Apple Pay, Google Pay, and more payment options. Adam Kinzinger, Director of Technology at Waba Grill Franchise Corp., stated, the benefit of streamlining the digital stack is immense. allowing brands to focus on the guests and their experience. Furthermore, during a standing room only Beyond4 OloPay breakout session, one of the panelists stated that OloPay doesn't force its operators to choose between the guest experience or protecting their brand from fraud, as traditional payment processors have. OloPay's modern and industry-specific approach to fraud prevention is vital and enables an elegant guest experience. Another panelist said that fees from vendors in order to fight chargebacks or fraudulent orders could be $35 an order, which could be double the check average for some orders. However, Olopay's fully integrated solution enables restaurants to fight chargebacks without additional vendor fees, while also increasing authorization rates and reducing friction for guests. And excitement for borderless Olopay capabilities was palpable. As a reminder, borderless payments capabilities, which we plan to introduce later this year, will allow guests to securely speed through checkout at any participating restaurant within the OldoPay network with a single tap, quickly and seamlessly connecting 82,000 restaurant locations, 600 brands, and 85 million guests. Unprompted, four panelists who represent customers across various service models all indicated their intent to deploy Olopay due to its unique ability to fight chargebacks, integrated advanced fraud prevention, and future borderless capabilities. We believe Olopay is a differentiated payment solution that can deliver significant financial and operational benefits for restaurants, as well as a seamless and easier-to-use solution for their guests. It's a win-win. the kind of innovation we love at OLO. Borderless, as was the case with Dispatch and subsequently with Rails, is another example of the network effects OLO can leverage for continued product innovation on behalf of our customers. The common denominator across all networks OLO enables is data. And our unique positioning means we can harness this data to build and provide solutions to our customers that others frankly cannot. This is what gets us excited about the future and gives us confidence in our ability to provide our customers with a suite of solutions that enables digital hospitality at scale. In return, our customers are better equipped to interact with their guests in truly informed and differentiated ways. The end result is our customers enjoying the benefits of higher customer lifetime value the net effect of getting digital hospitality right. That said, we're committed to remaining true to our core tenets while continuing to execute on our ambition to enable digital hospitality at scale. These core tenets are open and integrated with more than 300 technology partners, vertical and purpose-built for restaurants, focused on enabling digital hospitality, innovative, and relentlessly focused on providing adaptive tools to enable restaurants to expand their digital programs, increase efficiency, drive revenue, and delight their guests. We observe in technology-dependent industries that platforms that are extensible, secure, and reliable are the platforms of choice. And I believe now more than ever that restaurants must have a full-stack offering in order to thrive. in our digital world and Ollo answers that call. And finally, as I typically do on earnings calls, I'd like to provide two corporate updates. First, I'm thrilled to welcome Diego Panama to the Ollo executive team as chief revenue officer. Diego is a seasoned public company executive with a proven track record of successfully scaling fast companies bringing deep and relevant domain knowledge as well as go-to-market experience on a global scale. He's worked at some of the most innovative tech companies, including LiveRamp and previously Microsoft, on digital transformation for enterprise-scale customers. Importantly, Diego has a great understanding of data applications and how enterprise brands can use data as a strategic lever in their business, an integral part of our restaurant customer strategy as they look to increase digital hospitality for all of their guests by leveraging guests and operational data. Diego will support Olo's relationships with its restaurant brands, champion their success, drive our sales and marketing initiatives, and importantly, drive Olo's next chapter of execution and growth as we realize our 100X scale opportunity. Diego will assume the role of Chief Revenue Officer at the beginning of July as our current Chief Customer Officer, Marty Honfeld, plans to retire. Marty has been a key leader in OLO's efforts toward digital entirety and in our growth throughout the industry. On behalf of the entire leadership team, I'd like to congratulate Marty on his retirement and thank him for his dedication and significant impact to OLO and its customers throughout his tenure. And second, I'm pleased to share an update in connection with our OLO for Good initiative. As a reminder, we launched OLO for Good in 2021 and joined the Pledge 1% movement, committing to donate 1% of our time, equity, and product to doing good. As part of that, we committed to donating 1% of OLO shares over 10 years to our independent donor-advised fund managed by Tides Foundation. Last year, we recommended Tides Foundation make grants to nine nonprofit organizations. This quarter, in our second round of grant recommendations, we advised Tides Foundation to grant $2.1 million in total from our donor advised funds to the following nine organizations. American Forests, Appalachian Trail Conservancy, Emma's Torch, Giving Kitchen, Heart of Dinner, the LEE Initiative, or the Let's Empower Employment Initiative, the OCRA Project, Partnership with Native Americans, and World Central Kitchen. Grant recipients are nonprofits focused on diversity, equity, and inclusion, ending childhood hunger and increasing access to food, supporting the restaurant industry's frontline workers, and protecting natural resources and reducing waste and emissions. We continue to be enthusiastic about our ability to use OLO as a platform for social impact and positive change for our communities. We love to do well and do good in parallel. And now I'd like to turn things over to Peter Benavides, OLO's CFO, to share more details on OLO's first quarter performance. Peter?
spk04: Thanks, Noah. In the first quarter, revenue grew on continued location and transaction volume growth demonstrating the mission critical nature of our solutions, which are helping to enable digital hospitality within the restaurant industry. Total revenue in the first quarter was $42.8 million, an increase of 18% year over year. Platform revenue in the first quarter was $41.5 million, an increase of 19% year over year, driven by an increase in active locations coming onto the platform, further multi-product and multi-partner adoption, and the durability of digital ordering. In terms of key metrics, we ended the quarter with approximately 82,000 active locations on the platform, a 19% increase year-over-year, and a 4% increase sequentially, as we deployed new brands such as Quick Trip, Taco Time, Poke Works, amongst others. ARPU for the first quarter was approximately $516, representing a 2% decrease year-over-year, which I'll speak to in more detail in a moment, and a 2% increase sequentially. Net revenue retention in the first quarter was approximately 107%, which as expected, was less than recent periods. The year-over-year decline in ARPU and net revenue retention was primarily due to two factors. First, this past quarter, we continued to lap the residual impacts of financial stimulus in the last pre-vaccination period of the COVID-19 pandemic, during which time order volumes were elevated. In second, this past quarter we lapped the final quarter operating under our prior DoorDash agreement. With the impact of these two dynamics behind us, we expect to see ARPU and net revenue retention accelerate in the ensuing quarters as customers continue to adopt additional product modules such as OLO Pay in our front of house and customer engagement solutions. For the remainder of the financial metrics disclosed, unless otherwise noted, I will be referencing non-GAAP financial measures. Gross profit for the first quarter was $32.4 million, compared to $30 million in the prior year period, driven by the revenue growth previously mentioned, partially offset by higher platform and professional service and other compensation costs to support the growth in transactions and active locations coming onto the platform. as well as the near-term impacts due to our recent wisely and omnivore acquisitions. Sales and marketing expense for the first quarter was $6.1 million, or 14% of total revenue. This compares to 3.4 million and 10% a year ago. Year-over-year increases were driven by further expansion of relevant teams to continue to drive revenue growth by securing new and expanding existing relationships, as well as increasing our partnership ecosystem. Research and development expense for the first quarter was $12.8 million, or 30% of total revenue. This compares to 11 million and 30% a year ago. General and administrative expense for the first quarter was $11.8 million, or 28% of total revenue. This compares to 9.5 million and 26% a year ago. As expected, increases were primarily due to increased costs associated with operating as a public company. Going forward, as we lap the initial increase in costs associated with operating as a public company, we expect G&A to decrease as a percentage of total revenue. Operating income for the first quarter was $1.7 million compared to $6 million a year ago. Net income in the first quarter was $1.7 million, or one cent per share, based on approximately $183.3 million fully diluted weighted average shares outstanding. Turning our attention to the balance sheet and cash flow statement, our cash equivalents and marketable securities balance was $463.7 million as of March 31st, 2022. Regarding cash flows, net cash used in operating activities was $900,000 compared to net cash provided by operating activities of $4.2 million a year ago. Free cash flow was negative $3.4 million compared to $4 million a year ago. I'll wrap up by providing our guidance for the second quarter and full year 2022. For the second quarter, we expect revenue in the range of $45.5 million and $46 million, and non-GAAP operating income in the range of $600,000 to $1 million. For the fiscal year 2022, we now expect revenue in the range of $195 million and $197 million and non-GAAP operating income in the range of $7.6 million and $9.2 million. In terms of guidance for the year, there are a few things to highlight. First, we remain incredibly excited about the market opportunity ahead. Now that we have lapped the residual impacts of the COVID-19 pandemic, we anticipate a re-acceleration of revenue growth as implied in our second quarter and full-year guidance. Additionally, while we're encouraged by the overall excitement from our customers regarding the commercial availability of OLO Pay, we have not factored any meaningful revenue contribution into our guidance. Next, the second quarter will be the first quarter in which we feel the full impact of the Omnivore acquisition, which closed on March 4th. Also in the second quarter, as Noah mentioned, in April we hosted our Beyond 4 conference. Expenses related to the conference were approximately $1 million. As a result, following the second quarter, we anticipate expanding operating profit and achieving the full-year profitability outlined in our guidance. To summarize, we continue to deliver revenue growth and profitability as we take meaningful strides towards enabling digital hospitality. Our position is strong as we have a long runway for growth through adding more locations, cross-selling our robust and comprehensive product suite, and through expanded use cases of the platform. I'd now like to turn it over to the operator to begin the Q&A session. Operator?
spk09: Thank you. We will now begin the question and answer session. To join the question queue, you may press star, then one on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star, then 2. We will pause for a moment as callers join the queue. Our first question comes from Steven Sheldon of William Blair. Please go ahead.
spk03: Hey, thanks for taking my questions. It sounds like you had some nice customer wins for wisely. So curious if you can share what kind of level of interest you've seen in your existing customer base to potentially add wisely modules. And I guess, you know, you've talked, I think before about 10 million, a potential 10 million revenue contribution there. I think you talked about for 2022, you talked about that last quarter. Are you still, given what you're seeing now, are you still on track to meet that or, you know, are things going better than maybe you'd originally expected there?
spk05: Hey, Stephen, this is Noah. I'll take the first part of that question and then hand it over to Peter. So I want to pick up really on the piece that you wrote this morning about digital engagement. I think that it sort of sets the table for where we are in terms of brands and their ambitions to drive toward 100% digital and kind of where Wisely fits into that as a way of taking the data that flows from those interactions with guests and using it to better engage with consumers, what we think of as unlocking digital hospitality, ultimately having every guest feel like a regular based on the brand's ability to use the data that they've gathered about that guest to better serve and personalize their experience. So it's amazing when we see brands that are already up. I think you noted in your piece Wingstop now at 62.3% digital, Sweetgreen at 66% digital. But these brands have the ambition of being 100% digital. And as part of that, you're seeing a broad interest in how do we use tools to really get great at digital marketing to learn from all of this information that we're gathering and drive customer lifetime value of our guests and also go and acquire more customers guests that look like our best guests. And that's really what the wisely suite what we now think of as our marketing automation and customer data platform components of that suite represent and have seen a lot of interest from especially at our beyond for conference a few weeks ago, and we just saw huge excitement from our customer base now over 600 brands, and really unlocking digital hospitality and understanding that as the banner under which all of those solutions live.
spk02: Got it.
spk04: Yeah. Just picking up from where Noah left off there. That is correct in terms of our revenue target for the year. We're still maintaining that $1 million goal. And we are obviously really encouraged and enthused with the progress that we've made to date and some of the quick wins that we mentioned on the call. But that is still in line with our full year targeted revenue.
spk03: Great to hear. And I just wanted to ask, you know, you guys have a lot of initiatives underway. I just wanted to ask some about your talent strategy and what trends you've seen in being able to attract new talent, retain existing talent in this environment. You know, if you think about this year and maybe over the next couple, are you well-staffed at this point to push forward the initiatives you have in place?
spk05: Hey, Stephen, this is Noah again. I'll jump in there. Yeah, I mean, we're feeling really good about our talent. currently on the team and our talent pipeline and our ability to fill the roles and needs that we have as an organization with a lot of ambition and a lot of different capabilities that are all driving forward. One of the things that I'm particularly excited about is the talent that we have brought into the company in the different roles as general managers of various business units. And so we have four general managers who are operating our payments, and that's responsible for Olopay, the Wisely team, customer engagement, and front of house, another business unit. And then we have GMs that are focused on rails and network and syndication partnerships, and then also our direct ordering business. And all of those things are areas where, as we talked about new initiatives and things that we're excited about on the product front, we mentioned and initiative from each of those groups. And it's exciting that we have great leaders, almost like many CEOs, who are leading those initiatives and have incredible product design and engineering teams underneath them and a unified go-to-market to really meet the needs of our customers, broadly speaking.
spk03: Great to hear, and nice results. Thank you.
spk09: Our next question comes from Terry Tillman of Choice Security. Please go ahead.
spk06: Yeah, thanks for taking my questions. Hey, Noah, Peter, and Stephanie. First question I had is I was actually impressed with just where we've moved, I think, just over the course of a quarter from 500 brands to 600 brands. Hopefully I've got that right. But if indeed you've seen that kind of incremental brands being added to the platform, I'd love to kind of double-click into, you know, the typical new customers you're seeing or brands coming onto the platform and Is their buying behavior changing because of, you know, kind of the inflationary environment we're in? Are they buying multiple products or starting with one? It's just how this expansion in customer brands kind of manifests itself in revenue either this year or next year. So that ended up being like four parts that I could repeat if I have to.
spk05: And then that'll follow up for Peter. All right, Terry. Well, thank you for the multi-part question. I'll see if I can touch all those areas. This is Noah. Sure. Yeah, so I think we were over 500 brands as we discussed our customer base last quarter. We're now over 600 brands. We talked a little bit last quarter about expanding some of our focus on what we define as the emerging enterprise segment of the market. Those are, through our definition, brands that have between 5 and 99 locations. And then we classify enterprise as 100 or more locations. So a lot of expansion of new brands restaurant brands that are starting their relationship with Olo from that emerging enterprise segment. I think broadly speaking, what has become clear, certainly through COVID, I would argue before COVID and certainly now, is that a digital ordering platform, digital commerce, and digital marketing tools, marketing automation, CDP, these are not nice to have. These are must-have capabilities for every brand out there. And so we're seeing brands really engaging with Olo to stand up their digital platform, forging those direct relationships with guests, and then seeing that Olo itself is growing and changing. We now have 12 different software modules, and we can really help the brand go from zero to 100% digital, utilizing all the capabilities that we have to offer. I think Peter can get into how brands have, over time, started their relationship with more of our software modules. We ourselves have grown the total number of software modules dramatically, both organically and through acquisition. But it's exciting for us to see all of the new brands and all of the opportunity for those brands to really go further faster in their digital transformation by utilizing more of the OLO platforms.
spk06: Yep, yep, got it. Thank you. That was a solid response to my multi-part question, so I'll give you an A. Thank you, Noah. Peter, just the follow-up question is on gross margin. I mean, it sounds like you've added a couple of technology stacks from the acquisition, so maybe they're just duplicative costs, or how do we think about gross margins the rest of the year? Would they be more at this level, or could you see them actually starting to improve a bit? Thank you.
spk04: Yeah, thanks, Terry. Great question. So, you know, I guess from a high level, the trends that you're seeing are in line with our expectations. I think what you're seeing is some increased investment in the core business to better align with the growth that we've experienced over the past 12 to 18 months in terms of number of locations coming onto the platform and growth and transaction volumes. And as you mentioned, you're also seeing the impact of a full quarter of the wisely acquisition and a one-month period of the omnivore acquisition, both of those with lower gross margin profiles than OLO. I think longer term, you know, holding aside OLO Pay, we do expect to see some improvement in gross margins as we can continue to integrate the Wisely and omnivore acquisitions and begin to leverage OLO's economies of scale.
spk06: Sounds good. Thank you.
spk09: Our next question comes from Matt Hedberg of RBC Capital Markets. Please go ahead.
spk00: Hey, this is Anusha from Matt Hedberg. Thanks for taking my questions. You mentioned, you know, from three products during IPO, you have now reached 12 products across five product suites. You've certainly come a long way. Could you expand on the momentum you're seeing with multi-product adoption and how products from Weisli and eventually Olope can help make your platform secure? And then maybe if you could talk about the level of penetration in your customer base. Thanks.
spk04: Yeah, so I think I could, this is Peter here, so I think I could probably bundle those two questions into one answer. So we disclosed last quarter that on average locations subscribe to 2.7 modules per location. And as you noted there, we have upwards of a dozen products spread across five product suite. So when you think about the opportunity to expand within our customer base, there's, there's clearly a lot, a lot of opportunity there and obviously future growth and digital order volumes will help to, to increase, uh, both revenue and ARPU over time as well. Uh, in terms of attach rates, uh, specifically the core OLO platform in the wisely, uh, suite of business, um, it's still early in terms of, uh, seeing the, full suite attach rate from the onset of the relationship. Where we're seeing a lot of momentum and early success is through that upsell motion. So leveraging those trusted relationships that we've developed with the brands over the years and helping educate them on really the added value of having a marketing automation suite and CDP suite in conjunction with their digital ordering platform, that's where we're seeing a lot of early success.
spk00: Got it. And then on OLO Pay, although it's still early, maybe can you talk about the adoption trends of OLO Pay in the quarter and then when we might start to see more meaningful contribution to the results of OLO Pay? Thanks.
spk04: Yeah, it's Peter here again. I can take that one. So in terms of adoption trends, still a little early. So we announced the commercial availability of OLO Pay last quarter. And as Noah mentioned in his prepared remarks, we had a great customer conference this past month where Olope was a central focus of the narrative of that conference. And coming out of the conference, we've seen a lot of momentum and a lot of excitement around Olope and the pipeline it's building. That said, I still think we're maybe a quarter early in terms of being able to go a level deeper on what we think the revenue opportunity will be this year in long term. But we're really encouraged with how the pipeline is developing today.
spk00: Bye, thank you.
spk08: Our next question comes from Brent Braceland of Piper Sandler.
spk09: Please go ahead.
spk07: Hi, this is Clark Jeffries on for Brent. First question is, you know, the feedback on OLO Pay sounds very encouraging, especially because it seems that OLO Pay is not being judged as just an attractive integrated option for newer existing customers, but a payment solution judged by its own merits to be very attractive. I was wondering if you could share maybe some additional detail on how you're able to do some of those outcomes for customers, reducing charge pack fees compared to the incumbents, whether this is a an architectural advantage or a vertical focus advantage, if you could dive into that, that'd be much appreciated.
spk05: Well, Clark, this is Noah. Thanks for the question. So I think key to understanding OLO Pay's advantage over the incumbent payment solutions is understanding that OLO Pay is really kind of bundled into the commerce platform itself. And so that means that on the front end, the consumer experience, Olapay is bundled into their checkout experience and we can implement that one tap checkout for eliminating friction from the checkout experience. The guest doesn't have to remember their email address and password that they've used. They don't have to reenter credit card details. That makes for a better front end experience that leads to a higher basket conversion rate. It also embeds within the commerce platform on the back end, on the operator experience. And so today, if you think about the status quo for digital ordering and payment within digital ordering, the digital ordering platform, OLO, is acting as a gateway into whatever credit card processor the brand is using for card present transactions at the restaurant. And that means that the brand is, or the operator is, really managing the transaction in two places. And when there is a refund or when there is a chargeback, they have to administer that in two different systems, the credit card platform and that dashboard and the OLO dashboard. That goes away with OLO Pay. With OLO Pay, they can manage refunds, they can manage chargebacks, they can manage all things payments within the OLO dashboard. So it becomes a single platform to manage the digital ordering business. And we think that has great advantages for helping operators simplify operations. And then also through the network effect of the OLO platform and our partnership with Stripe and the Stripe radar product in particular and OLO Shield, which is our own proprietary fraud prevention solution. we have the ability to fight fraud across all of the restaurant transactions that we can see within Olo and that Stripe can see across their network. So that's part of the advantage of OloPay. I want to be clear that OloPay is not just credit card transactions. It is also Apple Pay. It is also Google Pay. It is not, therefore, in competition with Apple Pay or in competition with Google Pay. And it also doesn't require that the brand has to completely rip and replace whatever processor or processors their operators are using inside of the restaurant. It's purely about the digital ordering experience, making that a seamless experience for the consumer and also simplifying things on the operator side.
spk07: Appreciate it. It sounds like it's building on the integration benefits of even something like the marketing automation platform, helping the operators have a simpler stack. You know, a follow-up question about the expansion into convenience stores seems like a meaningful expansion in terms of, you know, 55,000 potential locations. Wondering if you could just maybe dig into, you know, how the friction points are different for those businesses compared to normal enterprise restaurant brands. how they operate, are they owned and operated by similar franchisees, partners, and are they sort of businesses that could adopt all of the modules available from OLOC?
spk05: So I think with C-Stores, the only module I can think that does not make sense for C-Stores that we offer is probably our reservations platform. It may make sense at some point, but I don't really see that. I think everything else that we offer from digital ordering, delivery, marketing automation, et cetera, these have resonance for anyone who is doing takeout and delivery of made-to-order food. And that's specifically how we're working with C-Store operators is to on that prepared food. To the extent that a restaurant and a C-store look similar, it's that they're taking orders, they're preparing those orders custom-made, fresh, just in time, and then handing off that order to a guest who's coming in or to a courier who's coming in to collect the order on the guest's behalf. From a go-to-market perspective, very similar go-to-market motion where we're selling into the brand and just like with enterprise restaurants, We always sell to the brand and then we're adopted across the entire, uh, location base, whether those are corporate owned or franchise owned. Um, I guess, you know, some different point of sale integrations in the, uh, C-store point of sale space. We're no stranger to that. We've done well over two dozen, perhaps well over three dozen points of sale integrations. And we do have many point of sales that are, instead of OLO integrating to them, now integrating into OLO. So I think with that exception, a very familiar setting for us, just a new opportunity of what we estimate to be 55,000 additional locations in our TAM, looking at the U.S. enterprise C-store segment.
spk07: Appreciate the call. Thank you very much.
spk09: Once again, if you have a question, please press star then one. Our next question comes from Brad Redback of Stiefel. Please go ahead.
spk01: Great. Thanks very much. Can we go back to the gross margin question that Terry had brought up? If I look at revenue, it grew $2.8 million sequentially, but gross profit dollars actually went down $200,000. So there was a negative incremental gross margin. What exactly happened in the quarter?
spk04: Hey, Brad. So Peter here. So really two things happened this past quarter. We had the full sort of quarter impact of the Wisely acquisition, as well as one month impact from Omnivore. And then the ability to catch up on some investments in the core business to support active location growth and transaction volume growth that's occurred over the past 12 to 18 months. With respect to the core business, one thing that I do want to call out is we had investments earmarked for later on in the year in terms of net headcount ads. But through the Omnivore acquisition, we were able to take some of those folks that we acquired through the acquisition and have them take some of the roles that we had earmarked for the back half of the year. So part of what you're seeing there is really an acceleration of of some of those expenses that we already had planned in the year. We just were able to capture those earlier in the year.
spk01: Okay.
spk08: Thanks very much. This concludes the question and answer session.
spk09: I would like to turn the conference back over to Noah Glass for any closing remarks.
spk05: Okay. Well, thank you all for joining us again today. As I hope you can hear from the content of our prepared remarks and this Q&A session, we're proud of OLO's past, we're confident in our present, and we're really excited for our future. I want to say thank you, Team OLO, for your hard work and execution. We have miles to go before we sleep.
spk09: This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.
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