Olo Inc

Good afternoon. My name is Paul, and I will be your conference operator today. At this time, I would like to welcome everyone to the OLO second 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. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the call over to OLO's Vice President of Investor Relations, Ms. Stephanie Dawkus.

Please go ahead. Thank you. Good afternoon, everyone, and welcome to OLO's second quarter 2022 earnings conference call. Joining me today are Noah Glass, OLO's founder and CEO, and Pierre Benavides, OLO's CFO. During our call today, some of our discussion and responses to your questions may contain certain 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 quarterly report on form 10Q for the quarter ended June 30, 2022. You should not rely on our forward-looking statements as predictions of future events. We undertake no obligations to update 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.

Thank you, Stephanie. Hi, everyone. Thank you for spending time with us today. Ollo delivered solid second quarter results. We generated $45.6 million in total revenue, a 27% increase year over year, as our platform supported continued growth in new brands, increased module adoption within our existing customer base, and increased transaction volume. We increased average revenue per unit, or ARPU, to $544, 12% year-over-year and 5% sequentially, as existing customers adopted additional modules, including early adoption of OLO Pay. We deployed roughly 3,000 new locations to the platform, with ending active locations increasing 11% year-over-year, flat sequentially to approximately 82,000. More on that in a moment. We're excited to have welcomed a number of leading brands to the OLO platform this quarter. These brands span various hospitality service models from quick service to fine dining and virtual brands to convenience stores or C-stores. Most notably, Freddy's Frozen Custard and Steakburgers, a fast casual restaurant with hundreds of locations, deployed Olo's full stack of digital ordering solutions this quarter, including ordering, dispatch, rails, network, and OloPay. Freddy's represents one of our newest and largest customers to adopt OloPay. In addition to welcoming new brands to the platform this quarter, we expanded relationships within our existing customer base, increasing adoption of products across several Olo product suites. Brands such as California Fish Grill, CC's Pizza, and Duck Donuts expanded their usage of ordering solutions. Twin Peaks and Whataburger expanded their usage of delivery enablement solutions. O'Charlie's Restaurant and Bar and Sprinkles adopted guest engagement solutions, and On the Border and Smokey Bones adopted front-of-house solutions. As OLO continues to innovate in order to help restaurants embrace their digital opportunity by offering more mission-critical solutions, such as OLO Pay and guest engagement, we expect an increasing share of our revenues to be driven by upsells. In the same way that customer expansion is an important growth driver for the company, we continue to be excited by the momentum of our on-premise digital ordering solutions, which are supercharging our restaurants in their pursuit to be 100% digital. For example, last quarter I spoke of Nando's, a fast casual restaurant utilizing Serve as its exclusive dine-in ordering system, as well as the benefits associated with this offering, specifically increasing basket size, higher staff tips, and operational efficiencies. Given these benefits, this quarter the brand signed on to adopt our OloPay solution, combining our best-in-class solutions for both on-premise digital ordering and payments. These examples of adding new brands to the platform, expanding within our existing customer base, including enabling on-premise digital ordering and increasing revenue per order, are reflective of OLO executing toward our 100X opportunity. And while encouraged by the underlying trends in support of our 100X opportunity, we remain highly focused on helping our brands navigate through several macroeconomic challenges. Currently, the industry is facing major challenges brought on by the residual impacts of the COVID-19 pandemic, including structural labor challenges, margin pressure due to inflationary economic conditions as well as supply chain challenges, and resulting concerns related to a recessionary environment. These industry dynamics have impacted our customers and prospects in two ways. At the brand level, these challenges have resulted in elongated sales cycles as fewer brand resources have lengthened the decision-making process. And at the operator level, these challenges have resulted in elongated deployment timelines as many operators are unable to deploy in a timely manner. While we continue to actively work to help alleviate these issues at the brand and operator levels through product enhancements, expanding our network of implementation partners, and directly managing more of the deployment process, we anticipate both of these dynamics to continue through the balance of the year and therefore have factored in lower expectations for net new deployments and revenue in the second half of the year. That said, It's our belief that over time, restaurants will increasingly rely on technology to alleviate macroeconomic pressures, improve profitability, ease operational burdens, and enable digital hospitality to drive repeat business and increase revenues. As this trend continues, Olo is well-positioned to help brands achieve their digital ambitions through our modular suite of order management, delivery enablement, guest engagement, front of house, and payment solutions. Holo can be a force multiplier in helping brands address macroeconomic challenges while realizing their digital goals in a cost-effective and operationally lean manner. Regarding recessionary dynamics, I'd like to remind investors that unlike other retail categories, food is non-discretionary. Consumers tend to eat 20 to 25 times every week. And in times like these, consumers don't typically begin to cook. Instead, they trade down. This is a phenomenon that Ola witnessed firsthand in 2008 and 2009, when consumers purchased food from lower ticket size restaurants with greater prevalence. In fact, the on-demand food dollar, which we define as total spend on food to be eaten away from home, has consistently shifted to restaurants versus grocery, even through recessions, accounting for $1.17 trillion in 2021, or 55%. of total food expenditures. Olo's customer base, consisting of enterprise brands primarily within the limited service, quick service, and fast casual segments, leaves Olo in a favorable position, as these types of restaurants have fared well during economic slowdowns. As we look at the opportunity ahead, I'm excited to have new sales leadership to help Olo realize this opportunity. Since our last call, we've welcomed Diego Panama as our Chief Revenue Officer. As a reminder, Diego is a seasoned public company executive with a proven track record of successfully scaling SaaS companies, bringing deep and relevant domain knowledge, as well as go-to-market experience on a global scale. We look forward to Diego amping up our go-to-market and deployment strategies that will drive long-term, durable growth. As I mentioned earlier, this quarter we deployed roughly 3,000 new locations to the platform, with ending active locations increasing 11% year-over-year, flat sequentially to approximately 82,000. This quarter, our active location count was impacted by a change in our relationship with Subway. In February of 2020, we announced a relationship with Subway in which approximately 15,000 locations would utilize the Rails module to integrate and manage third-party marketplace orders. Certain subway locations began directly integrating with marketplaces, impacting our ending active location count by roughly 2,500 locations in the second quarter. We expect Subway's direct marketplace integration to continue with the balance of their locations being removed from our total active location counts in the fourth quarter of this year or the first quarter of 2023. This is not a trend we expect to experience broadly. as Subway's global proprietary point-of-sale platform is an unusual circumstance in the industry and not representative of the broader long-term opportunity with our current or prospective customers. As brands continue to navigate through macro uncertainties, this quarter we continue to implement product enhancements to better serve our customers, including launching several innovations in our first-ever summer release event. Second quarter product advancements include, first, we launched borderless OloPay in pilot with three brands on July 5th. As a reminder, borderless capabilities allow guests to securely speed through an accelerated checkout at any participating restaurant within the OloPay network, whether through app, website, or on-premise. This is possible as borderless OloPay stores payment credentials at the platform and brand level. allowing seamless checkout regardless of the restaurant a consumer transacts with. Borderless will enable brands to capture data for guests without requiring guests to create a new account for every brand. Early results are compelling, with 76% of guests saving their credit card information for future purchases, roughly two and a half times the average number of guests saving their cards on file. We've also observed a meaningful increase in basket conversion rates, leading to increased revenues and transactions for restaurants and Olo. And we're on track to expand borderless capabilities to more restaurant brands before the end of the year. Second, we furthered our commitment to being an open platform by growing our diverse technology partner network in two ways. One, by completing our first ordering integration with QSR Automations. a market leader in kitchen display systems, or KDS. KDS integrations enable Olo customers to see and optimize all orders, whether on or off-premise, providing a 360-degree view of all orders in production. This information will allow Olo to provide brands with operational decision-making abilities by including capacity management features that quote and throttle orders based on the real-time kitchen activity levels. ultimately creating a more integrated technology solution for restaurants and expanding our vertical offerings throughout the restaurant value chain. Two, through strategically partnering with two leading geofencing platforms, Flyby from Radius Networks and Radar. These partnerships ensure guests receive food as fresh as possible, minimizing pickup and drive-through wait times through the use of location-aware technology. augmenting QSR digital ordering programs. Olo's growing open ecosystem of more than 300 integrated technology and service partners that span the full digital tech stack from enterprise-ready solutions to emerging technologies is essential to delivering a best-in-class experience powered by the Olo platform. Our partnerships also create a flywheel in which adding a new customer to our restaurant network benefits all Olo partners and adding a new technology partner to our partner network benefits all Olo customers. Third, we continue to invest in enhancing the Olo platform by introducing new features that help our customers provide digital hospitality. For example, we added a party seated web hook, which emits an event when a wait list or reservation party is seated from the Olo host app. This unlocks the ability to fire a queued order to the kitchen when a guest arrives to be seated unlocking a win-win for guests and restaurants with faster service and increased table turns. I'm proud that Olo continues to implement product enhancements to better serve our customers, and I'm glad the industry recognizes it. Recently, we earned Best Feature Set and Best Relationship from the Trust Radius Best of Summer Awards. We're honored to support our restaurant brands and look forward to delivering on the high expectations they set for us. And we'll continue to make advancements in our partner network platform and products for the benefit of our customers and to rev up the engine of hospitality. And finally, as I typically do on earnings calls, I'd like to provide a corporate update. OLO is committed to building a diverse and inclusive culture that promotes growth and equity for underrepresented groups while supporting and celebrating all voices and perspectives. In the spirit of transparency and commitment to this effort, we've updated our DEI website with gender and ethnicity metrics as of June 30th, and we remain on track to have our team be comprised of 42% women and 18% underrepresented ethnicities by 2024. We also furthered our commitment to equity by adopting a new equitable access to healthcare policy. signing the Human Rights Watch business statement on anti-LGBTQ legislation to support our LGBTQ plus employee population, and signing the Don't Ban Equality statement in response to the U.S. Supreme Court's Dobbs decision. I'm personally honored to be deeply involved in these efforts along with my executive team, as DEI is hugely important to our success as a company and as a pillar in the community. To close, we believe now more than ever that Ollo is a mission-critical solution that will enable brands to be successful in spite of the current macro environment, to do more with less, relieving labor challenges, increasing operational efficiencies, and enabling every guest to feel like a regular. We're encouraged by the underlying trends in our business in support of Ollo's 100x revenue opportunity. as we remain highly focused on helping our brands to thrive and gain share through the industry's digital transformation. And with that, I'd like to hand it over to Peter to discuss more detailed results. Peter?