Olo Inc

call. Joining me today are Noah Glass, OLO's founder and CEO, and Peter Benavides, OLO's CFO. During this call, we'll make forward-looking statements, including but not limited to statements regarding our expectations of our business, our industry, our operations, and future financial results. These statements reflect our beliefs and assumptions only as of today and are subject to a variety of risks and uncertainties that could cause actual results to differ materially. For a discussion of these material risks and uncertainties, please refer to our Form 10-K, which was filed today. and our other SEC filings. 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 is available on the investor relations page of our website. And finally, in terms of our prepared remarks or responses to your questions, we may offer incremental metrics. Please be advised, this additional detail may be one time in nature, and we may or may not provide an update in the future on these metrics. And with that, I'll turn the call over to Noah.

Thank you, Gary. Hi, everyone. Thank you for spending time with us today. Team Olo posted a fantastic 2024. For more than 750 brands, we powered $29 billion in gross merchandise volume. If Olo was a restaurant brand, this level of sales would make us the second largest brand in North America, ahead of Starbucks and trailing only McDonald's. We also more than doubled our gross payment volume to $2.8 billion, up from more than $1 billion in 2023 and $250 million in 2022. And we increased borderless accounts from 2 million this time last year to nearly 15 million today. Polo's continued reliability at scale recently supported a record Super Bowl Sunday. and a Valentine's Day that was the largest sales day in Olo's history. We innovated across all three product suites to support continued growth, launching new features in Catering Plus and Engage, and introducing OloPay card present functionality to further scale our payments business and aggregate on-premise transaction data that helps power the Olo guest data flywheel strategy. And we published strong financial results throughout the year, including Q4 performance that exceeded our revenue and non-GAAP operating income guidance ranges. As our full year 2025 guidance reflects, we are confident we can continue to serve our brands while accelerating gross profit growth and driving operating leverage. I'll review the fourth quarter customer and product highlights, our new Freedom Pay partnership, and our 2025 priorities. And then Peter will discuss our Q4 financial performance and our guidance for Q1 and full year 2025. We'll then take your questions. We ended the quarter with approximately 86,000 active locations, adding approximately 1,000 net new locations over the fourth quarter and 6,000 in full year 2024. We also continue to retain and expand with customers. with net revenue retention at year-end of 115%, a gross revenue retention rate in excess of 98%, and year-over-year ARPU growth of 12%. It was another solid quarter of enterprise and emerging enterprise customer implementations, including more brands that evolved to OLO flywheel customers by deploying modules across all three of OLO's product suites, pay, and engage. Enterprise new deployments included Jason's Deli, who launched on the full order suite, Catering Plus, and OloPay Card Not Present. Leading Ice-T franchise HTO added OloPay, and we're excited to announce that top 25 brand Jack in the Box expanded their Olo relationship to include Rails. In Emerging Enterprise, Walk-Ons deployed our full-order suite, OloPay Card Not Present and Catering Plus, and Crispin Green launched as a full flywheel brand with nine Olo product modules. Brands like Burgerville and Costa Vida expanded with OloPay, and we're proud to announce that Blake's Lotta Burger, for all you Breaking Bad fans, and Mendocino Farms added Engage to become full flywheel brands. We believe the OLO guest data flywheel strategy is resonating within our base, and we expect to add more flywheel brands this year. Finally, CateringPlus enjoyed another successful quarter of expansion deployments with enterprise brands like BJ's Restaurants and Brewhouse, Black Bear Diner, and Raising Cane's, and with more than a dozen emerging enterprise brands. CateringPlus was off to a great start in 2024. And I'll share more about our plans for this important channel when I discuss our 2025 priorities. In product innovation, we released 13 product enhancements in our winter release, including AI-powered menu item recommendations, SparkFly and Spengo loyalty partner integrations, and deeper reporting and analytics in Engage. and enhanced Catering Plus account management features to give brands the insights and tools they need to succeed in this increasingly important channel. In partnerships, Grubhub, a longstanding member of our Rails network, expanded their OLO relationship to include Dispatch. And earlier this month, we announced an exciting new partnership with Freedom Pay, a leading payment gateway terminal provider. where OloPay Card Present functionality will be integrated with FreedomPay's gateway terminals and supported by our existing Stripe relationship. We believe this is great news for three reasons. First, FreedomPay is already integrated with over 1,000 POS and payment systems. This accelerates Olo's time to market, enabling us to sell and deploy OloPay Card Present into the majority of our location base more quickly than by integrating with one POS partner at a time. Second, we can now provide our brands with choice, use OlaPay through a direct POS integration or through FreedomPay terminals connected to their POS. Third, the FreedomPay data API will give us access to transaction data that's similar to what we can capture through an OlaPay direct POS integration today. Regardless of how a brand chooses to work with Olopay, we can match their full-stack payment data and our wealth of digital ordering data through Engage's GDP to build a 360-degree view of their guests and help brands personalize guest experiences and drive profitable traffic. We think our FreedomPay partnership is a game-changer for Olopay. We expect Olopay to be generally available with FreedomPay by mid-year. and we've already enabled the sales team to take this new offering to market in Q1. Before I turn the call over to Peter, I want to share our top priorities for 2025. Failing Catering Plus, ramping Olapay card presence, and increasing our base of full flywheel customers. With Catering Plus, we believe we can replicate our success in mealtime digital ordering in the increasingly popular catering channel. In 2024, CateringPlus began expanding into our existing base. In 2025, we're focused on building on this expansion motion while also winning new brands through CateringPlus' modularity, including top 25 brands seeking to add digital catering order management to their in-house tech stacks. And after landing a new brand with CateringPlus, we can then expand these relationships into OLO Dispatch, Engage, Pay, and Rails. to support the growth of a brand's catering channel. For Olopay, 2025 is about ramping card present transaction processing, which we estimate is a $130 billion plus GPV opportunity that unlocks the full $160 billion plus GPV opportunity within our existing base. This can help drive the OLO guest data flywheel strategy, providing brands with access to data from the 80% plus of transactions that occur on premise, while also accelerating our gross profit growth as greater GPV scale helps drive better payment processing economics for OLO. Brands currently piloting CardPresent report faster processing times and better reporting and reconciliation functionality, which helps improve the guest experience and improve operational efficiency. And with Freedom Pay, we believe we're in a strong position to begin ramping card present business within our base. And in 2025, we plan to increase the number of brands using products from all three of our suites. The power of the OLO guest data flywheel is resonating with innovative brands like California Fish Grill, who's aggregating order and pay transaction data into Engage's GDP and using the Engage marketing module to identify and understand its guests, maximize marketing ROI through personalized communications, and drive sales. In six months, California Fish Grill generated a 41% increase in known guests, a 21% increase in guests they can directly market to, and $7 million of digital order revenue attributable to these personalized marketing campaigns. As we further demonstrate the value of combining order, pay, and engage with early adopters, we expect more brands to rely on the OLO guest data flywheel to convert their guest transaction data into actionable insights, personalized communications and experiences, and profitable traffic. 2024 was another successful year for OLO, and we believe we can achieve even more in 2025. We wouldn't be here without the talented and dedicated members of our team who are committed to our mission, hospitality at scale. I'll now turn the call over to Peter, who will review our fourth quarter and full year 2024 financial highlights and our 2025 guidance. Peter?

Thanks, Noah. Today I'll review our fourth quarter and full year 2024 results, as well as provide guidance for the first quarter and the full year 2025. In the fourth quarter, total revenue was $76.1 million, an increase of 21% year over year. Platform revenue in the fourth quarter was $75.2 million, an increase of 21% year over year. Pay had another strong quarter, and platform revenue excluding pay also outperformed our expectations. Active locations were approximately 86,000, up approximately 1,000 locations sequentially, due primarily to the deployment activity Noah mentioned. We added approximately 6,000 net new locations over the year, exceeding the full-year target for net new locations we provided in our initial 2024 guidance. ARPU for the fourth quarter was approximately $878, up 12% year-over-year due primarily to increased order volumes and modules per location, in particular, OLO Pay. Net revenue retention was 115% in line with historical trends. Gross revenue retention remains above 98% as we continue to retain brands through our platform's scalability, reliability, security, and the breadth of our solutions. For the remainder of the Q4 financial metrics disclosed, unless otherwise noted, I will be referencing non-GAAP financial measures. Gross profit for the fourth quarter was $45.2 million, up 11% year-over-year. Gross margin for the fourth quarter was 59.5%. in line with the expectations we set on our prior call. Gross profit and gross margin performance reflect the impact of this quarter's revenue outperformance, as well as the increasing mix of OLO Pay revenue. In Q4, we continue to be disciplined in managing our operating expenses while investing for future growth. As shown in today's earnings press release, All three operating expense line items improved year over year on a percentage of revenue basis. Operating expense dollars were down sequentially due to a full quarter impact of the cost reductions we announced in late September. Operating income for the fourth quarter was $11.5 million, up from $6.8 million a year ago. Operating margin was 15.1% in Q4, an increase of approximately 430 basis points year-over-year. This strong performance reflects both continued expense discipline and the revenue outperformance. Net income in the fourth quarter was $11.3 million, or six cents per share, based on approximately 176 million fully diluted shares. For the full year of 2024, Revenue of $284.9 million increased 25%, and ARPU of approximately $3,400 rose 25%. OLO Pay revenue was slightly above $70 million in the year. Brands utilized 3.7 average modules per location as of December 31, 2024, versus 3.5 average modules per location as of year-end 2023. Full year 2024 non-GAAP operating income, or NGOI, was $32.9 million, up approximately 80% year over year. NGOI margin in 2024 was 11.6%, up approximately 360 basis points from 8% in 2023. Turning our attention to the balance sheet and cash flow statement, our cash, cash equivalents, and short and long-term investments totaled approximately $403 million as of December 31st, 2024. Net cash provided by operating activities was $9.3 million in the quarter compared to $5.8 million in the year-ago quarter. Free cash flow was $6.8 million compared to $2.7 million a year ago. Q4 cash flow metrics primarily reflect operating income performance and working capital timing. For the full year 2024, we generated approximately $40 million in cash from operating activities and $27 million in free cash flow. I'll wrap up by providing our guidance for the first quarter and full year 2025. For the first quarter of 2025, we expect revenue in the range of 77.2 million and 77.7 million dollars, and non-GAAP operating income in the range of 8.7 million and 9 million dollars. For the full year 2025, we expect revenue in the range of 333 million and 336 million dollars, and non-GAAP operating income in the range of 45.5 million and 47 million dollars. A few things to keep in mind as you consider our outlook for the year. We continue to expect trends in the restaurant industry to be similar to what we saw in 2024. Consistent growth in digital ordering, a continued need to improve efficiency to offset rising costs, and macro uncertainty. Our guidance once again assumes a two-thirds, one-third split between incremental revenue from existing projects currently in deployment and new business signed and deployed intra-year. We expect to add approximately 5,000 net new locations in 2025, in line with recent trends, and we expect location count to ramp throughout the year. Note that the addition of 6,000 net new locations in 2024 was above our initial guidance of approximately 5,000 due to primarily outperformance from brands that signed and deployed intra-year. We expect full-year 2025 OLO Pay revenue of approximately $110 million, with card not present transactions continuing to account for the vast majority of total OLO Pay revenue. We expect card present revenue to begin to ramp in the second half of the year and contribute gross revenue in 2025 in the high single-digit million-dollar range. Full-year 2025 guidance assumes that gross margins will compress by approximately 250 basis points versus full-year 2024 gross margin as we continue to scale OLO Pay revenue. Based on our revenue growth and gross margin expectations, we expect the gross profit growth for full-year 2025 to be greater than full-year 2024 gross profit growth. with growth acceleration expected to be more prevalent in the back half of the year due to the tougher comps in the first half of 2024. For operating expenses, we will continue to manage our cost structure to drive operating leverage while continuing to invest to support our customers and our key growth initiatives. As we've previously shared, we expect operating margins and dollars to improve over time as we continue to scale into our payments opportunity, as the incremental profit dollar per payment transaction process continues to improve. This is the power of our payments-led cross-sell model, which we're beginning to see play out. Full-year 2025 guidance assumes total OpEx dollars will grow in the mid single-digit percent range versus full-year 2024, with higher spend in Q1 due to approximately $2 million in investment in our March Beyond Four annual customer conference. We also expect annual compensation increases to hit in Q2, as was the case in 2024. Finally, we want to remind investors of our commitment to delivering both growth and profitability. As our strategy has played out and we've scaled OLO Pay revenue, Gross profit growth has become a more relevant growth indicator for our overall business. Given this, we are focused on managing the business for Rule of 40 performance based on gross profit. Gross profit year-over-year growth plus non-GAAP operating income as a percentage of gross profit dollars. We believe this metric is a fair way to assess annual performance of the business. And on this basis, we moved from a rule of 25 in 2023 to a rule of 31 in 2024 and ended 2024 with a rule of 36 in Q4. Our full year 2025 guidance implies we'll see further improvement in this metric in full year 2025 versus 2024. And we anticipate the business will meet or exceed Gross Profit Rule of 40 in Q4 2025. To wrap up, OLOB hosted another strong year of financial performance in 2024, and we believe we can perform at an even higher level in 2025. We're executing on our strategy, and we expect to drive a solid mix of growth and operating leverage going forward. With that, I'd now like to turn it over to the operator to begin the Q&A session. Operator?