Executive Summary / Key Takeaways

• Olo is transforming from a digital ordering provider to a comprehensive guest-centric technology platform, leveraging its scaled network and open architecture to aggregate valuable transaction data across digital and physical channels.
• The strategic focus on the Olo Guest Data Flywheel, powered by the Order, Pay, and Engage suites, aims to enable restaurants to personalize guest experiences and drive profitable traffic, a critical need in the current macroeconomic environment.
• Recent performance shows strong revenue growth (21.3% YoY in Q1 2025), expanding ARPU (up 12% YoY in Q1 2025), and improving non-GAAP operating income (margin increased ~580 bps YoY in Q1 2025), demonstrating operational discipline and value expansion within the customer base.
• The ramp of Olo Pay, particularly the upcoming card-present functionality enabled by partnerships like FreedomPay, represents a significant growth vector, unlocking a large addressable market ($130B+ GPV opportunity) and expected to accelerate gross profit growth in the latter half of 2025.
• While facing risks from economic uncertainty and competition from integrated POS providers like Toast (TOST) and Square (SQ), Olo's differentiated focus on enterprise-level, guest-centric data aggregation positions it as a critical partner for large restaurant brands seeking efficiency and profitable growth.

The Evolution of Restaurant Technology and Olo's Strategic Pivot

Olo Inc., initially founded in 2005 as Mobo Systems, Inc., has evolved significantly from its roots as a digital ordering provider. Operating as an open SaaS platform purpose-built for the complex needs of multi-location restaurants, Olo has strategically expanded its offerings to become a central hub for restaurant digital commerce and guest data. This evolution is critical in an industry historically characterized by fragmented, legacy technology and a growing need for efficiency and direct guest relationships in the face of rising costs and macroeconomic uncertainty.

The company's platform is structured around three core product suites: Order, Pay, and Engage. The Order suite, Olo's foundational offering, powers digital ordering, delivery, and menu management. The Pay suite, including Olo Pay, addresses payment processing across channels. The Engage suite provides marketing and data analytics tools, built upon the Guest Data Platform (GDP). This integrated, yet modular, approach allows Olo to serve over 750 restaurant brands across approximately 88,000 active locations as of March 31, 2025, handling over 2.5 million orders per day on average.

Olo's strategic narrative centers on the "Olo Guest Data Flywheel." This concept posits that by processing transactions through the Order and Pay suites, Olo can aggregate comprehensive guest data into the Engage GDP. This data, spanning digital and increasingly on-premise interactions, enables brands to gain deep insights into guest behavior, personalize experiences, and ultimately drive profitable traffic – a key differentiator from traditional discounting strategies. This pivot towards becoming the "guest data gravity control point," distinct from the "staff-facing tech stack" dominated by Point-of-Sale (POS) systems, is Olo's core strategic response to the competitive landscape.

In this landscape, Olo faces competition from various angles. Integrated POS providers like Toast and Square offer broader, often hardware-inclusive, restaurant management suites. Lightspeed (LSPD) also competes in the POS and commerce space. These competitors often aim to be the single technology provider for restaurants. Third-party marketplaces like DoorDash (DASH) also compete for digital order volume, though they typically own the guest relationship and data, which is less profitable for the brand. Olo differentiates itself through its open platform architecture, which integrates with over 400 third-party solutions, including most major POS systems. This open approach provides flexibility and allows brands to leverage their existing technology investments while adopting Olo's specialized modules.

While competitors like Toast may have a larger share in the overall POS market and offer a more vertically integrated solution, Olo emphasizes its deep expertise in digital ordering efficiency and its growing capability in comprehensive guest data aggregation. Historically, Olo was "inch-wide" (digital orders) but "mile-deep" (guest context), while POS systems were "mile-wide" (all transactions) but "inch-deep" (blind to guest identity). The introduction of Olo Pay card-present is designed to change this, making Olo "mile-wide" and "mile-deep" by capturing data from all transactions, including the 82% that are non-digital. This capability, coupled with the Engage suite, is Olo's primary technological moat, aiming to provide a level of guest understanding and personalization that competitors, particularly those focused primarily on payments or POS, struggle to match.

The company's history includes strategic acquisitions, though specific targets are not publicly detailed. These acquisitions, alongside significant internal R&D investment (Q1 2025 R&D expenses were $17.1 million), have been crucial in building out the current platform capabilities, particularly in the Pay and Engage suites. Recent R&D highlights include AI-powered menu recommendations, enhanced Catering Plus features, and the beta launch of Olo Guest Intelligence (OGI), which directly surfaces guest metrics. OGI, in particular, is expected to become more valuable as Olo Pay data is integrated, further strengthening the guest data aggregation moat. The rapid growth of Borderless, Olo's passwordless checkout solution (over 16 million guests, 2 million using it at multiple brands), also demonstrates the potential for network effects and second-party data leverage across the platform.

Financial Performance and Operational Momentum

Olo's recent financial performance reflects the execution of its strategy, particularly the expansion of its platform offerings and increasing adoption within its large customer base. For the three months ended March 31, 2025, total revenue grew 21.3% year-over-year to $80.68 million, up from $66.51 million in the prior-year period. This growth was primarily driven by a 20.5% increase in Platform revenue, reaching $79.23 million. Management attributed this increase to higher Olo Pay volume and growth in Order revenue. Professional Services and Other revenue also saw significant growth, increasing 94.2% to $1.45 million, reflecting increased implementation activity.

A key operational metric, Average Revenue Per Unit (ARPU), rose to approximately $911 in Q1 2025, a 12% increase from $816 in Q1 2024. This expansion is a direct result of customers adopting more modules and increased order volumes processed through the platform, underscoring the success of Olo's land-and-expand strategy. The dollar-based net revenue retention rate stood at 111% for the quarter ended March 31, 2025, indicating that existing customers are spending more on the platform over time, further validating the value proposition of Olo's expanding module set. Gross revenue retention remained strong, exceeding 98%.

Profitability metrics also showed improvement. Gross profit increased 19.1% year-over-year to $44.31 million in Q1 2025. However, the gross margin slightly decreased to 54.9% from 55.9% in Q1 2024. This margin compression is primarily attributed to the increasing mix of Olo Pay revenue, which currently carries lower margins than other modules. Platform cost of revenue increased 25.7% to $35.60 million, driven by higher transaction processing costs associated with increased Olo Pay volume and increased amortization of capitalized internal-use software.

Operating expenses, while increasing in absolute dollars, showed leverage relative to revenue. Total operating expenses were $46.73 million in Q1 2025, up from $44.37 million in Q1 2024. Research and development expenses saw a modest increase (0.6%), while Sales and Marketing expenses decreased (5.3%), primarily due to cost savings from the workforce reduction enacted in late 2024. General and administrative expenses increased significantly (23.8%), influenced by the absence of litigation-related insurance recoveries and lease termination benefits recorded in Q1 2024, coupled with higher third-party professional fees. Despite the increase in G&A, the overall operating expense growth was managed, contributing to a substantial improvement in operating income.

Olo achieved GAAP net income of $1.81 million in Q1 2025, a notable improvement from a net loss of $2.36 million in Q1 2024. On a non-GAAP basis, operating income was $11.53 million, up from $5.62 million in the prior-year quarter, resulting in a non-GAAP operating margin of 14.3%, a significant increase of approximately 580 basis points year-over-year. This strong bottom-line performance reflects both the revenue outperformance and continued expense discipline. The company also highlighted its Gross Profit Rule of 40 performance, which was 42% in Q1 2025, indicating a healthy balance of gross profit growth and non-GAAP operating margin.

Liquidity remains robust. As of March 31, 2025, Olo held $401.8 million in cash, cash equivalents, and short/long-term investments.

This strong cash position provides ample flexibility for working capital, strategic investments, and the authorized share repurchase program ($100 million authorized in April 2024, with no repurchases made as of March 31, 2025). The company also has access to a revolving credit facility, with $68.6 million available as of March 31, 2025, and no outstanding borrowings. The maturity date of this facility was recently extended to May 2027. While Q1 2025 saw negative free cash flow of $1.9 million, this was impacted by working capital timing related to a partner's payment terms change; normalizing for this, free cash flow would have been approximately $4 million.

The company believes its current liquidity is sufficient to meet its capital requirements for the foreseeable future.

Outlook and Strategic Priorities for Future Growth

Management's outlook for 2025 signals continued growth and a focus on key strategic initiatives designed to accelerate the Olo Guest Data Flywheel. For the second quarter of 2025, Olo expects revenue between $82.0 million and $82.5 million and non-GAAP operating income between $11.5 million and $11.8 million.

For the full year 2025, the company guided to revenue in the range of $338.5 million to $340.0 million. This outlook implies continued growth, albeit at a pace influenced by macroeconomic uncertainty and the expected mix of revenue from existing deployments versus new business signed and deployed within the year. Olo anticipates adding approximately 5,000 net new locations in 2025, in line with recent trends, with location count expected to ramp throughout the year.

A significant driver of future growth is the continued scaling of Olo Pay. Full year 2025 Olo Pay revenue is projected to be approximately $110 million. While card-not-present transactions are expected to account for the vast majority of this revenue, the company anticipates card-present revenue will begin to ramp in the second half of the year, contributing gross revenue in the high single-digit million dollar range in 2025. The partnership with FreedomPay is seen as a "game changer" for Olo Pay card-present, accelerating its general availability (expected mid-2025) and enabling broader deployment across the existing customer base, regardless of their underlying POS system. This capability unlocks a substantial $130 billion+ GPV opportunity within Olo's existing customer footprint, representing the vast majority of their on-premise transactions.

The scaling of Olo Pay, particularly card-present, is expected to have a notable impact on gross profit. While full year 2025 guidance assumes gross margins will compress by approximately 250 basis points compared to 2024 due to the increasing mix of lower-margin Pay revenue, management expects gross profit growth for the full year 2025 to be greater than in 2024. This acceleration is anticipated to be more prevalent in the back half of the year, driven by the ramp-up of Olo Pay and the continued adoption of high-margin software modules like Catering Plus. Normalized year-over-year gross profit growth in the first half of 2025 is expected to be approximately 14%, an acceleration from 12% in the first half of 2024.

Non-GAAP operating income for full year 2025 is guided to be between $48.6 million and $49.8 million. This implies continued operating leverage, with total operating expense dollars expected to grow in the mid-single-digit percent range versus 2024. Management remains committed to driving operating leverage while investing in key growth initiatives. The company anticipates meeting or exceeding a Gross Profit Rule of 40 in Q4 2025, demonstrating a focus on balancing growth and profitability.

Olo's top priorities for 2025 reflect this strategic focus: scaling Catering Plus, ramping Olo Pay card-present, and increasing the number of full Flywheel customers (brands using modules from all three suites). The recent pilot win with Chipotle (CMG) for Catering Plus and the full deployment deal for Olo Pay card-present with an existing publicly-traded enterprise brand are seen as early validations of these priorities and the broader Guest Data Flywheel strategy.

Risks and Challenges

Despite the positive momentum and strategic clarity, Olo faces several risks and challenges. The company is heavily reliant on the health of the restaurant industry, which is susceptible to macroeconomic conditions such as inflation, fluctuating interest rates, and shifts in consumer spending. While Olo's focus on enterprise and limited service concepts is seen as a mitigating factor due to their relative resilience and potential benefit from a "trade-down" effect in consumer behavior, a prolonged or severe economic downturn could still negatively impact digital ordering volumes, customer spending on technology, and potentially lead to customer churn or delayed deployments.

Competition remains intense. Integrated POS providers continue to expand their offerings, potentially pressuring Olo's market share, particularly if they can effectively replicate Olo's guest-centric data capabilities. The risk of customers developing or expanding their own in-house technology solutions also persists, although Olo believes the cost, complexity, and risk associated with maintaining homegrown platforms at scale favor the adoption of its SaaS solution.

The successful ramp-up of Olo Pay, particularly card-present, is crucial to the company's growth and profitability acceleration strategy. Delays in technology integration with POS partners, slower-than-expected customer adoption, or unforeseen challenges in processing on-premise transactions at scale could impact revenue mix, gross margins, and overall financial performance relative to expectations. The lower margin profile of transaction-based revenue from Olo Pay, while expected to improve with scale, will continue to influence overall gross margins in the near term.

Operational risks include the ability to effectively manage growth, successfully integrate any future acquisitions, and protect intellectual property rights. The company also faces ongoing litigation, including derivative actions related to past events, which can be costly and divert management resources, regardless of the outcome.

Furthermore, Olo contracts directly with delivery service providers (DSPs) for its Dispatch module and then invoices its restaurant customers. This exposes Olo to potential working capital risks if customer payments lag payments to DSPs, or credit risk if customers default on payments for DSP services.

Conclusion

Olo is executing a compelling strategic pivot, aiming to become the indispensable guest-centric technology platform for enterprise restaurants. By leveraging its established position in digital ordering and expanding aggressively into payments and guest engagement, Olo is building a powerful Guest Data Flywheel designed to help brands drive profitable traffic through personalization. The recent financial results, marked by strong revenue growth, expanding ARPU, and improving profitability, demonstrate the initial success of this strategy and operational discipline.

The ramp-up of Olo Pay, particularly the card-present opportunity enabled by strategic partnerships like FreedomPay, represents a significant potential catalyst for future growth and gross profit acceleration, albeit with near-term pressure on overall gross margins due to revenue mix shifts. While macroeconomic uncertainty and competition from integrated POS providers present ongoing challenges, Olo's differentiated focus on enterprise-level scalability, open architecture, and comprehensive guest data aggregation positions it favorably. The company's outlook for 2025 reflects confidence in continued growth and operating leverage, underpinned by key priorities like scaling Catering Plus and increasing Flywheel customer adoption. For investors, the core thesis hinges on Olo's ability to successfully execute on its payments and data strategy, proving that its unique position as the guest data control point translates into sustainable, profitable growth and a widening competitive moat in the evolving restaurant technology landscape.