Olo Inc. (OLO) has emerged as a leading player in the restaurant technology space, revolutionizing the way customers interact with their favorite dining establishments. With a focus on delivering innovative digital ordering, payment, and guest engagement solutions, Olo has positioned itself as a critical partner for restaurant brands seeking to navigate the ever-evolving landscape of on-demand dining.

Company Background

Founded in June 2005 in New York City as Mobo Systems, Inc., Olo's journey has been marked by a relentless pursuit of technological excellence and a deep understanding of the unique challenges faced by the restaurant industry. The company was formed to provide an enterprise-grade, open SaaS platform that powers restaurant brands' digital ordering, delivery, and full-stack payment programs. In January 2020, the company changed its name from Mobo Systems, Inc. to Olo Inc.

Over the years, Olo has developed its platform in collaboration with many of the leading restaurant brands in the United States. The company's platform and APIs seamlessly integrate with a wide range of solutions, unifying disparate technologies across the restaurant ecosystem. From its humble beginnings, the company has grown to serve more than 750 restaurant brands, representing approximately 86,000 active locations across the United States as of December 31, 2024. Olo's platform currently handles, on average, more than 2.5 million orders per day, and more than 95 million guests have transacted on the platform over the last year.

Business Overview

In 2024, Olo processed approximately $29 billion in gross merchandise volume and $2.8 billion in gross payment volume. The company generates subscription revenue primarily from its Order platform and Engage solutions, as well as transaction revenue from its Olo Pay solution and fees charged to partners in its ecosystem. Despite its success, Olo has faced several challenges over the years, including elongated sales cycles, difficulties retaining and expanding revenue from existing customers, and competition from other restaurant technology providers. The company has also had to navigate the fragmented and complex nature of the restaurant industry, where franchisee operator groups may use different technology vendors than those used by a restaurant brand's owned and operated locations.

Platform and Solutions

Olo's platform combines a suite of powerful modules, including Order, Pay, and Engage, each designed to address the specific needs of its restaurant customers. The Order suite empowers brands to provide a seamless, branded digital ordering experience, while the Pay module offers a fully integrated payment processing solution that helps streamline operations and improve the customer experience. The Engage suite, on the other hand, enables restaurants to better understand and engage with their guests through data-driven marketing and personalization efforts.

The Order suite includes key modules such as Ordering, Rails, and Dispatch. The Ordering module allows restaurants to provide a fully branded digital ordering experience, manage complex menus, and integrate digital orders into their in-restaurant systems. The Rails module enables restaurants to control and syndicate menu, pricing, and location data to third-party marketplaces, while the Dispatch module connects restaurants with a nationwide network of delivery service providers to offer and manage direct delivery.

Olo Pay, which became commercially available in the first quarter of 2022, is a fully integrated payments platform that enables restaurants to improve operations through unified payment processing management and reporting across digital and on-premise transactions, as well as advanced fraud prevention.

The Engage suite includes modules such as Guest Data Platform, Marketing, Sentiment, Sync, and Host, allowing restaurants to aggregate and analyze guest data from Olo's Order and Pay modules, as well as other sources, to segment customers and deliver personalized marketing campaigns.

Recent Performance

2024 was a banner year for Olo, as the company continued to demonstrate its ability to drive growth and innovation. The company's total revenue for the year reached $284.9 million, a 25% increase from the previous year, with the Olo Pay module contributing $70 million in revenue. Olo's average revenue per unit (ARPU) also grew by 25% to approximately $3,400, underscoring the increasing value that restaurant brands derive from the company's comprehensive platform.

For the year ended December 31, 2024, 45.5% of Olo's platform revenue was subscription-based from the Order suite, while 54.5% was transaction-based. The company's active locations grew to approximately 86,000 as of December 31, 2024, up from 80,000 the prior year, exceeding their initial guidance of adding approximately 5,000 net new locations.

Olo's dollar-based net revenue retention rate, which measures the company's ability to retain and expand within its existing customer base, was approximately 115% for the three months ended December 31, 2024. This reflects Olo's success in cross-selling additional modules to its restaurant brand customers as they continue to expand their digital capabilities.

Strategic Partnerships

One of the key drivers of Olo's success has been its focus on building strategic partnerships and integrations. The company's open SaaS platform seamlessly integrates with over 400 restaurant technology solutions, including point-of-sale systems, aggregators, delivery service providers, and loyalty programs. This level of interoperability has allowed Olo to become a critical hub for restaurant brands, enabling them to streamline their operations and provide a more cohesive digital experience for their customers.

In 2024, Olo made a significant stride in its efforts to expand its payment processing capabilities with the announcement of a new partnership with FreedomPay, a leading payment gateway provider. This collaboration will allow Olo to offer card-present payment processing to its customers, further enhancing the company's ability to capture a larger share of the $160 billion-plus addressable gross payment volume opportunity within its existing customer base.

Financials

Olo's financial performance has been impressive, with the company reporting strong growth in both revenue and profitability. For the full year 2024, Olo's revenue reached $284.9 million, a 25% increase from the previous year. The company's non-GAAP operating income reached $32.9 million, up approximately 80% year-over-year, with a non-GAAP operating margin of 11.6%, an increase of 360 basis points from the previous year.

Despite the strong revenue growth, Olo reported a net loss of $0.9 million for the full year 2024. However, the company demonstrated strong cash flow generation, with operating cash flow of $39.7 million and free cash flow of $27 million for the year.

In the most recent quarter (Q4 2024), Olo reported revenue of $76.1 million, representing a 21% year-over-year growth. The company's Q4 2024 performance exceeded their revenue and non-GAAP operating income guidance ranges.

Future Outlook and Guidance

Looking ahead, Olo has provided guidance for the full year 2025, targeting revenue in the range of $333 million to $336 million and non-GAAP operating income between $45.5 million and $47 million. For Q1 2025, the company expects revenue in the range of $77.2 million to $77.7 million and non-GAAP operating income in the range of $8.7 million to $9 million.

Olo expects to add approximately 5,000 net new locations in 2025, in line with recent trends. The company anticipates full year 2025 Olo Pay revenue to be approximately $110 million, with card-not-present transactions continuing to account for the vast majority. Card-present revenue is expected to begin ramping in the second half of 2025 and contribute high single-digit million dollars in revenue.

The company expects full year 2025 gross margins to compress by approximately 250 basis points compared to full year 2024, as they continue to scale Olo Pay revenue. Full year 2025 total operating expense dollars are expected to grow in the mid-single-digits percent range versus full year 2024.

Olo is focused on managing the business for "Rule of 40" performance, based on gross profit year-over-year growth plus non-GAAP operating income as a percentage of gross profit dollars. They expect to meet or exceed gross profit Rule of 40 in Q4 2025.

Future Growth Strategies

One of the key areas of focus for Olo in 2025 will be the continued rollout of its Catering Plus module, which enables restaurant brands to offer a branded, dedicated digital ordering channel for large-order fulfillment. The company believes this module represents a significant opportunity to replicate its success in the core meal-time digital ordering market and further strengthen its presence within the growing catering segment.

Additionally, Olo will be prioritizing the ramp-up of its card-present payment processing capabilities through the FreedomPay partnership, which is expected to contribute to the company's overall revenue and gross profit growth in the coming year. By providing restaurant brands with a unified solution for both digital and in-store transactions, Olo aims to solidify its position as a comprehensive technology partner, empowering its customers to better understand and engage with their guests across all touchpoints.

The company's Olo Guest Data Flywheel strategy, which leverages the data generated across its Order, Pay, and Engage modules to drive personalized marketing and guest experiences, has also been gaining traction with innovative brands. As more customers adopt this holistic approach, Olo expects to see increased module adoption and stronger customer retention, further bolstering its long-term growth prospects.

Liquidity

Olo maintains a strong liquidity position, with $286.8 million in cash and cash equivalents as of December 31, 2024. The company has a debt-to-equity ratio of 0.02, indicating a low level of debt relative to its equity. Olo also has access to a $68.6 million credit line under the Second Amended and Restated Loan and Security Agreement with Banc of California.

The company's current ratio and quick ratio both stand at 7.52, indicating a strong ability to meet short-term obligations. This robust liquidity position provides Olo with financial flexibility to invest in growth initiatives and weather potential economic uncertainties.

Despite the challenges posed by the ongoing pandemic and macroeconomic uncertainty, Olo has demonstrated its resilience and adaptability. The company's focus on reliability, security, and scalability has enabled it to support its customers through periods of volatility, solidifying its reputation as a trusted partner in the restaurant technology ecosystem.

Industry Trends

Olo is well-positioned to capitalize on the ongoing digital transformation in the restaurant industry. According to data from Circana, digital orders accounted for 18% of total restaurant industry orders in 2024, highlighting the growing importance of digital channels in the food service sector. Olo's platform, which processed $29 billion in gross merchandise volume in 2024, is at the forefront of this trend, enabling restaurant brands to meet the evolving demands of their customers.

Conclusion

In conclusion, Olo Inc. (OLO) has emerged as a powerhouse in the restaurant technology space, offering a comprehensive platform that empowers restaurant brands to navigate the ever-evolving digital landscape. With a strong track record of innovation, strategic partnerships, and financial performance, Olo is well-positioned to continue its trajectory of growth and solidify its position as a leading provider of digital ordering, payment, and guest engagement solutions for the restaurant industry. As the company continues to expand its product offerings, improve its financial metrics, and capitalize on industry trends, Olo remains a compelling player in the rapidly evolving restaurant technology ecosystem.