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OI

Olo Inc. (OLO)·Q3 2024 Earnings Summary

Executive Summary

  • Olo delivered a “beat-and-raise” Q3: revenue $71.9M (+24% YoY) and non-GAAP operating income $8.2M, both above the high end of guidance, while gross margin stepped down as mix tilted to Olo Pay; FY24 revenue guidance raised to $281.4–$281.9M and NGOI to $30.2–$30.5M .
  • Execution catalysts: card-present pilots for Olo Pay launching with Qu and NCR Voyix in Q4, Borderless accounts now >10M, and deeper ezCater integration—supporting data-driven personalization and ARPU expansion .
  • KPIs: ARPU ~$850 (+15% YoY, flat QoQ), locations ~85k (+3k QoQ), NRR >120%; Olo hit its 5k net new locations target one quarter early and now expects ~6k adds in 2024 .
  • Watch items: sequential ARPU pause tied to Wingstop downsell and single-module new logos; gross margin trough in 2024 as Pay scales; CRO transition by year-end could create near-term go-to-market uncertainty .
  • Stock-relevant narrative: accelerating payments (card-present) + Engage/Borderless data flywheel vs. near-term margin dilution; raised FY guide and pilots are positive catalysts, while leadership changes and margin trajectory remain investor debate points .

What Went Well and What Went Wrong

What Went Well

  • “Beat-and-raise” quarter: revenue/NGOI exceeded high-end of guidance; FY24 revenue/NGOI guidance raised (Q4 revenue $72.5–$73.0M; NGOI $8.7–$9.0M) .
  • Strategic momentum: card-present functionality generally available on Qu POS, pilots expected with Qu and NCR Voyix in Q4; Borderless accounts surpassed 10M, scaling 10x YoY .
  • Multi-suite/product expansion: Catering+ deployments (Bojangles, Cowboy Chicken, Mendocino Farms), deeper ezCater integration automating menu updates; enterprise adds like Dutch Bros (Ordering + Pay CNP) and Paris Baguette (Order + Pay CNP) .

What Went Wrong

  • Gross margin compressed sequentially to ~60.7% non-GAAP (~54% GAAP) as Pay mix increased; management still expects FY24 to be the trough in gross profit growth .
  • ARPU flat QoQ at ~$850 due to Wingstop’s transition from 3 modules to 1 and single-module new logos (e.g., Long John Silver’s on Rails), despite +15% YoY .
  • Leadership transition: CRO Diego Panama departing Dec 31; interim sales oversight by CEO while search begins—raises execution focus on bookings while COO expands remit .

Financial Results

Sequential performance (Q1–Q3 2024)

MetricQ1 2024Q2 2024Q3 2024
Revenue ($USD Millions)$66.511 $70.504 $71.853
GAAP Diluted EPS ($)$(0.01) $0.03 $(0.02)
Non-GAAP EPS ($)$0.05 $0.05 $0.06
Gross Margin % (GAAP)56% 57% 54%
Gross Margin % (Non-GAAP)62% 63% 61%
Operating Margin % (GAAP)(11)% 1% (12)%
Operating Margin % (Non-GAAP)8% 11% 11%

YoY comparison (Q3 2024 vs Q3 2023)

MetricQ3 2023Q3 2024
Revenue ($USD Millions)$57.794 $71.853
GAAP Diluted EPS ($)$(0.07) $(0.02)
Non-GAAP EPS ($)$0.04 $0.06
Gross Margin % (GAAP)60% 54%
Gross Margin % (Non-GAAP)67% 61%

Revenue mix (Platform vs Services)

MetricQ1 2024Q2 2024Q3 2024
Platform Revenue ($USD Millions)$65.765 $69.600 $70.999
Professional Services & Other ($USD Millions)$0.746 $0.904 $0.854

KPIs

KPIQ1 2024Q2 2024Q3 2024
ARPU ($)~$816 ~$852 ~$850
Active Locations~81,000 ~82,000 ~85,000
NRR>120% >120% >120%
Cash + Short/Long Investments ($USD Millions)$377.4 $387.0 $391.9

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($M)Q4 2024n/a$72.5–$73.0 New
Non-GAAP Operating Income ($M)Q4 2024n/a$8.7–$9.0 New
Revenue ($M)FY 2024$279.5–$280.5 $281.4–$281.9 Raised
Non-GAAP Operating Income ($M)FY 2024$25.6–$26.4 $30.2–$30.5 Raised
Gross Margin (%)FY 2024Low 60s (trough year) Low 60s; Q4 flat vs Q3 Maintained
Olo Pay Revenue ($M)FY 2024Mid-$60s High-$60s Raised

Notes:

  • Workforce reduction (~9% headcount) lowers annual cost base by ~$8M; ~60% flows to NGOI with remainder reinvested .
  • Company expects gross profit growth to reaccelerate in 2025; Q4 GM flat vs Q3 .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q3)Trend
Olo Pay (card-present)Targeting card-present launch in 2H24; POS partnerships expanded (TRAY joins NCR Voyix and Qu); Honeygrow case shows ~6x GP/location with full-stack Pay GA for card-present on Qu POS; 5 pilots in Q4 with Qu & NCR Voyix; FY24 Pay now high-$60M; $2.5B GPV vs ~$26B GMV opportunity Accelerating
Borderless & Engage (Guest Data Platform)Borderless >7M accounts; Engage case studies (Five Guys) showing incremental revenue via targeted campaigns; AI/ML capabilities highlighted Borderless >10M accounts (+10x YoY); loyalty sign-in integration; emphasis on personalized guest experiences Scaling rapidly
Catering+ & ezCaterStrong adoption; enhanced order management; multiple deployments in Q2 More deployments (Bojangles, Cowboy Chicken, Mendocino Farms); new ezCater menu integration automating updates Broadening footprint
ARPU & locationsARPU +19% YoY to ~$852; added ~1k locations; pacing to 5k net adds in 2024 ARPU ~$850 (+15% YoY; flat QoQ); ~85k locations (+3k QoQ); hit 5k target early, now ~6k expected ARPU mixed; locations strong
Gross margin trajectorySecond half GM to be ~200bps lower than 1H due to Pay mix; FY24 trough in GP growth Q3 non-GAAP GM ~60.7% (GAAP 54%); Q4 GM flat vs Q3; FY24 trough reiterated Near-term pressure; stabilizing
Go-to-market & leadershipPOS ecosystem expanding; new share buyback program in Q1 CRO departure at YE; interim sales under CEO; COO expands scope; plan to initiate 10b5-1 for $100M buyback in Q4 Transition; bookings focus

Management Commentary

  • CEO framing: “We delivered revenue and bottom line performance that exceeded the high-end of our guidance ranges… and positioned us to complete a successful 2024,” highlighting the platform’s role enabling personalization and profitable traffic .
  • Card-present catalyst: “We expect to launch 5 Olo Pay card-present pilots in Q4 with brands on Qu and NCR Voyix… Olo Pay pipeline is building… majority with enterprise brands,” underscoring payment and data flywheel .
  • Borderless scale: “Borderless continues to scale… more than 10 million accounts, up 10x from 1 million a year ago,” aiding guest-level personalization .
  • CFO discipline and mix: Non-GAAP GM ~60.7% (down ~200bps QoQ) “reflect the impact of this quarter’s revenue outperformance as well as the increasing mix of Olo Pay revenue,” while OpEx ratios improved across all lines .
  • Cost actions: Workforce reduction lowers annual cost base by ~$8M, with ~60% to NGOI and remainder reinvested; FY GM low-60s; GP growth seen reaccelerating in 2025 .

Q&A Highlights

  • Olo Pay growth path: Management sees $2.5B GPV in 2024 vs ~$26B GMV and <2% penetration of addressable ~$160B GMV with card-present; pilots to drive 2025 momentum .
  • ARPU dynamics: Sequential flat driven by Wingstop downsell and single-module logos; long-term ARPU expansion supported by 16+ modules and Pay adoption .
  • Gross margin outlook: GM pressure from Pay mix offset by cost optimization (RIF); Q4 GM flat vs Q3; 2025 GP growth reacceleration contingent on card-present ramp and higher-margin software (Order/Engage) .
  • Go-to-market transition: CRO departure refocuses on bookings; interim sales leadership by CEO; COO consolidates marketing, CS, partnerships to tighten product-commercialization linkage .
  • Capital return: Plan to initiate a 10b5-1 buyback in Q4 under $100M authorization (post-litigation settlement) .

Estimates Context

  • Wall Street consensus (S&P Global) for Q3 and Q4 was unavailable due to data access limits; as a result, numerical comparison to consensus cannot be provided at this time. Values from S&P Global were unavailable.
  • Company context: Q3 revenue/non-GAAP operating income exceeded high end of guidance; FY24 revenue/NGOI guidance raised; Q4 guidance introduced—indicating a positive estimates revision bias is likely among analysts .

Key Takeaways for Investors

  • Payments-led expansion is the key catalyst: card-present pilots with Qu/NCR Voyix and growing POS/kiosk partners should accelerate Olo Pay scale and deepen Engage data, supporting ARPU growth even as near-term margins dilute from mix .
  • Data flywheel strengthens: Borderless (>10M accounts) and Engage case studies demonstrate measurable revenue uplift via personalization; expect increased cross-sell into Engage as payments consolidate guest data .
  • KPI trajectory: locations growth ahead of plan (~6k adds expected for 2024) supports baseline revenue, while ARPU expansion remains the larger driver over time despite Q3 sequential pause .
  • Margin path: FY24 is the trough in GP growth; watch Q4 GM stabilization and 2025 reacceleration tied to card-present and higher-margin software modules (Order, Engage) .
  • Execution watchlist: CRO transition and bookings focus—monitor pipeline conversion, especially enterprise wins and multi-suite deals; any slippage could affect ARPU trajectories .
  • Capital allocation: with ~$392M cash & investments and buyback plan resuming under 10b5-1, capital return provides downside support, contingent on operating momentum .
  • Tactical trading: raised FY guide and card-present pilots are near-term positive catalysts; margin debate and leadership change may cap multiple—position for follow-through on payments milestones and ARPU acceleration in early 2025 .

Appendix: Additional Press Releases Relevant to Q3 Themes

  • ezCater integration: automated menu updates via Olo Rails to simplify catering menu management—supports Catering+ momentum and operational efficiency for enterprise brands .