OLO Q1 2024 Earnings Call Transcript

Quartr
Provided by Quartr
May 7, 2024

There are 9 speakers on the call.

Operator

welcome to Olo Inc. First Quarter 20 24 Earnings Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded.

Operator

I would now like to turn the conference over to your host, Gary Fugis, Senior Vice President of Investor Relations. Please go ahead, sir.

Speaker 1

Thank you. Good afternoon, and welcome to Olo's Q1 2024 financial results conference call. Joining me today are Noah Glass, Olo's Founder and CEO and Peter Benavides, Olo's CFO. During this call, we will make forward looking statements, including, but not limited to, statements regarding our expectations of our business, our industry 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.

Speaker 1

For a discussion of these and material risks and uncertainties, please refer to our Form 10 Q, 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 on our earnings release, which is available on our Investor Relations page of our website. 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.

Speaker 1

With that, I'll turn the call over to Noah.

Speaker 2

Thank you, Gary. Hi, everyone. Thank you for spending time with us today. Polo got off to a great start in Q1. We increased revenue 27% year over year and expanded non GAAP operating margin to 8% and we're raising our 2024 revenue and profitability guidance.

Speaker 2

We announced new integrations with NCR Voyix and Q that move us closer to launching full stack pay functionality later this year and will provide access to ingredient level and guest linked data from non digital transactions, where more than 80% of restaurant business is conducted today. With omnichannel guest data at scale and the AI and machine learning solutions to leverage it, we believe Olo is uniquely positioned to help brands deliver more personalized guest experiences that increase sales and grow guest lifetime value. I'll review our customer and innovation highlights and share more about our new POS integrations and then Peter will discuss our Q1 performance and updated guidance. We ended the quarter with approximately 81,000 active locations, adding approximately 1,000 net new locations sequentially. 1st quarter ARPU of $8.16 increased 29% year over year and net revenue retention was in excess of 120%.

Speaker 2

We continued to land and expand with enterprise and emerging enterprise brands and we further strengthened our open platform through new features and ecosystem partners. In enterprise, Quiznos deployed ordering, rails, dispatch, pay and engages sentiment and sync, a 3 suite implementation. And we're super excited to announce today that Dutch Bros will deploy our ordering and pay modules to enable guests to order ahead through their app. It's a great example of digital moving into the drive thru channel and we're thrilled to help this fast growing brand deliver on their core values of speed, quality and service. Dutch Bros has completed a successful pilot and we expect them to deploy Olo across their 850 plus locations across 17 states throughout 2024.

Speaker 2

In emerging enterprise, we continue to land and expand. More than a dozen brands like Moon Bowls and Rock and Ramen had multi module implementations, while brands like Bluestone Lane and Mendocino Farms expanded into pay and Panini Kebab Grill and Uncle Julio's expanded into Engage. We spent time with more than 100 of our brands in March at our Beyond 4 customer conference. This was a fantastic event with record attendance overall and among senior level decision makers. Customers loved our roadmap presentation, the hands on demos of our 3 suites and our announcement to integrate Olopay and Engage's guest data platform with Queue.

Speaker 2

It was great validation that our products and strategy are resonating with brands. In Q1, we announced 13 major product enhancements in our spring release and further expanded our ecosystem partnerships. I'll share a few highlights. Catering is an increasingly important channel for brands. It's rebounded significantly post COVID and it generates high average order values.

Speaker 2

And it's a large TAM. 3rd party research estimates that U. S. Workplace and event catering is a $60,000,000,000 market. However, managing catering orders can be inefficient, often requiring manual order entry and customer cross referencing with POS data.

Speaker 2

To address this opportunity, Olo launched its Catering Plus module in the fall. And this spring, we released a new production sheet feature that streamlines the prep for large volume orders, improving staff efficiency and enabling brands to capture more high value catering sales. We're very excited about our early success here with brands expanding into Catering Plus in Q1. Since implementing Catering Plus, Dolf Sarita's Fresh Mexican Grill has increased catering same store sales by 22% and has improved order accuracy and staff efficiency. With Catering Plus, we believe we can do for catering what we've done for mealtime ordering and delivery, integrate the channel into the brand's operations and drive sales and efficiencies.

Speaker 2

Like Rails and Dispatch, Catering Plus is a standalone module and it's generating interest from large brands not currently working with Olo as well as restaurants within our base. We look forward to sharing more this year as we focus on making Catering Plus a larger part of our business. We also announced smart cross sells, an AI powered feature that surfaces personalized dynamic item suggestions during the ordering and checkout process. By recommending items based on contextual data such as order history, location menu and cart contents, This new feature is improving guest engagement and average order value. In a recent OLO test, smart cross sells accounted for 10% more basket value on average than static cross sells.

Speaker 2

Smart cross sells is live today and we see an opportunity to combine it with Borderless, which has doubled since year end and now exceeds 4,000,000 guests to flex the Ollo network effect and power cross sells across the Ollo network to drive even more guest engagement and sales lift. In pay, we announced the general availability of card present functionality in self-service kiosks, which is another step toward bringing card present to market this year. Honeygrow, a high growth stir fry and salad concept is a digital first brand that runs nearly all of its orders through Olo's platform. They're also the first to adopt Olapay for both on and off premise transactions, which reduced chargeback costs by 83% and increased authorization rates for card not present transactions by over 7%. By running all their payments through Olapay, we enabled Honeygrow to improve their financial performance and their guest experience and they are generating significantly higher ARPU than our platform average.

Speaker 2

ARPU expansion is a key growth lever, and we believe we can replicate our success with HoneyGrow throughout our base. As in Engage, we released new features to help brands assess ROI, manage contact lists and analyze campaign effectiveness. We also enhanced the guest data platform's user interface to make it easier for brands to develop a comprehensive view of their guests across all channels and platforms in real time. These engage enhancements give brands more power to convert their data into the insights and actions that increase sales and guest lifetime value. In our ecosystem, which now exceeds 400 partners, we announced a number of new integrations including Kurbit for kitchen capacity, order and delivery management, Kia for voice ordering and Sparkfly for guest engagement.

Speaker 2

We remain committed to providing an open platform that helps restaurants benefit from innovation provided by Olo and other best of breed technologies. Before I turn the call over to Peter, I want to discuss our new POS integration announcements with NCR Voyix and Q and why we believe these are so important to our strategy. By integrating Olopay into POS providers like NCR, Voyix and Queue, we will expand our payment processing and data footprint into non digital transactions, where 84% of U. S. Restaurant business occurs.

Speaker 2

Coupled with Engage integration capabilities, Ola will be positioned to touch 100% of restaurant transactions and offer brands a differentiated omni channel guest data platform at scale. We believe that's an unlock for scaling pay and engage revenue and a game changer for Olo's ability to help brands drive sales, grow guest lifetime value and make every guest feel like a regular. Today, our open platform enables brands to aggregate guest data from Olo solutions and our ecosystem partners to better understand their guest lifetime value, personalize the guest experience and drive sales and operating efficiencies. For example, Sunny's Barbecue ingests data from multiple sources across its tech stack including ordering, rails and dispatch into the Engage GDP to better understand guest lifetime value, order frequency and average spend. Sunny has leveraged this data to drive 50% growth in marketing subscribers and learned that the top 15% of their guests account for half of their sales.

Speaker 2

FirstWatch uses Ollo to unify their data and increase frequency with repeat customers. Engage enabled FirstWatch to deliver personalized automated email campaigns that resulted in a 20% lift in spend by recipients over 30 days and $2,700,000 in total spend in the campaign's 1st 90 days. And as brands face the challenges of continued food cost inflation, minimum wage legislation and a tight labor market, the benefits of data driven personalization are becoming increasingly important to a brand's success. With greater data breadth, depth and scale than alternatives, Ola will be in an even stronger position to help brands win. Our network of 700 brands, 85,000,000 guests and 400 Ecosystem Partners drives data breadth.

Speaker 2

Our APIs pull deeper levels of transaction data than alternative providers and our expanding POS integrations will provide a meaningful increase in data scale. This is why we believe Olo has a durable competitive advantage versus the traditional walled garden approach of POS providers. Data driven personalization yields success for restaurants, and we believe Olo is set to become the clear leader in restaurant data and therefore best positioned to leverage AI and machine learning to drive insights and action that results in greater sales, guest lifetime value and hospitality. I'll now turn the call over to Peter to review our Q1 results and guidance.

Speaker 3

Peter? Thanks, Noah. Today, I'll review our Q1 results as well as provide guidance for the Q2 and the full year 2024. In the Q1, total revenue was $66,500,000 an increase of 27% year over year. Platform revenue in the Q1 was $65,800,000 an increase of 28% year over year.

Speaker 3

Revenue from all 3 suites, order, pay and engage outperformed our expectations. Active locations were 81,000, up approximately 1,000 sequentially. Note that the vast majority of Dutch Bros locations are yet to be deployed, so they are not included in the Q1 active location count. We expect location count to ramp throughout the year and we continue to expect to add approximately 5,000 net new locations this year. ARPU for the Q1 was approximately $8.16 up 29% year over year and 4% sequentially.

Speaker 3

Year over year increases in ARPU were driven by increased order volumes and modules per location, in particular, Olopay. And net revenue retention was above 120%, the 2nd consecutive quarter where NRR was at or above 120%. For the remainder of the Q1 financial metrics disclosed, unless otherwise noted, I will be referencing non GAAP financial measures. Gross profit for the Q1 was $41,500,000 This compares to $37,200,000 a year ago. The year over year growth in gross profit was driven by continued revenue growth, partially offset by the increasing revenue mix of Olapay.

Speaker 3

Sales and marketing expense for the Q1 was $12,700,000 or 19 percent of total revenue. This compares to $9,900,000 19 percent a year ago. Research and development expense for the Q1 was $13,900,000 or 21 percent of total revenue. This compares to $15,700,000 or 30% of total revenue a year ago. General and administrative expense for the Q1 was $9,300,000 or 14% of total revenue.

Speaker 3

This compares to $10,400,000 20 percent a year ago. Operating income for the Q1 was $5,600,000 This compares to $1,200,000 a year ago. Operating margin was approximately 8% in Q1 and the year over year improvement reflects the combination of our focus on managing costs as well as growth in revenue. Sequentially, the decline in profitability from Q4 2023 reflects seasonality around factors such as tax resets and benefit expense increases associated with the new calendar year, as well as costs associated with hosting our annual customer conference Beyond 4 in March. Net income in the Q1 was $7,800,000 or $0.05 per share based on approximately 172,700,000 fully diluted weighted average shares outstanding.

Speaker 3

Turning our attention to the balance sheet and cash flow statement. Our cash, cash equivalents and short and long term investments totaled approximately $377,000,000 as of March 31, 2024. Pursuant to our current share repurchase program, in the Q1, we repurchased 2,800,000 shares for a total of approximately $15,000,000 Since the introduction of our share repurchase program, we have repurchased 14,300,000 shares for approximately $93,100,000 We had approximately $6,900,000 remaining on the authorization as of the end of the quarter and have since completed the program. And today, we announced that our Board has authorized a new $100,000,000 share repurchase program. Net cash provided by operating activities was $6,000,000 in the quarter compared to $7,200,000 in the quarter a year ago.

Speaker 3

Free cash flow was $2,800,000 compared to $3,900,000 a year ago. I'll wrap up by providing our guidance for the Q2 and full year 2024. For the Q2 of 2024, we expect revenue in the range of $67,500,000 $68,000,000 and non GAAP operating income in the range of $5,500,000 $5,900,000 For the fiscal year 2024, we are raising revenue and non GAAP operating income guidance. We now expect revenue in the range of $274,500,000 $276,500,000 and non GAAP operating income in the range of $23,000,000 $24,500,000 A few things to keep in mind as you consider our outlook for the year. We got off to a solid start to the year as reflected in our raised full year guidance.

Speaker 3

That said, we continue to take a prudent approach to our full year outlook. We expect trends in the restaurant industry will remain similar to what we saw in 2023, consistent growth in digital ordering, a continued need to improve efficiency to offset rising costs and macro uncertainty. Revenue guidance continues to assume a 2 thirds, 1 third split between incremental revenue from existing projects currently in deployment and new projects signed and deployed in year, which will be driven primarily by ARPU expansion as Olopay scales and we have further success in selling multiple modules in our order and engage suites. In terms of gross margin, we now expect the sequential decline will be less pronounced. Specifically, we expect Q2 gross margin to decrease approximately 100 to 150 basis points from Q1's gross margin and for this range of decline to occur from Q2 to Q3 and from Q3 to Q4.

Speaker 3

The change from our initial expectation of 150 basis points to 200 basis points is due to a shift of certain costs from cost of revenue to operating expenses as well as from better cost optimization within the platform. In terms of non GAAP operating income, we expect to generate operating leverage in the second half of the year compared to the first half, directionally consistent with prior year trends. Finally, as a reminder, the quarterly pacing of operating expenses will be slightly different in the first half of twenty twenty four versus prior years. As we stated on our last call, this year's annual compensation increases begin hitting in Q2. Historically, annual comp increases began in Q1.

Speaker 3

To wrap up, we got off to a strong start this year. We are making good progress across our key strategic priorities and believe we are well positioned to deliver on our updated financial targets for the year. We remain at the early stages of the digitization of the restaurant industry and believe Olo's portfolio of solutions helps brands solve many of their most pressing operational challenges. Further, our open platform approach is allowing us to significantly increase the scale of our data asset and do more to help brands increase their sales and improve their operations. With that, I'd now like to turn it over to the operator to begin the Q and A session.

Speaker 3

Operator?

Operator

Thank you, sir. Ladies and gentlemen, at this time, we will be conducting a question and answer The first question we have comes from Terry Tillman of Trey Securities. Please go ahead. Yes.

Speaker 4

Good afternoon, gentlemen. Can you hear me okay?

Speaker 2

Loud and clear, Terry. Thanks.

Speaker 4

Wonderful. So congrats on some of these wins like Dutch Bros. And some of the other transactions. First of all, I've got 2 questions. The first one is a multi partner.

Speaker 4

The second one, it might also be a multi partner. So, bear with me. But in terms of you've got a couple of POS relationships now integrating into OWLOPay. I would love just some qualitative perspective on what are you hearing from your large customer base as now that's starting to unlock? And then secondly, I think, Peter, you had talked about, if I'm not mistaken, about a doubling of VOLOPAY the year to $60,000,000 Does that still hold true or does that change?

Speaker 4

Thank you. And then I had

Speaker 2

a follow-up. Terry, I'll get started on the qualitative part. This is Noah. So it's been fun to work on these POS partnerships that go beyond the traditional way that we integrate to the 3 dozen point of sale providers that we integrate to with just order injection, but to now include both Olopay and also Olo Engage. So we're able to process those on premise transactions happening inside of the restaurants or through the drive through and have all of the data from those transactions, the 84% of transactions that take place in non digital channels, but in on premise channels flowing into the guest data platform.

Speaker 2

It's been even more fun to see the reaction from customers who many of whom describe this kind of capability of being able to see 100% of transactions and tie every transaction back to a guest as something of a Holy Grail that they've been waiting for this industry to get to. So being able to unlock that Holy Grail because it runs really think about marketing and guest engagement differently and enables them to really understand guest lifetime value, not just for the 16% of digital transactions, but for all 100% has been really, really encouraging. So we've seen that reaction as we posted about these relationships with Q initially, which we announced at our Beyond 4 customer conference about 6 weeks back and then more recently with NCR Voyix, we've seen these reactions in social media. Then we've also had direct conversations with the executives at the restaurant brands that are today common customers of Olo and these point of sale platforms. They are really excited about the future for both Pay and for Engage and the unlock that this represents.

Speaker 2

And beyond that, it's been really fun to see what prospects are saying and thinking about these capabilities as they're evaluating POS partners and seeing this as a real competitive advantage for the POS partners that are working with Olo beyond just order injection, but across all three of our product suites. So we have these 2 announced and we obviously are seeking to do this across our point of sale partner relation

Speaker 1

Apologies, Gary here. I think we may have lost Noah. Just give us a second.

Speaker 3

While Noah connects, I can jump in there, Terry, on your question around the estimates for pay this year. So you're right, we are still estimating a doubling of the business to over 60,000,000 dollars of revenue for the year. And again, that will just include the card not present portion of the business with card present being a revenue contributor in 2025.

Speaker 4

That's great. Thanks for that. And I know Gary, I don't know if we've had a thank you for that, Peter. Gary, did Noah rejoin?

Speaker 1

I believe, Terry, he's dialing back in. So apologies for that.

Speaker 4

Okay. Well, maybe what I'll do is just for in the spirit of letting other folks get in here, maybe I could just ask you, Peter, then and then I'll just jump back in the queue. As it relates to free cash flow for the year, just any updated thoughts there, how you're thinking about free cash flow for the year? Thank you.

Speaker 3

Yes. So I'm sure you noticed this quarter we generated free cash flow, which is about half of what we brought in from an operating income perspective, with the difference there being really cap software driven. I would expect holding aside any one time items that we're not foreseeing currently for that dynamic to continue through the balance of the year and being free cash flow positive for the year.

Speaker 4

All right. Thank you.

Speaker 1

Operator, next question please. Apologies, we seem to be having continued difficulties here. Just hang with us here one second. All right, folks, we're working through this here. We're still here and we're working on getting the Q and A.

Speaker 1

I see folks in the Q and A and we're working on getting you through. So please be patient. Thank you. Max at Lake Street. Can you hear me?

Speaker 4

Yes, I can. Sorry, I

Speaker 3

just said you were not talking to me.

Speaker 1

Yes, that's right. I'm taking over here, Max. I'm trying to do this remotely. So we've got your line live. So we've got Peter in the office to fire away.

Speaker 3

Okay. All right. Sounds good. So if we just go to the queue and NCR Voyage partnership, I guess what I'm wondering here, is this arrangement dependent on the launch of card present or are we seeing card not present revenue from them today?

Speaker 2

Well, so we currently have the integrations, Max, this is Noah, for order injection and Ollo can be the digital ordering provider with card not present processing. The idea of this relationship is really tied to the launch of card present processing where the transaction is happening, the order is being taken on the POS, the payment is being done POS adjacent connected to the point of sale. And then you're receiving the data from that order, not just the transaction data of the total amount that you typically get from a payment transaction, but we're actually getting ticket data. So we're able to see item level data, ingredient level data, what was modified, adjusted, substituted, added to an item and that's getting pulled back into the Olo Engage guest data platform. And all of that is tied back to a guest profile.

Speaker 2

So that's what I mean when I say being able to see 100% of transactions for 100% of guests. And we're really seeing a level of depth of those transactions, a granularity that is typically associated with digital transactions where we're able to see all of that customization detail down to the ingredient level. We're now able to do that we're now able to do that rather for on premise transactions through these 2 different point of sale platforms, Q and MCR Voyix. And our ambition is to replicate that kind of arrangement across all of the point of sale partners that we work with in serving enterprise restaurant brands guest data needs.

Speaker 3

Yes. All right. And then I guess on top of that, I mean, is there a possibility for a similar arrangement with Micros?

Speaker 2

Yes. We don't take any of the POS partners that we currently work with today off the table. We're sequencing this based on a variety of factors and we're excited to work with Q as a challenger point of sale that is kind of relatively new on the scene and gaining share and with NCR as our longest term POS partner and the largest POS partner that we have the most number of restaurant brands and locations with today and everything in between.

Speaker 4

All right. Hey, great quarter guys.

Speaker 3

Thanks for taking my questions.

Speaker 2

Thank you.

Speaker 5

Our next question is from Stephen Sheldon with William Blair.

Speaker 6

Hey, Noah and Peter, you have Matt Fialik on for Stephen. Thank you for the questions. Wanted to start with a macro level question. Just curious on what trends you are seeing in consumer spending and engagement and how you feel about the overall health of the consumer heading into the second half of the year?

Speaker 2

Well, great question and certainly one that's been in focus as we've listened to restaurants reporting earnings. I would say there is certainly the same sort of sentiments with consumers of a trade down into lower expensive restaurant offerings. You've heard restaurant brands talk about losing some of the lower income consumers. What we really see at this moment in the industry is that restaurants are dealing with 2 different forces. 1 is labor pressure, the higher cost of labor, some of that is based on regulations as in California, the difficulty of getting enough labor inside the restaurants and traffic declining.

Speaker 2

And part of traffic declining is some of that price sensitivity. I think also some of it is driven by food costs and the inflation in food costs leading to restaurants taking price. And that's always a trade off when restaurants take price and charge higher prices for traffic.

Speaker 4

So a

Speaker 2

big thing that we're focused on at Olo is addressing those two challenges that restaurants are facing. The first around labor, helping them to do more with less and that is something that Olo has always been all about in every solution that we brought to market, helping the restaurant be more efficient in their use of labor, putting more of the ordering and payment in the hands of the guests so that the restaurant can focus on really delivering on high hospitality interactions with the guests and be more efficient from a labor standpoint. And on the other front, really helping restaurants know their guests better, understanding all of the different touch points with the guests and being able to personalize their marketing to the guests, increase conversion and have guests increasing their guest lifetime value without necessarily requiring restaurants to resort to things like discounting or offers to drive guests back in. So these two value propositions of both helping you do more with less and better know your guests to drive traffic are really resonant with restaurants given those challenges that they're experiencing with consumers at this moment.

Speaker 6

Got it. That's helpful, Noah. Thank you for that. And then can you just talk some more about the recently announced smart cross sells product, particularly what early customer feedback has been like? And do you think that's something that could be a driver to ARPU growth over the longer term?

Speaker 2

Yes. Smart cross sells is one that we are really proud of. I mentioned there were 13 different capabilities that we announced in our spring release. Smart cross sells is one that is really, really fun because it is using that ordering and checkout experience and all of the data that we're able to see to utilize the context of what is in the cart and what we've seen in terms of product affinity from one product to other products that go nicely with that product in a really data driven way to make a, as the name suggests, smart cross sell rather than just saying, do you want fries with that or do you want to drink with that as we're all used to hearing. And the results really speak for themselves.

Speaker 2

We've seen a 10% lift in basket size when using smart cross sells versus using the sort of traditional upsell. And all of this is automated. This does not require that somebody is manually doing upkeep to do that affinity mapping of one product to another product. It's very similar to the way that services like Netflix or Spotify use collaborative filtering to use AI, to use machine learning, to use the data that we see to have the best offering put in front of the customer at the right moment. I'm very proud to announce this was not in the prepared remarks, but we now have over 10,000 locations already adopting smart cross sells.

Speaker 2

And we're very excited that it also means no manual upkeep. This will continue to get smarter and smarter. And we hinted a little bit at how this can get smarter from here. So understanding who that guest is, what they've ordered in their order history is one way that we're focused on making smart cross sell even smarter. And then also pulling in the data that we can see about the guests from across the Ollo platform, really flexing the Ollo network through our borderless identity to understand who that guest is and what they've done in other ordering scenarios that other brands to make the smart cross sells even smarter for that specific guest with a network and borderless that's already 4,000,000 strong.

Speaker 2

So we're excited about continuing on that personalization journey using data, using AI, using machine learning. And certainly, we believe that there is a revenue opportunity there and therefore an ARPU opportunity there over time.

Speaker 6

Got it. Thanks for that added color. That's helpful. Appreciate the time. Nice quarter, guys.

Speaker 2

Thank

Speaker 5

Our next question is from Clark Jefferies with Piper Sandler.

Speaker 7

Hello. Thank you for taking the question. Noah, Peter, good to be speaking with you. Noah, I wanted to ask, coming away from beyond 2024, I think it was very interesting to see the progress 1 year in the sort of mind share of the marketing products and the sort of the help on the marketing side that you've built with the Engage suite. I was just curious about your takeaways on the appetite balance between Engage and Pay as you look at this year.

Speaker 7

Does Engage seem like a product that might bump up in the priority list or the demand list looking at 2024? And when you think about smart cross sell as an accelerant to that, could that be a factor? And the final part of that question is just could you remind us how many customer profiles you have powered by the borderless data today? And then one follow-up.

Speaker 2

Dorothy and Clark, well, first thank you for attending and thank you to all of you in the analyst community who joined us at Beyond 4. I think it was hard to come away from that event not feeling like Olo customers are really leaning into the relationship with Olo, looking for new capabilities from Olo and really viewing Olo as their digital consigliere that's going to help them on their digital journey as

Speaker 8

they become more and

Speaker 2

more digitally mature. And certainly, one of the things that we really wanted to focus on was the way in which the solution suites play off of one another. We think about this data flywheel that order and pay together drive a ton of data and that data enriches our ability to know the guests and our ability to help the brand know the guests and then to engage they speak with them and how they personalize the experience and smart cross sell is just a great example of that. In terms of what brands are focused on, I think that what we see is we talk about allo, pay, engage in that sequence and that's very intentional. That's how we think brands are sequencing their efforts that order and pay are the great feeders of data and then there's all this data to use for engagement.

Speaker 2

Certainly a lot of restaurant customers who were there at Beyond 4 were really eager to hear about what we're doing with Engage. And I think Borderless was almost a cherry on top. On Borderless, what was it 180 days ago, we announced that we had reached 1,000,000 guests on Borderless. Then 90 days ago in our last call, we were up to 2,000,000 guest accounts on Borderless. And then today, we've announced we're 4,000,000 guest accounts on Borderless.

Speaker 2

So you can really see that exponential growth of restaurant of guests who have Olo level profiles that they can then use across multiple brands. And that's what we mean when we talk about this network effect, Olo sitting in between restaurant brands and restaurant guests and being able to leverage the data that we can see about the guests across multiple brands for an even more personalized experience that leads to higher conversion, higher frequency and greater guest lifetime value. I think all of these things are really a direct hit for restaurant brands and what they're thinking about given the environment that they're operating in and also given kind of what they're able to do now with digital ordering and payments throwing off so much data and giving them the opportunity to leverage that data as a great co product of the digitization of their business to really offer hospitality in a new way, in a digital realm and make every guest feel like a regular.

Speaker 7

Great, perfect. And then I had one follow-up just in relation to the point of sale partnerships, very encouraging to hear those vendors be brought up proactively before the announcement was even said about a flagship point of sale partner. I just wanted to be clear about when you think about go to market with these partnerships, where would you rank order the partnerships where they could be an additional distribution channel where you'll be proactively pulled into a new customer relationship and situations where there'll be a preferred partner, and this is about technical integrations and compatibility within the ecosystem. Just kind of clarity around where you're thinking about point of sale partners in that regard would be helpful. Thank you.

Speaker 2

Yes. I think, it's a great question. We like to be an open platform, as you've heard us talk about from the very beginning, and that has really been our ethos and we don't want to prioritize one partner over another. It has been great to be able to walk into our customers and say here are all the partners that we work with and you can look them up in our great Olo Connect partner directory on our website and you can see exactly what we're doing with each, how many other brands and how many other locations are working with them, what they have to say about it and how long that relationship has been in place. Obviously, when we're walking into a restaurant brand and we have a capability like what we now have with Q and NCR Voyix, we think that puts them as POS providers at a competitive advantage to be able to say, we can be a POS partner who works with Olo for order, for pay, for engage and really helps you to have this holy grail kind of capability where you can get every transaction tied back to a guest, whether it's off premise or on premise, digital or non digital.

Speaker 2

Our hope is that we can do that with every point of sale provider that we work with over time. And I think it's incumbent upon the POS providers to embrace that open philosophy as Q and NCR Voyix have done and do that for really innovation to flourish for our common customers and for the industry as a whole.

Speaker 7

Really appreciate it. Thank you, Noah.

Speaker 8

Thank you.

Speaker 5

Our next question is from Gabriela Borges with Goldman Sachs.

Speaker 8

Hi, this is Kevin Kumar on for Gabriela. Thanks for taking the question. Noah, can you give an update on the ramp of the professional services team? How is that coming along? And anything you can say, I guess, on the impact it's having on customers from a time to value perspective?

Speaker 2

Sure thing. Well, it's something that was another really hot topic at Beyond 4. We talked about it a little bit on our last call about professional services and how we saw a need for Olo to do more. And I would put it under that same heading of helping restaurant brands to do more with less. A lot of restaurant brands don't have somebody necessarily in house who is a digital marketing guru and knows how to use all of the data that they now have access to or use all the tools that they now have access to through the Olo Engage platform.

Speaker 2

So we see a great opportunity and I mentioned this with announcing California Pizza Kitchen and 5 Guys last quarter coming on to Olo Engage that they can leverage Olo professional services to operationalize and optimize a program and they can also use us on an ongoing basis to kind of be that digital consigliere almost like a fractional Chief Digital Officer for the brand and really help to optimize the programs over time. That's true and I mentioned it for Olo Engage. It's also true of Olo ordering. It's also true of Pay and how we sort of set up the program and get brands up and running beyond just implementation, but make sure that we're fine tuning the program as it goes. I would say, and this is a bit anecdotal, not as quantified as you may wish, but from the Beyond 4 conference, we had stickers that were out at check-in when people were registering.

Speaker 2

And I remember well that the yellow stickers were the ones that indicated that it was an Olo restaurant customer who wanted to hear about the professional services offering. We had other stickers for the different product suites. We had stickers for catering plus etcetera. The yellow stickers ran out very quickly. A lot of restaurant brands want Ola to play this role of professional services and we're excited about building that muscle.

Speaker 2

As we look today, it's a very small portion of our overall revenue mix. But again, we think that professional services is an important part of our revenue story going forward and a huge unlock for software revenue in addition to just being another revenue stream. It will help our customers get to value faster and use more of OOF's capabilities as they get more digitally mature faster.

Speaker 8

Thank you and congrats on the floor. Thank you.

Speaker 1

Operator, we'll take one more question please.

Speaker 5

Our next question is a follow-up from Terry Tillman with Truist.

Speaker 4

Thanks. I hope I didn't cause you to hang up there earlier. I know I'm glad you're back. Just a follow-up is, I think you had a good question from somebody else earlier asking about the other products and including Engage. But I think you talked about the sequential order, the way it really the cadence to work is ZoloPay and then ZoloEngage.

Speaker 4

What I'm curious about is because now you have these POS relationships with a low pay, I just want to know about the go to market. Are you set up to go sell engage more aggressively? Like is it a dedicated sales force or is your whole sales team trained? It's more kind of in the how the sausage gets made in terms of how you're going to monetize this to go to market. Thank you.

Speaker 2

Yes, Terry, it's a great question. Sorry about the difficulties earlier with the call. So the way that go to market, I've had an awesome time over the past couple of weeks really witnessing this firsthand being out with our team, talking to customers, talking to prospects and seeing the magic of the way that go to market works today with a more nuanced structure, really working. And I would describe it as we have, in many cases, a long standing trusted relationship with a restaurant brand at the C suite level. And they know us typically from being their ordering platform over something like catering, which is a module catering plus within the order suite, we have the ability to have that relationship, hear about what they're looking to do, and then bring in our great sales engineering team to do a demo in real time, showcase studies of other brands and what they're doing using some new module that the brand has expressed interest in.

Speaker 2

And that one two punch of the long standing relationship that's kind of broad in nature and that deep and specific knowledge of that sales engineer is really an awesome model and credit to Diego Panama, our Chief Revenue Officer, who came in and reshaped our team in that way. But that model is really working. It's helping us to educate our restaurant customers and prospects about the new capabilities that we offer. It's helping our salespeople to understand broadly all the things that Oh! Can do, but also know that in their back pocket, they have a team of experts who can go deep on those things, do those live demos, answer any questions that brands have.

Speaker 2

And I think that's really showing up in success for our go to market team in these new product modules and in these new solution suites.

Speaker 4

Thanks, Noah. That's helpful.

Speaker 8

Thank you.

Speaker 5

Ladies and gentlemen, we have reached the end of the question and answer session. I I'd like to turn the floor back to Noah Glass for closing remarks.

Speaker 2

Okay. Well, thank you for joining us today and bearing with us due to some of the technical difficulties. We started off 2024 with strong Q1 financial results, raised full year guidance and expanded partnerships to help brands leverage 100% of their transactions and drive guest lifetime value. Through our open platform, we believe we are uniquely positioned to capitalize on the increasing demand for guest personalization. Olo is accelerating the future of hospitality and we're laser focused on executing on the opportunity in front of us.

Speaker 2

Have a great evening.

Speaker 5

Thank you. This concludes today's conference. You may disconnect your lines at this time.

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Earnings Conference Call
OLO Q1 2024
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