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Olo Inc (OLO) Q1 2024 Earnings Call Transcript Highlights: Robust Growth and Strategic Advances

GuruFocus Research
·4-min read

  • Total Revenue: $66.5 million, up 27% year-over-year.

  • Platform Revenue: $65.8 million, increased by 28% year-over-year.

  • Active Locations: 81,000, up by approximately 1,000 sequentially.

  • Revenue Per User (RPU): $816, up 29% year-over-year.

  • Net Revenue Retention: Above 120%.

  • Gross Profit: $41.5 million, compared to $37.2 million a year ago.

  • Operating Income: $5.6 million, with an operating margin of 8%.

  • Net Income: $7.8 million, or $0.05 per share.

  • Free Cash Flow: $2.8 million.

  • Full Year Revenue Guidance: Raised to $274.5 million to $276.5 million.

  • Full Year Non-GAAP Operating Income Guidance: Raised to $23 million to $24.5 million.

Release Date: May 07, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • Olo Inc (NYSE:OLO) reported a 27% year-over-year increase in total revenue for Q1 2024, reaching $66.5 million.

  • The company announced new POS integrations with NCR, Wix, and Q, enhancing its payment processing and data footprint.

  • Olo Inc (NYSE:OLO) successfully launched several major product enhancements, including smart cross-sells and AI-powered features, improving guest engagement and average order value.

  • The company's net revenue retention remained strong, exceeding 120% for the second consecutive quarter.

  • Olo Inc (NYSE:OLO) raised its full-year revenue and non-GAAP operating income guidance for 2024, reflecting confidence in continued growth and operational efficiency.

Negative Points

  • Despite strong revenue growth, Olo Inc (NYSE:OLO) faces challenges from increasing OpEx, which partially offset the gross profit gains.

  • The company noted ongoing macroeconomic uncertainties and industry-specific challenges such as food cost inflation and labor market tightness.

  • Olo Inc (NYSE:OLO) is still in the early stages of scaling its card-present functionality, with revenue contributions expected to start in 2025.

  • There was a slight decline in profitability from Q4 2023 to Q1 2024 due to seasonal factors and increased expenses from hosting the annual customer conference.

  • The company's free cash flow in Q1 was lower than expected, primarily driven by capital expenditures on software development.

Q & A Highlights

Q: Can you provide some qualitative perspective on what you are hearing from your large customer base now that U.S. relationships are integrating Olo Pay? A: (Noah Glass - CEO, Olo Inc) Customers are excited about the integration of Olo Pay and Olo Engage with POS systems, which allows them to process on-premise transactions and access comprehensive transaction data. This capability is seen as a "holy grail," enabling brands to understand and engage with customers across all transaction types, enhancing marketing and guest engagement strategies.

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Q: Is the estimate of doubling Olo Pay to $60 million still valid? A: (Peter Benevides - CFO, Olo Inc) Yes, the estimate remains that Olo Pay will double to over $60 million in revenue this year, focusing on card-not-present transactions, with card-present transactions expected to contribute in 2025.

Q: How are you thinking about free cash flow for the year? A: (Peter Benevides - CFO, Olo Inc) Olo generated positive free cash flow this quarter, which was about half of the operating income, mainly driven by capital software investments. This dynamic is expected to continue throughout the year, maintaining a positive free cash flow.

Q: Can you discuss the recently announced smart cross-sells product and its potential impact on RPU growth? A: (Noah Glass - CEO, Olo Inc) Smart cross-sells use AI to suggest personalized item recommendations during the ordering process, which has shown a 10% increase in basket size compared to traditional upsells. This feature, already adopted by over 10,000 locations, is expected to enhance guest engagement and average order value, contributing to RPU growth.

Q: What trends are you observing in consumer spending and engagement, and how is Olo positioned in this environment? A: (Noah Glass - CEO, Olo Inc) There is a noticeable trend of consumers trading down to less expensive dining options and some sensitivity to price increases. Olo is focused on helping restaurants manage labor costs and enhance customer engagement through data-driven personalization, which is increasingly important for maintaining traffic and managing operational challenges.

Q: How is the ramp-up of the professional services team progressing, and what impact is it having on customers? A: (Noah Glass - CEO, Olo Inc) The professional services team is expanding to help restaurants operationalize and optimize their digital strategies, particularly in digital marketing and data utilization. This service is becoming an essential part of Olo's offering, helping brands accelerate their digital maturity and enhance their operational efficiency.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.