Release Date: May 08, 2025

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

Positive Points

Olo Inc (NYSE:OLO) exceeded the high end of its revenue and non-GAAP operating income guidance ranges for Q1 2025. The company added approximately 2,000 net new locations, bringing the total to about 88,000 active locations. Olo Inc (NYSE:OLO) reported a 12% year-over-year growth in revenue per unit (RPU), reflecting strong customer expansion. The company secured significant customer signings, including a Catering Plus pilot with Chipotle and a full deployment deal for Olo Pay card presence with an existing enterprise customer. Gross revenue retention increased sequentially, remaining above 98%, indicating strong customer loyalty and satisfaction.

Negative Points

Free cash flow was negative $1.9 million in Q1 2025, compared to $2.8 million a year ago, primarily due to changes in payment terms with a partner. Gross margin is expected to decrease by 250 to 275 basis points for the full year 2025 as the company scales into the card present opportunity. The company experienced a one-time cost to revenue adjustment of approximately $1 million, impacting gross profit. Olo Inc (NYSE:OLO) faces macroeconomic uncertainties, including rising input costs and potential impacts from tariffs. The company anticipates challenges in maintaining gross profit growth due to difficult comparisons with the previous year.

Q & A Highlights

Warning! GuruFocus has detected 6 Warning Signs with OLO.

Q: Congratulations on the Chipotle pilot. Can you elaborate on what this deal means for Catering Plus and TOP25 brands, and discuss any adoption of core Olo offerings? A: (Noah Glass, CEO) We're excited about the Catering Plus pilot with Chipotle. Catering Plus is a significant upsell opportunity for existing customers and a way to land new customers, including TOP25 brands. Chipotle is a great example, using multiple modules beyond Catering Plus, such as Olo Pay and delivery services. This validates our strategy of using Catering Plus to engage with top brands like Chipotle, which traditionally use homegrown technology.

Q: Can you provide more details on the gross margin benefit from the cost of revenue adjustment and any future implications? A: (Peter Benavides, CFO) The one-time impact was about $1 million, with 2/3 from a new agreement with our processor and 1/3 from a favorable card mix. Going forward, we don't anticipate this mix to persist, but if it does, it would be upside to our model. We expect gross margins to decrease by 250 to 275 basis points as we scale into the card present opportunity.

Story Continues

Q: What are you hearing from customers post-liberation day regarding rising input costs? A: (Noah Glass, CEO) It's another challenge for the industry, but restaurants are non-discretionary, and people tend to opt for limited service restaurants during economic uncertainty. This benefits our customer base, as 2/3 are limited service restaurants. Enterprise chains are financially healthier than SMBs and tend to gain share during downturns. We've seen this pattern in past economic uncertainties.

Q: How do you view Olo's competitive positioning and any plans for new products or modules? A: (Noah Glass, CEO) We feel strong about our competitive position, evidenced by our high gross revenue retention. Our platform's order, pay, and engage suites are all growing. We're excited about the potential of Olo Pay card presence and the guest data flywheel strategy. There's significant opportunity in leveraging guest data for personalized marketing and enhancing guest experiences.

Q: Regarding the Chipotle win, were they using homegrown technology, or did you displace a competitor? A: (Noah Glass, CEO) Chipotle was using a homegrown catering platform. They saw value in Catering Plus for its features like tax-exempt status and house accounts, and in our additional modules that enhance their catering solution.

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

This article first appeared on GuruFocus.

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