Full Year 2023 Energy Recovery Inc Earnings Call

Operator: Good afternoon. My name is Ryan, and I will be your conference operator today. At this time, I would like to welcome everyone to the Olo, Inc. fourth quarter and full year 2023 earnings conference call. All lines have been placed on mute to prevent any background noise.

Good afternoon.

My name is Ryan and I will be conference operator today.

At this time I would like to welcome everyone to the Ono, Inc. Fourth quarter and full year 2023 earnings conference call.

All lines have been placed on mute to prevent any background noise.

Operator: After the speaker's remarks, there will be a question and answer session. If anyone should require operator assistance during the conference, please press star and zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the call over to Gary Fugis, Senior Vice President of Investor Relations. Please go ahead, sir.

After the Speakers' remarks, there will be a question and answer session.

If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.

As a reminder, this conference is being recorded.

I would now like to turn the call over to Gary You'll just senior Vice President of Investor Relations. Please go ahead Sir.

Gary Fugis: Thank you. Good afternoon, everyone, and welcome to OLO's fourth quarter and full year 2023 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'll 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.

Thank you good afternoon, everyone and welcome to all of those fourth quarter and full year 2023 financial results Conference call. Joining me today are no glass was founder and CEO and Peter have been a few days, although as CFO. During this call, we'll make forward looking statements, including but not limited to statements regarding our expectations of our business, our industry and future financial results.

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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 for a discussion of these material risks and uncertainties. Please refer to our Form 10-K that was filed today and our other SEC filings.

Gary Fugis: For a discussion of these material risks and uncertainties, please refer to our Form 10-K that 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 in our earnings release, which is available on the investor relations page of our website. Finally, in terms of our prepared remarks, or in response to your questions, we may offer additional metrics. Please be advised that this additional detail may be one-time only, and we may or may not provide an update in the future on these metrics. With that, I'll turn the call over to Noah.

Also during this call will present, both GAAP and non-GAAP financial measures reconciliations to the most directly comparable GAAP financial measures are available in our earnings release, which is available on the 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 maybe onetime in nature, and we may or may not provide an update in the future on these metrics.

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

Noah Glass: Thank you, Gary. Hi everyone. Thank you for spending time with us today. In 2023, Olo will again be instrumental in helping enterprise restaurants succeed at scale. Our platform facilitated more than $26 billion in gross merchandise volume across approximately 80,000 locations and approximately 700 brands. Additionally, we processed more than $1 billion in gross payment volume through OvoPay, a nearly 4x increase from 2022. Since our last earnings call, we've continued to scale. We had another record number of orders on Super Bowl Sunday, including record sales days across more than 40 brands.

Thank you Gary Hi, everyone. Thank you for spending time with us today in 2020 three although was again instrumental and helping enterprise restaurants succeed at scale.

Our platform facilitated more than $26 billion and gross merchandise volume across approximately 80000 locations and approximately 700 brands.

We processed more than $1 billion in gross payment volume through old okay.

Early for X increase from 2022.

Since our last earnings call. We've continued to scale, we had another record number of orders on Super Bowl Sunday, including record sales days across more than 40 brands.

Noah Glass: And since our last call, we've doubled the number of accounts on Borderless, all those passwordless checkout features, to more than 2 million opt-in guests. As a result of Team Olo's great work, we also delivered continued growth and profitability in 2020, increasing revenue by 23% year-over-year and expanding non-GAAP operating margins by close to 300. And we ended the year strong, fourth quarter revenue and non-GAAP operating income again exceeding the high end of their respective guidance. In Q4, we increased revenue 27% year-over-year, expanded non-GAAP operating margin to 11%, and deployed Marquis Enterprise Branch. In 2024, we expect to balance growth with increased profitability while investing in products, go-to-market, and data-related initiatives that we believe will help even more brands accelerate their. We believe no one is better positioned to help the restaurant brand leverage the power of digital commerce and data to drive guest lifetime value and operational efficiency. We ended the quarter with approximately 80,000 active locations, adding approximately 2,300 net new locations sequentially. Fourth quarter ARPU increased 38% year over year, and net revenue retention expanded for the sixth consecutive quarter to 120%. In December, we announced that Waffle House deployed Order for Pickup, Pay for Card Not Present transactions, and Borderless to power all guest logins and check-ins.

And since our last call we've doubled the number of accounts on borderlands, all those password list checkout feature to more than 2 million opt in guests.

As a result of team all those great work. We also delivered continued growth and profitability in 2023, increasing revenue by 23% year over year, and expanding non-GAAP operating margin by close to 300 basis points.

And we ended the year strong fourth quarter revenue and non-GAAP operating income again exceeding the high end of their respective guidance ranges.

In Q4, we increased revenue, 27% year over year expanded non-GAAP operating margin to 11% and deployed with marquee enterprise brands.

In 2024, we expect to balance growth with increased profitability, while investing in product go to market and data related initiatives that we believe will help even more brands accelerate their future.

We believe no one is better positioned to help the restaurant brands leverage the power of digital commerce and data to drive guest lifetime value and operational efficiencies.

We ended the quarter with approximately 80000 active locations, adding approximately 2300 net new locations sequentially.

Fourth quarter, <unk> increased 38% year over year, and net revenue retention expanded for the sixth consecutive quarter to 120%.

In December we announced that Waffle house deployed order for pick up pay for card not present transaction and border Lewis to power all guests log in and check out.

Noah Glass: This is Waffle House's first brand-wide digital investment, and they chose Olo for our, quote, exceptional online ordering experience, close quote, and the, quote, strategic and financial value of Olo's reliable platform, close. We're excited to be part of the Waffle House success story, and we believe we can expand further with this iconic brand as we deliver value. Q4 was the sixth consecutive quarter where an existing enterprise customer expanded into our payment system, as a large casual dining company launched Olapay across all of their content. This brand was looking to support digital wallets like Apple Pay and Google Pay, reduce fraud and increase authorization, and Streamline, their charged back managed. We believe Olopay addresses all of those problems.

This is waffle houses first brand wide digital investment and they chose <unk> for our quote exceptional online ordering experience close quote and quote strategic and financial value of all those reliable platform close quote.

We're excited to be part of the Waffle House success story, and we believe we can expand further with this iconic brand as we deliver value.

Q4 was the sixth consecutive quarter, where an existing enterprise customer expanded into our payment suite.

A large casual dining company launched overpay across all of their concepts.

This brand was looking to support digital wallets like Apple pay and Google pay reduce fraud and increase authorization rates and streamline their chargeback management.

We believe overpay addresses all of those needs.

Noah Glass: We're also excited to share that Five Guys has expanded its Olo relationship into the Engage Suite's guest data platform and marketing module. The GDP aggregates data from guest digital touchpoints to help Five Guys analyze purchase, generate lifetime value prediction, and optimize guest acquisition. Marketing activates this rich data through email and text message journeys to re-engage lapsed guests, surveys new customers to create a powerful feedback loop, and powers targeted email campaigns to drive sales. Five guys joined us in 2009 as our first enterprise brand, and we're now helping them leverage their data to inform business decisions and drive guest lifetime value. Two of our key differentiators for large enterprises are our modularity and open architecture.

We're also excited to share that five guys has expanded its older relationship into the engaged suites guest data platform and marketing module.

The G D P aggregates data from guests digital touch points to help five guys analyzed purchase behavior.

Lifetime value prediction.

And optimize guest acquisition.

Marketing activates this rich data through email and text message journey to Reengage lapsed guest surveys new customers to create a powerful feedback loop and powers targeted E mail campaigns to drive sales.

Five guys joined us in 2009, as our first enterprise brands and we're now helping them leverage their data to inform business decisions and drive guest lifetime value.

Two of our key Differentiators for large enterprises are our modularity and open architecture brands can buy our full suite or utilize specific modules to supplement existing technology.

Noah Glass: Brands can buy our full suite or utilize specific modules to supplement existing technology, and they can work with our 300+ partner integrations. A great example of this is Wingstop, who we're pleased to say will be continuing its strategic partnership with Olo by leveraging our AI-powered voice ordering integration to digitize their phone awareness. It's a great validation of our flexibility in working with the largest brands, especially those who share our vision of digitizing every transaction and using guest data to drive a more personalized guest experience. Peter will share more about how our evolving Wingstop relationship impacts our finances. It was also another successful quarter with emerging enterprise brands, which we define as brands with 5 to 99 locations today and aspirations to scale. We deployed multiple modules with brands like Barburritos, Carrot Express, Small Sliders, and Texas De Brazil.

And they can work with our 300 plus partner integrations.

Great example of this is wingstop, we're pleased to say, we'll be continuing its strategic partnership with Ono by leveraging our AI powered voice ordering integrations to digitize their phone in orders, it's a great validation of our flexibility in working with the largest brand, especially those who share our vision of digitizing.

Every transaction and using guest data to drive a more personalized guest experience.

Peter will share more about how our evolving wingstop relationship impact our financials.

It was also another successful quarter with emerging enterprise brands, which we define as brands with five to 99 locations today and aspiration to scale.

We deployed multiple modules with brands like Barbie Redoes Carat Express.

Small sliders and Texas de Brazil.

Noah Glass: Merging enterprises has become a meaningful contributor to location count since we doubled down on our go-to-market strategy for this brand category about 18 months ago. Today, approximately 14,000 of our total active locations are from emerging enterprises brands, and we have room to grow. Winds here drive ARPU through multi-module adoption at the start of the release, and they can help drive incremental growth by adding modules and locations over time. To scale successfully, emerging enterprise brands need a secure, reliable, and scalable platform with the flexibility to integrate across multiple vendors. And that's exactly why Olo is winning.

Emerging enterprise has become a meaningful contributor to location count since we doubled down on our go to market strategy for this brand category about 18 months ago.

Today, approximately 14000 of our total active locations are from emerging enterprise brands and we have room to grow.

Here drive RP through multi module adoption at the start of the relationship and they can help drive incremental growth by adding modules and locations over time.

The scale successfully emerging enterprise brands need a secure reliable and scalable platform with flexibility to integrate across multiple vendors and that's exactly why <unk> is winning here.

Noah Glass: An essential part of our ability to win with brands is our relentless focus on innovation. And in January, we announced nine new features as part of our Winter 2023 release announcement. OLO COO Joe Lambert highlighted three of these in the video announcement available at OLO.com. After launching CateringPlus in Q3, we followed up in Q4 with new functionality that allows brands to recognize and authenticate the tax-exempt status of a guest. This makes it easier than ever for restaurants to serve the 1.7 million tax-exempt organizations in the U.S. We also launched split check capabilities as part of our pay at table service, so that guests simply scan a QR code on the receipt, select how to divide the check, and pay through each guest's personal device.

An essential part of our ability to win with brands is our relentless focus on innovation and in January we announced nine new features as part of our winter 2023 release announcements.

Although CLO Joe Lambert highlighted three of these in the video announcement are available at <unk> Dot com.

After launching catering plus in Q3, we followed up in Q4 with new functionality that allows brands to recognize and authenticate the tax exempt status of a gap.

This makes it easier than ever for restaurants to serve the $1 7 million tax exempt organizations in the U S.

We also launched split check capabilities as part of our pay at table solution. So that guests simply scan a QR code on the receipt.

How to divide the check and pay through each guests personal device.

Noah Glass: Brands with Engage integrated into Pay at Table can also trigger post-transaction surveys to collect in-the-moment guest experience feedback. And still, the biggest story in our winter release was expanding borderless availability. Previously available only to OloPay customers, BordaList is now accessible to all Olo customers who use CERF.

Brands with engage integrated into pay at table could also trigger post transaction surveys to collect in the moment guest experience feedback.

And still the biggest story in our winter release was expanding border lists availability.

Previously available only to although pay customers Bordeaux is now accessible to all the customers who use or all those white labeled ordering interface. That's part of the order suite.

Noah Glass: Since Olo's white-labeled ordering interface is part of the order system, more Olo restaurant brands will be able to provide a passwordless and convenient sign-in and seamless checkout experience, which is shown to help brands increase guest account sign-up, grow expected order frequency, and improve checkout conversion rates by up to 7.5%. This is a great first step in giving brands the ability to simplify the guest checkout process and capture more data to help them run their operations more efficiently and increase guest lifetime value. As we look forward, we believe we're still early on in the industry's journey to fully leveraging the promise of digital. NPD data shows that digital accounted for 16% of U.S. restaurant orders in 2022.

More although restaurant brands will be able to provide a password list and convenient sign it and seamless checkout experience, which has shown to help brands increased guest account balance.

<unk> expected order frequency and improved checkout conversion rates I up to seven 5%.

This is a great first step in getting brands the ability to simplify the guest checkout process and capture more data to help them run their operations more efficiently and increase guest lifetime value.

As we look forward, we believe we're still early on in the industry as a journey and fully leveraging the promise of digital.

N P. D data shows that digital accounted for 16% of U S restaurant orders up one point from 2022.

Noah Glass: There's still a ton of opportunity in front of us to help the restaurant industry transact more through digital channels to make themselves more productive and to capture more data that they can utilize to help every guest feel like a regular. In 2024, we will continue to invest to help accelerate brands along their digital journey. In order to do so, we'll invest in tooling to make Olo and our customers more efficient in how they use the platform. And we'll add functionality to our catering module to help brands manage orders. Notification and accounts receivable.

There's still a ton of opportunity in front of us to help the restaurant industry transact more through digital channels that make themselves more productive and to capture more data that they can utilize to help every guest feel like a regular.

In 2024 will continue to invest to help accelerate brands along their digital journey.

In order, we'll invest in tooling to make all O and our customers more efficient in how they use the platform and will add functionality to our catering module to help brands manage order approvals notification and accounts receivable.

Noah Glass: In pay, we'll continue our work to launch full card present functionality in the second half of the year. We see great potential in selling card presence into our existing base, starting with the brands that have already adopted our card not presence offer, and in Engage, we'll continue to add enterprise-grade functionality our customers are asking for, like more powerful analytics and GDP integration, so they can leverage their data to drive more traffic and frequency. Within our platform, we'll work to extend borderless access to our entire installed base and further leverage our scale to power data-driven solutions for guests and brands. We can drive new customers into our marketing funnel through industry reports, power new features like smart upsells and dynamic pricing, and provide actionable insights like order-ready AI for guests and benchmarking solutions for brands.

In PE, we will continue our work to launch full card present functionality in the second half of this year.

See great potential in selling card presence into our existing base starting with the brands that have already adopted our card not present offering.

And in engage will continue to add enterprise grade functionality, our customers are asking for it like more powerful analytics and G. D P integration.

So they can leverage their data to drive more traffic and frequency.

Within our platform will work to extend burda with access into our entire installed base and further leverage our scale to powered data driven solutions for gas and brand.

We can drive new customers into our marketing funnel through industry reports power new features like smart Upsells and dynamic pricing and provide actionable insights like order ready AI forget.

And benchmarking solutions for brands.

Noah Glass: In go to market 2024, it is about driving sales across all three suites and our brand category, will continue to educate the top 25 on how our modular platform can enhance what they have already built or drive cost savings and platform-level innovation by cutting over to OLE, and Enterprise will lead with expansion within our impressive install. And in Emerging Enterprise, we'll stay focused on fast-growing concepts that drive location counts and our. We had a great year, and the Ola team never lost focus on delivering for our brand. I'm proud of what we accomplished in 2020.

And go to market 2024, it is about driving sales across all three suites and our brand category.

We'll continue to educate the top 25 on how our modular platform to enhance what they have already built or drive cost savings and platform level innovation like cutting over to OLED.

In enterprise will lead with expansion within our impressive installed base.

And in emerging enterprise, we will stay focused on fast growing concepts drive location count and ARPA.

We had a great year and the older team never lost focus on delivering for our brands.

I'm proud of what we accomplished in 2023, and we're more excited than ever about the opportunities for 2024 and beyond.

Peter Benavides: And we're more excited than ever about the opportunities for 2024 and beyond. I'll now turn the call over to Peter. Thanks, Noah.

I'll now turn the call over to Peter Peter.

Peter.

Thanks, Noah today, I'll review, our fourth quarter results as well as provide guidance for the first quarter and the full year 2024.

Peter Benavides: Today, I'll review our fourth-quarter results, as well as provide guidance for the first quarter of the full year 2024. In the fourth quarter, total revenue was $63 million, an increase of 27% year-over-year. Platform revenue in the fourth quarter was $61.9 million, an increase of 27% year-over-year. We saw growth across all three product suites, most notably Olope, which is tracking ahead of our expectations. I'll provide more color on this momentarily.

In the fourth quarter total revenue was $63 million, an increase of 27% year over year.

Platform revenue in the fourth quarter with $61 9 million, an increase of 27% year over year.

We saw growth across all three product suites, most notably all of pain, which is tracking ahead of our expectation.

I'll provide more color on this momentarily.

Peter Benavides: In terms of key metrics, ARPU for the fourth quarter was approximately $787, representing a 38% increase year-over-year and a 6% increase sequentially. Further growth in ARPU was driven by continued progress in driving the average number of modules adopted by our customer base, including higher ARPU solutions like OLAP. Net revenue retention was approximately 120%, an increase of approximately 100 basis points sequentially. And lastly, we added approximately 2,300 net new active locations to the platform sequentially, ending the quarter with approximately 80,000 active locations. This reflects approximately 5500 location additions for the year net of subway, which was above the revised range we provided last quarter. This strong result was driven primarily by Waffle House opening at the majority of their locations in the quarter. For the remainder of the Q4 financial metrics disclosed, unless otherwise noted, I will be referencing non-GAAP financial measures. Gross profit for the fourth quarter was $40.8 million.

In terms of key metrics are proof for the fourth quarter was approximately $787.

Presenting a 38% increase year over year, and a 6% increase sequentially.

Further growth in <unk> was driven by continued progress in driving the average number of modules adopted by our customer base, including higher RP solutions like Oh, Okay.

Net revenue retention was approximately 120% an increase of approximately 100 basis point sequentially.

And lastly, we added approximately 2300 net new active locations the platform sequentially ending the quarter with approximately 80000 active locations.

This reflects approximately 5500 location additions for the year net of subway, which was above the revised range, we provided last quarter.

This strong result was driven primarily by waffle house deploying at the majority of their locations in the quarter.

For the remainder of the Q4 financial metrics disclosed unless otherwise noted I will be referencing non-GAAP financial measures.

Gross profit for the fourth quarter was $48 million. This compares to $37 $1 million a year ago.

Peter Benavides: This compares to $37.1 million 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 old. Sales and marketing expense for the fourth quarter was $9.7 million, or 15% of total revenue.

The year over year growth in gross profit was driven by continued revenue growth, partially offset by the increasing revenue mix a little okay.

Sales and marketing expense for the fourth quarter was $9 $7 million or 15% of total revenue. This compares to $7 million or 14% a year ago.

Peter Benavides: This compares to $7 million, or 14% a year ago. Research and development expense for the fourth quarter was $13.7 million, or 22% of total revenue, compared to $16.1 million, or 32% of total revenue a year ago. General and administrative expense for the fourth quarter was $10.5 million, or 17% of total revenue.

Research and development expense for the fourth quarter was $13 $7 million or 22% of total revenue compared to $16 $1 million or 32% of total revenue a year ago.

General and administrative expense for the fourth quarter was $10 $5 million or 17% of total revenue. This compares to $10 $9 million and 22% a year ago.

Peter Benavides: This compares to $10.9 million and 22% a year ago. Operating income for the fourth quarter was $6.8 million compared to $3.1 million a year ago. Operating margin was approximately 11% in Q4 as we generated operating leverage both sequentially and on a year-over-year basis. Net income in the fourth quarter was $8.5 million, or five cents per share based on approximately 174.4 million fully diluted weighted average shares outstanding.

Operating income for the fourth quarter was $6 $8 million compared to $3 $1 million a year ago opt.

Operating margin was approximately 11% in Q4, as we generated operating leverage both sequentially and on a year over year basis.

Net income in the fourth quarter was eight $5 million or five cents per share based on approximately $174 4 million fully diluted weighted average shares outstanding.

Peter Benavides: For the full year of 2023, revenue of $228.3 million increased 23%, and ARPU of just over $2,700 rose 23%; total pay revenue was approximately $30 million in the year. Brands utilize 3.5 modules per location on average as of December 31, 2023, versus three average modules per location as of year-end 2022. Non-GAAP operating margin in 2023 was 8%, up approximately 270 basis points from 5.3% in 2022 Turning our attention to the balance sheet and cash flow statement, our cash equivalents in short and long-term investments totaled approximately $388 million as of December 31, 2023. Pursuant to the share repurchase program, which we announced in September 2022, in the fourth quarter, we repurchased 2.8 million shares for a total of approximately $15 million.

For the full year of 2023 revenue of $228 $3 million increased 23% in <unk>.

Over $2700 rose 23%.

<unk> revenue was approximately $30 million in the year.

Brands utilize 3.5 modules per location on average as of December 31, 2023.

Versus three average module per location.

Year end 2022.

non-GAAP operating margin in 2023 was 8% up approximately 270 basis points from five 3% in 2022.

Turning our attention to the balance sheet and cash flow statement.

Our cash cash equivalents and short and long term investments totaled approximately $388 million as of December 31 2023.

Pursuant to the share repurchase program, which we announced in September 2022 in the fourth quarter, we repurchased two 8 million shares for a total of approximately $15 million since the introduction of our share repurchase program. We have repurchased 11 5 million shares for 78 million.

Peter Benavides: Since the introduction of our share repurchase program, we have repurchased 11.5 million shares for $78 million. We have approximately $22 million remaining on our authorization. Net cash provided by operating activities was $5.8 million in the quarter as compared to roughly break even in the quarter a year ago. Pre-cash flow was $2.7 million compared to negative $1.6 million a year ago.

Dollars.

We have approximately $22 million remaining on our authorization.

Net cash provided by operating activities was $5 $8 million in the quarter as compared to roughly breakeven in the quarter a year ago.

Free cash flow was $2 $7 million compared to negative $1 $6 million a year ago.

Peter Benavides: I'll wrap up by providing our guidance for the first quarter of full year 2024. For the first quarter of 2024, we expect revenue in the range of $64 million and $64.5 million and non-GAAP operating income in the range of $5.1 million and $5.5 million. For the fiscal year 2024, we expect revenue in the range of $269 million and $272 million and non-GAAP operating income in the range of $22 million and $24 million. Here are a few things to keep in mind as you consider our outlook for the year. We continue to take a prudent approach to our outlook for the year.

I'll wrap up by providing our guidance for the first quarter and full year 2024 for.

For the first quarter of 2024, we expect revenue in the range of $64 million and $64 $5 million and non-GAAP operating income in the range of $5 1 million and $5 $5 million.

For the fiscal year 'twenty 'twenty four we expect revenue in the range of $269 million and $272 million and non-GAAP operating income in the range of $22 million and $24 million.

A few things to keep in mind as you consider our outlook for the year.

We continue to take a prudent approach to our outlook for the year.

Peter Benavides: We expect trends in the restaurant industry will remain similar to what we saw throughout 2023, with consistent growth in online ordering and a continued need to improve efficiency and offset rising costs in an uncertain macro environment. Our guidance once again assumes a two-thirds, one-third split between incremental revenue from existing projects currently in deployment and new projects signed and deployed during the year. Revenue growth will continue to be driven primarily by ARPU expansion as OLAPAY scales and we have further success selling multiple modules in our Order and Engage suite. We expect Olopay revenue to approximately double in 2024 as we add more brands to the offering. Please note, we are not anticipating any material revenue from card-present transactions, which we expect will begin to be a growth driver in 2025. In terms of locations, we expect to add approximately 5,000 net new locations this year.

We expect trends in the restaurant industry will remain similar to what we saw throughout 2023 with consistent growth in online ordering a continued need to improve efficiency and offset rising costs in an uncertain macro environment.

Our guidance once again assumes a two thirds one third split between the incremental revenue from existing projects currently in deployment and new projects signed and deployed in year.

Revenue growth will continue to be driven primarily by our two expansion as oil pay scales and we have further success selling multiple modules and our order and engage suites.

We expect Oulu pay revenue to approximately double in 2024, as we add more brands to the offering.

Please note we are not anticipating any material revenue from card present transactions, which we expect will begin to be a growth driver in 2025.

In terms of locations, we expect to add approximately 5000 net new locations this year.

Peter Benavides: Our 2024 guidance reflects the impact of our updated Wingstop relationship. We now expect the revenue contribution of the existing relationship to extend through the end of Q2 2024. Starting in Q3, Wingstop will begin using our voice ordering module, as Noah mentioned.

Our 2024 guidance reflects the impact of our updated wingstop relationship.

We now expect the revenue contribution of the existing relationship to extend through the end of Q2 2024.

Starting in Q3, Wingstop will begin using our voice ordering module as Noah mentioned as a result of this updated relationship. The approximately 1800 wingstop locations will remain in our location count metric with Arco lowered as a single module customer.

Peter Benavides: As a result of this updated relationship, the approximately 1,800 Wingstop locations will remain in our location count metric, with ARPU lowered as a single module customer. In terms of gross margin, we would expect 150 to 200 basis points of sequential margin decline throughout the year as OLOPE continues to become a larger portion of our revenue mix. Based on our current expectations, we would expect 2024 to be the trough in terms of gross profit growth. For operating expenses, we will continue to prudently manage our cost structure while funding our various growth initiatives. We have made significant progress building out and rebalancing our go-to-market teams and would expect sales and marketing growth to moderate from recent levels. Note that our annual user conference, BEYOND4, will take place in March, which will result in higher marketing expenses of approximately $1 million in Q1.

In terms of gross margin, we would expect 150 to 200 basis points in sequential margin decline throughout the year as all opaque continues to become a larger portion of our revenue mix based on our current expectations. We would expect 2024 to be the trough in terms of gross profit growth.

For operating expenses, we will continue to prudently manage our cost structure, while funding our various growth initiatives. We have made significant progress in building out and rebalancing. Our go to market teams and would expect sales and marketing growth to moderate from recent levels.

Note that our annual user conference beyond four will take place in March which will result in higher marketing expenses of approximately $1 million in Q1.

Peter Benavides: Similarly, we'll begin to generate operating leverage in R&D now that much of the investment in the engage and pay suites is behind us. In GNA, we also expect to generate operating leverage, but note that the timing of compensation increases will be a Q2 event in 2024 instead of a Q1 event as they were in 2023. To wrap up, Q4 was a strong finish to a solid year.

Similarly will begin to generate operating leverage in R&D now that much of the investment in the engage in pay suites is behind us.

In G&A, we also expect to generate operating leverage but note that the timing of compensation increases will be a Q2 event in 2024 instead of a Q1 event as they were in 2023.

To wrap up Q4 was a strong finish to a solid year, we expect a balanced growth with continued operating leverage in 2024. The strategy is working and we believe we can continue to drive future growth by landing and expanding within our enterprise and emerging enterprise brand.

Operator: We expect to balance growth with continued operating leverage in 2024. The strategy is working, and we believe we can continue to drive future growth by landing and expanding within our enterprise and emerging enterprise brands. With that, I'd now like to turn it over to the operator to begin the Q&A session.

With that I'd now like to turn it over to the operator to begin the Q&A session operator.

Operator: Thank you. Ladies and gentlemen, we will now be conducting a question and answer session. If you would like to ask a question, please press star and 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star and 2 if you would like to remove your question from the queue.

Thank you.

Ladies and gentlemen, we will now be conducting a question and answer session.

If you would like to ask a question. Please press star and one on your telephone keypad.

Confirmation tone will indicate your line is in the question queue.

You May press Star two if you would like to remove your question from the queue.

Matt Swanson: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start key. Ladies and gentlemen, we will wait for a moment while we poll for questions. Our first question is from Matt Hedberg with RBC. Please go ahead. Great, thank you. This is actually Matt Swanson. I'm for Matt.

All participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Ladies and gentlemen, we will wait for a moment, while we poll for questions.

Our first question is from Matt Hedberg with RBC. Please go ahead.

Oh, great. Thank you this is actually Matt Swanson from my.

Matt Swanson: Congratulations on the quarter and congratulations on the strong traction we've seen from OloPay so far. The gross margin commentary for next year was super helpful, as well as the commentary on being in the trough. Could you give us just some basic framework of how we should think about recovery from the trough? Maybe recovery is not the right word, but how we come out of that, and kind of the shape of the curve.

Since on the quarter and congratulations on the strong traction we have seen from <unk> pay so far the gross margin commentary for next year. It was super helpful as well as the commentary about being the top could you give us just some basic framework of how we should think about the recovery from the trough or maybe a recovery is not the right word, but how we come out of that.

Kind of the shape of the curve. Thank you.

Peter Benavides: Thank you. Yeah, it's a great question, Matt. Thank you. So, the way to think about it, you know, just based on the commentary around net active locations, 5,000 targeted for the full year, ramping throughout, coupled with the commentary on gross margin trends throughout the quarters would then reflect sort of a trough in the back half of 24, which then sets us up for a reacceleration in 2025. And the reason for that reacceleration is the combination of hard present coming to market, which we're pretty hopeful about the progress and the success we'll have there, coupled with continued penetration of both order and engage, both of those being high margin, high gross profit dollar product modules. So it's really the combination of those two things kind of starting to play out in the back half of 24 into 25 that gives us conviction in this year being the trough from a gross profit growth perspective.

Yeah, It's a great question, Matt. Thank you so the way to think about it you just based on the commentary around net active locations 5000 targeted for the full year ramping throughout couple.

Coupled with the commentary on gross margin trends.

Throughout the throughout the quarters would then reflect sort of a trough in the back half of 'twenty, four which then sets us up for a reacceleration in 2025 and the reason for that Reacceleration or is the combination of card present coming to market, which where we are.

Pretty hopeful on the progress.

And the success, we'll have there.

Coupled with our continued penetration of both water and engage both of those being.

High margin high gross profit dollar.

Product modules. So it's really the combination of those two things I'm kind of starting to play out in the back half of 'twenty four into 'twenty five that gives us conviction in this year being the trough from a gross profit growth perspective.

Noah Glass: And then if I could just ask one more, maybe more high-level question on the customer data platform. Could you just talk us through a little bit on how that product is responding, but kind of specifically segmenting your customers by sizes from enterprise to emerging enterprise and below that? And just, is it a good fit for kind of all three cohorts or just kind of what you're seeing from customer conversations? Matt, great question. This is Noah here.

And then if I can just ask one more maybe more high level question on the customer data platform could you just talk us through a little bit on how that product is resonating with the kind of specifically segmenting your customers buy sizes from enterprise to emerging enterprise and below that and just is it a good fit for kind of all three cohorts.

Or just kind of what you're seeing from customer conversations.

That's a great question. This is Noah here, so we're thrilled about being able to announce the five guys partnership with although engage which is the larger suite that contains in it our customer data platform, which we call a guest data platform.

Noah Glass: So we're thrilled about being able to announce the Five Guys partnership with Olo Engage, which is the larger suite that contains in it our customer data platform, which we call a guest data platform. What Five Guys is adopting and has now implemented is the guest data platform and also marketing, two components of the Engage suite. They're not alone.

What five guys, who is adopting and has now implemented the guest data platform and also marketing two components of the engage suite.

They're not alone. We've also had wins in emerging enterprise that we've announced and we've announced a win with CP Chem, California Pizza kitchen in the enterprise segment recently as well.

Noah Glass: We've also had wins in emerging enterprises that we've announced, and we announced a win with CPK, California Pizza Kitchen, in the enterprise segment recently as well. I think these are really exciting proof points for us and for our customer base to see brands adopting the marketing stack and being able to use all of the data that they can see from the order platform, from the payment platform, to ultimately personalize the guest experience and how we communicate with guests, and how we personalize the guest ordering experience. This is, I think, a really key part of the OLO story, and I think the Engage platform is really responding broadly. And one thing that I wanted to mention connected to the success we're seeing with Engage is OLO providing professional services to brands to get set up with the Engage suite, to make sure it's operational, to make sure it's then optimized, and to play the role of either maintaining the Engage suite or training the restaurant brand in how to use the Engage suite. This is a new leg of the stool in our go-to-market motion. We have sales engineers and solutions architects.

I think these are really exciting proof points for us and for our customer base to see brands adopting the marketing stack and being able to use all of the data that they can see from the order platform from the pay platform to ultimately personalize the guest experience and how we communicate with guests and how we personalize the <unk>.

The ordering experience.

This is I think a really key part of the old story and I think the engage platform is really resonating broadly and one thing that I wanted to mention connected to you. The success, we're seeing with engage.

Is.

Although providing professional services to brands to get set up with the engage suite to make sure its operational to make sure. It's then optimize and to play the role of either maintaining the engage suite or training the restaurant brand and how to using each suite. This is a new leg of the stool in our go to market motion.

We have sales engineers solutions architects now we have professional services as a function of it although we look at other SaaS peers and see that that is a healthy chunk of their revenue, it's quite small relatively speaking for although today.

Noah Glass: Now we have professional services as a function at OLO. We look at other staff peers and see that that is a healthy chunk of their revenue. It's quite small, relatively speaking, for OLO today.

Stephen Sheldon: But as our chief revenue officer, Diego Panama, likes to say, every dollar of professional services revenue leads to a multiple of software revenue. And we're excited to see that playing a role in CPK, playing a role in Five Guys, and enabling our restaurant brands to embrace Engage, speed up their time to value with the guest data platform and all the other components of the Engage suite to really personalize the experience for guests and ultimately make every guest feel like a regular. Thank you. Our next question is from Stephen Sheldon with William Blair. Please go ahead.

But as our Chief revenue Officer, Diego, Panama likes to say.

Every dollar of professional services revenue leads to a multiple of software revenue and we're excited to see that playing a role in sea teekay playing a role in five guys.

Our restaurant brands to embrace engage speed up their time to value with the guests data platform and all the other components of the engage suite to really personalize the experience for guests and ultimately make every guest feel like a regular.

Thank you.

Thank you.

Thank you.

Our next question is from Stephen Sheldon with William Blair. Please go ahead.

Peter Benavides: Hey, thank you, and nice results here. First, just wanted to make sure I caught the right numbers on Olopay. Did you say that Olape was about $30 million in revenue for 2023 and then expect that to roughly double in 2024? Just wanted to make sure I got that right.

Hey, Thank you and nice results here.

First just wanted to make sure I caught the right numbers on at all okay.

Did you say that that Oh, okay. It was about $30 million in revenue for 2023, and then expecting that to roughly double in 2024, just wanted to make sure I got that right.

Peter Benavides: Yep, that's right. Okay, perfect. And then as we think about, when you think about the adoption of card-present activity within Olopay, when do you think that could start to move the needle for the business after you start rolling it out or making it generally available in the second half of the year? Just based upon the conversations you're having with customers, are you seeing a lot of interest for you to come in and support that card-present activity? And then, can you also remind us of the gross margin implications of that? This is Noah.

Yes, that's right.

Okay perfect.

Perfect.

Then as you think about.

When you think about the adoption of card present activity within all okay. When do you think that could start to move the needle for the business that after you start rolling it out or making that generally available in the second half of the year.

Just based upon the conversations youre, having with customers are you seeing a lot of interest for you to come in and support that card present activity.

And then can you also remind us of the gross margin implications as that ramps.

Yeah. This is Noah I'm going to start on that one and then hand it over to Peter for the second part.

Noah Glass: I'm going to start on that one and then hand it over to Peter for the second part. Just a reminder that Olopay CardPresent is something that we actually began the journey with in 2023, initially with kiosk transactions. And we had our first kiosk provider with an Olopay SLED to take payment CardPresent. Later in 2023, we added a second kiosk provider. We've now added a third kiosk provider, and that's already really proving the ARPU potential of Olopay CardPresent. Again, I'll let Peter speak to that.

Just a reminder, that Oh little pay card presence is something that we actually began the journey with in 2023, initially with kiosk transactions and we had our first kiosk provider with an OLED <unk> sled to take payment card present.

Earlier in 2023, we added a second kiosk provider, we've now added a third kiosk provider.

That's already really proving out the <unk> potential of although pay card present again, I'll, let peter speak to that.

Noah Glass: The lion's share of CardPresent transactions are done at the point-of-sale, with payment typically connected to the point-of-sale. And that is the movement that we're engaged in now and planning to have in the market in the second half of 2024. We have, as you know, over 30 point-of-sale partnerships, really all of the point-of-sale providers that serve the enterprise market. And we have those partnerships as an open platform, primarily for Olo to play the role of order injection, and now we're adding on to that with payment processing. And these point-of-sale providers typically have a lot of different payment processors that they work with as well. The really great thing about Olo pressing into this space is that customer advocacy, that we're having customers saying, I've seen the results now of OloPay card not present for digital transactions. I've seen the benefit of mobile wallets. I've seen the benefit of passwordless login with borderless capability.

Lions share of card present transactions are done on the point of sale with payment typically connected to the point of sale and that is the motion that we're engaged in now in planning to have in market in the second half of 2024.

We have as you know over 30 point of sale partnerships really all of the point of sale providers that serve the enterprise market and we have those partnerships as an open platform.

Primarily for although to play the role of order injection and now we're adding on to that with payment processing and these point of sale providers typically have a lot of different payment processors that they work with as well.

The really great thing about although pressing into this space is that customer advocacy that we're having customers, saying I've seen the results now of all the pay card not present for the digital transactions have seen the benefit of mobile wallets I've seen the benefit of password list log in with the board was capability.

Peter Benavides: I've seen better results in authorization rates, fighting fraud, chargebacks, et cetera. And now I want that same capability for in-restaurant transactions, and I want to unify my view of that guest for digital and non-digital transactions so I can see all transactions through OloPay. And part of the secret sauce is that, unlike other payment processors, Olo is able to pull that data of those card-present transactions, inclusive of the items and the customizations of each dish, back into the guest data platform, connected to that guest profile. And so the data imperative is so strong for our brand to really collect all data from opt-in guests and be able to serve them better, personalize their experience, increase conversion, increase frequency, spend, and ultimately lifetime value.

Seen better results and authorization rates fighting fraud charge backs et cetera.

And now I want that same capability for in restaurant transactions and I want to unify my view of that guest for digital and non digital transaction. So I can see all transactions through old okay.

Part of the secret sauce is that unlike other payment processors all of those able to then pull that data of those card present transactions inclusive of the items and the customization of each dish back into the guest data platform connected into that guest profile.

The data imperative is so strong for our brands to really collect all data from opt in guests and be able to serve them better personalize their experience increased conversion increased frequency and spend and ultimately lifetime value. That's why we're having such great customer advocacy and why we're excited about expanding our.

Peter Benavides: That's why we have such great customer advocacy and why we're excited about expanding our relationship with the point-of-sale providers to be a payment option for OloPay card presence in the back half of 24. Yeah, just to pile on there in terms of the adoption curve, Stephen. So, what we've heard from customers through the Card Not Present conversations is that there is a cohort of existing Card Not Present customers that are waiting for Card Not Present to arrive. They've shared with us their intent to use that platform as it becomes available because they want that kind of single view of the guests, the single view of all the payment transactions, and they see a lot of value in what Noah just laid out there. And then there are folks that aren't on Card Not Present today because we don't have Card Present.

<unk> shipped with the point of sale providers to be a payment option for all the pay card presence in the back half of 'twenty four.

Yeah, and just to pile on there in terms of the adoption curves Stephen so.

You know what we've heard from customers through the card not present conversations is that theres a cohort of existing card not present customers that are waiting for card present to arrive they've they've shared with us their intent to use that platform as it becomes available because they want that kind of single view of.

I guess the single view of all the payment transactions and see a lot of value what what no. It just just laid out there and then there's folks that arent on card not present today, because we don't have card present. So we think that's another way or another opportunity rather as card present becomes available it helps to unlock incremental.

Peter Benavides: So, we think that's another way or another opportunity, rather, as Card Present becomes available. It helps to unlock incremental relationships, you know, for those that are waiting for the product to arrive. And I think we have a really good jumping-off point in terms of, you know, from a lead gen perspective. We shared in our prepared remarks that this past year we processed over $1 billion of DPV for the Card Not Present use case. And if you tie that back to the 16 percent digital that Noah shared in his prepared remarks, that means just within the installed base that are using Card Not Present today, there's a six, more than six X opportunity for Card Present just within that installed base.

Relationships.

For those that are that are waiting for the product to arrive and I think where we have a really good jumping off point in terms of.

From a from a lead Gen perspective, as we shared in our prepared remarks that this past year, we processed over $1 billion of P. P V.

The card not present.

Use case, and if you tie that back to the 16% digital that nowhere shared in his prepared remarks that means just within the installed base that are using card not present today. There is a six more than six X opportunity for card present, just within that installed base, so call it over $6 billion of existing customers.

<unk> using overpays payment processing that would be immediately addressable escort president is available. So it was those are the things that get us really excited about.

Peter Benavides: So call it over $6 billion of existing customers using OloPay's payment processing that would be immediately addressable as Card Present is available. So those are the things that get us really excited about that opportunity. And there's work to do, but again, we hope to be in the market, call it back half of 24 with revenue contribution in 25. And then, sorry, lastly, I know you mentioned gross margins. So from a gross margin perspective, that would be accretive to the overall OloPay and overall platform margin profile, given that margins tend to be a bit higher for a Card Present transaction versus a Card Not Present transaction. And then, of course, with incremental scale comes better pricing. So that would also help on the Card Not Present side as well. Great, I appreciate all the color.

That opportunity and and you know, there's there's work to do but again, we hope to be in market called the back half of 'twenty four with with revenue contribution in 'twenty five.

And then I'm, sorry, Lastly, I know you mentioned gross margins. So from a gross margin perspective that would be accretive to the overall polo pay and overall platform margin profile given that.

Margins tend to be a bit higher for a card present transaction.

Versus a card not present transaction and then of course with incremental scale comes better pricing. So that would also help on the card not present side as well.

Great I appreciate all the color.

Thank you.

Next question is from the line of Eric Martin Hosey with Lake Street Capital markets. Please go ahead.

Peter Benavides: Thank you. Our next question is from the line of Eric Martinuzzi with Lake Street Capital Markets. Please go ahead. I'm curious to learn a little bit more about the evolution of the Wingstop relationship.

Yes, just curious to learn a little bit more about the evolution of the wingstop relationship.

Noah Glass: It was relatively, what, the November time frame when it looked like the relationship was going to term out in Q1 of 2024. I'm curious, though, is this the use of the module that they've talked about here, is this potentially they're using it from OLO while they design their own? Or is the expectation that this is going to be an ongoing relationship rather than one that might have a built-in sunset?

Yeah.

I'm relatively what.

November timeframe when it looked like the relationship was going to term out in Q1 of 'twenty 'twenty four I'm curious so is this the use of the module that they've talked about here is this potentially.

They're using it from a little while they design their own or is the expectation that this is going to be an ongoing relationship rather than one that might have a built in sunset.

Yes.

Noah Glass: Eric, this is Noah here. I'll address that later. So, I think the way that things have evolved since we last spoke to the group in November, and by the way, Eric, welcome to the group. The way that things have evolved is the continuation of the relationship that currently exists, as we mentioned, for an additional quarter, and then moving to powering voice AI through the OLO platform and our ordering API and our partner network. We have several partners; you can look them up in our partner directory on OLO.com that provide voice ordering AI capabilities.

Eric This is Noah here, Oh, I'll address that so I think the way that things have evolved since we last spoke to the group in November and by the way Eric welcome to the group.

The way things have evolved as the continuation of the relationship that currently exist as we mentioned for an additional quarter and then moving to powering voice AI.

Through the older platform and our ordering API and our partner network. We have several partners you can look them up and our partner directory on older Dot com that provide voice ordering AI capabilities.

Noah Glass: If you think about Wingstop, this is a brand that is already very digitally mature. Sixty-seven percent of their transactions or thereabouts are already digital, coming through the digital ordering platform. The remainder, the other 33 percent, is a mix of in-restaurant transactions and phone order transactions, so the opportunity that they've identified and that we're working together on, again, with our partner ecosystem, is to help to digitize those phone order transactions and accelerate Wingstop's desire to get to 100 percent digital. We think that's a great example of a brand utilizing all its modularity with that shared strategy of wanting to get to 100 percent What we've mentioned, what we know today, it's a two-year relationship for that component, and that extends until the end of Q2 of 2026. Okay, that's helpful.

If you think about Wingstop. This is a brand that is already very digitally mature 67% of their transactions or thereabouts or digital already coming through the digital ordering platform. The remainder the other 33% or a mix of in restaurant transactions and phone order transactions. So the op.

Fortuity that they've identified and that we're working together on again with our partner ecosystem is to help to digitize those phone order transactions and accelerate wingstop desire to get to 100% digital we think that's a great example of a brand utilizing.

All those modularity.

With that shared strategy of wanting to get to 100% digital to accelerate their path. There we mentioned, but we know it today, it's a two year relationship for that component and that extends until the end of Q2 of 2026.

Yeah.

Okay. That's helpful.

Noah Glass: And then on the 2024, the basis for the 2024 forecast involving some level of uncertainty about macroeconomics. Is that something that you're hearing directly from customers, or is that just OLO management looking at the broader, you know, economic headlines? I think it's pretty consistent with what we've seen in prior quarters. I mean, this is an industry that has been under pressure from commodity prices, from commodity prices, from labor, from other input costs.

And then on the.

You talked about the 'twenty 'twenty four the basis for the 2024 forecasts involving some level of an uncertain macro is that something that you're hearing directly from customers or was that just hello management looking at the broader.

Economic headlines.

I think it's pretty consistent with what we've seen in prior quarters. I mean, this is an industry that has been under pressure from a commodity price from from commodity prices from labor from other input costs. It's also an industry that has seen kind of the.

Noah Glass: It's also an industry that has seen kind of a rise in prices coming at the expense of traffic in recent quarters. And so a big focus for us is, how do we demonstrate our ability to help brands do more with less, become more efficient, and more profitable while maintaining and actually upgrading hospitality? And also, how do we help them drive traffic, mainly with the Engage suite by utilizing the data that we're able to collect and personalizing transactions and improving conversion and frequency to drive traffic without having to resort to discounting? And so that's a big focus. I think it's one of the things that we hear in every conversation: how do we become more profitable? How do we become more efficient?

The raising of prices coming at the expense of traffic in recent quarters and so a big focus for US is how do we illustrate our ability to help brands and do more with less become more efficient and more profitable, while maintaining and actually upgrading of hospitality.

And also how do we help them drive traffic, mainly with the engaged suite by utilizing the data that we're able to collect and personalizing transactions and improving conversion in frequency to drive traffic without having to resort to discounting and so that's a big focus I think it's one of the things that we're hearing every customer carbon.

Conversation, how do we become more profitable how do we become more efficient and how do we identify our best guests and think about what we can do to get them to order one more time per quarter, because that has an outsized impact with a frito principle that we've observed where the top 20% of guests tend to represent 60% of.

Noah Glass: And how do we identify our best guests and think about what we can do to get them to order one more time per quarter? Because that has an outsized impact. With the Pareto principle that we've observed, where the top 20% of guests tend to represent 60% of overall transactions, and so identifying them and focusing communications with those guests, and then, of course, going and finding more like them is top of mind for every brand that we work with. I understand. Thanks for taking my questions, of course.

Overall transactions and so identifying them and focusing communications with those guests and then of course going and finding more like them is top of mind for every brand that we speak with.

I understand and thanks for taking my questions.

Of course.

Max: Thank you. Our next question is from the line of Gabriela Borges with Goldman Sachs. Please go ahead.

Thank you.

Our next question is from the line of Gabriel I apologize with Goldman Sachs. Please go ahead.

Max: Hi, thanks. This is Max on behalf of Gabriela. I wanted to ask you, based on your roadmap combos with large customers, how are you thinking about the risk of any other large customers churning over the next three years? And what are some of the levers you can pull to mitigate this risk? Max, this is Noah.

Hi, Thanks, This is Max on for Gabriela.

Wanted to ask you based on your roadmap combos with large customers. How are you thinking about the risk of any other large customers churning over the next three years or so.

Some of the levers you can pull to mitigate this risk.

This is Noah thanks for the question I think we've talked about this with regard to to Wingstop, but worth mentioning again, we see the trend really being brands migrating from homegrown solutions onto the <unk> platform and our ability to land with brands who are in that top 25.

Noah Glass: Thanks for the question. I think we've talked about this with regard to Wingstop, but it's worth mentioning again that we see the trend really being brands migrating from homegrown solutions onto the Olo platform and our ability to land with brands who are in the top 25. Great example, this is Jack in the Box with a single module and then expanding the relationship so that they ultimately cut off from a homegrown solution and onto Olo. That's something that we've seen happen over 10 times since our IPO in March of 2021.

<unk>. Great example of this is Jack in the box with a single module and then expand their relationships. So that they ultimately cut off of a homegrown solution and onto although.

That's something that we've seen happen over 10 times since our IPO in March of 2021 was a big reason for our wanting to become a public company to show that you can build on top of although as an open an independent platform that has conviction for the long term that has a strong balance sheet.

Noah Glass: It was a big reason for our wanting to become a public company to show that you can build on top of Olo as an open and independent platform that has conviction for the long term and that has a strong balance sheet. I tried to break down some of the math last quarter about the upfront cost of building versus using a platform like Olo. And without sparing you the details, it was a 100 to 1 ratio of the cost of building in-house versus using the Olo platform. A great illustration of the economies of scale of a SaaS platform versus homegrown software.

Tried to break down some of the math last quarter about the upfront cost of building versus using a platform like <unk>.

And without sparing you. The details it was a 100 to one ratio with the cost of building in house versus using your platform a great illustration of the economies of scale of a SaaS platform versus homegrown software I think the other argument is the network effect that although has created with now 80000 Brad.

Noah Glass: I think the other argument is the network effect that Olo has created with now 80,000 locations across 700 brands and 300 integrated technology partners on the other side of the network. And also platform level innovation and things like dispatch in Olo pay and borderless that we're able to bring to market for all of our restaurant customers. That's why I think you see those numbers of brands converting from homegrown to Olo as the trend. Of course, there are notable outliers to that trend.

<unk> seven sorry, 80000 locations across 700 brands and 300 integrated technology partners on the other side of the network, but also the platform level of innovation in things like dispatch and overpay and border list that we're able to bring to market for all of our restaurant customers.

That's why I think you see those numbers of brands converting some homegrown onto although as the trends of course, there were notable outlier set trends.

Noah Glass: And it's also why you see our gross revenue retention of, sorry, our gross retention rate of over 95% since our IPO and net revenue retention of 120% this quarter. It's because brands want to lean into their relationship with Olo as kind of the nucleus of their digital stack and do more with us over time and do more with our partner ecosystem over time. So, no visibility into other brands that are considering this kind of move away from the Olo stack and into homegrown, much more of it coming in the other direction of brands leaning into Olo and the Olo relationship to help accelerate their digital future. Thank you. And I appreciate the color on balancing growth versus profitability. And how are you thinking about investing in growth from here?

And it's also why you see our gross revenue retention of our gross retention rate of over 95% since our IPO and net revenue retention of 120% this quarter.

The brands want to lean into their relationship with Ono is kind of the nucleus of their digital stack and do more with us over time and do more with our partner ecosystem over time, so no visibility into other brands that are considering this kind of move away from the oldest stacking into home grown much more of a it's coming the other direction.

<unk> leading into although in the all our relationship to help accelerate their digital future.

Understood. Thank you and I appreciate the color on balancing growth versus profitability and how how are you thinking about investing in growth from here could you expand a little bit on the go to market and data initiatives that you had mentioned and maybe you could also give some detail on those potential further operational efficiency.

Peter Benavides: Could you expand a little bit on the go-to-market and data initiatives that you mentioned? And maybe you could also give some detail on the potential further operational efficiencies in the business? Yeah, so I can take that one.

As in the business.

Yeah, So I can take that one.

Peter Benavides: So, you know, when you think about the past, call it two years of investment, in particular OpEx. We've invested pretty aggressively across all lines, really, sales and marketing, R&D, and G&A. I think now we've reached a point where a lot of that investment, specific to R&D and G&A, is now behind us, and you're starting to see it. You saw it as we progressed through last year, and what we plan to do going through 2024 is continue to expand leverage within R&D and G&A. In terms of sales and marketing, the plan is to continue to invest in sales and marketing, but at levels that are less than what we've done in recent periods, and again, if you think back to the priorities in 2023 from a go-to-market perspective, it was really right-sizing the team, given the opportunity, and wanted to create more focus and specialization within the group in the form of sales engineers and solution consultants to better support the three- That's the plan going forward, so what we're doing, again, is balancing growth in OpEx against the commentary around gross margin trends, such that we're able to both grow the top line while at the same time expanding operating margin. Great Thank you very much.

So you know when you when you think about the past call. It two years of investment in particular and in Opex.

And we've invested.

You know pretty aggressively across all lines really sales and marketing R&D and G&A and it I think now we've reached a point where a lot of that investment specific to R&D and G&A is now behind us and you're starting to see you saw it as we progress through last year and what we plan to do go going through.

Through 2024 is continued to expand.

Leverage within within R&D and G&A in terms of sales and marketing of the plan is to continue to invest in.

Sales and marketing, but at levels that are less than.

What we've done in recent periods and again, if you think back to <unk>.

The priorities in 2023 from a go to market perspective, it was really right sizing the team given the opportunity and wanted to create more focus in specialization within the group in the form of sales engineers and solution consultants to better support the three product suite structure order pay and engage.

So that's the plan going forward and so what we're doing again is balancing.

Growth in an opex against the commentary around gross margin trends.

That we're able to both grow the top line while at the same time, expanding our op margins.

Great. Thank you very much just to just to add in on the on the go to market priorities, which I think was it was part of the question you know as we look at these different brand categories top 25 enterprise and emerging enterprise go to market priorities are different for those different brand segments of top 25, it's really about.

Noah Glass: Max, just to add on the go-to-market priorities, which I think was part of the question, as we look at these different brand categories, top 25, enterprise, and emerging enterprise, go-to-market priorities are different for those different brand segments. The top 25, it's really about what I just talked about, the modular set of capabilities that we have to offer, the platform-level innovation that we have to offer, the opportunity to cut off from homegrown and on to OLO and the cost savings that can occur as a result. For enterprise, it's really about that cross sell of Olopay and Engage into our stronghold of those enterprise customers. And I'd say, you know, as we think about that part of the business, specifically, it's really about stacking S-curves of going from order to pay, and all of the data from order and pay then leading to a great setup, really setting the table for filling in both the OLO paycard presence and engagement as great opportunities for us to accelerate the relationship with those enterprise brands. And in the emerging enterprise segment, as you heard, we're up to 14,000 locations across great emerging enterprise brands.

What I just talked about that's a modular set of capabilities that we have to offer the platform level innovation that we have to offer the opportunity to cut off of homegrown and onto although in the cost savings.

That can that can occur as a result for enterprise, it's really about that cross sell of overpay and engage into our stronghold of those enterprise customers.

I'd say you know as we think about.

That part of the business, specifically, it's really about stacking S curves of going from order to pay and all of the data from order and pay then leading to a great setup really setting the table for selling into the pay card presence and engage as great opportunities for.

To accelerate their relationship with us enterprise brands and.

And then the emerging enterprise segment is.

As you heard we're up to 14000 locations across great emerging enterprise brands.

Noah Glass: These are, you know, the great enterprises of tomorrow, the ones that we are going after who are going to represent great ARPU out of the gates and also great location growth going forward as they're accelerating into those great enterprises of tomorrow. So that's kind of how we think about go-to-market priorities for the year ahead.

These are the great enterprises, if tomorrow the ones that we are going after who are going to represent great <unk> out of the gates and also great location growth going forward as they are accelerating into those great enterprises of tomorrow, but that's kind of how we think about go to market priorities for the year ahead.

Understood. Thank you.

Clark Jeffries: Thank you. Thank you. Our next question is from Clark Jeffries with Piper Sandler. Please go ahead.

Thank you.

Our next question is from Clarke Jeffries with Piper Sandler. Please go ahead.

Noah Glass: Hello Peter and Noah, thank you for taking the question. I was wondering if you could share maybe a little bit of information about Waffle House, what they were using prior to you for online ordering, and what percent of digital, if you could share that, were they as a business? And, you know, for card not present payments, what solution were they using? Was that tied to their point of sale system, or was it bespoke? And then I have one follow-up. Hey Clark, this is Noah.

Hello.

Peter Thank you for taking the question I was wondering if you could share.

Maybe a little bit of information about Wassa Waffle house, what they were using prior T for online ordering.

What percent is digital if you can share that were they as a business and you know for card not present payments.

What what solution, where they using was that tied to their point of sale system.

Or was it bespoke and then I have one follow up.

Great Hey, Clarke. This is a this is noah.

Noah Glass: So, with Waffle House, this is a legendary, iconic brand that really hadn't been doing anything with regard to digital ordering or digital payment as a result of that. And so, this is the first brand-wide investment in digital that Waffle House has made. We're honored to be their partner in working with them on order and on pay, and we think there's additional potential to do more together over time. One thing that's really exciting to me about Waffle House is also their use of borderless. The only way to sign up, sign in, and check out at Waffle House is through the borderless passwordless login and checkout.

So with Waffle House you know this is a legendary iconic brands that really hadn't been doing anything with regard to digital ordering or digital payment as a result of that and so this is the first investments brand wide investments in digital that waffle houses made we're honored to be their partner in and working with them.

On order and on PE.

And we think there is additional potential to do more together over time, one thing that's really exciting to me about waffle House is also their use of border with the only way to sign up and sign in and checkout and Waffle House is through the border list password less log in.

And check out and it's an awesome experience and I think really shows the way for other brands and how.

Noah Glass: And it's an awesome experience and I think it really sets the way for other brands and how you can really meet the evolving guest needs for an accelerated checkout experience that doesn't involve remembering a password and yields a better guest experience and more data for the brand at the same time. Perfect. And then, you know, Peter, it's impressive to see that R2 growth accelerate. How are you thinking about the sustainability of net retention?

How you can really meet the evolved guest needs for it.

It accelerated checkout experience that doesn't involve remembering a password and yields a better guest experience and more data for the brand at the same time.

Perfect.

Peter It personally to see that our true growth accelerate.

This high teens level interested in sort of validated by 100 net retention how are you thinking about the sustain ability of net retention anyway to share some thoughts around what you think net retention could be over the medium term.

Peter Benavides: Any way to share some thoughts around what you think net retention could be over the medium term as we get through this cycle of several quarters of acceleration and here at the 120% mark? Thank you. Yeah, so we've made a lot of great progress in net revenue retention over the past, say four or five quarters now. We've been steadily increasing in line with ARPU growth. I think ARPU, for the most part, is a pretty good proxy for how net revenue retention will trend over time. And just in terms of the guide and sort of like mapping back the guide to what that then means from an ARPU perspective, it works out to call it high team growth on a full year basis as sort of the target for ARPU on a full year basis. So I think that's one way to think about the progression of NRR over time. But apart from that, we haven't really shared specifics on how we think the 120 will trend over time. Well, that's perfect.

As we get through this cycle of several quarters of acceleration in here out of the 120% Mark. Thank you.

Yeah. So we found a lot of great progress in net revenue retention over the past when I say four or five quarters now we've been steadily increasing.

In line with with ARPA growth I think <unk> for the most part is a pretty good proxy for how net revenue retention will trend over time and you know just in terms of the guide and sort of like mapping back that guide to what that then means from an RP prospect.

It works out to call it a high teen growth on a full year basis is sort of the target for for RPM on a full year basis. So I think that's one way to think about like the progression of NRI overtime.

But apart from that.

We haven't really shared specifics on how we think the 120th will trend over time.

Perfect. Thank you Peter.

Peter Benavides: Thank you, Peter. Thank you. Our next question is from the line of Andrew Hart with BTIG. Please go ahead.

Thank you.

Our next question is from the line of Andrew Hot with B D. I T. Please go ahead.

Andrew Hart: Hey, thanks for the question. Nice quarter. On the Olopay side, I guess, what are the expectations for the more traditional software offerings thinking of order and engage? You know, kind of when we strip out the Olopay contribution in 24 and 23, it seems like it's kind of high single-digit growth for traditional software offerings. So just any color there would be helpful.

Thanks for the question and nice quarter and on the payer side I guess, what are the expectations for the more traditional software offerings thinking of or.

And engage.

When we strip out the older Patriarch contribution in 'twenty, four and 'twenty three it seems like it's kind of a high single digits growth for traditional software offerings. So just any color there would be helpful. Thanks.

Peter Benavides: Thanks. Yeah, I could take that one, Andrew. So that's correct. If you think about the full year performance, less the pay portion of the business, you know, that said, when we set out for 2023, in terms of what the targets were for the year, both for order and engage, those were in line with what we had set out to achieve in 2023. So we feel we feel good about that.

Yeah, I can take that one Andrew.

That's correct and if you if you think about the full year performance less to pay a portion of the business.

That said when we set out for 2023 in terms of what the targets were for the year, both for ordering and engage.

Those were in line with what we had set out to achieve in 2023. So we feel we feel good about that I'd say.

Peter Benavides: I'd say, When you think about the sales performance from a booking standpoint in 23 and then how that plays out in 24 from a revenue standpoint, we saw a lot of success with pay adoption from a booking standpoint, and from a go-to-market perspective, we ran with that opportunity. We had a lot of success in bookings, which is obviously now showing its benefits, showing its results in revenue. But when we look ahead to 2024, we want to make sure that we're taking a more balanced approach to how we're thinking about, you know, booking performance and making sure that, you know, we're having continued success with Order and Engage. And in many ways, as Noah mentioned earlier, I think the success in Pay actually sets us up really well for more success in Engage because now we have both the order and the payment transaction being processed over the platform. And brands are now looking for ways to house that data, analyze that data, and act upon that data.

Do you think about the sales performance from a bookings standpoint in 'twenty three and then how that plays out in 'twenty four from a revenue standpoint, we saw a lot of success with pay adoption from a booking standpoint and from a go to market perspective, we ran to that opportunity and we had a lot of success in bookings, which obviously is now now showing it.

Showing its results in revenue when we look ahead to 2024, we want to make sure that we're taking a more balanced approach to how we're thinking about bookings performance and making sure that.

You know where we're at.

Having continued success with with water and engage and in many ways as Noel mentioned earlier I think the success and pay actually sets us up really well for a more.

Access and engage because now we have both the order and the payment transaction being processed over the platform and brands are now looking for ways to how is that data analyze that data and act upon that data and that's where engage comes in so I think we're set up actually really well going into 2024 to have more success.

Peter Benavides: And that's where Engage comes in. So I think we're set up really well going into 2024 to have more success in sort of the pure software offerings of Engage. That's all for me, guys. Thank you. As there are no further questions, I would now hand the conference over to Noah Glass for his closing comments. Okay.

And sort of the pure software offerings of engage.

That's all for me thanks, guys.

Thank you.

Thank you.

As there are no further questions I would now hand, the contract silver to know how Clos for his closing comments.

Okay. Thank you for joining us today, and we finished 2023 on a strong note and we're focused on delivering a balance of growth and increased profitability in 2024, with our scale reliability and modularity, although is uniquely positioned to enable restaurant brands to drive traffic and frequency that result in more.

Noah Glass: Thank you for joining us today. We finished 2023 on a strong note, and we're focused on delivering a balance of growth and increased profitability in 2024. With our scale, reliability, and modularity, Olo is uniquely positioned to enable restaurant brands to drive traffic and frequency that result in more sales and greater operating efficiency. I'd like to thank the Olo team for their continued focus on delivering for our customers. I look forward to accomplishing our goals for the year ahead. Have a great evening! Thank you. The conference of OLO Inc. has now concluded. Thank you for your participation. You may now disconnect your line.

Sales and greater operating efficiency I'd like to thank team, although for their continued focus on delivering for our customers I look forward to accomplishing our goals for the year ahead have a great evening.

Thank you.

The conference off All Inc. Has now concluded. Thank you for your participation you may now disconnect your lines.

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