OLO Reshuffle Sets Company Up for Massive Opportunities Ahead
Olo Inc. (NYSE:OLO) restructuring on heels of strong balance sheet, solid Q1
Strategically reorganizing, centralizing engineering, hiring new COO
New COO Joanna Lambert to lead Olo’s BU and engineering teams; previously worked at Yahoo, Venmo, American Express, PayPal
Olo R&D spend at 33% compared to most companies in low 20s
Olo G&A spend at 20% compared to most companies in mid teens
$6 million in net burn to get to $122 million of annualized recurring revenue
By Jarrett Banks
In David Mamet’s 1984 Pulitzer-winning play Glengarry Glen Ross, Alec Baldwin’s character Blake admonishes a group of salesmen with “ABC – Always. Be. Closing.”
While the patois of salesmen has changed over the years, the sentiment remains in an era of rapid digital transformation—with the restaurant and hospitality payments industry standing at the forefront. And that’s where Olo Inc. (NYSE:OLO), a restaurant-focused commerce platform, leads the field by ensuring a seamless and satisfying customer experience.
Olo’s success can be attributed to its ability to provide solutions for every guest touchpoint. From drive-thru engagement and delivery to payment, dine-in, reservations and takeout. By embracing Olo’s platform, customers like Portillo’s, Nando’s and Din Tai Fung have tapped into the vast potential of the digital realm, expanding their reach and revenue streams.
And now Olo is making a few key strategic changes to position itself for future success: It is strategically reorganizing, centralizing engineering and hiring a new chief operating officer.
The reshuffle starts with a switch to what it calls “Order, Pay, Engage,” to reflect how customers view Olo and invest in holistic solutions. The company has transitioned from a uni-suite product (Order) to a multi-suite of products (Order, Pay, Engage). The simplicity enables customers to understand the breadth of Olo’s product functionality without listing a laundry list of products.
Centralizing engineering will enable a more efficient allocation of focus as priorities change, and will ensure reliability of the platform with one centralized team. While this will include the reduction of 11% of its workforce, or 81 employees, it’s worth pointing out that the company had no layoffs throughout the entire Covid-19 pandemic.
New COO Joanna Lambert will lead Olo’s BU and Engineering teams, and set a future vision for its suite of products. She will lead product and engineering organizations, including the Business Units, driving the strategy and growth of three product suites—Order, Pay, and Engage.
Ms. Lambert, previously president and GM of consumer at Yahoo, has had a successful career in financial services, including stints at American Express and PayPal. Joanna led various brands under Yahoo, reaching around 900 million monthly active users worldwide. She focused on delivering quality content, enhancing user experiences, and driving audience growth, particularly in the retail investment market.
OLO COO Joanna Lambert
Add it all up and you can see a transition from a SaaS business to a fintech company, with an ability to leverage increasing amounts of data to benefit restaurant partners. For example, Olo’s recent partnership with Adyen, a global financial technology platform, offers streamlined payment solutions and embedded financial services to the hospitality sector. The collaboration aims to provide restaurant businesses with an all-in-one experience for consolidating digital and in-store payments, accessing capital, and managing cash flow.
A good comparison might be Shopify, which started as ecommerce platform and transitioned to a payments business.
Olo Pay, Olo’s payment tech-stack for restaurants, will integrate with Adyen’s platform, allowing customers to accept and oversee both digital and in-store payments. This integration will increase operational efficiency by eliminating the need for multiple tools and enabling a more data-driven approach to strategic investments.
Adyen will also provide embedded financial services, such as capital advances and business accounts, to meet the financial needs of Olo Pay customers. The partnership aims to transform how the restaurant industry operates by delivering a unified commerce experience and facilitating faster and easier access to financial solutions.
Consumers are increasingly embracing the convenience of digital ordering and off-premise dining experiences. However, with only 15% of restaurant orders being digital, there is immense untapped potential for growth. Olo is poised to enable the breadth of industry orders and revolutionize the way restaurants operate.
The numbers speak for themselves. Olo R&D spend is at 33% compared to most companies in low 20s, while G&A spend at 20% compared to most companies in mid teens. Olo had $6 million in net burn to get to $122 million of annualized recurring revenue. For all 2021 IPOs, Olo had the lowest amount of net burn and the ratio of annualized recurring revenue to that burn.
Olo boasts an impressive roster of 600+ brands and partnerships with over 300 restaurants. With a staggering $23B+ in GMV (Gross Merchandise Volume) and 2M+ orders per day, Olo’s influence and market presence are undeniable. Moreover, with a compound annual growth rate of 27% in active locations, Olo continues to be an enterprise-focused, scaled vertical leader.
Olo’s success is further underscored by its financial highlights. In the first quarter of 2023 alone, Olo witnessed a 22% year-over-year revenue growth, with an average revenue per unit (ARPU) of approximately $632. These numbers reflect the increasing digital orders and multi-product adoption that Olo enables, driving growth for its partners and the industry as a whole.
One of Olo’s key strengths lies in its efficient go-to-market strategy. By establishing long-term exclusivity across all locations and maintaining a unique mix of high revenue growth and profitability, Olo has successfully built a scalable business model. This strategy allows for effective revenue acquisition and optimal operating leverage, ensuring sustainable growth and profitability for both Olo and its restaurant partners.
And the success of its customers such as Portillo’s, a popular restaurant chain in Chicago, tell the tale. In 2016, the brand partnered with Olo to implement an online ordering and delivery program, aiming to provide convenient and high-quality service to its customers. By transitioning to Olo Serve, a white-label ordering interface, in early 2022, Portillo’s sought to enhance the guest experience by offering a seamless ordering process, improved order sequence, and a faster path to checkout. The results have been significant, with the cart conversion rate doubling, an increase in average ticket size, and a faster checkout experience for customers. The implementation of Olo Serve and menu optimization has successfully created a frictionless online ordering experience at Portillo’s.
Meanwhile, renowned Taiwanese restaurant Din Tai Fung, partnered with Olo in 2020 to leverage its online ordering platform and implemented Rails to streamline orders from third-party marketplaces. Expo was utilized to manage the increasing volume of digital orders, providing centralized order monitoring. Additionally, Host, an all-in-one solution, improved online order communication and waitlist management. Olo’s integrations have allowed Din Tai Fung to focus on guest experiences while efficiently managing orders from multiple channels.
With the food industry being a large and growing +$2T market, Olo is well-positioned to capitalize on the shift in consumer spending from food at home to food away from home. As full-service and fast-food restaurants dominate the commercial foodservice market, Olo’s platform offers the ideal solution for these establishments to tap into the growing market of food-away-from-home sales.
The reshuffle will help Olo chart the path forward for years to come. Savvy investors will want to mind their ABC’s and pick up some shares.
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