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Commission File Number: 001-40213

Securities registered pursuant to Section 12(b) of the act:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x  No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes x  No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨  No x

As of May 5, 2023, 104,449,461 shares of the registrant’s Class A common stock and 57,535,360 shares of registrant’s Class B common stock were outstanding.

This Quarterly Report on Form 10-Q contains express or implied forward-looking statements that are based on our management’s belief and assumptions and on information currently available to our management. All statements other than statements of historical fact contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations or financial condition, business strategy, and plans and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “forecast,” “if,” “intend,” “likely,” “may,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “target,” “will,” or “would” or the negative of these words or other similar terms or expressions.

Forward-looking statements are not guarantees of future performance and involve risks, uncertainties, and assumptions. Actual results may differ materially from the forward-looking statements we make. Factors that may cause or contribute to such differences include, but are not limited to:

•our expectations regarding our revenue, expenses, and other operating results, including overall transaction volumes, average revenue per unit, ending active locations, dollar-based net revenue retention, gross merchandise volume, and gross payment volume;

•our ability to acquire new customers and successfully retain existing customers;

•our ability to develop and release new products and services and the success of any new products;

•our ability to develop and release successful enhancements, features, and modifications to our existing products and services;

•our ability to increase usage of our platform and upsell and cross sell additional modules;

•our ability to attain or sustain our profitability;

•the durability of the growth we have experienced in the past due to the COVID-19 pandemic and the associated government-imposed restrictions on guest preferences for digital ordering and customer adoption of multi-modules;

•the effects of the COVID-19 pandemic or other public health crises, macroeconomic conditions such as inflation and fluctuating interest rates, and overall market uncertainty;

•future investments in our business, our anticipated capital expenditures, and our estimates regarding our capital requirements;

•our ability to repurchase shares at all or at the times or in the amounts we desire, and the results of our share repurchase program;

•our ability to compete effectively with existing competitors and new market entrants;

•the costs and success of our sales and marketing efforts, and our ability to promote our brand;

•our ability to identify, recruit, and retain skilled personnel;

•our ability to effectively manage our growth, including any international expansion;

•our ability to realize the anticipated benefits of past or future investments, strategic transactions, or acquisitions, and risk that the integration of these acquisitions may disrupt our business and management;

•our ability to protect our intellectual property rights and any costs associated therewith;

•the growth rates of the markets in which we compete;

•our ability to successfully combine and integrate the businesses that we acquire, and to realize the synergies and anticipated strategic, financial, and other benefits from such acquisitions;

•our ability to successfully defend or resolve any current or future litigation matters, and to discharge those matters without significant financial penalty or payments, restrictions on our business and operations, or other remedies; and

•other risks and uncertainties, including those listed under the caption “Risk Factors.”

You should not rely on forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, and operating results. These statements are based on information available to us as of the date of this Quarterly Report on Form 10-Q. While we believe that information provides a reasonable basis for these statements, that information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information.

The outcome of the events described in these forward-looking statements is subject to risks, assumptions, uncertainties, and other factors described elsewhere in this Quarterly Report on Form 10-Q and those listed in the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. The results, events, and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.

The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements.

Unless the context otherwise indicates, references in this report to the terms “Olo,” “the Company,” “we,” “our,” and “us” refer to Olo Inc.

“Olo” and other trade names and trademarks of ours appearing in this Quarterly Report on Form 10-Q are our property. This Quarterly Report on Form 10-Q contains trade names and trademarks of other companies, which are the property of their respective owners. We do not intend our use or display of other companies’ trade names or trademarks to imply an endorsement or sponsorship of us by such companies, or any relationship with any of these companies.

Item 1. Financial Statements.

									Three Months Ended March 31,
															2023						2022
Revenue:
Platform															$	51,371					$	41,466
Professional services and other															869						1,290
Total revenue															52,240						42,756
Cost of revenue:
Platform (1)															17,613						11,241
Professional services and other (1)															1,136						1,819
Total cost of revenue															18,749						13,060
Gross Profit															33,491						29,696
Operating expenses:
Research and development (1)															20,473						17,156
General and administrative (1)															17,210						17,249
Sales and marketing (1)															12,881						8,193
Total operating expenses															50,564						42,598
Loss from operations															(17,073)						(12,902)
Other income, net:
Interest income															3,454						52
Interest expense															(69)						—
Other income, net															—						6
Total other income, net															3,385						58
Loss before income taxes															(13,688)						(12,844)
Provision (benefit) for income taxes															18						(1,335)
Net loss															$	(13,706)					$	(11,509)
Net loss per share attributable to Class A and Class B common stockholders:
Basic															$	(0.08)					$	(0.07)
Diluted															$	(0.08)					$	(0.07)
Weighted-average Class A and Class B common shares outstanding:
Basic															161,691,506						159,190,371
Diluted															161,691,506						159,190,371

(1) To conform the prior years presented to the current year presentation, $0.7 million was reclassified from general and administrative expense, of which $0.2 million was included in platform cost of revenue, $0.1 million was included in professional service and other cost of revenue, $0.1 million was included in sales and marketing expenses, and $0.3 million was included in research and development expenses. Such reclassifications had no effect on previously reported operating loss, net loss, or accumulated deficit. See “Note 2—Significant Accounting Policies” for additional information on the reclassifications.

1.Business

Olo Inc. was formed on June 1, 2005 in Delaware and is headquartered in New York City. On January 14, 2020, our Board of Directors and stockholders approved our name change from Mobo Systems, Inc. to Olo Inc. Unless the context otherwise indicates or requires, references to “we,” “us,” “our,” and “the Company” shall refer to Olo Inc.

We are an open SaaS platform for restaurants. Our platform powers restaurant brands’ on-demand digital commerce operations, enabling digital ordering, delivery, front-of-house management, and payments, while further strengthening and enhancing restaurants’ direct guest relationships. We provide restaurants with a business-to-business-to-guest, enterprise-grade, open SaaS platform to manage their complex digital businesses and enable fast and more personalized experiences for their guests. Our platform and application programming interfaces seamlessly integrate with a wide range of solutions, unifying disparate technologies across the restaurant ecosystem. Restaurant brands rely on us to increase their digital omni-channel sales, maximize profitability, establish and maintain direct guest relationships, and collect, protect, and leverage valuable guest data.

2.Significant Accounting Policies

The accompanying unaudited condensed consolidated financial statements and accompanying notes were prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and in accordance with the rules and regulations of the United States Securities and Exchange Commission (the “SEC”). Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been omitted pursuant to such rules and regulations. The December 31, 2022 condensed consolidated balance sheet was derived from the audited financial statements as of that date, but may not include all disclosures including certain footnotes required by U.S. GAAP on an annual reporting basis.

These unaudited condensed consolidated financial statements have been prepared on a basis consistent with our annual financial statements and, in the opinion of management, reflect all adjustments, which include all normal recurring adjustments necessary to fairly state our financial position as of March 31, 2023, our results of operations and comprehensive loss for the three months ended March 31, 2023 and 2022 and our cash flows for the three months ended March 31, 2023 and 2022, respectively. The results of operations for the three months ended March 31, 2023 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2023 or for any other future annual or interim period.

The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the consolidated financial statements and related notes included in our Annual Report on Form 10-K filed with the SEC on February 24, 2023. All intercompany balances and transactions have been eliminated in consolidation.

Effective January 1, 2023, we began allocating certain employee-related costs to platform cost of revenues, sales and marketing, and research and development expenses. Previously, such costs had been presented within general and administrative expenses on our condensed consolidated statement of operations. These costs are allocated based on each department’s proportionate share of total employee headcount. We determined that these changes would better reflect industry practice and provide more meaningful information as well as increased transparency of our operations.

To conform the prior years presented to the current year presentation, $0.7 million was reclassified from general and administrative expense, of which $0.2 million was included in platform cost of revenue, $0.1 million was included in professional service and other cost of revenue, $0.1 million was included in sales and marketing expenses, and $0.3 million was included in research and development expenses. Such reclassifications had no effect on previously reported operating loss, net loss, or accumulated deficit.

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period.

We regularly assess these estimates, including but not limited to, stock-based compensation including the determination of the fair value of our stock-based awards, realization of deferred tax assets, estimated life of our long-lived assets, purchase price allocations for business combinations, valuation of the acquired intangibles purchased in a business combination, valuation of goodwill, estimated standalone selling price of our performance obligations, and estimated consideration for implementation services and transactional revenue in certain arrangements. We base these estimates on historical experience and on various other market-specific and relevant assumptions that we believe to be reasonable under the circumstances. Actual results could differ from these estimates and such differences could be material to our financial position and results of operations.

Our significant accounting policies are outlined in Note 2, “Significant Accounting Policies” in the Notes to Consolidated Financial Statements included in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2022. During the three months ended March 31, 2023, there were no material changes to our significant accounting policies from those described in our Annual Report on Form 10-K for the year ended December 31, 2022, except as described below.

We are exposed to concentrations of credit risk primarily through our cash and short- and long-term investments held by financial institutions. We primarily deposit our cash with two financial institutions and the amount on deposit has exceeded federally insured limits at various times. We have not experienced any losses in such accounts and believe we are not exposed to any significant risk in cash, as we place our cash and investments with major financial institutions with high credit ratings. For the three months ended March 31, 2023 and 2022, one customer accounted for 12% and 13% of our revenue, respectively.

On June 10, 2022, we entered into the Second Amended and Restated Loan and Security Agreement with Pacific Western Bank related to a revolving credit and term loan facility (the “Second Amended and Restated LSA”).

The Second Amended and Restated LSA includes a financial covenant requiring compliance with certain minimum revenue amounts. In addition, the Second Amended and Restated LSA contains representations and warranties generally consistent with the Amended and Restated Loan and Security Agreement, dated February 11, 2020, as amended (the “Prior LSA”), as well as certain non-financial covenants, including, but not limited to, limitations on our ability to incur additional indebtedness or liens, pay dividends, or make certain investments. We were in compliance with these covenants as of March 31, 2023.

As of March 31, 2023, we had $43.6 million of commitments available under the Second Amended and Restated LSA, after consideration of $25.0 million in our letter of credit to DoorDash and $1.4 million in our letter of credit on the lease of One World Trade Center. As of March 31, 2023, we had no outstanding borrowings under the line of credit, and no amounts have been drawn against any of our letters of credit.

There have been no recent accounting pronouncements, changes in accounting pronouncements, or recently adopted accounting guidance during the three months ended March 31, 2023 that are of significance or potential significance to us.

3.Revenue Recognition

The following table disaggregates revenue by type (in thousands):

Professional services revenue is generally recognized ratably over the implementation period, beginning on the commencement date of each contract. Platform revenue is recognized as the services are delivered. Under ASC Topic 606, we record a contract asset when revenue recognized on a contract exceeds the billings. Our standard billing terms are monthly; however, the billings may not be consistent with the pattern of recognition, based on when services are performed. Contract assets were $0.8 million and $0.6 million as of March 31, 2023 and December 31, 2022, respectively.

Unearned revenue primarily consists of billings or payments received in advance of revenue recognition from subscription services and is recognized as revenue when transfer of control to customers has occurred. During the three months ended March 31, 2023, we recognized $0.8 million of revenue related to contracts that were included in unearned revenue at December 31, 2022.

As of March 31, 2023, our remaining performance obligations were approximately $36.5 million, approximately 48% of which we expect to recognize as revenue over the next twelve months, and substantially all of the remaining revenue will be recognized thereafter over the next 24 to 48 months. These amounts only include contracts subject to a guaranteed fixed amount or the guaranteed minimum under variable contracts. Unrecognized revenues under contracts disclosed above do not include: (1) contracts with an original expected term of one year or less; (2) contracts for which variable consideration is determined based on the customer’s subsequent sale or usage; and (3) agreements for which our right to invoice corresponds with the value provided to the customer.

The following table summarizes the activity of current and non-current deferred contract costs (in thousands):

4.Fair Value Measurement

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. We apply the following fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

Level 1 inputs: Based on unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2 inputs: Based on observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 inputs: Based on unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities, and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability.

The following tables present the costs, net unrealized losses, and fair value by major security type for our investments as of March 31, 2023 and December 31, 2022 (in thousands):

Our assets measured at fair value on a nonrecurring basis include long-lived assets and finite-lived intangibles, which are considered to be Level 3 inputs. No impairment charges were recorded during the three months ended March 31, 2023. For the three months ended March 31, 2022 we recorded a non-cash impairment charge of $0.5 million related to the estimated fair value of a portion of our internal-use software that was non-recoverable.

Accounts receivable, accounts payable, and accrued expenses are stated at their carrying value, which approximates fair value due to the short time to the expected receipt or payment date.

5.Acquisitions

On February 20, 2022, we signed a definitive agreement to acquire Omnivore Technologies, Inc. (“Omnivore”), a restaurant technology provider that connects restaurants’ Point of Sale systems with technologies that improve efficiency and increase profitability. We closed the acquisition on March 4, 2022 for total consideration of approximately $49.3 million in cash, net of cash acquired and a post-closing working capital adjustment.

The operating results of Omnivore have been included in our condensed consolidated statement of operations since the acquisition date. Actual results of operations from the date of acquisition through March 31, 2023 and supplemental pro forma revenue and results of operations have not been presented because the effects were not material to the condensed consolidated financial statements.

We have finalized the valuation of assets acquired and liabilities assumed for the acquisition of Omnivore as of March 31, 2023.

The following table summarizes the allocation of the purchase price to the fair value of the assets acquired and liabilities assumed of Omnivore (in thousands):

			Final Purchase Price Allocation
Accounts receivable			$	451
Other current assets			148
Operating lease right-of-use asset			236
Property and equipment			24
Other assets, noncurrent			9
Customer relationships			1,290
Developed technology			4,410
Trademark			150
Goodwill			44,919
Accounts payable			(198)
Accrued expenses and other current liabilities			(101)
Unearned revenue			(226)
Operating lease liability, current			(81)
Operating lease liability, noncurrent			(177)
Deferred tax liability, net			(1,519)
Total purchase price, net of cash acquired and post-closing working capital adjustment			$	49,335

Transaction-related expenses for the three months ended March 31, 2023 were immaterial. We recorded $1.1 million in transaction-related expenses, primarily related to transaction-related compensation, advisory, legal, valuation, and other professional fees, for the three months ended March 31, 2022.

6.Accrued Expenses and Other Liabilities

Accrued expenses and other current liabilities consisted of the following (in thousands):

7.Stockholders’ Equity

On September 7, 2022, our Board of Directors authorized a program to repurchase up to $100 million of our Class A common stock (the “Stock Buyback Program”). Under the Stock Buyback Program, shares of common stock may be repurchased from time to time on a discretionary basis through open market repurchases, privately negotiated transactions, block purchases, or other means, and will be structured to occur in compliance with applicable securities laws. In addition, open market repurchases of common stock could be made pursuant to trading plans established pursuant to Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, which would permit common stock to be repurchased at a time that we might otherwise be precluded from doing so under insider trading laws or self-imposed trading restrictions.

The Stock Buyback Program does not obligate us to acquire any specific number of shares.

The timing and actual number of shares repurchased is determined by a committee established by the Board of Directors and depends on a variety of factors, including the Class A common stock price, trading volume, market conditions, our cash flow and liquidity profile, the capital needs of the business, and other considerations. Repurchases are funded with existing cash on hand. The Stock Buyback Program has no expiration date and may be modified, suspended or terminated at any time by the Board of Directors at its discretion.

The following table summarizes the cumulative share repurchase activity of our Class A common stock under the Stock Buyback Program in the three months ended March 31, 2023 (in thousands, except share and per share amounts):

(1) Average price paid per share and value of shares excludes broker commission fees.

8.Stock-Based Compensation

The 2021 Equity Incentive Plan (“2021 Plan”) provides for the issuance of incentive and nonqualified stock options, SARs, restricted stock, restricted stock units (“RSUs”), performance-based restricted stock units (“PSUs”), and other awards, to employees, directors, consultants, and advisors. Pursuant to the evergreen provisions of the 2021 Plan, the Board of Directors approved an automatic increase of 8,124,002 additional shares of Class A common stock reserved and available for issuance under the 2021 Plan effective as of January 1, 2023.

As of March 31, 2023 and December 31, 2022 the maximum number of shares authorized for issuance to participants under the Plans was 39,322,426 and 30,263,529, respectively. As of March 31, 2023 and December 31, 2022, the number of shares available for issuance to participants under the Plans was 24,866,185 and 23,358,039, respectively.

During the first quarter of 2023, RSUs and PSUs were awarded at fixed dollar amounts. The target number of shares underlying the RSU and PSU awards were determined based on the higher of (a) the 30-trading day average price preceding the grant date or (b) the floor price as determined by the Compensation Committee of the Board of Directors for the calendar year.

The amount of PSUs issued will depend on the achievement of financial metrics relative to the approved performance targets. Depending on the actual financial metrics achieved relative to the target financial metrics, the number of PSUs issued could range from 0% to 120% of the target amount.

The following table summarizes the activity for the unvested RSUs and PSUs during the three months ended March 31, 2023:

The total fair value of RSUs vested during the three months ended March 31, 2023 was $6.3 million. Future stock-based compensation for unvested RSUs and PSUs awarded as of March 31, 2023 was approximately $104.0 million and is expected to be recognized over a weighted-average period of 3.39 years.

The employee stock purchase plan (“2021 ESPP”) current offering period began in December 2022 and ends in June 2023. Pursuant to the evergreen provisions of the 2021 ESPP, the Board of Directors approved an automatic increase of 1,050,883 additional shares of Class A common stock reserved and available for issuance under the 2021 ESPP effective as of January 1, 2023. For the three months ended March 31, 2023 and 2022, we recorded approximately $0.4 million and $0.4 million of compensation expense associated with our 2021 ESPP, respectively.

The classification of stock-based compensation expense, which includes expense for stock options, RSUs, PSUs, and ESPP charges, by line item within the condensed consolidated statements of operations was as follows (in thousands):

9.Income Taxes

We had an effective tax rate benefit of (0.13)% and expense of 10.39% for the three months ended March 31, 2023 and 2022, respectively. The effective tax rate benefit for the three months ended March 31, 2023 is driven primarily by adjustments to the full valuation allowance on our deferred tax assets and adjustments for share-based compensation. We maintain a full valuation allowance on our net federal and state deferred tax assets as we have concluded that it is more likely than not the deferred tax assets will not be realized.

We evaluated the available evidence supporting the realization of our deferred tax assets, including the amount and timing of future taxable income, and determined that it is more likely than not that our net deferred tax assets will not be realized. Due to uncertainties surrounding the realization of the deferred tax assets, we maintain a full valuation allowance against substantially all of our net deferred tax assets. When we determine that we will be able to realize some portion or all of our deferred tax assets, an adjustment to our valuation allowance on our deferred tax assets would have the effect of increasing net income in the period such determination is made.

We applied ASC 740, Income Taxes, and determined that we do not have any uncertain positions that would result in a tax reserve for each of the three months ended March 31, 2023 and 2022. Our policy is to recognize interest and penalties related to uncertain tax positions in income tax expense. We are subject to U.S. federal tax authority and state tax authority examinations.

10.Commitments and Contingencies

Liabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. If we determine that a loss is reasonably possible, and the loss or range of loss can be estimated, we will disclose the possible loss in the notes to our financial statements. Accounting for contingencies requires us to use judgment related to both the likelihood of a loss and the estimate of the amount or range of loss. Legal costs incurred in connection with loss contingencies are expensed as incurred.

On September 26, 2022, a putative securities class action lawsuit was filed in the United States District Court for the Southern District of New York against us and certain executive officers, captioned Steamship Trade Association of Baltimore - International Longshoremen’s Association Pension Fund v. Olo Inc., et al (Case 1:22-cv-08228). An amended complaint was filed in the lawsuit on January 13, 2023. The lawsuit asserts claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and alleges that Olo made materially false and misleading statements regarding the number of active locations. The lawsuit seeks unspecified damages, interest, costs and attorneys’ fees, and other unspecified relief that the Court deems appropriate. On February 3, 2023, we filed a motion to dismiss the amended complaint. On April 10, 2023, the Court denied our motion to dismiss the amended complaint. We believe the case is without merit and are vigorously defending this matter. However, we are unable to predict the outcome, or the reasonably possible loss or range of loss, if any, related to this matter.

On May 4, 2023, Cashondra Floyd, an alleged Olo stockholder, derivatively and on behalf of Olo as a nominal defendant, filed a complaint in the U.S. District Court for the Southern District of New York against certain of our directors and officers (the “Derivative Defendants”), captioned Floyd v. Glass, et al., (Case No. 1:23-cv-03770) (the “Floyd Derivative Complaint”). The Floyd Derivative Complaint alleges that, between at least August 10, 2021 and August 11, 2022, the Derivative Defendants caused, or failed to prevent, Olo’s alleged issuance of materially false and misleading statements concerning our publicly disclosed active locations count and our business relationship with Subway. The Floyd Derivative Complaint asserts claims for (1) violations of Sections 10(b), 20(a), and 21D of the Exchange Act (as to the named officer defendants), (2) breach of fiduciary duty, (3) aiding and abetting breach of fiduciary duty, and (4) waste of corporate assets. The Floyd Derivative Complaint seeks a judgment declaring that the plaintiff may bring the action on behalf of Olo in a derivative capacity; awarding damages for the Derivative Defendants’ alleged securities law violations, breaches of fiduciary duties, and waste of corporate assets; requiring us to reform and improve our corporate governance and internal procedures; ordering the Derivative Defendants to pay restitution; awarding the plaintiff her costs, fees, and expenses, including attorney’s fees; and granting such other relief that the Court determines to be appropriate. We believe the case is without merit and are vigorously defending this matter. However, we are unable to predict the outcome, or the reasonably possible loss or range of loss, if any, related to this matter.

We are a party to various lawsuits and claims in the ordinary course of business, including the matter described above. Future litigation may be necessary to defend ourselves or our customers by determining the scope, enforceability, and validity of third-party proprietary rights or to establish our proprietary rights. Defending such proceedings is costly and can impose a significant burden on management and employees. The results of any current or future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors.

During March 2023, we abandoned our office lease located at 26 Broadway, New York NY, resulting in a reduction of $0.3 million to operating lease right-of-use assets and operating lease liabilities, respectively. See “Note 12—Subsequent Events” for additional information.

Sublease income was $0.7 million and $0.1 million for the three months ended March 31, 2023 and 2022, respectively.

11.Net Loss per Share Attributable to Common Stockholders

A reconciliation of net loss available to common stockholders and the number of shares in the calculation of basic net loss per share is as follows (in thousands, except share and per share data):

The following potential common shares were excluded from the computation of diluted net loss per share attributable to common stockholders for the periods presented, because including them would have been anti-dilutive (on an as-converted basis):

									Three Months Ended March 31,
															2023						2022
Outstanding stock options															27,815,043						35,445,788
Outstanding restricted and performance-based stock units															11,362,142						3,573,464
Outstanding shares estimated to be purchased under ESPP															290,734						112,116
Total															39,467,919						39,131,368

12.Subsequent Events

On April 18, 2023, we entered into an agreement with our landlord that provided for an early termination of our office lease located at 26 Broadway, New York, New York.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

We are Olo, a leading open SaaS platform for restaurants.

Our platform powers restaurant brands’ on-demand digital commerce operations, enabling digital ordering, delivery, front-of-house management, and payments, while further strengthening and enhancing restaurants’ direct guest relationships. Guests today expect more on-demand convenience and personalization from restaurants, particularly through digital channels, but many restaurants lack the in-house infrastructure and expertise to satisfy this increasing demand in a cost-effective manner. We provide restaurants with a business-to-business-to-guest, enterprise-grade, open SaaS platform to manage their complex digital businesses and enable fast and more personalized experiences for their guests. Our platform and application programming interfaces, or APIs, seamlessly integrate with a wide range of solutions, unifying disparate technologies across the restaurant ecosystem. Restaurant brands rely on us to increase their digital omni-channel sales, maximize profitability, establish and maintain direct guest relationships, and collect, protect, and leverage valuable guest data.

As a result of our ability to meet restaurant brands’ growing needs, gross merchandise volume, or GMV, which we define as the gross value of orders processed through our platform, has increased on an annual basis, reaching more than $23 billion in GMV during the year ended December 31, 2022, and gross payment volume, or GPV, which we define as the gross volume of payments processed through our Olo Pay module, has reached $250 million during the year ended December 31, 2022. Management uses GMV and GPV to assess demand for our products. We also believe these metrics provide investors with useful supplemental information about the financial performance of our business, enable comparison of financial results between periods where certain items may vary independent of business performance, and allow for greater transparency with respect to key metrics used by management in operating our business. Our well-established platform has led many of the major publicly traded and top 50 fastest growing private restaurant brands, measured by overall sales, in the United States to work with us and has been a factor in our dollar-based net revenue retention approximating 114% for the three months ending March 31, 2023. See the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Part I, Item 2 of this Quarterly Report on Form 10-Q for additional information on how we calculate dollar-based net revenue retention. Further, industry-recognized outlets, including Restaurant Business Online, QSR Magazine, and Nation’s Restaurant News, have also deemed Olo a leading food ordering platform for the restaurant industry.

We built Olo with the goal of being the leading SaaS platform for the restaurant industry by aligning the solutions we have developed with the needs of our customers. For over 15 years, we have developed our platform in collaboration with many of the leading restaurant brands in the United States. We believe our platform is the only independent open SaaS platform for restaurants to enable hospitality with modern solutions that allow brands to:

•Order. A suite of solutions powering restaurant brands’ on-demand commerce operations, enabling digital ordering, delivery, and channel management through the Ordering, Dispatch, Rails, Switchboard, Network, Virtual Brands, Kiosk, Catering, and Sync modules.

•Engage. A suite of restaurant-centric marketing solutions optimizing Guest Lifetime Value, or LTV, by strengthening and enhancing the restaurants’ direct guest relationships through the Guest Data Platform, or GDP, Marketing, Sentiment, and Host modules.

•Pay. A fully-integrated, frictionless payment platform, enabling restaurants to grow and protect their digital business through an improved guest payment experience, offering advanced fraud prevention designed to improve authorization rates for valid transactions, and increase basket conversion through our Olo Pay module.

The key milestones in our corporate history are the following:

•2005: Olo Founder and CEO Noah Glass accepted $0.5 million in Series A funding to start Mobo.

•2010: We began rebranding as “Olo” and shifted our focus to enterprise customers.

•2015: We launched Dispatch, our first significant product extension.

•2017: We launched Rails and surpassed $1 billion in GMV.

•2021: We completed our IPO, executed our first acquisition, and surpassed $20 billion in GMV.

•2022: We announced commercial availability of Olo Pay, and surpassed $23 billion in GMV and $250 million in GPV.

Leading restaurant brands trust Olo’s enterprise-grade platform for its capabilities, reliability, security, scalability, and interoperability. Our platform currently handles, on average, more than 2 million orders per day, and more than 85 million guests have transacted on our platform over the last year. We continually invest in architectural improvements so that our system can scale in tandem with our continued growth. Additionally, both internal and external security experts frequently test our system for vulnerabilities. We have never experienced a material breach of customer or guest data. Our open SaaS platform integrates with over 300 restaurant technology solutions including point-of-sale, or POS, systems, aggregators, delivery service providers, or DSPs, ordering service providers, or OSPs, payment processors, user experience and user interface providers, and loyalty programs, giving our customers significant control over the configuration and features of their distinct digital offering.

We are the exclusive direct digital ordering provider for many leading brands across all service models of the restaurant industry, including quick service, fast casual, casual dining, family dining, and coffee and snack food. Our contracts typically have initial terms of three years or longer, with continuous one-to-two-year automatic renewal periods, providing visibility into our future financial performance. Our brands tend to be highly loyal.

We have a highly efficient go-to-market model as a result of our industry thought leadership, partnership approach with our restaurant customers, and experienced enterprise sales, customer success, and deployment teams. Unlike other enterprise software businesses, where the sales team works to add a single location or division and expand to others, we enter into relationships at the brand’s corporate level and strive to secure exclusivity across all locations. This enables us to deploy our modules across all new and existing brand locations without any additional sales and marketing costs, and upsell new offerings to the brand itself, rather than each individual location.

We refer to our business model as a transactional SaaS model, as it includes both subscription and transaction-based revenue streams, and we designed it to align with our customers’ success. Our model allows our customers to forego the cost of building, maintaining, and securing their own digital ordering and delivery platforms and to retain direct relationships with their guests while maximizing profitability. Our hybrid-pricing model provides us with a predictable revenue stream and enables us to further grow our revenue as our customers increase their digital order volume. We generate subscription revenue from our Ordering, Switchboard, Virtual Brands, Kiosk, Catering, Sync, GDP, Marketing, Sentiment, and Host modules. In addition, a growing portion of our customers purchase an allotment of monthly orders for a fixed monthly fee and pay us an additional fee for each excess order, which we also consider to be subscription revenue. Our transaction revenue primarily includes revenue generated from our Dispatch, Rails, and Olo Pay modules. In most cases, we also charge aggregators, channel partners, and other service providers in our ecosystem on a per transaction basis for access to our Rails and Dispatch modules. We also derive transactional revenue from our Network module, which allows brands to take orders from non-aggregator digital channels (e.g., Order with Google, which enables restaurants to fulfill orders directly through Google Search results and Google Maps pages) and generates fees predominantly through revenue sharing agreements with partners.

Our large base of enterprise customers and transactional SaaS revenue model represent an opportunity for further revenue expansion from the sale of additional modules and the addition of new restaurant locations. A key factor to our success in executing our expansion strategy will be our ability to retain our existing and future restaurant customers. Our long-term, direct digital ordering contracts with our customers provide us the opportunity to form unique, trusted partnerships with our restaurant brands, further enhancing our ability to satisfy and retain our customers.

Our contracts typically have initial terms of three years or longer, with continuous one-to-two-year automatic renewal periods, providing visibility into our future performance. One indication of our ability to grow within our customer base through the development of our products that our customers value is our average revenue per unit. We calculate our average revenue per unit by dividing the total platform revenue in a given period by the average active locations in that same period. We believe this demonstrates our ability to grow within our customer base through the development of our products that our customers value. Our ability to retain and increase revenue from existing customers will depend on a number of factors, including fluctuations in our customers’ spending levels, fluctuations in the number of transactions processed by our customers on the platform, and the ability of our customers to switch to a competitor or develop their own internal platform solutions. We have experienced, and will continue to experience, certain of our customers reducing or terminating their usage of our platform as a result of developing their own internal solutions that do not utilize any or all of our modules or moving to a competitor.

We believe there is a substantial opportunity to grow our customer base across the U.S. restaurant industry, adding to our over 600 existing brands across approximately 76,000 active locations as of March 31, 2023, down from approximately 82,000 active locations as of March 31, 2022. We define an “active location” as a unique restaurant location that is utilizing one or more modules in a given quarterly period. Given this definition, active locations in any one quarter may not reflect (i) the future impact of new customer wins as it can take some time for their locations to go live with our platform, or (ii) the customers who have indicated their intent to reduce or terminate their use of our platform in future periods. We consider each specific restaurant brand to be a customer, even if owned by a parent organization that owns multiple restaurant brands. We intend to continue to drive new customer growth by leveraging our brand and experience within the industry, and expanding our sales and marketing efforts. We have also historically pursued and will continue to target the most well-capitalized, fastest-growing restaurant brands in the industry. Our ability to attract new customers will depend on a number of factors, including our ability to innovate, the effectiveness and pricing of our new and existing modules, the growth of digital ordering, and the success of our marketing efforts.

The following summarizes our average revenue per unit and approximate number of active locations for the three months ended, or as of, each of the dates presented.

A further indication of the propensity of our customers to continue to work with and expand their relationship with us over time is our dollar-based net revenue retention, which compares our revenue from the same set of active customers in one period to the prior year period. We calculate dollar-based net revenue retention as of a period-end by starting with the revenue, defined as platform revenue, from the cohort of all active customers as of 12 months prior to such period-end, or the prior period revenue. We then calculate the platform revenue from these same customers as of the current period-end, or the current period revenue. Current period revenue includes any expansion and is net of contraction or attrition over the last 12 months, but excludes platform revenue from new customers in the current period. We then divide the total current period revenue by the total prior period revenue to arrive at the point-in-time dollar-based net revenue retention. We believe that net revenue retention is an important metric to our investors, demonstrating our ability to retain our customers and expand their use of our modules over time, proving the stability of our revenue base and the long-term value of our customer relationships.

For the quarter ended March 31, 2023, net revenue retention was approximately 114%. We have maintained a net revenue retention in excess of 100% throughout the past several years, and expect to continue this trend in the near term as customers continue to adopt additional product modules such as Olo Pay, GDP, Marketing, Sentiment, and Host.

We believe that, in the near term, average revenue per unit and net revenue retention will be greater drivers of growth than total active locations. This is due to the potential opportunity for further multi-module penetration and continued growth in digital ordering across our existing customer base. Additionally, because multi-module penetration can vary across active locations, fluctuations in active locations may not be a clear indication of performance. An example of this would be when a brand has transitioned from our platform and the associated total revenue or revenue per unit of that brand is not material or less than our average.

Transaction revenue will continue to be an important source of our growth. We intend to continue to work with our existing restaurant customers to enable higher transaction volume at their locations, which may enable us to generate additional subscription and transaction revenue. As on-demand digital commerce grows to represent a larger share of total food consumption, we expect to significantly benefit from this secular trend as we capture a portion of this increased on-demand digital commerce order volume. Not only does our software create the opportunity to drive more orders for our customers, but we also expect the industry’s secular tailwinds to help increase transaction order volume as more guests order food through digital means, including on- and off-premise. As transaction volume increases, the subscription revenue we receive from certain subscription-based modules may also increase as customers subscribe for higher tier ordering packages to enable more transactions. Additionally, as we continue to expand our product offerings and improve our current software, we also believe that we may be able to increase our share of the transaction revenue that flows through our platform. Specifically, in February 2022, we announced the general availability of our payment solution, Olo Pay, which we believe can significantly increase our ability to generate transactional revenue. Our ability to increase transaction volume is dependent on macroeconomic conditions, as well as the continued shift to digital ordering for food consumption and our ability to capture a meaningful portion of that shift.

We have invested and intend to continue to invest in expanding the functionality of our current platform and broadening our capabilities to address new market opportunities, particularly around payments, data analytics, and on-premise dining. We also intend to continue to invest in enhancing awareness of our brand and developing more modules, features, and functionality that expand our capabilities to facilitate the extension of our platform to new use cases and industry verticals. We believe this strategy will provide new avenues for growth and allow us to continue to deliver differentiated, high-value outcomes to both our customers and stockholders. Specifically, we intend to invest in research and development to expand our existing modules and build new modules, sales and marketing to promote our modules to new and existing customers and in existing and expanded geographies, professional services to ensure the success of our customers’ implementations of our platform, and other operational and administrative functions to support our expected growth and requirements as a public company. We expect our total operating expenses will increase over time and, in some cases, have short-term negative impacts on our operating margin. We also intend to continue to evaluate strategic acquisitions and investments in businesses and technologies to drive product and market expansion. Our future success is dependent, in part, on our ability to successfully develop, market, and sell new and existing modules to new and existing customers.

We plan to expand our current ecosystem of third-party partners to better support our customers. Our platform is highly configurable and deeply embedded into our customers’ disparate existing infrastructures. Our platform seamlessly integrates with technology providers across the restaurant ecosystem, including most POS systems, DSPs, Ordering Service Providers, or OSPs, aggregators, payment processors, loyalty programs, on-premise ordering providers, kitchen display systems, labor management providers, inventory management providers, and reservation and customer relationship management platforms. We believe that we can leverage these unique partnerships to deliver additional value to our customers. We see opportunity to further broaden our partnership group and build upon the integrations we currently offer. We plan to continue to invest and expand our ecosystem of compatible third-party technology providers to allow us to service a broader network of restaurant brands. We believe that these technology partnerships make us a critical component for restaurant brands looking to enhance their digital ordering and delivery platforms. We intend to continue to invest in building functionality that further integrates our platform with additional third-party technology providers, which would expand our capabilities and facilitate the extension of our platform to new use cases and industry verticals. Our future success is dependent on our ability to continue to integrate with third-party technology providers in the restaurant ecosystem.

While we have not made any significant investments in this area to date, we believe there is an opportunity to partner with small- and medium-sized businesses to enable their on-demand digital commerce presence. Additionally, as many of our customers operate internationally, we believe there is a significant opportunity to expand the usage of our platform outside of the United States. We also believe that our platform can be applied to other commerce verticals, beyond the restaurant industry, that are undergoing a similar digital transformation to deliver real-time experiences and on-demand fulfillment to guests. For example, we currently partner with a number of grocery chains who use our Ordering module to help their guests order ready-to-eat meals and may potentially expand these or other partnerships in the future. We anticipate that our operating expenses will increase as a result of these initiatives.

We generate revenue primarily from platform fees and professional services.

Platform revenue primarily consists of fees that provide customers access to one or more of our modules and standard customer support. Our contracts typically have initial terms of three years or longer, with continuous one-to-two-year automatic renewal periods. We generally bill monthly in arrears. A majority of our platform revenue is derived from our Order solutions, which consist of our Ordering, Dispatch, Rails, Switchboard, Network, Virtual Brands, Kiosk, Catering, and Sync modules. We also generate platform revenue from our Olo Pay module, which became commercially available during 2022, as well as from our Engage solutions, which consist of our GDP, Marketing, Sentiment, and Host modules.

Professional services and other revenue primarily consists of fees paid to us by our customers for the implementation of our platform. The majority of our professional service fees are billed on a fixed fee basis upon execution of our agreement. While we generally expect professional services and other revenue to increase primarily as a result of continued deployment of additional active locations, we also expect that this increase will be offset as our deployment teams become more efficient and more familiar with customer systems and shorten deployment periods.

Platform cost of revenue primarily consists of costs directly related to our platform services, including expenses for customer support and infrastructure personnel, including salaries, taxes, benefits, bonuses, and stock-based compensation, which we refer to as personnel costs, third-party software licenses, hosting, amortization of internal-use software and developed technology, payment processing, and allocated overhead. We expect platform cost of revenue to increase in absolute dollars in order to support additional customer and transaction volume growth on our platform.

Professional services and other cost of revenue primarily consists of the personnel costs of our deployment team associated with delivering these services and allocated overhead.

Gross profit, or revenue less cost of revenue, has been, and will continue to be, affected by various factors, including revenue fluctuations, our mix of revenue associated with various modules, the timing and amount of investments in personnel, increased hosting capacity to align with customer growth, and third-party licensing costs.

Our operating expenses consist of research and development, general and administrative, and sales and marketing expenses. Personnel costs are the most significant component of operating expenses.

Research and development expenses primarily consist of engineering and product development personnel costs and allocated overhead costs. Research and development costs exclude internal-use software development costs, as they are capitalized as a component of property and equipment, net and amortized to platform cost of revenue over the term of their estimated useful life. We anticipate investments in this area to increase slightly on an absolute dollar basis, but to decrease as a percentage of revenue in the short-term, as we balance growth initiatives and investments in innovative solutions to support our customers’ rapidly evolving needs.

General and administrative expenses primarily consist of personnel costs and contractor fees for finance, legal, human resources, information technology, and other administrative functions. In addition, general and administrative expenses include amortization of trademarks, travel-related expenses, and allocated overhead. We also incur general and administrative expenses as a result of operating as a public company. We expect that our general and administrative expenses will continue to grow on an absolute dollar basis while declining as a percentage of revenue as we continue to scale our operations over time.

Sales and marketing expenses primarily consist of sales, marketing, and other personnel costs, commissions, general marketing, amortization of customer relationships, promotional activities, and allocated overhead costs. Sales commissions earned by our sales force are deferred and amortized on a straight-line basis over the expected benefit period. We plan to continue to invest in sales and marketing by expanding our go-to-market activities, hiring additional sales representatives, and sponsoring additional marketing events and trade shows. We expect our sales and marketing expenses to increase on an absolute dollar basis and as a percentage of revenue in the short-term as we continue to invest in our ability to sell new products and increase the visibility of our brand to new and existing customers.

Other income (expenses), net consists primarily of income earned on our investments and money-market funds in cash and cash equivalents and interest expense related to any outstanding debt.

(Benefit) provision for income taxes primarily relates to U.S. state income taxes where we conduct business.

The following tables set forth our results of operations for the periods presented.

(1) To conform the prior years presented to the current year presentation, $0.7 million was reclassified from general and administrative expense, of which 0.2 million was included in platform cost of revenue, $0.1 million was included in professional service and other cost of revenue, $0.1 million was included in sales and marketing expenses, and $0.3 million was included in research and development expenses. Such reclassifications had no effect on previously reported operating loss, net loss, or accumulated deficit. See “Note 2—Significant Accounting Policies” to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information on the reclassifications.

(2) Includes stock-based compensation expense as follows (in thousands)

The following table sets forth our statements of operations data expressed as a percentage of total revenue for the periods presented:

Total platform revenue increased $9.9 million, or 23.9%, to $51.4 million for the three months ended March 31, 2023 from $41.5 million for the three months ended March 31, 2022. This increase was primarily the result of higher ordering related to increased active locations coming onto the platform, and increases in Olo Pay adoption and Engage utilization among our existing customer base. Active locations decreased to approximately 76,000 as of March 31, 2023 from approximately 82,000 as of March 31, 2022 as a result of the previously announced transition of Subway off of the platform. Average revenue per unit increased to approximately $632 for the three months ended March 31, 2023 from approximately $516 for the three months ended March 31, 2022. For the three months ended March 31, 2023 and 2022, 47.6% and 50.2% of our platform revenue was subscription revenue, respectively, and 52.4% and 49.8% was transaction revenue, respectively.

Total professional services and other revenue decreased $0.4 million, or 32.6%, to $0.9 million for the three months ended March 31, 2023 from $1.3 million for the three months ended March 31, 2022, due to a combination of macroeconomic factors such as labor shortages which have delayed certain deployments due to their impact on restaurant customers at both the operator and brand levels, as well as efficiencies in our deployment process resulting in shorter deployment periods, which in turn drive lower deployment fees. Additionally, our efforts to upsell additional platform solutions to existing customers who have already been deployed on our platform is driving growth not reflected in professional services and other revenue. While we generally expect professional services and other revenue to increase primarily as a result of continued deployment of additional active locations, we also expect this increase to be offset as our deployment teams become more efficient and continue to shorten deployment periods.

Total platform cost of revenue increased $6.4 million, or 56.7%, to $17.6 million for the three months ended March 31, 2023 from $11.2 million for the three months ended March 31, 2022. This increase was primarily the result of higher processing and personnel-related compensation costs associated with the increased adoption of Olo Pay. Also contributing to the increase were the costs from amortization of internal-use software and additional amortization of developed technology related to the acquisition of Omnivore Technologies, Inc., or Omnivore.

Total professional services and other cost of revenue decreased $0.7 million, or 37.5%, to $1.1 million for the three months ended March 31, 2023 from $1.8 million for the three months ended March 31, 2022. This decrease was primarily the result of decreased compensation costs due to decreased headcount and efficiencies in the deployment process leading to shorter deployments periods. The decrease is also attributable to a decrease in third party consulting costs.

Gross profit increased $3.8 million to $33.5 million for the three months ended March 31, 2023, from $29.7 million for the three months ended March 31, 2022. Gross margin decreased 5.3% to 64.1% for the three months ended March 31, 2023 from 69.5% for the three months ended March 31, 2022. The increase in gross profit was due to higher ordering from new locations coming onto the platform in conjunction with increased module adoption among our existing customer base. The decrease in gross margin is driven by higher platform and other compensation costs to support growth in transactions as well as the costs from amortization of internal-use software and additional amortization of developed technology related to the Omnivore acquisition.

Research and development expense increased $3.3 million, or 19.3%, to $20.5 million for the three months ended March 31, 2023 from $17.2 million for the three months ended March 31, 2022. This increase was primarily the result of higher compensation costs associated with additional personnel and an increase in the use of software tools to support further investments in our platform development and continued product innovation. As a percentage of total revenue, research and development expenses declined slightly to 39.2% for the three months ended March 31, 2023 compared to the three months ended March 31, 2022.

General and administrative expense remained flat for the three months ended March 31, 2023 from $17.2 million for the three months ended March 31, 2022, primarily due to decreased headcount offset by an increase in certain litigation-related expenses. As a percentage of total revenue, general and administrative expenses decreased to 32.9% for the three months ended March 31, 2023 from 40.3% for the three months ended March 31, 2022.

Sales and marketing expense increased $4.7 million, or 57.2%, to $12.9 million for the three months ended March 31, 2023 from $8.2 million for the three months ended March 31, 2022. This increase was primarily the result of additional compensation costs, due to increases in headcount, as well as costs associated with our in-person customer conference, Beyond4, which we held in the first quarter of 2023 as opposed to the conference being held in the second quarter of 2022. As a percentage of total revenue, sales and marketing expense increased to 24.7% for the three months ended March 31, 2023 from 19.2% for the three months ended March 31, 2022.

Other income for the three months ended March 31, 2023 was primarily driven by income earned on our investments and money-market funds.

The income tax provision for the three months ended March 31, 2023 was driven primarily by adjustments to the full valuation allowance on our deferred tax assets and adjustments for share-based compensation. We maintain a full valuation allowance on our net federal and state deferred tax assets as we have concluded that it is more likely than not that the deferred tax assets will not be realized.

As of March 31, 2023, our principal sources of liquidity were cash and cash equivalents and short-term and long-term investments in marketable securities totaling $438.3 million, which was held for working capital purposes and to fund repurchases of our Class A common stock (as described more fully below), as well as the available balance of our revolving line of credit, described further below.

We have financed our operations primarily through payments received from customers and sales of our equity securities.

On September 7, 2022, the Board of Directors authorized a program to repurchase up to $100 million of our Class A common stock, or the Stock Buyback Program. Under the Stock Buyback Program, shares of our Class A common stock may be repurchased from time to time on a discretionary basis through open market repurchases, privately negotiated transactions, block purchases or other means, and will be structured to occur in compliance with applicable securities laws. The timing and actual number of shares repurchased are determined by a committee established by the Board of Directors, depending on a variety of factors, including the Class A common stock price, trading volume, market conditions, our cash flow and liquidity profile, the capital needs of the business, and other considerations. We expect to fund repurchases with existing cash on hand. The Stock Buyback Program has no expiration date and may be modified, suspended, or terminated at any time by the Board of Directors at its discretion. During the three months ended March 31, 2023, we repurchased shares of our Class A common stock for approximately $20.1 million under the Stock Buyback Program.

We believe our existing cash and cash equivalents, marketable securities, and amounts available under our outstanding credit facility will be sufficient to support our working capital and capital expenditure requirements for at least the next twelve months. Our future capital requirements will depend on many factors, including, but not limited to, our obligation to repay any balance under our credit facility if we were to borrow against the facility in the future, our platform revenue growth rate, receivable and payable cycles, and the timing and extent of investments in research and development, sales and marketing, and general and administrative expenses.

As of March 31, 2023, we had $43.6 million of commitments available under the Second Amended and Restated Loan and Security Agreement with Pacific Western Bank related to a revolving credit and term loan facility, after consideration of $25.0 million in our letter of credit to DoorDash and $1.4 million in our letter of credit on the lease of One World Trade Center. As of March 31, 2023, we had no outstanding borrowings under the line of credit, and no amounts have been drawn against any of our letters of credit.

The following table summarizes our cash flows for the periods presented:

For the three months ended March 31, 2023, net cash provided by operating activities was $7.2 million, primarily due to net loss of $13.7 million adjusted for non-cash charges of $17.0 million and a net increase attributable to our operating assets and liabilities of $4.0 million. The non-cash adjustments primarily relate to stock-based compensation charges of $14.0 million and depreciation and amortization expense of $2.1 million. The net increase attributable to our operating assets and liabilities was primarily driven by an increase in accrued expenses and other current liabilities of $9.1 million related primarily to higher fees owed to delivery service providers and vendors as well as professional and consulting fees. These increases were partially offset by an increase in accounts receivable of $3.0 million and an increase in deferred contract costs of $1.3 million primarily due to growth of our revenue as well as a decrease in accounts payable of $1.2 million.

For the three months ended March 31, 2022, net cash used in operating activities was $0.9 million, primarily due to a net loss of $11.5 million adjusted for non-cash charges of $12.7 million and a net decrease attributable our operating assets and liabilities of $2.1 million. The non-cash adjustments primarily related to stock-based charges of $11.7 million and depreciation and amortization expense of $1.1 million. The net decrease attributable to our operating assets and liabilities was primarily driven by an increase in accounts receivable of $4.9 million and an increase in prepaid expenses of $3.5 million. These increases were offset by an increase in accrued expenses of $4.2 million, related primarily to higher fees owed to delivery service providers and vendors as well as employee compensation accruals, and an increase in deferred revenue of $1.7 million.

Cash used in investing activities was $8.1 million during the three months ended March 31, 2023, primarily due to $4.7 million of net purchases of investments and $3.4 million for the development of internal-use software to support further product development and to expand our employee base to support our operations.

Cash used in investing activities was $51.8 million during the three months ended March 31, 2022, primarily due to cash paid of $49.3 million to acquire Omnivore and $2.5 million for the development of internal-use software and purchases of computer and office equipment to support further product development and to expand our employee base to support our operations.

Cash used by financing activities was $17.7 million during the three months ended March 31, 2023, primarily driven by $20.1 million of stock repurchases under the Stock Buyback Program, partially offset by $1.9 million of net proceeds from the exercise of stock options.

Cash provided by financing activities was $2.0 million during the three months ended March 31, 2022, primarily driven by net proceeds from the exercise of stock options.

There were no material changes in our material cash requirements during the three months ended March 31, 2023 from the obligations and commitments disclosed in our Annual Report on Form 10-K filed with the SEC on February 24, 2023. See “Note 11—Leases” and “Note 16—Commitments and Contingencies” of the Notes to Consolidated Financial Statements included in Part II, Item 8 of our Annual Report on Form 10-K for additional information regarding our material cash requirements.

We report our financial results in accordance with accounting principles generally accepted in the United States, or GAAP. To supplement our financial statements, we provide investors with non-GAAP operating income and free cash flow, each of which is a non-GAAP financial measure, and certain key performance indicators, including GMV, GPV, active locations, net revenue retention, and average revenue per unit.

Management uses these non-GAAP financial measures and key performance indicators, in conjunction with financial measures prepared in accordance with GAAP for planning purposes, including in the preparation of our annual operating budget, as a measure of our core operating results and the effectiveness of our business strategy, and in evaluating our financial performance. These measures provide consistency and comparability with past financial performance as measured by such non-GAAP figures, facilitate period-to-period comparisons of core operating results, and assist shareholders in better evaluating us by presenting period-over-period operating results without the effect of certain charges or benefits that may not be consistent or comparable across periods or compared to other registrants’ similarly named non-GAAP financial measures and key performance indicators.

We adjust our GAAP financial measures for the following items to calculate non-GAAP operating income and non-GAAP operating margin: stock-based compensation expense (non-cash expense calculated by companies using a variety of valuation methodologies and subjective assumptions) and related payroll tax expense, certain litigation-related expenses, loss on disposal of assets, non-cash capitalized software impairment, intangible and internal-use software amortization (non-cash expense), certain severance costs, and transaction costs incurred within one year of the related acquisition. Management believes that it is useful to exclude certain non-cash charges and non-core operational charges from non-GAAP operating income and non-GAAP operating margin because: (1) the amount of such expenses in any specific period may not directly correlate to the underlying performance of our business operations; and (2) such expenses can vary significantly between periods.

Free cash flow represents net cash provided by operating activities, reduced by purchases of property and equipment and capitalization of internal-use software. Free cash flow is a measure used by management to understand and evaluate our liquidity and to generate future operating plans. Free cash flow excludes items that we do not consider to be indicative of our liquidity. The reduction of capital expenditures facilitates comparisons of our liquidity on a period-to-period basis. Management believes providing free cash flow provides useful information to investors and others in understanding and evaluating the strength of our liquidity and future ability to generate cash that can be used for strategic opportunities or investing in our business from the perspective of our management and Board of Directors.

Our use of non-GAAP financial measures and key performance indicators has limitations as an analytical tool, and these measures should not be considered in isolation or as a substitute for analysis of financial results as reported under GAAP. Because our non-GAAP financial measures and key performance indicators are not calculated in accordance with GAAP, they may not necessarily be comparable to similarly titled measures employed by other companies.

The following table presents a reconciliation of non-GAAP operating income to GAAP operating (loss) income, the most directly comparable GAAP measure, for the following periods:

The following table presents a reconciliation of free cash flow to net cash provided by operating activities, the most directly comparable GAAP measure, for each of the periods indicated:

Our management’s discussion and analysis of financial condition and results of operations are based upon our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. The preparation of our condensed consolidated financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, equity, revenue, expenses, and related disclosures. We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis. Actual results may differ from those estimates.

There have been no material changes to our critical accounting policies and estimates during the three months ended March 31, 2023, as compared to those disclosed under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies” in our Annual Report on Form 10-K filed with the SEC on February 24, 2023.

See “Note 2—Significant Accounting Policies” to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for all recently issued standards impacting our condensed consolidated financial statements.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

We are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily a result of exposure to potential changes in interest rates. We do not enter into investments for trading or speculative purposes and have not used any derivative financial instruments to manage our interest rate risk exposure.

Our primary market risk exposure is changing interest rates in connection with our investments and the Second Amended and Restated Loan and Security Agreement with Pacific Western Bank. Interest rate risk is highly sensitive due to many factors, including U.S. monetary and tax policies, U.S. and international economic factors, and other factors beyond our control.

As of March 31, 2023, advances under the formula revolving line of the Second Amended and Restated Loan and Security Agreement bear interest equal to the greater of (A) the Prime Rate then in effect; or (B) 3.25%. As of September 30, 2022, advances under the term loans bear interest equal to the greater of (A) 0.25% above the Prime Rate then in effect; or (B) 3.50%. As of March 31, 2023, we had no outstanding debt under our credit facility.

Our interest-earning instruments also carry a degree of interest rate risk. Our cash and cash equivalents have a relatively short maturity, and are therefore relatively insensitive to interest rate changes. As of March 31, 2023, we had cash and cash equivalents of $331.5 million. We invest in money market funds, U.S. and municipal government agency securities, corporate bonds and notes, certificates of deposit, and commercial paper. Our current investment policy seeks first to preserve principal, second to provide liquidity for our operating and capital needs, and third to maximize yield without putting our principal at risk. As of March 31, 2023, we invested $178.9 million in money market funds and $106.8 million in other securities, of which $90.7 million was classified as short-term. Because the majority of our investment portfolio is short-term in nature, we do not believe an immediate 10% increase in interest rates would have a material effect on the fair market value of our portfolio, and therefore we do not expect our results of operations or cash flows to be materially affected by a sudden change in market interest rates.

Our revenue and costs are generally denominated in U.S. dollars and are not subject to foreign currency exchange risk. However, to the extent we commence generating revenue outside of the United States that is denominated in currencies other than the U.S. dollar, our results of operations could be impacted by changes in exchange rates. A hypothetical 10% strengthening or weakening in the value of the U.S. dollar relative to the foreign currencies in which our revenues and expenses are denominated would not result in a material impact to our consolidated financial statements.

Inflation has remained at historically high levels in the U.S. and overseas, resulting in rising transportation, wages, and other costs. The primary inflation factors affecting our business are increased cost of labor and overhead costs. However, we do not believe that inflation has had a material effect on our business, results of operations, or financial condition. If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, results of operations, and financial condition.

Item 4. Controls and Procedures.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of March 31, 2023.

Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of March 31, 2023 due to the material weakness in our internal control over financial reporting described below under “Management’s Report on Internal Control Over Financial Reporting.”

Our management is responsible for establishing and maintaining adequate “internal control over financial reporting,” as defined in Rule 13a-15(f) of the Exchange Act. Our management conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2022 based on the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. As a result, our management has concluded that our internal control over financial reporting was not effective at December 31, 2022, due to the material weakness in internal control over financial reporting.

We identified a material weakness in our internal control over financial reporting related to the lack of sufficient qualified personnel who possessed an appropriate level of technical expertise and we did not design and maintain effective controls over complex technical accounting matters. This material weakness was previously reported in the Registration Statement on Form S-1 in connection with the initial public offering and reported in the Annual Report on Form 10-K for the fiscal year ended December 31, 2021, and was updated, as necessary, as of December 31, 2022. A material weakness is a deficiency or combination of deficiencies in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our consolidated financial statements would not be prevented or detected on a timely basis. This material weakness could result in misstatements to our consolidated financial statements that would be material and would not be prevented or detected on a timely basis.

On March 4, 2022, we completed our acquisition of Omnivore (see “Note 5—Acquisitions” of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q). As the acquisition occurred during 2022, management excluded the acquisition from its assessment of internal control over financial reporting. As of the fiscal year ended December 31, 2022, the acquisition constituted 0.1% of our total assets (excluding goodwill and intangibles) and 2.8% of our total revenue.

Starting in 2021 and continuing through 2023, we have been actively engaged in the implementation of remediation efforts to address the material weakness. Specific remedial actions undertaken by management included, without limitation:

•Engaged external resources to assist with remediation efforts and internal control execution, as well as to provide additional training to existing personnel.

•Hired additional internal resources with appropriate knowledge and technical expertise to effectively operate financial close and reporting processes and controls over complex technical accounting matters.

•Enhanced the design of our existing controls over complex technical accounting matters

The above controls need to operate for a sufficient period of time so that management can conclude that our controls are operating effectively. As such, the material weakness will not be considered remediated until management has concluded through additional testing that these controls are effective.

We are taking actions to remediate the material weakness relating to our internal control over financial reporting, as described above. Except as otherwise described herein, there were no changes in our internal control over financial reporting in connection with the evaluation required by Rule 13a-15 (d) and 15d-15 (d) of the Exchange Act that occurred during the period covered by this Quarterly Report on Form 10-Q that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Item 1. Legal Proceedings.

A description of our legal proceedings is included in and incorporated by reference to “Note 10—Commitments and Contingencies” of the notes to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Item 1A. Risk Factors.

Investing in our securities involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together with all of the other information in this Quarterly Report on Form 10-Q, including our consolidated financial statements and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” as well as in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 24, 2023 and our other filings with the SEC, before making any investment decision with respect to our securities. The risks and uncertainties described below and in our other filings with the SEC, including our Annual Report on Form 10-K filed with the SEC on February 24, 2023, may not be the only ones we face. If any of the risks actually occur, our business could be materially and adversely affected. In that event, the market price of our Class A common stock could decline, and you could lose part or all of your investment.

The following description includes new risk factors and material changes to risk factors associated with our business previously disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on February 24, 2023 under the heading “Risk Factors.”.

Our ability to grow and generate incremental revenue depends, in part, on our ability to maintain and grow our relationships with existing customers, to have them increase their deployment and use of our platform and modules, and to increase or maintain transaction volume on our platform. Although our customers generally have multi-year contracts with us, they generally have the right to elect not to renew by providing at least 90 days’ written notice prior to the expiration date of the contract. In addition, if our customers do not increase their use of our platform or adopt and deploy additional modules, or if they reduce the number of locations using our platform, then our revenue may decline and our results of operations may be harmed. Customers in the past have not renewed, and in the future may not renew, their contracts with us or reduce their use of our platform for any number of reasons, including if they are not satisfied with our platform or modules, the value proposition of our platform or our ability to meet their needs and expectations, security or platform reliability issues, or if they decide to directly integrate with one or more of our partners, build their own solution internally or if they decide to temporarily or permanently close their restaurants in a location. For example, Subway and other customers have not renewed their contracts with us or reduced their use of our platform.

Additionally, guests may change their purchasing habits or reduce their orders from our current customers, which could harm their business and reduce their use of our platform. We cannot accurately predict our customers’ usage levels and the loss of customers or reductions in the number of locations that use our platform or their usage levels of our modules may each have a negative impact on our business, results of operations, and financial condition and may cause our expansion rate to decline. If a significant number of customers cease using, or reduce their usage of our platform, then we may be required to spend significantly more on sales and marketing than we currently plan to spend in order to maintain or increase revenue from our customers. Such additional sales and marketing expenditures could adversely affect our business, results of operations, and financial condition.

Actual events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions, transactional counterparties or other companies in the financial services industry generally, or concerns or rumors about any events of these kinds or other similar risks, have in the past led and may in the future lead to market-wide liquidity problems. On March 10, March 12, and May 1, 2023, the Federal Deposit Insurance Corporation, or the FDIC, took control and was appointed receiver of Silicon Valley Bank, or SVB, Signature Bank, and First Republic Bank, respectively, after each bank was unable to continue its operations. Although we did not have any cash or cash equivalent balances on deposit with SVB, Signature Bank or First Republic Bank, we are unable to predict the extent or nature of the impacts of the failures of these banks and related circumstances at this time. Similarly, we cannot predict the impact that the high market volatility and instability of the banking sector more broadly could have on economic activity and our business in particular. The failure of other banks and financial institutions and measures taken, or not taken, by governments, businesses, and other organizations in response to these events could adversely impact our business, financial condition, and results of operations.

If the financial institutions with which we do business enter receivership or become insolvent in the future, there is no guarantee that the Department of the Treasury, the Federal Reserve, and the FDIC will intercede to provide us and other depositors with access to balances in excess of the $250,000 FDIC insurance limit, that we would be able to (i) access our existing cash, cash equivalents, and investments, (ii) maintain any required letters of credit or other credit support arrangements, or (iii) adequately fund our business for a prolonged period of time or at all, any of which could have a material adverse effect on our current or projected business operations and results of operations and financial condition. In addition, if any parties with which we conduct business are unable to access funds pursuant to such instruments or lending arrangements with such a financial institution, such parties’ ability to continue to fund their business and perform their obligations to us could be adversely affected, which, in turn, could have a material adverse effect on our business, financial condition, and results of operations.

We began commercially offering Olo Pay in the first quarter of 2022. The payment card networks require us to comply with payment card network operating rules, including special operating rules that apply to us as a “payment service provider” that provides payment processing-related services to merchants and payment processors. The payment card networks set these network rules and have discretion to interpret them and change them. We are also required by our payment processors to comply with payment card network operating rules and we have agreed to reimburse our payment processors for any fines they are assessed by payment card networks as a result of any rule violations by us or our customers. Any changes to or interpretations of the network rules that are inconsistent with the way we and the payment processors and merchants currently operate may require us to make changes to our business that could be costly or difficult to implement. If we fail to make such changes or otherwise resolve the issue with the payment card networks, they could fine us, cancel or suspend our registration as a payment service provider or prohibit us from processing payment cards, which could have an adverse effect on our business, financial condition, and operating results. In addition, violations of the network rules or any failure to maintain good standing with the payment card networks as a payment service provider could impact our ability to facilitate payment card transactions on our platform, increase our costs or otherwise harm our business. If we were unable to facilitate payment card transactions on our platform or were limited in our ability to do so, our business would be materially and adversely affected.

If we fail to comply with the rules and regulations adopted by the payment card networks, we could also be in breach of our contractual obligations to our payment processors, financial institutions or partners. Such failure to comply may subject us to fines, penalties, damages, higher transaction fees, and civil liability, and could eventually prevent us from processing or accepting payment cards or could lead to a loss of payment processor partners, even if there is no compromise of customer or guest information. In the event that we are found to be in violation of any of these legal or regulatory requirements, our business, financial condition, and results of operations could be harmed.

We currently substantially rely on one third-party payment processor to facilitate payments made by guests and payments made to customers through the Olo Pay module. While we are seeking to develop payment processing relationships with other payment processors, we expect to continue to rely on a limited number of payment processors for the foreseeable future. In the event that any of our third-party payment processors fail to maintain adequate levels of support, experience interrupted operations, do not provide high quality service, increase the fees they charge us, discontinue their lines of business, terminate their contractual arrangements with us, or cease or reduce operations, we may suffer additional costs and be required to pursue new third-party relationships, which could materially disrupt our operations and our ability to provide our products and services, and could divert management’s time and resources. In addition, such incidents could result in periods of time during which our platform cannot function properly, and therefore cannot collect payments from customers and their guests, which could adversely affect our relationships with our customers and our business, reputation, brand, financial condition, and results of operations.

We believe the licensing requirements of the Financial Crimes Enforcement Network and state agencies that regulate banks, money service businesses, money transmitters, and other providers of electronic commerce services do not apply to us. One or more governmental agencies may conclude that, under its statutes or regulations, we are engaged in activity requiring licensing or registration. In that event, we may be subject to monetary penalties and adverse publicity and may be required to cease doing business with residents of those states until we obtain the requisite license or registration.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

On March 16, 2021, our registration statement on Form S-1 (File No. 333-253314) was declared effective by the SEC for our IPO. There has been no material change in the planned use of proceeds from our IPO from those disclosed in our final prospectus dated March 16, 2021 and filed with the SEC pursuant to Rule 424(b) under the Securities Act.

The following table provides information with respect to repurchases of our Class A common stock during the periods indicated: