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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 November 2, 2023, 109,286,996 shares of the registrant’s Class A common stock and 54,891,834 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, dollar-based net revenue retention, ending active locations, 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 and successful products and services;

•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 experienced in the past, including due to the COVID-19 pandemic, and guest preferences for digital ordering and customer adoption of multi-modules;

•the effects of any public health crises, global conflicts, potential government shutdowns, macroeconomic conditions such as inflation and fluctuating interest rates, changes in discretionary spending, 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, new market entrants, and customers generally developing their own solutions to replace our products

•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 our information provides a reasonable basis for these statements, our 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 and in our subsequent Quarterly Reports on Form 10-Q. 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 September 30,												Nine Months Ended September 30,
			2023						2022						2023						2022
Revenue:
Platform			$	57,261					$	46,357					$	163,235					$	132,361
Professional services and other			533						909						2,050						3,262
Total revenue			57,794						47,266						165,285						135,623
Cost of revenue:
Platform (1)			22,203						14,114						59,537						38,341
Professional services and other (1)			1,026						1,368						3,220						4,640
Total cost of revenue			23,229						15,482						62,757						42,981
Gross Profit			34,565						31,784						102,528						92,642
Operating expenses:
Research and development (1)			18,035						19,391						56,806						54,123
General and administrative (1)			21,307						20,295						56,986						54,047
Sales and marketing (1)			11,363						8,016						36,438						25,224
Restructuring charges (Note 12)			166						—						6,848						—
Total operating expenses			50,871						47,702						157,078						133,394
Loss from operations			(16,306)						(15,918)						(54,550)						(40,752)
Other income, net:
Interest income			4,598						1,525						12,207						2,110
Interest expense			(43)						(70)						(165)						(116)
Other (expense) income			(1)						(7)						(1)						6
Total other income, net			4,554						1,448						12,041						2,000
Loss before income taxes			(11,752)						(14,470)						(42,509)						(38,752)
Provision (benefit) for income taxes			7						90						32						(1,010)
Net loss			$	(11,759)					$	(14,560)					$	(42,541)					$	(37,742)
Net loss per share attributable to Class A and Class B common stockholders:
Basic			$	(0.07)					$	(0.09)					$	(0.26)					$	(0.23)
Diluted			$	(0.07)					$	(0.09)					$	(0.26)					$	(0.23)
Weighted-average Class A and Class B common shares outstanding:
Basic			163,991,486						162,364,654						162,674,062						160,667,412
Diluted			163,991,486						162,364,654						162,674,062						160,667,412

•For the three months ended September 30, 2022, $0.6 million was reclassified from general and administrative expense as follows: $0.2 million into platform cost of revenue, $0.1 million into sales and marketing expenses, and $0.3 million into research and development expenses.

•For the nine months ended September 30, 2022, $2.0 million was reclassified from general and administrative expense as follows: $0.6 million into platform cost of revenue, $0.1 million into professional services and other cost of revenue, $0.3 million into sales and marketing expenses, and $1.0 million into 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 September 30, 2023, our results of operations and comprehensive loss for the three and nine months ended September 30, 2023 and 2022 and our cash flows for the nine months ended September 30, 2023 and 2022, respectively. The results of operations for the three and nine months ended September 30, 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, professional services and other 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.

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 nine months ended September 30, 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.

Cash and cash equivalents are stated at fair value. We consider all short-term, highly liquid investments, with an original maturity of three months or less, to be cash equivalents. We received restricted cash on behalf of the subtenant of our former corporate headquarters at One World Trade Center in advance of certain future rental obligations that will be due from the subtenant. The balance we received on behalf of the subtenant of $2.7 million is included in cash and cash equivalents in the condensed consolidated balance sheets as of September 30, 2023. See “Note 10—Commitments and Contingencies” for more details.

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, cash equivalents, and investments with financial institutions that management believes are of high credit quality and the amounts on deposit may exceed federally insured limits at various times. We have not experienced any significant losses in such accounts and believe we are not exposed to any significant risk. For the three months ended September 30, 2023 and 2022, one customer accounted for 12% of our revenue. For the nine months ended September 30, 2023 and 2022, one customer accounted for 12% of our revenue.

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 September 30, 2023.

As of September 30, 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 our former corporate headquarters at One World Trade Center. As of September 30, 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 nine months ended September 30, 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 $0.7 million and $0.6 million as of September 30, 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 nine months ended September 30, 2023, we recognized $1.4 million of revenue related to contracts that were included in unearned revenue at December 31, 2022.

As of September 30, 2023, our remaining performance obligations were approximately $29.4 million, approximately 53% 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.

We capitalize the incremental costs of obtaining a revenue contract, including sales commissions for new and renewal revenue contracts, certain related incentives, and associated payroll tax and fringe benefit costs. Capitalized amounts are recoverable through future revenue streams under customer contracts.

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 September 30, 2023 and December 31, 2022 (in thousands):

			As of September 30, 2023
			Cost						Net Unrealized Losses						Fair Value						Cash and Cash equivalents						Short-term Investments						Long-term Investments
Cash (1)			$	112,924					$	—					$	112,924					$	112,924					$	—					$	—
Level 1:
Money market funds			173,477						—						173,477						173,477						—						—
Commercial paper			19,177						(9)						19,168						—						19,168						—
Subtotal			192,654						(9)						192,645						173,477						19,168						—
Level 2:
Certificates of deposit			22,790						—						22,790						—						22,790						—
U.S. Government and agency securities			45,682						(308)						45,374						—						31,376						13,998
Corporate bonds			23,961						(87)						23,874						—						17,048						6,826
Subtotal			92,433						(395)						92,038						—						71,214						20,824
Level 3:			—						—						—						—						—						—
Total			$	398,011					$	(404)					$	397,607					$	286,401					$	90,382					$	20,824

(1) We received restricted cash on behalf of the subtenant of our former corporate headquarters at One World Trade Center in advance of certain future rental obligations that will be due from the subtenant and have included this in cash and cash equivalents in the condensed consolidated balance sheets. See “Note 10—Commitments and Contingencies” for more details.

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 material impairment charges were recorded during the nine months ended September 30, 2023. For the nine months ended September 30, 2022 we recorded a non-cash impairment charge of $0.5 million related to the estimated fair value of a portion of our capitalized internal-use software that was non-recoverable and a non-cash impairment charge of $2.3 million related to our right-of-use asset and furniture and fixtures in connection with the sublease of our former corporate headquarters at One World Trade Center.

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 September 30, 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

We recorded $0.4 million in transaction-related expenses for the nine months ended September 30, 2023 primarily related to professional fees and sales taxes associated with the acquisition of Omnivore and the acquisition of Wisely, Inc in November 2021. We recorded $1.5 million in transaction-related expenses, primarily related to transaction-related compensation, advisory, legal, valuation, and other professional fees, for the nine months ended September 30, 2022.

6.Accrued Expenses and Other Liabilities

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

(1) We received restricted cash on behalf of the subtenant of our former corporate headquarters at One World Trade Center in advance of certain future rental obligations that will be due from the subtenant. See “Note 10—Commitments and Contingencies” for more details.

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

In addition, open market repurchases of common stock could be made pursuant to our trading plans established pursuant to Rule 10b5-1 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which would permit us to repurchase common stock at a time that we might otherwise be precluded from doing so under insider trading laws or self-imposed trading restrictions.

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 under the Stock Buyback Program have to date been, and are expected in the future to be, 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 share repurchase activity of our Class A common stock under the Stock Buyback Program for the periods presented (in thousands, except share and per share amounts):

			Total Number of Shares Purchased						Average Price Paid per Share (1)						Value of Shares Repurchased (1)						Remaining Amount Authorized
Balance as of January 1, 2023																					$	80,000
Repurchases of common stock for the three months ended:
March 31, 2023			2,652,372						$	7.54					$	20,000					(20,000)
June 30, 2023			1,409,420						$	7.11					$	10,018					(10,018)
September 30, 2023			2,014,202						$	6.45					$	12,995					(12,995)
Total			6,075,994						$	7.08					$	43,013					$	36,987

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

In March 2021, our Board of Directors approved the issuance of 1,729,189 shares of our Class A common stock to an independent donor-advised fund sponsor, Tides Foundation, in conjunction with our Olo for Good initiative.

We donated 172,918 shares of our Class A common stock to the Olo for Good Fund at Tides Foundation and recognized $1.1 million as a non-cash general and administrative expense in our condensed consolidated statement of operations for the three and nine months ended September 30, 2023. We donated 172,918 shares of our Class A common stock and recognized $1.4 million as a non-cash general and administrative expense for the three and nine months ended September 30, 2022.

Through September 30, 2023, we have donated a total of 691,672 shares of our Class A common stock. We expect to donate 1/10th of the total remaining approved shares into the fund annually.

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 September 30, 2023 and December 31, 2022 the maximum number of shares authorized for issuance to participants under the Plans was 40,185,923 and 30,263,529, respectively. As of September 30, 2023 and December 31, 2022, the number of shares available for issuance to participants under the Plans was 24,812,139 and 23,358,039, respectively.

Starting in 2023, we began awarding PSUs in addition to the RSUs at fixed dollar amounts. The target number of shares underlying the RSU and PSU awards was 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 nine months ended September 30, 2023:

The total fair value of RSUs vested during the nine months ended September 30, 2023 was $19.8 million. Future stock-based compensation for unvested RSUs and PSUs awarded as of September 30, 2023 was approximately $87.3 million and is expected to be recognized over a weighted-average period of 3.14 years.

The employee stock purchase plan (“2021 ESPP”) current offering period began in June 2023 and ends in December 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. As of September 30, 2023, a total of 5,785,854 shares are available for issuance to employees under the 2021 ESPP. For the nine months ended September 30, 2023 and 2022, we recorded approximately $0.9 million and $1.2 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 recorded a provision for income taxes resulting in an effective tax rate of (0.08)% for the nine months ended September 30, 2023. We recorded a benefit for income taxes resulting in an effective tax rate of 2.61% for the nine months ended September 30, 2022. The effective tax rate for the nine months ended September 30, 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 nine months ended September 30, 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 class action lawsuit was filed in the United States District Court for the Southern District of New York asserting claims under the federal securities laws against us and certain of our executive officers. On December 21, 2022, the Court appointed a lead plaintiff and lead counsel on behalf of the putative class, following which the case was captioned Steamship Trade Association of Baltimore - International Longshoremen’s Association Pension Fund v. Olo Inc., et al. (Case No.1:22-cv-08228-JSR). On August 9, 2023, lead plaintiff filed a second amended complaint asserting claims on behalf of a putative class composed of all persons who purchased or otherwise acquired our securities between March 17, 2021 and August 11, 2022, inclusive (the “Second Amended Complaint”). The Second Amended Complaint asserts a claim against all defendants for alleged violations of Section 10(b) of the Exchange Act and Rule 10b5 promulgated thereunder and a claim under Section 20(a) of the Exchange Act against Mr. Glass, our Chief Executive Officer, and Mr. Benevides, our Chief Financial Officer, as alleged controlling persons. The Second Amended Complaint alleges that defendants made materially false and misleading statements concerning, among other things, our business relationship with the restaurant brand Subway, our financial position, our enterprise market segment, and our publicly disclosed “active locations” counts, and that these alleged false and misleading statements caused losses and damages for members of the putative class. The Second Amended Complaint seeks unspecified damages, interest, costs and attorneys’ fees, and other unspecified relief that the Court deems appropriate. On August 24, 2023, we filed a motion to dismiss the Second Amended Complaint. On September 26, 2023, the Court issued a summary order granting in part and denying in part our motion to dismiss, dismissing the claims in the Second Amended Complaint to the extent they are premised on misstatements about Subway, our financial prospects, and our prospects in the enterprise market, but permitting the remaining claims to proceed. Under the current schedule, a final pre-trial conference is set for January 25, 2024. 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 us 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). On May 25, 2023, the plaintiff voluntary dismissed her complaint and refiled in the Court of the Chancery of the State of Delaware (C.A. No. 2023-0560) (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, our alleged issuance of materially false and misleading statements concerning our business relationship with the restaurant brand Subway and our publicly disclosed “active locations” counts. The Floyd Derivative Complaint asserts claims for breaches of fiduciary duty, aiding and abetting breach of fiduciary duty, and waste of corporate assets. The Floyd Derivative Complaint seeks a judgment declaring that the plaintiff may bring the action on behalf of us in a derivative capacity; awarding us damages for the Derivative Defendants’ alleged breaches of fiduciary duty, and waste of corporate assets; requiring us to reform and improve our corporate governance and internal procedures; ordering the Derivative Defendants to pay restitution to us; awarding the plaintiff her costs, fees, and expenses, including attorney’s fees; and granting such other relief that the Court determines to be appropriate. On June 1, 2023, the Court granted the parties’ stipulation to stay the Floyd Derivative Complaint. 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, New York, resulting in a reduction of $0.3 million to operating lease right-of-use assets and operating lease liabilities, respectively. 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.

We received restricted cash on behalf of the subtenant of our former corporate headquarters at One World Trade Center in advance of certain future rental obligations that will be due from the subtenant. The balance we received on behalf of the subtenant of $2.7 million is included in cash and cash equivalents, with an equal and offsetting liability in accrued expenses and other current liabilities in the condensed consolidated balance sheets as of September 30, 2023.

Sublease income was $0.6 million and $0.1 million for the three months ended September 30, 2023 and 2022, respectively. Sublease income was $1.9 million and $0.3 million for the nine months ended September 30, 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 September 30,												Nine Months Ended September 30,
			2023						2022						2023						2022
Outstanding stock options			22,730,187						31,960,236						22,730,187						31,960,236
Outstanding restricted and performance-based stock units			10,404,528						4,710,098						10,404,528						4,710,098
Outstanding shares estimated to be purchased under ESPP			192,422						125,128						192,422						125,128
Total			33,327,137						36,795,462						33,327,137						36,795,462

12.Restructuring Charges

On June 14, 2023, we completed the Restructuring Plan and had a reduction of our workforce by approximately 11% to reorganize our business to better focus our investments on customer needs and to support long-term growth objectives.

We incurred charges of $6.8 million in connection with the Restructuring Plan for the nine months ended September 30, 2023, consisting of the following: $4.5 million related to severance expense and payroll taxes, $1.7 million related to stock-based compensation expense due to the acceleration of equity awards, and $0.6 million related to other employee benefits. These expenses are recorded within the restructuring charges line item in the condensed consolidated statement of operations.

The following table summarizes the restructuring liabilities, which are recorded within accrued expenses and other current liabilities on the condensed consolidated balance sheets, as of September 30, 2023 (in thousands):

The actions associated with the Restructuring Plan were fully completed during the nine months ended September 30, 2023 and we do not expect to incur any material additional charges under this plan.

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 the 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, which approximated 119% for the three months ended September 30, 2023. See the section below entitled “Key Factors Affecting Our Performance” 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.

•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.

•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.

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. To our knowledge, to date, 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 sell to a single location or division and expand to others, we generally enter into relationships at the brand’s corporate level and strive to secure exclusivity across all locations. We consider each specific restaurant brand to be a customer, even if owned by a parent organization that owns multiple restaurant brands. In addition, each restaurant brand may have hundreds or even thousands of individual operators (sometimes referred to as “franchisees”) who own and operate a specific location or locations. It may take time to get all locations deployed, or we may not ultimately deploy all locations due to varying factors. For example, operator locations generally have more latitude in terms of their use of brand-endorsed solutions. Our relationship at the brand’s corporate level, however, enables us to market our modules across new and existing 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. 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 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, our customers’ ability to deploy our modules, fluctuations in the number of transactions processed by our customers on the platform, the average number of active locations, and the ability of our customers to switch to a competitor or develop their own solutions to replace our products. We have experienced, and will continue to experience, certain of our customers or locations reducing or terminating their usage of our platform including as a result of developing their own solutions that do not utilize any or all of our modules or moving to a competitor. In addition, Wingstop Inc. recently announced an initiative to develop their own technology solution, which they expect to roll out beginning in the second quarter of 2024. Our current contract with Wingstop Inc. runs through March 2024, and it is unclear when and to what extent Wingstop Inc. will transition from our platform. Management does not believe that any change to the Wingstop Inc. relationship will be material to our business, results of operations, or financial condition.

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.

Another metric used to demonstrate 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. An active customer is a specific restaurant brand that utilizes one or more of our modules in a given quarterly 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 September 30, 2023, net revenue retention was approximately 119%. 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 that utilize our products. Higher transaction volumes may enable us to gene5rate 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 continue to increase our ability to generate transactional revenue. Our ability to increase transaction volume is dependent on, among other factors, 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 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 78,000 active locations as of September 30, 2023. 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. Of further note, not all of our customer locations may choose to utilize our products, and while we aim to deploy all of customer locations, not all locations may ultimately deploy. 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.

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. For example, as Olo Pay continues to scale and we realize expanded Olo Pay adoption, we may experience increased processing and personnel-related costs. 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, 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.

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 capitalized 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 capitalized 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, but decline as a percentage of revenue, over time.

Restructuring charges are comprised of severance costs, payroll taxes, and stock-based compensation expense associated with the accelerated vesting of equity awards. These charges were incurred as a result of our completed corporate reorganization in the second quarter of 2023, which entailed a reduction of workforce.

Other income, net consists primarily of income earned on our investments and money-market funds, partially offset by interest expense related to our credit facility.

Provision (benefit) 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.

•For the three months ended September 30, 2022, $0.6 million was reclassified from general and administrative expense as follows: $0.2 million into platform cost of revenue, $0.1 million into sales and marketing expenses, and $0.3 million into research and development expenses.

•For the nine months ended September 30, 2022, $2.0 million was reclassified from general and administrative expense as follows: $0.6 million into platform cost of revenue, $0.1 million into professional services and other cost of revenue, $0.3 million into sales and marketing expenses, and $1.0 million into 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):

(3) Includes charitable donation expense of $1.1 million for both the three and nine months ended September 30, 2023. Also includes $1.4 million of charitable donation expense for both the three and nine months ended September 30, 2022.

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 $10.9 million, or 23.5%, to $57.3 million for the three months ended September 30, 2023 from $46.4 million for the three months ended September 30, 2022. This increase was primarily the result of increases in Olo Pay adoption, higher Order revenue from new customers, and increases in Engage utilization among our existing customer base. Average revenue per unit increased to approximately $742 for the three months ended September 30, 2023 from approximately $558 for the three months ended September 30, 2022. For the three months ended September 30, 2023 and 2022, 43.9% and 51.6% of our platform revenue was subscription revenue, respectively, and 56.1% and 48.4% was transaction revenue, respectively. Active locations decreased to approximately 78,000 as of September 30, 2023 from approximately 84,000 as of September 30, 2022 as a result of the previously announced transition of Subway off of the platform.

Total professional services and other revenue decreased $0.4 million, or 41.4%, to $0.5 million for the three months ended September 30, 2023 from $0.9 million for the three months ended September 30, 2022. This decrease was driven by: (i) a

decrease in affiliate revenue due to the expiration of a certain referral agreement contract and (ii) 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. Additionally, our efforts to upsell additional platform solutions to existing customers who have already been deployed on our platform drive platform revenue growth, rather than growth in professional services and other revenue.