Thought this was an interesting upcoming IPO. Restaurant SaaS platform Olo filed for 100 million dollar (placeholder) IPO.
Some take-aways from the prospectus:
Intro and activities
- Founded in 2005, headquartered in NYC
- SaaS platform with three core offerings to restaurant chains:
Ordering (initial offering): A fully-integrated, white-label, on-demand commerce solution, enabling consumers to order directly from and pay restaurants via mobile, web, kiosk, voice, and other digital channels.
Dispatch (launched in 2015): A fulfillment solution, enabling restaurants to offer, manage and expand direct delivery while optimizing price, timing, and service quality
Rails (launched in 2017): An aggregator and channel management solution, allowing restaurants to control and syndicate menu, pricing, location data, and availability, while directly integrating and optimizing orders from third-parties into the restaurants’ point-of-sale, or POS, systems.
- Integrated with more than 100 other technology solutions, such as PoS systems, aggregators, payment processors, delivery service providers (Doordash, Uber,…), loyalty programs. As Olo is the “central” platform for all these solutions and integrations, they are deeply embedded in the restaurant industry.
- Fixed monthly subscription fee per restaurant location for the “ordering” module. Additional transactional revenue from “Rail” and “Dispatch” is generated for each order. In most cases, additional transactional revenue is generated by charging aggregators, channel partners and other service providers in their ecosystem for access to Rails and Dispatch. In 2020, 56.7% was subscription revenue and 43.3% transaction revenue.
Customers
- Approx. 400 restaurant brands as customers, with a total of 64.000 locations. Their focus is on restaurant chains, not your local mom and pop restaurants.
- 100% of revenue earned in the United States
- Signature customers: Five Guys, Shake Shack, Applebee’s, Chili’s, Cheesecake Factory, Denny’s, iHOP, Subway, Peet’s Coffee, Dairy queen, Wingstop
- Focus on fast growing customers that open a significant number of new locations each year. As revenue is driven by # of locations and # of orders, Olo is able to grow together with the customer
- 71% customers use all 3 offerings as of 2020, up from 44% in 2019
- Average contract length of 3 years with continuous automatic one-year renewals afterwards
- Rails module transaction revenue from their largest digital ordering aggregator, DoorDash, accounted for 19% of total revenue in 2020. DoorDash filed a lawsuit against Olo in October 2020. The complaint alleges breach of contract related to fees charged to DoorDash. DoorDash seeks damages in excess of $7.0 million.
Financials
- 14.6 billion $ GMV in 2020, 1.8 million orders/day. GMV has nearly doubled in each of the last 5 years.
-
120% net revenue retention rate. 99% gross retention rate over the last 5 years!! Net revenue retention is expected to decrease as more and more customers directly onboard with all 3 solutions, rather than land and expand
- 94% revenue growth in 2020 with a total revenue of 98 million $, accelerated from 59% growth in 2019 due to the COVID-19 pandemic. As all restaurants had to build out their online offering, this has been a tailwind to Olo. On a quarterly basis, revenue growth looks like this: Q1 - 55% ; Q2 - 100% ; Q3 - 94% ; Q4 - 118%
- Profitability for FY2020: 81% gross margin and 16% operating margin (on a GAAP basis!!, 22% on a non-gaap basis), 20% FCF margin
- Cash efficient, raised less than 100 million $ primary investment capital since inception 15 years ago
Opportunities
- Current TAM of $7 billion in North America. Penetration of 1.4%
- By providing new services to customers such as on-premise solutions (e.g. table-top dining through the use of QR coding and kiosk ordering), they believe they can increase the fee per transaction, increasing the TAM to $15 billion
- By pursuing SMB restaurants (vs. only larger chains now), the TAM would expand to $20 billion
- The opportunity outside the United States is at least as large as their domestic opportunity, implying a total global TAM of $40 billion
- Growth initiatives:
Continue adding new high-growth restaurant brands and locations in the United States
Upsell additional modules to existing customers. Note that 71% of customers already use all
modules so opportunity to expand is limited with the current product offerings.
Enable higher transaction volume by improving the product offering and increasing the share
of transactions that flow through their platform
Develop new product offerings (around payments, on-premise dining and data analytics)
Expand the ecosystem through more integrations with other technology solutions
Pursue SMB restaurants in the United States and restaurants outside of the United States
Address adjacent verticals such as grocery chains and convenience stores for ready-to-eat meals