Many thanks to JabbokRiver42 for bringing this company to my attention as a side note while discussing TOST and LSPD. He did a lot of hard digging.
OLO checks just about every box of a company we look for here…
• stellar sequential & yoy growth (see numbers below)
• Non-gaap profitable
• High recurring revenue business model. Dollar-based net revenue
retention over 120%.
• Efficient sales cycle.
• Founder in the management team.
• Good Glassdoor ratings.
• Massive TAM, small size
• No customer concentration risk.
• Excellent balance sheet and no debt. After its March IPO, the company
sits on $586,566 cash
TTM Q1'21 Q4 Q3 Q2 Q1'20 Q4 Q3 Q2 Q1'19 Revenue 107,042 36123 30,547 27,505 24,304 16,068 14,038 14,162 12,139 10,352 Sequen. 18.3% 11.1% 13.2% 51.3% 14.5% -0.9% 16.7% 17.3% yoy chg 150% 159% 36% 139% 60% Gr Prof 29,273 25,261 22,726 20,043 11,726 9,760 9,619 8,398 7,328 Gr Mar 81% 83% 94% 125% 84% 69% 79% 81%
I strongly recommend to those interested to read/listen to a MF glowing and thorough discussion just before the IPO at https://www.fool.com/investing/2021/03/09/what-investors-nee… Much of the narrative here is taken from that MF session.
OLO is a SaaS provider that helps big brand restaurants stand up their digital storefronts and make delivery happen. The company has 400 big name restaurant brands to their name and many of these listeners have ordered from and know. They process almost two million orders per day, and in 2020, $14.6 billion in gross merchandising volume. Not only can they enable order taking, they can also enable data and analytics.
The company generates revenue in two main main ways. The platform revenue is split between subscription based products, so they charge a per restaurant, per month fee, just to be on the old platform and that was about 57% of platform revenue last year, down from 93% in the prior year. However, they also have a transaction fee, and that is based on their dispatch model, as well as their analytics model. That is based on each transaction they take a fee for and that was 43% of revenue last year, up from 7% in 2018.
Even though it’s a small company with outstanding growth, it’s profitable because of their selling model. Per the S-1: "We don’t go door to door, or restaurants to restaurants looking for sales. We knock on corporate headquarters, When we go after the customers at that level, and if we win, we sign on thousands of customers all with one transaction”. This strategy makes selling costs very low.
How big is this market opportunity? It’s surprisingly large. Last year, which was a big time down year for the restaurant industry, total sales were still $660 billion. That number is expected to grow to $1 trillion by 2024. That gives them a total addressable market opportunity of about $7 billion They do have plans over time as they scale to shifts down-market and start focusing on medium-size restaurants and then smaller restaurants. If they make that move, you can expect their sales and marketing spending to go up significantly. But if they can do that, they believe that that will expand their TAM by another $8 billion, so doubled and again, just the United States.
However, a lot of their customers already have restaurants in international markets, so they do plan on expanding into international markets down the road and they believe that would give them a further $40 billion addressable market opportunity. Basically everyone on the inside side of the restaurant industry has deemed Olo the leader in the space.
They have consistently grown the way that we expect SaaS companies to grow. They get more and more revenue per location per customer. In 2019, they got about $1,100 per revenue per location. Last year, that was up $1,760.They structure their contracts when a customer signs on board – typically a three year deal. Once a company makes a switch and chooses to adopt Olo’s platform, I can see it being very hard for them to give it up.
Their top 10 biggest restaurant partners, accounted for only 21% of revenue.