0001431695us-gaap:CommonStockMember2021-09-30

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 20212022
¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 001-40213
olo-20210930_g1.jpgolo-20220930_g1.jpg
Olo Inc.
(Exact name of registrant as specified in its charter)

Delaware20-2971562
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification Number)
285 Fulton Street
One World Trade Center, 82nd Floor
New York, NY 10007
(Address of principal executive offices) (Zip Code)
(212) 260-0895
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A Common Stock, par value $0.001 per shareOLOThe New York Stock Exchange
As of November 5, 2021, 57,078,716 shares of the registrant’s Class A common stock and 94,626,917 shares of registrant’s Class B common stock were outstanding.
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”,filer,” “smaller reporting company”company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer¨Accelerated filer¨
Non-accelerated filerxSmaller reporting companyx¨
 Emerging growth companyx
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 4, 2022, 105,945,207 shares of the registrant’s Class A common stock and 57,460,687 shares of registrant’s Class B common stock were outstanding.


OLO INC.
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Page
Item 1.
1
Condensed Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020
1
Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income for the Three and Nine Months Ended September 30, 2021 and 2020
2
Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Comprehensive LossStockholders' Equity (Deficit) for the Three and Nine Months Ended September 30, 2021 and 2020
3
Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’Equity (Deficit)
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2021 and 2020
Notes to the Condensed Consolidated Financial Statements
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3.
Quantitative and Qualitative Disclosures About Market Risk

Item 4.
Controls and Procedures
PART II - OTHER INFORMATION
Item 1.
Legal Proceedings
Item 1A.
Risk Factors
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
Item 3.
Defaults Upon Senior Securities
Item 4.
Mine Safety Disclosures
Item 5.
Other Information
Item 6.
Exhibits
Signatures


RISK FACTOR SUMMARY
Our business operations are subject to numerous risks, factors and uncertainties, including those outside of our control, that could cause our actual results to be harmed, including risks regarding the following:
•The COVID-19 pandemic, including variants of COVID-19, and/or the impact of vaccinations and increased demand for in-person dining could materially adversely affect our business, financial condition, and results of operations;
•Our rapid growth may not be sustainable and depends on our ability to attract new customers, retain revenue from existing customers, and increase sales to both new and existing customers;
•Our limited operating history with our new modules in a new and developing market makes it difficult to evaluate our current business and future prospects, and may increase the risk that we will not be successful;
•Our business could be harmed if we fail to manage our growth effectively;
•We have a history of losses and we may be unable to sustain profitability;
•Our sales cycles can be long and unpredictable, and our sales efforts require considerable investment of time and expense. If our sales cycle lengthens or we invest substantial resources pursuing unsuccessful sales opportunities, our operating results and growth would be harmed;
•We expect fluctuations in our financial results, making it difficult to project future results, and if we fail to meet the expectations of securities analysts or investors with respect to our results of operations, our stock price and the value of your investment could decline;
•Our business depends on customers increasing their use of our platform, and any loss of customers or decline in their use of our platform could materially and adversely affect our business, results of operations, and financial condition;
•If we fail to continue to improve and enhance the functionality, performance, reliability, design, security, or scalability of our platform in a manner that responds to our customers’ evolving needs, our business may be adversely affected;
•Our growth depends in part on the success of our strategic relationships with third parties and our ability to integrate with third-party applications and software;
•Our Dispatch module currently relies on a limited number of delivery service providers, or DSPs;
•Our Rails module currently relies on a limited number of aggregators;
•We currently generate significant revenue from our largest restaurant customers, and the loss or decline in revenue from any of these customers could harm our business, results of operations and financial condition;
•Security breaches, denial of service attacks, or other hacking and phishing attacks on our systems or the systems with which our platform integrates could harm our reputation or subject us to significant liability and adversely affect our business and financial results;
•Our business is highly competitive. We may not be able to compete successfully against current and future competitors;
•If we cannot maintain our corporate culture as we grow, our success and our business and competitive position may be harmed;
•We may make acquisitions or enter into joint ventures or other partnerships, which could divert management’s attention, result in operating difficulties and dilution to our shareholders and otherwise disrupt our operations and adversely affect our business, operating results, or financial position.
•Our future success depends in part on our ability to drive the adoption of our platform by international and small-to-medium business, or SMB, customers, and to expand into new, on-demand commerce verticals;
•We may be subject to claims by third parties of intellectual property infringement;
•We identified a material weakness in our internal control over our financial reporting process. If we are unable to remediate this material weakness, we may not be able to accurately or timely report our financial condition or results of operations; and;


•The dual-class structure of our common stock has the effect of concentrating voting control with our existing stockholders, executive officers, directors, and their affiliates, which will limit your ability to influence the outcome of important transactions and to influence corporate governance matters, such as electing directors, and to approve material mergers, acquisitions, or other business combination transactions that may not be aligned with your interests.


SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
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 facts 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, and the amount and timing of any repurchases of our common stock under our share repurchase program, 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,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will,” or “would” or the negative of these words or other similar terms or expressions.
These forward-looking statements include, but are not limited to, statements concerning the following:
•our expectations regarding our revenue, expenses, and other operating results, including overall transaction volumes, average revenue per unit, or ARPU, ending active locations and dollar-based net revenue retention, or NRR;
•the durability of the growth we have experienced in the near termpast due to the COVID-19 pandemic and the associated shelter-in-place ordersgovernment-imposed restrictions on consumer preferences for digital ordering and customer adoption of multi-modules as COVID-19 associated restrictions continue to abate;multi-modules;
•our ability to acquire new customers and successfully retain existing customers;
•our ability to develop and release new products and services;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 effects of the COVID-19 and the associated global economic uncertaintypandemic or other public health crises;crises, macroeconomic conditions, such as inflation, interest rates, or overall market uncertainty;
•future investments in our business, our anticipated capital expenditures, and our estimates regarding our capital requirements;
•the loss or decline in revenue from any of our largestsignificant customers and our resulting financial condition;
•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 reliance on key personnel and 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 expectations regarding the period during which we qualify as an emerging growth company under the Jumpstart Our Business Startups Act of 2012, or a smaller reporting company as defined in the Securities Exchange Act of 1934, as amended;JOBS Act; 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. The outcome


of the events described in these forward-looking statements is subject to risks, assumptions, uncertainties, and other factors described in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q.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, 2021, our subsequent Quarterly Reports on Form 10-Q, and our other filings with the Securities and Exchange Commission. 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.



In addition, statements such asthat “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. 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. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these 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. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments.
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.

Table Of Contents
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
OLO INC.
Condensed Consolidated Balance Sheets (Unaudited)
(in thousands, except share and per share amounts)
As of
 September 30,
2021
As of
December 31,
2020
As of
 September 30,
2022
As of
December 31,
2021
ASSETSASSETS  ASSETS  
Current assets:Current assets:  Current assets:  
Cash and cash equivalentsCash and cash equivalents$597,742 $75,756 Cash and cash equivalents$366,399 $514,445 
Accounts receivable, net of allowances of $657 and $631, respectively40,392 45,641 
Short-term investmentsShort-term investments101,956 — 
Accounts receivable, net of allowances of $612 and $657, respectivelyAccounts receivable, net of allowances of $612 and $657, respectively43,108 42,319 
Contract assetsContract assets625 356 Contract assets402 568 
Deferred contract costsDeferred contract costs2,175 1,830 Deferred contract costs2,729 2,567 
Prepaid expenses and other current assetsPrepaid expenses and other current assets5,044 1,661 Prepaid expenses and other current assets6,644 5,718 
Total current assetsTotal current assets645,978 125,244 Total current assets521,238 565,617 
Property and equipment, netProperty and equipment, net2,843 2,241 Property and equipment, net10,540 3,304 
Intangible assets, netIntangible assets, net22,688 19,635 
GoodwillGoodwill207,540 162,956 
Contract assets, noncurrentContract assets, noncurrent1,132 503 Contract assets, noncurrent619 387 
Deferred contract costs, noncurrentDeferred contract costs, noncurrent3,595 3,346 Deferred contract costs, noncurrent3,991 3,616 
Deferred offering costs— 2,792 
Operating lease right-of-use assetsOperating lease right-of-use assets14,568 — 
Long-term investmentsLong-term investments804 — 
Other assets, noncurrentOther assets, noncurrent368 298 Other assets, noncurrent452 361 
Total assetsTotal assets$653,916 $134,424 Total assets$782,440 $755,876 
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)
LIABILITIES AND STOCKHOLDERS’ EQUITYLIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:Current liabilities:Current liabilities:
Accounts payableAccounts payable$5,293 $9,104 Accounts payable$1,930 $2,184 
Accrued expenses and other current liabilitiesAccrued expenses and other current liabilities59,704 42,578 Accrued expenses and other current liabilities46,543 45,395 
Unearned revenueUnearned revenue1,372 585 Unearned revenue2,608 1,190 
Redeemable convertible preferred stock warrant liability— 19,735 
Operating lease liabilities, currentOperating lease liabilities, current2,666 — 
Total current liabilitiesTotal current liabilities66,369 72,002 Total current liabilities53,747 48,769 
Unearned revenue, noncurrentUnearned revenue, noncurrent2,002 435 Unearned revenue, noncurrent1,121 3,014 
Deferred rent, noncurrent2,229 2,402 
Operating lease liabilities, noncurrentOperating lease liabilities, noncurrent16,328 — 
Other liabilities, noncurrentOther liabilities, noncurrent248 329 Other liabilities, noncurrent243 2,343 
Total liabilitiesTotal liabilities70,848 75,168 Total liabilities71,439 54,126 
Commitments and contingencies00
Redeemable convertible preferred stock, $0.001 par value, zero and 60,509,120 shares authorized at September 30, 2021 and December 31, 2020, respectively; zero and 58,962,749 issued and outstanding at September 30, 2021 and December 31, 2020, respectively— 111,737 
Stockholders’ equity (deficit):
Class A common stock, $0.001 par value; 1,700,000,000 and zero shares authorized at September 30, 2021 and December 31, 2020, respectively; 50,270,094 and zero shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively. Class B common stock, $0.001 par value; 185,000,000 shares authorized at September 30, 2021 and December 31, 2020, respectively; 100,585,301 and 22,320,286 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively151 22 
Preferred stock, $0.001 par value; 20,000,000 and zero shares authorized at September 30, 2021 and December 31, 2020, respectively— — 
Commitments and contingencies (Note 16)Commitments and contingencies (Note 16)
Stockholders’ equity:Stockholders’ equity:
Class A common stock, $0.001 par value; 1,700,000,000 shares authorized at September 30, 2022 and December 31, 2021; 105,063,706 and 78,550,530 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively. Class B common stock, $0.001 par value; 185,000,000 shares authorized at September 30, 2022 and December 31, 2021; 58,421,140 and 79,149,659 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectivelyClass A common stock, $0.001 par value; 1,700,000,000 shares authorized at September 30, 2022 and December 31, 2021; 105,063,706 and 78,550,530 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively. Class B common stock, $0.001 par value; 185,000,000 shares authorized at September 30, 2022 and December 31, 2021; 58,421,140 and 79,149,659 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively163 158 
Preferred stock, $0.001 par value; 20,000,000 shares authorized at September 30, 2022 and December 31, 2021Preferred stock, $0.001 par value; 20,000,000 shares authorized at September 30, 2022 and December 31, 2021— — 
Additional paid-in capitalAdditional paid-in capital692,420 16,798 Additional paid-in capital860,574 813,166 
Accumulated deficitAccumulated deficit(109,503)(69,301)Accumulated deficit(149,316)(111,574)
Total stockholders’ equity (deficit)583,068 (52,481)
Total liabilities, redeemable convertible preferred stock and stockholders’ equity (deficit)$653,916 $134,424 
Accumulated other comprehensive lossAccumulated other comprehensive loss(420)— 
Total stockholders’ equityTotal stockholders’ equity711,001 701,750 
Total liabilities and stockholders’ equityTotal liabilities and stockholders’ equity$782,440 $755,876 
The accompanying notes are an integral part of these financial statements.




1
Table Of Contents
OLO INC.
Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)
(in thousands, except share and per share amounts)

Three Months Ended
September 30,		Nine Months Ended
September 30,		Three Months Ended
September 30,		Nine Months Ended
September 30,
20212020202120202022202120222021
Revenue:Revenue:Revenue:
PlatformPlatform$36,084 $26,197 $105,533 $63,525 Platform$46,357 $36,084 $132,361 $105,533 
Professional services and otherProfessional services and other1,306 1,307 3,876 4,352 Professional services and other909 1,306 3,262 3,876 
Total revenueTotal revenue37,390 27,504 109,409 67,877 Total revenue47,266 37,390 135,623 109,409 
Cost of revenue:Cost of revenue:Cost of revenue:
PlatformPlatform6,632 3,583 18,419 10,191 Platform13,920 6,632 37,693 18,419 
Professional services and otherProfessional services and other1,532 1,196 3,958 3,191 Professional services and other1,346 1,532 4,543 3,958 
Total cost of revenueTotal cost of revenue8,164 4,779 22,377 13,382 Total cost of revenue15,266 8,164 42,236 22,377 
Gross ProfitGross Profit29,226 22,725 87,032 54,495 Gross Profit32,000 29,226 93,387 87,032 
Operating expenses:Operating expenses:Operating expenses:
Research and developmentResearch and development14,485 7,871 42,872 22,715 Research and development19,101 14,485 53,159 42,872 
General and administrativeGeneral and administrative21,270 5,461 53,034 15,137 General and administrative20,894 21,270 56,090 53,034 
Sales and marketingSales and marketing4,728 2,002 12,265 6,089 Sales and marketing7,923 4,728 24,890 12,265 
Total operating expensesTotal operating expenses40,483 15,334 108,171 43,941 Total operating expenses47,918 40,483 134,139 108,171 
(Loss) income from operations(11,257)7,391 (21,139)10,554 
Other expenses, net:
Loss from operationsLoss from operations(15,918)(11,257)(40,752)(21,139)
Other income (expenses), net:Other income (expenses), net:
Interest incomeInterest income1,525 — 2,110 — 
Interest expenseInterest expense— — — (157)Interest expense(70)— (116)— 
Other (expense) income, net(15)(3)(23)15 
Other (expense) incomeOther (expense) income(7)(15)6 (23)
Change in fair value of warrant liabilityChange in fair value of warrant liability— (2,234)(18,930)(4,251)Change in fair value of warrant liability— — — (18,930)
Total other expenses, net(15)(2,237)(18,953)(4,393)
(Loss) income before taxes(11,272)5,154 (40,092)6,161 
Provision for income taxes36 47 110 142 
Net (loss) income and comprehensive (loss) income$(11,308)$5,107 $(40,202)$6,019 
Total other income (expenses), netTotal other income (expenses), net1,448 (15)2,000 (18,953)
Loss before income taxesLoss before income taxes(14,470)(11,272)(38,752)(40,092)
Provision (benefit) for income taxesProvision (benefit) for income taxes90 36 (1,010)110 
Net lossNet loss$(14,560)$(11,308)$(37,742)$(40,202)
Accretion of redeemable convertible preferred stock to redemption valueAccretion of redeemable convertible preferred stock to redemption value— (17)(14)(52)Accretion of redeemable convertible preferred stock to redemption value— — — (14)
Undeclared 8% dividend on participating securities— (5,090)— (5,967)
Net loss attributable to Class A and Class B common stockholdersNet loss attributable to Class A and Class B common stockholders$(11,308)$— $(40,216)$— Net loss attributable to Class A and Class B common stockholders$(14,560)$(11,308)$(37,742)$(40,216)
Net loss per share attributable to Class A and Class B common stockholders:Net loss per share attributable to Class A and Class B common stockholders:Net loss per share attributable to Class A and Class B common stockholders:
BasicBasic$(0.08)$— $(0.35)$— Basic$(0.09)$(0.08)$(0.23)$(0.35)
DilutedDiluted$(0.08)$— $(0.35)$— Diluted$(0.09)$(0.08)$(0.23)$(0.35)
Weighted-average Class A and Class B common shares outstanding:Weighted-average Class A and Class B common shares outstanding:Weighted-average Class A and Class B common shares outstanding:
BasicBasic148,452,987 20,856,530 113,451,378 19,401,927 Basic162,364,654 148,452,987 160,667,412 113,451,378 
DilutedDiluted148,452,987 20,856,530 113,451,378 19,401,927 Diluted162,364,654 148,452,987 160,667,412 113,451,378 

The accompanying notes are an integral part of these financial statements.




2
Table Of Contents
OLO INC.
Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders' Equity (Deficit)Comprehensive Loss (Unaudited)
(in thousands, except share and per share amounts)thousands)

Redeemable Convertible
Preferred Stock		Class A and Class B Common StockAdditional
Paid In
Capital		Accumulated
Deficit		Total
Stockholders' Equity
(Deficit)
SharesAmountSharesAmount
Balance as of December 31, 202058,962,749 $111,737 22,320,286 $22 $16,798 $(69,301)$(52,481)
Initial public offering, net of underwriting discount and deferred offering costs— — 20,700,000 21 477,805 — 477,826 
Accretion of redeemable convertible preferred stock to redemption value— 14 — — (14)— (14)
Issuance of preferred stock on exercise of warrants1,681,848 2 — — 39,056 — 39,056 
Conversion of redeemable convertible preferred stock to common stock upon initial public offering(60,644,597)(111,753)100,196,780 100 111,653 — 111,753 
Issuance of common stock upon settlement of Share Appreciation Rights— — 1,642,570 2 2,845 — 2,847 
Issuance of common stock in connection with charitable donation— — 172,918 — 5,125 — 5,125 
Issuance of common stock on exercise of stock options— — 1,965,824 2 2,155 — 2,157 
Stock-based compensation— — — — 5,426 — 5,426 
Net loss— — — — — (26,457)(26,457)
Balance as of March 31, 2021— $— 146,998,378 $147 $660,849 $(95,758)$565,238 
Reversal of deferred offering costs— — — — 1,145 — 1,145 
Issuance of common stock on exercise of stock options— — 698,453 1 949 — 950 
Stock-based compensation— — — — 8,198 — 8,198 
Net loss— — — — — (2,437)(2,437)
Balance as of June 30, 2021— $— 147,696,831 $148 $671,141 $(98,195)$573,094 
Issuance of common stock in connection with charitable donation— — 172,918 — 7,982 — 7,982 
Issuance of common stock on exercise of stock options— — 2,984,858 3 5,370 — 5,373 
Vesting of restricted stock units— — 788 — — — — 
Stock-based compensation— — — — 7,927 — 7,927 
Net loss— — — — — (11,308)(11,308)
Balance as of September 30, 2021— $— 150,855,395 $151 $692,420 $(109,503)$583,068 




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Table Of Contents
OLO INC.
Condensed Statements of Redeemable Convertible Preferred Stock and Stockholders' Equity (Deficit) (Unaudited)
(in thousands, except share and per share amounts)
Redeemable Convertible
Preferred Stock		Class A and Class B Common StockAdditional
Paid In
Capital		Accumulated
Deficit		Total
Stockholders' Equity
(Deficit)
SharesAmountSharesAmount
Balance as of December 31, 201949,371,876 $61,901 18,451,120 $19 $10,795 $(72,364)$(61,550)
Issuance of common stock on exercise of stock options— — 197,727 — 19 — 19 
Accretion of redeemable convertible preferred stock to redemption value— 19 — — (19)— (19)
Stock-based compensation— — — — 949 — 949 
Net loss— — — — — (3,026)(3,026)
Balance as of March 31, 202049,371,876 $61,920 18,648,847 $19 $11,744 $(75,390)$(63,627)
Issuance of common stock on exercise of stock options— — 495,686 — 282 — 282 
Issuance of redeemable convertible preferred stock9,590,873 49,766 — — — — — 
Accretion of redeemable convertible preferred stock to redemption value— 16 — — (16)— (16)
Stock-based compensation— — — — 1,147 — 1,147 
Net income— — — — — 3,938 3,938 
Balance as of June 30, 202058,962,749 $111,702 19,144,533 $19 $13,157 $(71,452)$(58,276)
Issuance of common stock on exercise of stock options— — 2,658,137 3 1,243 — 1,246 
Accretion of redeemable convertible preferred stock to redemption value— 17 — — (17)— (17)
Stock-based compensation— — — — 1,400 — 1,400 
Net income— — — — — 5,107 5,107 
Balance as of September 30, 202058,962,749 $111,719 21,802,670 $22 $15,783 $(66,345)$(50,540)
Three Months Ended
September 30,		Nine Months Ended
September 30,
2022202120222021
Net loss$(14,560)$(11,308)$(37,742)$(40,202)
Other comprehensive loss:
Unrealized loss on investments(169)— (420)— 
Total other comprehensive loss(169)— (420)— 
Comprehensive loss$(14,729)$(11,308)$(38,162)$(40,202)
The accompanying notes are an integral part of these financial statements.

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OLO INC.
Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit) (Unaudited)
(in thousands, except share data)

Class A and Class B Common StockAdditional
Paid In
Capital		Accumulated
Deficit		Accumulated Other Comprehensive LossTotal
Stockholders’ Equity
SharesAmount
Balance as of December 31, 2021157,700,189 $158 $813,166 $(111,574)$— $701,750 
Issuance of common stock on exercise of stock options1,851,334 2 2,305 — — 2,307 
Vesting of restricted stock units136,662 — — — — — 
Stock-based compensation— — 12,457 — — 12,457 
Net loss— — — (11,509)— (11,509)
Balance as of March 31, 2022159,688,185 $160 $827,928 $(123,083)$— $705,005 
Issuance of common stock under the Employee Stock Purchase Plan193,267 — 1,764 — — 1,764 
Issuance of common stock on exercise of stock options1,118,331 1 2,322 — — 2,323 
Vesting of restricted stock units199,738 — — — — — 
Stock-based compensation— — 11,750 — — 11,750 
Other comprehensive loss— — — — (251)(251)
Net loss— — — (11,673)— (11,673)
Balance as of June 30, 2022161,199,521 $161 $843,764 $(134,756)$(251)$708,918 
Issuance of common stock in connection with charitable donation172,918 — 1,406 — — 1,406 
Issuance of common stock on exercise of stock options1,945,436 2 3,028 — — 3,030 
Vesting of restricted stock units166,971 — — — — — 
Stock-based compensation— — 12,376 — — 12,376 
Other comprehensive loss— — — — (169)(169)
Net loss— — — (14,560)— (14,560)
Balance as of September 30, 2022163,484,846 $163 $860,574 $(149,316)$(420)$711,001 

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OLO INC.
Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit) (Unaudited)
(in thousands, except share data)
Redeemable Convertible
Preferred Stock		Class A and Class B Common StockAdditional
Paid In
Capital		Accumulated
Deficit		Total
Stockholders' Equity (Deficit)
SharesAmountSharesAmount
Balance as of December 31, 202058,962,749 $111,737 22,320,286 $22 $16,798 $(69,301)$(52,481)
Initial public offering, net of underwriting discount and deferred offering costs— — 20,700,000 21 477,805 — 477,826 
Accretion of redeemable convertible preferred stock to redemption value— 14 — — (14)— (14)
Issuance of preferred stock on exercise of warrants1,681,848 2 — — 39,056 — 39,056 
Conversion of redeemable convertible preferred stock to common stock upon initial public offering(60,644,597)(111,753)100,196,780 100 111,653 — 111,753 
Issuance of common stock upon settlement of Share Appreciation Rights— — 1,642,570 2 2,845 — 2,847 
Issuance of common stock in connection with charitable donation— — 172,918 — 5,125 — 5,125 
Issuance of common stock on exercise of stock options— — 1,965,824 2 2,155 — 2,157 
Stock-based compensation— — — — 5,426 — 5,426 
Net loss— — — — — (26,457)(26,457)
Balance as of March 31, 2021— $— 146,998,378 $147 $660,849 $(95,758)$565,238 
Reversal of deferred offering costs— — — — 1,145 — 1,145 
Issuance of common stock on exercise of stock options— — 698,453 1 949 — 950 
Stock-based compensation— — — — 8,198 — 8,198 
Net loss— — — — — (2,437)(2,437)
Balance as of June 30, 2021— $— 147,696,831 $148 $671,141 $(98,195)$573,094 
Issuance of common stock in connection with charitable donation— — 172,918 — 7,982 — 7,982 
Issuance of common stock on exercise of stock options— — 2,984,858 3 5,370 — 5,373 
Vesting of restricted stock units— — 788 — — — — 
Stock-based compensation— — — — 7,927 — 7,927 
Net loss— — — — — (11,308)(11,308)
Balance as of September 30, 2021— $— 150,855,395 $151 $692,420 $(109,503)$583,068 
The accompanying notes are an integral part of these financial statements.

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OLO INC.
Condensed Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
Nine Months Ended
September 30, 2021		Nine Months Ended
September 30, 2020
Operating activities  
Net (loss) income$(40,202)$6,019 
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization800 440 
Stock-based compensation21,417 3,465 
Stock-based compensation in connection with vesting of Stock Appreciation Rights2,847 — 
Charitable donation of Class A common stock13,107 — 
Bad debt expense283 520 
Change in fair value of warrants18,930 4,251 
Changes in operating assets and liabilities:
Accounts receivable4,966 (30,404)
Contract assets(898)(59)
Prepaid expenses and other current assets(3,256)(148)
Deferred contract costs(594)(1,575)
Accounts payable(3,721)(3,461)
Accrued expenses and other current liabilities10,350 24,010 
Deferred rent(174)669 
Unearned revenue2,354 (337)
Net cash provided by operating activities26,209 3,390 
Investing activities
Purchases of property and equipment, including capitalized software(1,195)(989)
Net cash used in investing activities(1,195)(989)
Financing activities
Proceeds from issuance of common stock upon initial public offering, net of underwriting discounts485,541 — 
Cash received for employee payroll tax withholdings25,696 — 
Cash paid for employee payroll tax withholdings(18,691)— 
Proceeds from line of credit— 15,000 
Repayment of line of credit— (18,500)
Proceeds from exercise of warrants392 — 
Payment of deferred finance costs(135)— 
Payment of deferred offering costs(4,118)(1,105)
Proceeds from exercise of stock options8,287 1,708 
Proceeds from issuance of preferred stock— 50,000 
Costs incurred from issuance of preferred stock— (234)
Net cash provided by financing activities496,972 46,869 
Net increase in cash and cash equivalents521,986 49,270 
Cash and cash equivalents, beginning of period75,756 10,935 
Cash and cash equivalents, end of period$597,742 $60,205 

Nine Months Ended
September 30, 2022		Nine Months Ended
September 30, 2021
Operating activities  
Net loss$(37,742)$(40,202)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization4,285 800 
Stock-based compensation35,104 21,417 
Stock-based compensation in connection with vesting of Stock Appreciation Rights— 2,847 
Charitable donation of Class A common stock1,406 13,107 
Bad debt expense263 283 
Change in fair value of warrants— 18,930 
Non-cash lease expense1,706 — 
Deferred income tax benefit(1,421)— 
Non-cash impairment charges2,806 — 
Other non-cash loss, net(560)— 
Changes in operating assets and liabilities:
Accounts receivable(602)4,966 
Contract assets(66)(898)
Prepaid expenses and other current assets(404)(3,256)
Deferred contract costs(537)(594)
Accounts payable(452)(3,721)
Accrued expenses and other current liabilities927 10,350 
Operating lease liabilities(1,893)— 
Unearned revenue(558)2,354 
Other liabilities, noncurrent136 (174)
Net cash provided by operating activities2,398 26,209 
Investing activities
Purchases of property and equipment(454)(324)
Capitalized internal-use software(6,997)(871)
Acquisitions, net of cash acquired(49,241)— 
Purchases of investments(114,006)— 
Sales and maturities of investments11,388 — 
Net cash used in investing activities(159,310)(1,195)
Financing activities
Proceeds from issuance of common stock upon initial public offering, net of underwriting discounts— 485,541 
Cash received for employee payroll tax withholdings7,083 25,696 
Cash paid for employee payroll tax withholdings(7,012)(18,691)
Proceeds from exercise of warrants— 392 
Payment of deferred finance costs— (135)
Payment of deferred offering costs(423)(4,118)
Proceeds from exercise of stock options and purchases under employee stock purchase plan9,218 8,287 
Net cash provided by financing activities8,866 496,972 
Net (decrease) increase in cash and cash equivalents(148,046)521,986 
Cash and cash equivalents, beginning of period514,445 75,756 
Cash and cash equivalents, end of period$366,399 $597,742 





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OLO INC.
Condensed Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
Supplemental disclosure of cash flow information
Cash paid for income taxes, net$69 $— 
Cash paid for interest$— $157 
Cash received for early exercise of stock options$— $156 
Supplemental disclosure of non-cash investing and financing activities
Accrued offering costs$339 $710 
Vesting of early exercised stock options$174 $— 
Accretion of redeemable convertible preferred stock to redemption value$14 $52 
Purchase of property and equipment$34 $46 
Capitalization of stock-based compensation for internal-use software$173 $31 
Nine Months Ended
September 30, 2022		Nine Months Ended
September 30, 2021
Supplemental disclosure of non-cash investing and financing activities
Accrued offering costs$— $339 
Vesting of early exercised stock options$174 $174 
Accretion of redeemable convertible preferred stock to redemption value$— $14 
Purchase of property and equipment on account$— $34 
Capitalization of stock-based compensation for internal-use software$1,856 $173 
The accompanying notes are an integral part of these financial statements.




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OLO INC.
Notes to the Condensed Consolidated Financial Statements
(Unaudited)

1.Business
Olo Inc. was formed on June 1, 2005 in Delaware and is headquartered in New York City. On January 14, 2020, the boardour Board of directorsDirectors 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”“our,” and “the Company” shall refer to Olo Inc.
We are a softwarean open SaaS platform company for restaurants powering the industry’s digital transformation. Our platform powers restaurant industry and are focused onbrands’ on-demand digital commerce operations, enabling digital ordering, through the deployment of white label e-commerce websitesdelivery, front-of-house management, and applicationspayments, while further strengthening and tools for digital order management. Our platform also provides a delivery enablement module and an aggregator management module. Our platform combines digital ordering and delivery enablement toenhancing restaurants’ direct consumer relationships. We provide restaurants with a holistic viewbusiness-to-business-to-consumer, 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 businessomni-channel sales, maximize profitability, establish and enable them to ownmaintain direct guest relationships, and manage their relationships with their customers.collect, protect, and leverage valuable customer data.
Emerging Growth Company Status
We arecurrently qualify as an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act, until such time as those standards apply to private companies.
We have elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act.companies. As a result, our financial statements may not be comparable to financial statements of issuers whothat are required to comply with the effective dates for new or revised accounting standards based on public company effective dates.

We will remain an emerging growth company until the earliest of: (1) December 31, 2026; (2)However, as of the last business day of the firstour second fiscal year in which our annual gross revenue is $1.07 billion or more; (3) the date on which we have, during the previous rolling three-year period, issued more than $1 billion in non-convertible debt securities; and (4) the last dayquarter of the fiscal year in which2022, the market value of our equity securities, which includes Class A common stock and Class B common stockthat was held by non-affiliates exceedsexceeded $700 million, and as a result, we will no longer qualify as an emerging growth company as of June 30the end of suchthe current fiscal year.year ending December 31, 2022, and we will be subject to certain requirements that apply to other public companies but did not previously apply to us due to our status as an emerging growth company, including the provisions of Section 404(b) of the Sarbanes-Oxley Act of 2002, which require that our independent registered public accounting firm provide an attestation report on the effectiveness of our internal control over financial reporting. In addition, we will no longer be able to take advantage of the extended transition period as of the end of the current fiscal year ending December 31, 2022, and we will be required to adopt new or revised accounting standards when they are applicable to public companies that are not emerging growth companies.
Initial Public Offering
On March 19, 2021, we completed our initial public offering of Class A common stock (“IPO”)IPO in which we issued and sold 20,700,000 shares of our Class A common stock at the public offering price of $25.00 per share. We received net proceeds of approximately $485.5 million after deducting underwriting discounts and commissions. Upon completion of the IPO, $6.6 million of deferred offering costs, which consisted primarily of accounting, legal, and other fees related to our IPO, were reclassified into stockholders’ deficit as a reduction of the IPO proceeds.
Prior to the IPO, warrants to purchase 1,682,847 shares of our outstanding redeemable convertible preferred stock warrants were exercised and converted into redeemable convertible preferred stock. Upon completion of the IPO, all shares of our outstanding redeemable convertible preferred stock, inclusive of the shares issued pursuant to these warrant exercises, converted into 100,196,780 shares of Class B common stock. Additionally, upon completion of the IPO, stock appreciation rights (“SARs”) granted to employees vested and settled, resulting in the issuance of 1,642,570 shares of Class B common stock.

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OLO INC.
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
2.Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed interimconsolidated 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”) for interim reporting. As permitted under those. 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, 2021 condensed consolidated balance sheet was derived from the audited financial statements as of that date, but may not include all disclosures including certain notes or other financial information that are normallyfootnotes required by U.S. GAAP have been condensed or omitted from these interim financial statements. on an annual reporting basis.
These unaudited interimcondensed 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,




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OLO INC.
Notes to Condensed Financial Statements
(Unaudited)
2021, 2022, our results of operations and comprehensive income, our stockholders’ equity,loss for the three and nine months ended September 30, 20212022 and 20202021 and our cash flows for the nine months ended September 30, 2022 and 2021, and 2020, respectively. The financial data and the other financial information disclosed in the notes to the financial statements related to these periods are also unaudited. The results of operations for the three and nine months ended September 30, 20212022 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 20212022 or for any other future annual or interim period.
The unaudited condensed financial statementsinformation included in this Quarterly Report on Form 10-Q should be read in conjunction with the auditedconsolidated financial statements and related notes included in our final prospectus dated March 16, 2021 andAnnual Report on Form 10-K filed with the SecuritiesSEC on February 25, 2022. All intercompany balances and Exchange Commission pursuanttransactions have been eliminated in consolidation.
Certain prior period amounts have been reclassified to Rule 424(b) underconform to the Securities Act of 1933, as amended (the “Prospectus”).current period presentation.
Use of Estimates
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, allowance for doubtful accounts, stock-based compensation including the determination of the fair value of our stock, fair value of warrant liabilities,stock-based awards, realization of deferred tax assets, estimated life of our customers,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 theour financial position and results of operations.
Significant Accounting Policies
Segment InformationOur significant accounting policies are outlined in Note 2, “Significant Accounting Policies”
An operating segment is defined as a component of an enterprise for which discrete financial information is evaluated regularly by in the chief operating decision maker (“CODM”). We define the CODM as the Chief Executive Officer as his role isNotes to make decisions about allocating resources and assessing performance. Our business operatesConsolidated Financial Statements included in 1 operating segment as allPart II, Item 8 of our offerings operateAnnual Report on a single platform and are deployed in an identical way, with our CODM evaluating our financial information, resources and performance of these resources on a combined basis. Since we operate in 1 operating segment, all required financial segment information can be found inForm 10-K for the financial statements. As of September 30, 2021 andyear ended December 31, 2020, we did not have assets located outside of2021. During the United States and international revenue recognized during the three and nine months ended September 30, 2022, there were no material changes to our critical accounting policies from those described in our Annual Report on Form 10-K for the year ended December 31, 2021, was not material.except as described below.
Concentrations of Business and Credit Risk
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 exceeds federally insured limits. We reduce our credit risk by placing our cash and investments with major financial institutions with high credit ratings. As of September 30, 2022 and December 31, 2021, weno customer had no customers individually representinga balance over 10% of our accounts receivable and as of December 31, 2020, 11% of our accounts receivable were due from one customer.

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OLO INC.
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
receivable. For the three months ended September 30, 20212022 and 2020,2021, one customer accounted for 16%12% and 23%16% of our revenue, respectively. For the nine months ended September 30, 20212022 and 2020,2021, one customer accounted for 19%12% and 19% of our revenue, respectively.
Investments
Management determines the appropriate classification of investments at the time of purchase based upon management’s intent with regard to such investments. Our investments are classified as available-for-sale at the time of purchase, and we reevaluate such classification as of each balance sheet date. We consider all highly liquid investments with an original maturity of 90 days or less when purchased to be cash equivalents. Investments with remaining contractual maturities of one year or less from the balance sheet date, which are not considered cash equivalents, are classified as short-term investments, and those with remaining contractual maturities greater than one year from the balance sheet date are classified as long-term investments. All investments are recorded at their estimated fair value, and any unrealized gains and losses, net of taxes, are recorded in accumulated other comprehensive loss, which is reflected as a separate component of stockholders’ equity in the condensed consolidated balance sheets. Realized gains and losses on sales and maturities of investments are determined based on the specific identification method and are recognized in the condensed consolidated statements of operations.
We perform periodic evaluations to determine whether any declines in the fair value of investments below cost are other-than-temporary. The evaluation consists of qualitative and quantitative factors regarding the severity and duration of the unrealized loss, as well as our ability and intent to hold the investments until a forecasted recovery occurs. The impairments are considered to be other-than-temporary if they are related to deterioration in credit risk or if it is likely that the underlying securities will be sold prior to a full recovery of their cost basis. Other-than-temporary fair value impairments, if any, are determined based on the specific identification method and are reported in other (expense) income, net in the condensed consolidated statements of operations.
Accounts Receivable, Net
Accounts receivable, net are stated at net realizable value and include unbilled receivables. Unbilled receivables arise primarily from transactional services provided in advance of billing. Accounts receivable are net of an allowance for credit losses, are not collateralized, and do not bear interest. Payment terms vary by contract type but are generally due within 30 days. The accounts receivable balance at September 30, 2022 and December 31, 2021 included unbilled receivables of $0.6 million and $4.1 million, respectively.
We assess the collectability of outstanding accounts receivable on an ongoing basis and maintain an allowance for credit losses for accounts receivable deemed uncollectible. Upon adoption of Accounting Standards Update (“ASU”) 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, we analyzed our accounts receivable portfolio for significant risks, historical activity, and an estimate of future collectability to determine the amount that will ultimately be collected. This estimate is analyzed annually and adjusted as necessary or upon certain triggering events. Identified risks pertaining to our accounts receivable include the delinquency level, customer type, and current economic environment. Due to the short-term nature of such receivables, the estimate of the amount of accounts receivable that may not be collected is based on aging of the accounts receivable balances and the financial condition of customers.
The following summarizes our allowance for doubtful accounts activity (in thousands):
September 30,
20222021
Beginning balance$657 $631 
Bad debt expense263 283 
Writeoffs(308)(257)
Ending balance$612 $657 
Business Combinations
We account for acquisitions using the acquisition method of accounting and determine whether a transaction constitutes a business and is treated as a business combination or if the transaction does not constitute a business and is treated as an asset acquisition. The acquisition method of accounting requires, among other things, allocation of the fair value of

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OLO INC.
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
purchase consideration to the tangible and intangible assets acquired and liabilities assumed at their estimated fair values on the acquisition date. The results of businesses acquired in a business combination are included in our condensed consolidated financial statements from the date of acquisition.
Determining the fair value of assets acquired and liabilities assumed requires management to use significant judgment and estimates, including estimates of future revenue and adjusted earnings before interest and taxes and discount rates. Our estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ materially from estimates. Our estimates associated with the accounting for business combinations may change as additional information becomes available regarding the assets acquired and liabilities assumed. Any change in facts and circumstances that existed as of the acquisition date and impacts our estimates is recorded to goodwill if identified within the measurement period. Subsequent to the measurement period or our final determination of fair value of assets and liabilities, whichever is earlier, the adjustments will affect our earnings.
Transaction related expenses incurred in a business combination are not included as a component of consideration transferred, but are accounted for as an expense in the period in which the costs are incurred.
Goodwill and Intangible Assets
Goodwill represents the excess of the aggregate of the consideration transferred and the amount recognized for non-controlling interest, if any, over the fair value of identifiable assets acquired and liabilities assumed in a business combination. We have no intangible assets, other than goodwill, with indefinite useful lives.
Intangible assets other than goodwill are comprised of acquired developed technology, customer relationships, and trademarks. At initial recognition, intangible assets acquired in a business combination or asset acquisition are recognized at their fair value as of the date of acquisition. Following initial recognition, intangible assets are carried at acquisition date fair value less accumulated amortization and impairment losses, if any, and are amortized on a straight-line basis over the estimated useful life of the asset.
We review goodwill for impairment annually on October 1st (beginning day of the fourth quarter) of each fiscal year or whenever events or changes in circumstances indicate that an impairment may exist. In the first nine months of 2022, there were no events or changes in circumstances that would have required an interim impairment test. In conducting our annual impairment test, we review qualitative factors to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount. If factors indicate that the fair value of the reporting unit is less than its carrying amount, we perform a quantitative assessment and the fair value of the reporting unit is determined by analyzing the expected present value of future cash flows. If the carrying value of the reporting unit continues to exceed its fair value, the fair value of the reporting unit’s goodwill is calculated and an impairment loss equal to the excess is recorded.
We assess the impairment of intangible assets whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
Leases
Prior to the adoption of Accounting Standards Codification (“ASC”) 842, Leases, on January 1, 2022
We categorized leases at their inception as either operating or capital. In the ordinary course of business, we enter into non-cancelable operating leases for office space. We recognized lease costs on a straight-line basis and treated lease incentives as a reduction of rent expense over the term of the agreement. The difference between cash rent payments and rent expense was recorded as a deferred rent liability, with the amount expected to be amortized within the next twelve months classified as a current liability. We subleased a portion of our office space and recognize rental income on a straight-line basis as an offset to rent expense within general and administrative costs. The difference between cash rent payments received and rental income was recorded within prepaid expenses and other current assets.


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OLO INC.
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
Subsequent to the adoption of ASC 842 on January 1, 2022
We determine if an arrangement is a lease or contains a lease at inception. Our lease agreements are generally for office facilities, and the determination of whether such agreements contain leases generally does not require significant estimates or judgments. Our leases may also contain non-lease components such as payments of maintenance, utilities, and taxes, which we have elected to account for separately, as these amounts are readily determinable. At the commencement date of a lease, we recognize a liability to make lease payments and an asset representing the right to use the underlying asset during the lease term. The lease liability is measured at the present value of the minimum rental payments discounted using our incremental borrowing rate (“IBR”) over the lease term (or, if readily determinable, the rate implicit in the lease). The right-of-use asset is measured at cost, which includes the initial measurement of the lease liability and initial direct costs incurred and excludes lease incentives. We subleased a portion of our office space and recognize rental income on a straight-line basis as an offset to other leases costs, net within general and administrative expenses.
The lease term used to measure right-of-use lease assets and lease liabilities may include renewal options which are deemed reasonably certain to be exercised. Operating lease costs are recognized on a straight-line basis over the lease term. Variable lease payments are expensed as incurred. Our leases do not contain any material residual value guarantees or material restrictive covenants.
Recently Adopted Accounting Pronouncements
In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-02, Leases (Topic 842) (“ASC 842”), which requires lessees to recognize the following for all leases (with the exception of short-term leases) at the commencement date: (i) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (ii) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Additional disclosures are required to allow financial statement users to assess the amount, timing, and uncertainty of cash flows arising from leasing activities. A modified retrospective transition approach is required for leases existing at the time of adoption.
We adopted and began applying the standard on January 1, 2022 using the modified retrospective approach and applied it to all existing leases as of the adoption date. We will continue to present prior period amounts under ASC 840, Leases. In addition, we elected the package of practical expedients permitted under the transition guidance within the new standard which does not require us to reassess whether contracts that existed or expired prior to the adoption date contained an embedded lease, reassess historical lease classification, or evaluate initial direct costs for leases that were in effect at the adoption date. We did not elect the hindsight practical expedient related to determining the lease term.
As a result of implementing this guidance, we recognized $20.6 million in operating lease right-of-use assets as of January 1, 2022, and derecognized $2.4 million of previously recognized deferred rent. We also recorded $2.5 million in current operating lease liabilities and $18.1 million in operating lease liabilities, net of current portion in our condensed consolidated balance sheet as of January 1, 2022. The adoption of ASC 842 did not result in a cumulative-effect adjustment on retained earnings. See “Note 11—Leases” for additional details.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires an entity to utilize the current expected credit loss (“CECL”) model to estimate its lifetime “expected credit loss” and record an allowance that, when deducted from the amortized cost basis of the financial asset, presents the net amount expected to be collected on the financial asset. The CECL model results in more timely recognition of credit losses. This guidance also requires new disclosures for financial assets measured at amortized cost, loans, and available-for-sale debt securities. We adopted this standard as of January 1, 2022. The adoption did not have a material impact on our condensed consolidated financial statements.
In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805)—Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires an acquirer to recognize and measure contract assets and contract liabilities in accordance with ASC Topic 606, Revenue from Contracts with Customers. Under prior guidance, an acquirer generally recognized assets acquired and liabilities assumed in a business combination, including contract assets and contract liabilities arising from revenue contracts with customers, at fair value on the acquisition date. ASU No. 2021-08 results in the acquirer recording acquired contract assets and liabilities on the same basis that would have been recorded by the acquiree before the acquisition under ASC Topic 606. ASU No. 2021-08 is effective for fiscal years beginning after December 15, 2022, with early adoption permitted. We early adopted ASU No 2021-08 as of January 1, 2022 on a

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(Unaudited)
prospective basis and the adoption impact of the new standard was not material to our condensed consolidated financial statements. The standard did not impact our contract assets or liabilities prior to the adoption date.
3.Revenue Recognition
The following table disaggregates revenue by type (in thousands):
Three Months Ended September 30, 2022
PlatformProfessional
Services and
Other		Total
Timing of revenue recognition
Transferred over time$23,919 $909 $24,828 
Transferred at a point in time22,438 — 22,438 
Total revenue$46,357 $909 $47,266 
Three Months Ended September 30, 2021
PlatformProfessional
Services and
Other		Total
Timing of revenue recognition
Transferred over time$17,046 $1,306 $18,352 
Transferred at a point in time19,038 — 19,038 
Total revenue$36,084 $1,306 $37,390 
Nine Months Ended September 30, 2022
PlatformProfessional
Services and
Other		Total
Timing of revenue recognition
Transferred over time$67,710 $3,262 $70,972 
Transferred at a point in time64,651 — 64,651 
Total revenue$132,361 $3,262 $135,623 
Nine Months Ended September 30, 2021
PlatformProfessional
Services and
Other		Total
Timing of revenue recognition
Transferred over time$47,902 $3,876 $51,778 
Transferred at a point in time57,631 — 57,631 
Total revenue$105,533 $3,876 $109,409 
Contract Balances
Contract Assets
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 $1.0 million as of each of September 30, 2022 and December 31, 2021.

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Notes to the Condensed Consolidated Financial Statements
(Unaudited)
Unearned Revenue
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, 2022, we recognized $1.2 million of revenue related to contracts that were included in unearned revenue at December 31, 2021. During the nine months ended September 30, 2021, we recognized $0.4 million of revenue related to contracts that were included in unearned revenue at December 31, 2020.
As of September 30, 2022, our remaining performance obligations were approximately $40.8 million, approximately 45% 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.
Deferred Contract Costs
The following table summarizes the activity of current and non-current deferred contract costs (in thousands):
Nine Months Ended September 30,
20222021
Beginning balance$6,183 $5,176 
Capitalization of deferred contract costs3,084 2,607 
Amortization of deferred contract costs(2,547)(2,013)
Ending balance$6,720 $5,770 
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




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(Unaudited)
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.

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Notes to the Condensed Consolidated Financial Statements
(Unaudited)
The following summarizes assetstables present the costs, net unrealized losses, and liabilitiesfair value by major security type for our investments as of September 30, 20212022 and December 31, 2020 that are2021 (in thousands):
As of September 30, 2022
CostNet Unrealized LossesFair ValueCash and cash equivalentsShort-term investmentsLong-term investments
Cash$224,315 $— $224,315 $224,315 $— $— 
Level 1:
Money market funds140,977 — 140,977 140,977 — — 
Commercial paper20,617 (73)20,544 905 19,639 — 
Subtotal161,594 (73)161,521 141,882 19,639 — 
Level 2:
Certificates of deposit32,857 (124)32,733 — 32,733 — 
U.S. Government and agency securities27,392 (86)27,306 — 27,306 — 
Corporate bonds23,421 (137)23,284 202 22,278 804 
Subtotal83,670 (347)83,323 202 82,317 804 
Level 3:— — — — — — 
Total$469,579 $(420)$469,159 $366,399 $101,956 $804 
As of December 31, 2021
CostNet Unrealized LossesFair ValueCash and cash equivalentsShort-term investmentsLong-term investments
Cash$219,344 $— $219,344 $219,344 $— $— 
Level 1:
Money market funds295,101 — 295,101 295,101 — — 
Total$514,445 $— $514,445 $514,445 $— $— 
Our assets measured at fair value on a recurringnonrecurring basis by level, within the fair value hierarchy (in thousands):
September 30, 2021
Level 1Level 2Level 3
Cash and cash equivalents:
Money market funds$45,080 $— $— 
Total$45,080 $— $— 
December 31, 2020
Level 1Level 2Level 3
Cash and cash equivalents:
Money market funds$45,039 $— $— 
Redeemable convertible preferred stock warrant liability— — 19,735 
Total$45,039 $— $19,735 
There were no transfers of financial instruments between Level 1, Level 2,include long-lived assets and finite-lived intangibles, which are considered to be Level 3 duringinputs. During the periods presented.
The fair value measurement ofnine months ended September 30, 2022, we determined that the redeemable convertible preferred stock warrant liability is based on significant inputs not observed in the market and thus represents a Level 3 measurement. We estimated the fair value of a portion of our internal-use software was non-recoverable, and we recorded a non-cash impairment charge of $0.5 million, as more fully described in “Note 5—Property and Equipment.” In addition, during the liability usingthree months ended September 30, 2022, we entered into a sublease of our corporate headquarters, and in connection with this, we recorded a non-cash impairment charge of $2.3 million related to our right-of-use asset and furniture and fixtures within the intrinsic value of the warrants. The change in fair value was recognized as other expense in the accompanying statements of operations and comprehensive loss.leased space. See Note 10“Note 11—Leases” for additional information on the Level 3 inputs used to estimate the fair value of this liability. Prior to the IPO, all shares of our outstanding redeemable convertible preferred stock warrants were exercised and converted into redeemable convertible preferred stock. Upon completion of the IPO, all shares of our outstanding redeemable convertible preferred stock, inclusive of the warrants exercised, converted into shares of Class B common stock.new sublease agreement.
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. The recorded amount of the line of credit approximates fair value as it is based upon rates available for obligations of similar terms and maturities.
Revenue Recognition
We derive our revenue primarily from platform fees to access our software platform and professional services. Revenue is recognized when control of these services transfers to our customers in an amount that reflects the consideration we expect to be entitled to in exchange for those services.
We apply the principles in the standard using the following steps:
•Identify the contract(s) with a customer
•Identify the performance obligations in the contract
•Determine the transaction price
•Allocate the transaction price to the performance obligations in the contract
•Recognize revenue when (or as) we satisfy a performance obligation




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Notes to Condensed Financial Statements
(Unaudited)
Sales taxes collected from customers and remitted to various governmental authorities are excluded from the measurement of the transaction price and presented on a net basis in our statements of operations. Any balance collected and not paid, is reflected as a liability on the balance sheets.
Platform Revenue
Platform revenue primarily consists of fees generated when we provide our customers access to one or more of our Ordering, Dispatch and Rails modules of our cloud application, with routine customer support.
Our subscription contracts are non-cancellable and typically begin with a minimum three-year term with automatic, annual renewal periods thereafter. The majority of platform services revenue is derived from subscription fees from our Ordering module, which provides digital ordering capabilities for end consumers to place food orders online from restaurants. The Ordering module is a stand-ready obligation to provide access to the platform that is satisfied over the contract term. Our contracts for the Ordering module provide for monthly fixed fees, or monthly fixed fees for a specified quantity of orders processed on the platform, plus monthly overage fees. We generally bill customers on a monthly basis, in arrears. We allocate the variable consideration related to the monthly overages to the distinct month during which the related services were performed as those fees relate specifically to providing the Ordering module of the platform in the period and represents the consideration we are entitled to for the access to the platform. As a result, the fixed monthly fees and monthly overages are included in the transaction price and recognized as revenue in the period in which the fee was generated.
Our Dispatch module enables our restaurant customers to offer, manage, and expand delivery to its customers. Our customers for the Dispatch module are both the restaurants and delivery service providers (“DSPs”). The Dispatch module connects restaurants with DSPs to facilitate the ordering and delivery of orders to the restaurant’s customer. We typically collect a per transaction fee from both the restaurant and the DSP. Revenue is recognized when we have arranged for a DSP to deliver the order to the end consumer.
Our Rails module allows our customers to control and manage menu availability and pricing and location information while directly integrating orders from third-party channels. Our performance obligation is a stand-ready obligation to provide access to the Rails module that is satisfied over the contract term. We typically receive a fee from the third-party channel for each transaction processed. No minimum monthly amounts or overage fees are charged to third-party channel in these arrangements. Although we do not directly charge our Ordering customers for these transactions, the transactions count toward the specified quantity and overages activity used in determining our Ordering customers monthly Ordering revenue.
Professional Services and Other Revenue
Professional services and other revenue primarily consists of fees for platform implementation services. The implementation fees in our contracts are generally variable, consisting of either a fixed fee or a fixed monthly fee over the duration of the implementation project. For contracts with fixed monthly fees, we estimate this variable consideration using the expected value method whereby, at contract inception, we estimate how many months it will take to implement the platform into the customer environment, including time to onboard restaurant franchise locations. This estimate is multiplied by the fixed monthly professional services fee to determine the transaction price, which is recognized over time as the services are performed. The transaction price may be subject to constraint and is included only to the extent that it is probable that a significant reversal of the amount of cumulative revenue recognized will not occur in a future period. For arrangements where we charge monthly fees, any additional months required for implementation are billed at the same fixed monthly fee. Our customers benefit from our services as they are provided, and we use a cost-to-cost measure of progress to recognize revenue from our implementation services.
In certain contracts, we engage third parties to assist in providing professional services to our customers. We determined we are the principal in transferring these services to the customer and recognize revenue on a gross basis. We control the services being provided to our customer and are responsible for ensuring that the services are performed and are acceptable to our customer. That is, we are responsible for fulfillment of the promise in the contract with our customer, and we also have discretion in setting the price with our customer.




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Notes to Condensed Financial Statements
(Unaudited)
Contracts with Multiple Performance Obligations
Our contracts with customers may contain multiple performance obligations. We identify performance obligations in a contract with a customer based on the goods and services that will be transferred to the customer that are capable of being distinct and that are separately identifiable from other promises in the contract. If not considered distinct, the promised goods or services are combined with other goods or services and accounted for as a combined performance obligation. Identifying distinct performance obligations in a contract requires judgment. Our performance obligations primarily include access to our platform and its different modules and implementation services associated with the platform.
Implementation services that require us to perform significant customization and modification of our platform to interface with the customer’s environment are not distinct from the platform. Since our Ordering customers can renew their agreements without paying for implementation again upon renewal, we considered the discounted fees at renewal to provide a material right to the customer. That is, because the customer can renew the implemented service at a discount from the original transaction price, we considered the discount to be a material right since it provides the customer a significant discount to future services. Our obligation to provide future services at a discount is accounted for as a separate performance obligation. Accordingly, we recognize the fair value of the material right over the expected customer life, which commences when the implementation services are complete and the customer obtains access to the platform.
All other implementation services are generally distinct and accounted for as separate performance obligations. For contracts with multiple performance obligations, the transaction price is allocated to the separate performance obligations on a relative standalone selling price basis. We determine standalone selling price based on the price at which the distinct good or service is sold separately. If the standalone selling price is not observable through past transactions, we estimate the standalone selling price taking into account available information such as market conditions, internally approved pricing and cost-plus expected margin guidelines related to the performance obligations.
Contract Balances
The timing of revenue recognition may differ from the timing of invoicing to customers. We record a receivable when revenue is recognized upon invoicing and payment will become due solely due to the passage of time. We record a contract asset when revenue is recognized prior to invoicing or payment is contingent upon transfer of control of another separate performance obligation. We record unearned revenue when revenue is recognized subsequent to cash collection. Unearned revenue that will be recognized during the succeeding 12-month period is recorded as current, and the remaining unearned revenue is recorded as non-current. Contract assets that will be billed to the customer during the succeeding 12-month period is recorded as current and the remaining contract asset is recorded as non-current.
Payment terms and conditions vary by contract type, although terms generally include a requirement of payment within 30 days. We elected the practical expedient to not assess whether a significant financing component exists if the period between when we transfer a promised good or service to a customer and when the customer pays for that good or service is one year or less.
Stock-Based Compensation
We measure compensation expense for all stock-based payment awards, including stock options and restricted stock units (“RSUs”) granted to employees, directors, and nonemployees, as well as stock purchased under our 2021 Employee Stock Purchase Plan (“ESPP”), based on the estimated fair value of the awards on the date of grant. Compensation expense is recognized ratably in earnings, generally over the period during which an employee is required to provide service. We adjust compensation expense based on actual forfeitures as necessary.
Time-Based Service Awards
Our stock options generally vest ratably over a four-year period and the fair value of our awards is estimated on the date of grant using a Black-Scholes option pricing model. Awards with graded vesting features are recognized over the requisite service period for the entire award. The determination of the grant date fair value of stock awards issued is affected by a number of variables and subjective assumptions, including (i) the fair value of our common stock, (ii) the expected common stock price volatility over the expected life of the award, (iii) the expected term of the award, (iv) risk-free interest rates, (v) the exercise




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(Unaudited)
price, and (vi) the expected dividend yield of our common stock. The fair value for RSUs is calculated based on the stock price on the date of grant.
Prior to the IPO, the fair value of our shares of common stock underlying the awards was historically determined by the board of directors with input from management and contemporaneous third-party valuations, as there was no public market for our common stock. The board of directors determined the fair value of the common stock by considering a number of objective and subjective factors including: the valuation of comparable companies, our operating and financial performance, the lack of liquidity of common stock, transactions in our common stock, and general and industry specific economic outlook, amongst other factors. After the completion of the IPO, the fair value of the Company’s common stock is determined based on the New York Stock Exchange (“NYSE”) closing price on the date of grant.
We derive the volatility from the average historical stock volatilities of several peer public companies over a period equivalent to the expected term of the awards. We selected companies with comparable characteristics to us, including enterprise value, risk profiles, and position within the industry and with historical share price information sufficient to meet the expected term of the stock options. The historical volatility data has been computed using the daily closing prices for the selected companies.
For non-employee and employee awards granted, we estimate the expected term based on the simplified method, which is the mid-point between the vesting date and the end of the contractual term for each award since our historical share option exercise experience does not provide a reasonable basis upon which to estimate the expected term. The risk-free interest rate is based on the United States Treasury yield curve in effect at the time of grant whose term is consistent with the expected life of the award.
Expected dividend yield is zero percent as we have not paid and do not anticipate paying dividends on our Class B common stock or Class A common stock. Upon the exercise of a stock option award, shares of either our Class B common stock or Class A common stock are issued from authorized but unissued shares.
Performance-Based Awards
We also have historically granted SARs that vest only upon the satisfaction of performance based conditions. The performance-based conditions are satisfied upon the occurrence of a qualifying event, defined as the earlier of (i) the closing of certain change in control transactions, or (ii) an IPO. We record stock-based compensation expense for performance-based equity awards when the performance-based conditions are considered probable to be satisfied. As of September 30, 2021, the SARs were vested and settled upon completion of the IPO and 1,642,570 shares of Class B common stock were issued in connection with the IPO and we recognized $2.8 million of compensation expense.
For performance-based SARs, we determine the grant-date fair value utilizing the valuation model as described above for time-based awards.
Recently Adopted Accounting Pronouncements
In December 2019, the Financial Accounting Standards Board (“FASB”) issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes, eliminates certain exceptions within ASC Topic 740, “Income Taxes,” and clarifies certain aspects of the current guidance to promote consistency among reporting entities. Most amendments within the standard are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. This guidance will be effective for public entity fiscal years beginning after December 15 2020. We adopted ASU 2019-12 for the period that includes the nine months ended September 30, 2021. The most applicable provision is the requirement for entities to account for the income-based portion of a tax as an income tax for those taxes that are partially based on income. This provision and all other provisions did not have a material impact to the tax provision for the three and nine months ended September 30, 2021.
Accounting Pronouncements Issued but Not Yet Adopted
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) which requires lessees to recognize the following for all leases (with the exception of short-term leases) at the commencement date; (i) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (ii) a right-of-use asset,




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(Unaudited)
which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Additional disclosures will be required to allow the user to assess the amount, timing and uncertainty of cash flows arising from leasing activities. A modified retrospective transition approach is required for leases existing at the time of adoption. On November 15, 2018, the FASB issued ASU 2019-10 which deferred the effective date of the standard to fiscal years beginning after December 15, 2020. In June 2020, the FASB issued ASU No. 2020-05, Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842): Deferral of the Effective Date, which delays the effective date of ASU No. 2014-09, which requires nonpublic companies to adopt the provisions of ASU 2016-02 for fiscal years beginning after December 15, 2021, and for interim periods within fiscal years beginning after December 15, 2022. We plan to adopt this standard as of the effective date for private companies using the modified retrospective approach for all leases entered into before the effective date. The impact of our adoption of Topic 842 to our financial statements will be to recognize the operating lease commitments as operating lease liabilities and right-of-use assets upon adoption, which will result in an increase in the assets and liabilities recorded on the balance sheet. We are continuing our assessment, which may identify additional impacts Topic 842 will have on our financial statements.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires an entity to utilize a new impairment model known as the current expected credit loss (“CECL”) model to estimate its lifetime “expected credit loss” and record an allowance that, when deducted from the amortized cost basis of the financial asset, presents the net amount expected to be collected on the financial asset. The CECL model is expected to result in more timely recognition of credit losses. This guidance also requires new disclosures for financial assets measured at amortized cost, loans and available-for-sale debt securities. This guidance will be effective for us beginning January 1, 2022. We have completed our initial assessment and do not expect adoption of the standard to have a material impact on our financial statements.
3.Revenue Recognition
The following table disaggregates revenue by type (in thousands):
Three Months Ended September 30, 2021
PlatformProfessional
Services and
Other		Total
Timing of revenue recognition
Transferred over time$17,046 $1,306 $18,352 
Transferred at a point in time19,038 — 19,038 
Total revenue$36,084 $1,306 $37,390 
Three Months Ended September 30, 2020
PlatformProfessional
Services and
Other		Total
Timing of revenue recognition
Transferred over time$11,765 $1,307 $13,072 
Transferred at a point in time14,432 — 14,432 
Total revenue$26,197 $1,307 $27,504 




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Notes to Condensed Financial Statements
(Unaudited)
Nine Months Ended September 30, 2021
PlatformProfessional
Services and
Other		Total
Timing of revenue recognition
Transferred over time$47,902 $3,876 $51,778 
Transferred at a point in time57,631 — 57,631 
Total revenue$105,533 $3,876 $109,409 
Nine Months Ended September 30, 2020
PlatformProfessional
Services and
Other		Total
Timing of revenue recognition
Transferred over time$31,764 $4,352 $36,116 
Transferred at a point in time31,761 — 31,761 
Total revenue$63,525 $4,352 $67,877 
Contract Balances
Contract Asset
As described in Note 2, 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 Accounting Standards Codification Topic 606, Revenue from Contracts with Customers, we record a contract asset when revenue recognized on a contract exceeds the billings and unearned revenue when the billings or payments on a contract exceed the revenue recognized. 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 $1.8 million and $0.9 million as of September 30, 2021 and December 31, 2020, respectively.
Unearned Revenue
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, 2021, we recognized $0.4 million of revenue related to contracts that were included in unearned revenue at December 31, 2020. During the nine months ended September 30, 2020, we recognized $0.7 million of revenue related to contracts that were included in unearned revenue at December 31, 2019.
As of September 30, 2021, our remaining performance obligations were approximately $36.6 million, approximately 41% of which we expect to recognize as revenue over the next 12 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.
Deferred Contract Costs
The following table summarizes the activity of current and non-current deferred contract costs (in thousands):
Balance at December 31, 2020$5,176 
Capitalization of deferred contract costs2,607 
Amortization of deferred contract costs(2,013)
Balance at September 30, 2021$5,770 




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Notes to the Condensed Consolidated Financial Statements
(Unaudited)
4.5.Property and Equipment
Property and equipment consisted of the following (in thousands):
Estimated Useful Life
(in Years)
As of
 September 30,
2021
As of
December 31,
2020
Estimated Useful Life
(in Years)
As of
 September 30,
2022
As of
December 31,
2021
Computer and office equipmentComputer and office equipment3 - 5$1,737 $1,375 Computer and office equipment3 - 5$2,186 $1,800 
Capitalized software32,696 1,653 
Capitalized internal-use softwareCapitalized internal-use software311,770 3,392 
Furniture and fixturesFurniture and fixtures10386 386 Furniture and fixtures10132 386 
Leasehold improvementsLeasehold improvementsShorter of estimated useful life or remaining term of lease373 374 Leasehold improvementsShorter of estimated useful life or remaining term of lease364 374 
Total property and equipmentTotal property and equipment5,192 3,788 Total property and equipment14,452 5,952 
Less: accumulated depreciation and amortization(2,349)(1,547)
Less: accumulated depreciation and amortization of internal-use softwareLess: accumulated depreciation and amortization of internal-use software(3,912)(2,648)
Total property and equipment, netTotal property and equipment, net$2,843 $2,241 Total property and equipment, net$10,540 $3,304 
Depreciation and amortization expense from property and equipment was approximately $0.3$0.7 million and $0.2$0.3 million for the three months ended September 30, 20212022 and 2020,2021, respectively. Depreciation and amortization expense from property and equipment was approximately $0.8$1.5 million and $0.4$0.8 million for the nine months ended September 30, 2022 and 2021, respectively.
We recorded a non-cash impairment charge of $0.5 million for the nine months ended September 30, 2022 related to a portion of our internal-use software that was abandoned. This amount was recorded in research and 2020, respectively.development expenses within the condensed consolidated statement of operations. In addition, we recorded a non-cash impairment charge of $0.1 millionfor the three and nine months ended September 30, 2022 in connection with the sublease of our corporate headquarters, as we determined a group of assets in the leased space was no longer recoverable. This amount was recorded in general and administrative expenses within the condensed consolidated statement of operations. See “Note 11—Leases” for additional information on the new sublease agreement.
5.6.Acquisitions
Omnivore Acquisition
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, 2022 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.
Purchase Price Allocation
The acquisition was accounted for under the acquisition method in accordance with ASC 805, Business Combinations. We recognized and measured the identifiable assets acquired and liabilities assumed at their estimated fair values on the date of acquisition.


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Notes to the Condensed Consolidated Financial Statements
(Unaudited)
The following table summarizes the preliminary allocation of the purchase price to the fair value of the assets acquired and liabilities assumed of Omnivore as of March 4, 2022 (in thousands):
Initial Fair Value Estimate
Accounts receivable$451 
Other current assets148 
Operating lease right-of-use asset236 
Property and equipment24 
Other assets, noncurrent9 
Customer relationships1,290 
Developed technology4,410 
Trademark150 
Goodwill44,678 
Accounts payable(198)
Accrued expenses and other current liabilities(101)
Unearned revenue(83)
Operating lease liability, current(81)
Operating lease liability, noncurrent(177)
Deferred tax liability, net(1,421)
Total purchase price, net of cash acquired and post-closing working capital adjustment$49,335 
Customer relationships were measured at fair value using the multiple-period excess earnings method under the income approach. Significant inputs used to measure the fair value include an estimate of projected revenue and costs associated with existing customers, and a discount rate of 11.0%.
Developed technology was measured at fair value using the relief-from-royalty method of the income approach. Significant inputs used to measure the fair value include an estimate of projected revenue from existing technology, a pre-tax royalty rate of 20.0% and a discount rate of 11.0%.

Trademark was measured at fair value using the relief-from-royalty method under the income approach. Significant inputs used to measure the fair value include an estimate of projected revenue from the trademark, a pre-tax royalty rate of 1.0% and a discount rate of 11.0%.

The preliminary purchase price allocation resulted in the recognition of $44.7 million of goodwill. Goodwill represents the future economic benefits expected to arise from other intangible assets acquired that do not qualify for separate recognition, including an experienced workforce that will help accelerate product development and go to market strategy, as well as expected future synergies generated by integrating Omnivore’s products with those in our existing platform. Accordingly, Omnivore will be reported along with our historical solutions under the same operating segment. None of the goodwill is expected to be deductible for tax purposes.

We recorded $1.2 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. The transaction related expenses are recorded within the condensed consolidated statements of operations as follows (in thousands):

Operating expenses:
Sales and marketing$79 
General and administrative1,155 
Total transaction costs$1,234 

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Notes to the Condensed Consolidated Financial Statements
(Unaudited)
We expect to finalize the purchase price allocation after management has further analyzed and assessed a number of the factors used in establishing the fair values of assets acquired and liabilities assumed as of the acquisition date, including, but not limited to, the working capital acquired.
Wisely Acquisition
On October 21, 2021, we signed a definitive agreement to acquire all of the outstanding shares of Wisely Inc. (“Wisely”), a customer intelligence and engagement platform for restaurants. We believe Wisely’s Guest Engagement and Front-of-House solutions complement our existing solution suite and enhance our value to our customers. We closed the acquisition on November 4, 2021 for total consideration of approximately $177.8 million, consisting of $75.2 million in cash (net of cash acquired), $96.6 million of Class A common stock, and $5.9 million of substituted stock options granted in connection with the acquisition. The fair values of the Class A common stock and substituted stock options were based on a price per Class A common share of $27.93, which is equal to the closing price of our Class A common stock on the date of the transaction. As a result of the equity consideration component, we issued approximately 3.5 million shares of our Class A common stock and granted approximately 0.2 million fully vested stock options at the acquisition date. The fair value of the substituted options granted was based upon the estimated value of vested stock options held by Wisely employees immediately prior to the acquisition.
We recorded $0.2 million in transaction related expenses, primarily related to legal and insurance fees, for the nine months ended September 30, 2022 in general and administrative expenses within the condensed consolidated statement of operations.
During the nine months ended September 30, 2022, we decreased goodwill by $0.1 million as a result of finalizing our working capital acquired. We expect to finalize the purchase price allocation after management has further analyzed and assessed a number of the factors used in establishing the fair values of assets acquired and liabilities assumed as of the acquisition date.
7.Goodwill and Intangible Assets
The following table summarizes the changes in the carrying amount of goodwill (in thousands):
Balance at December 31, 2021$162,956 
Adjustment to Wisely acquisition(94)
Acquisition of Omnivore44,678 
Balance at September 30, 2022$207,540 

The gross book value and accumulated amortization of intangible assets, net, as of September 30, 2022 were as follows (in thousands):
Weighted-average Remaining Useful Life (in years)Gross Carrying ValueAccumulated AmortizationNet Carrying Value
Developed technology5.2$14,595 $(1,985)$12,610 
Customer relationships7.210,921 (1,197)9,724 
Trademark2.1486 (132)354 
Balance at September 30, 2022$26,002 $(3,314)$22,688 


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Notes to the Condensed Consolidated Financial Statements
(Unaudited)
Amortization expense associated with intangible assets was $1.0 million and $2.8 million for the three and nine months ended September 30, 2022, respectively. As of September 30, 2022, estimated amortization related to the identifiable acquisition-related intangible assets expected to be recognized in future periods was as follows (in thousands):
2022 (remaining)$950 
20233,967 
20243,949 
20253,813 
20263,804 
Thereafter6,205 
Total$22,688 
No goodwill or intangible asset impairment losses were recognized during the nine months ended September 30, 2022. See “Note 6—Acquisitions” for additional information on the acquisitions of Omnivore and Wisely.
8.Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consist of the following (in thousands):
As of
 September 30,
2021
As of
December 31,
2020
As of
 September 30,
2022
As of
December 31,
2021
Prepaid software licensing feesPrepaid software licensing fees$1,683 $855 Prepaid software licensing fees$2,466 $1,888 
Prepaid insurancePrepaid insurance504 1,298 
OtherOther3,361 806 Other3,674 2,532 
Total prepaid expenses and other current assetsTotal prepaid expenses and other current assets$5,044 $1,661 Total prepaid expenses and other current assets$6,644 $5,718 
6.9.Accrued Expenses and Other Liabilities
Accrued expenses and other current liabilities consistedconsisted of the following (in thousands):
As of
 September 30,
2021
As of
December 31,
2020
As of
 September 30,
2022
As of
December 31,
2021
Accrued delivery service partner feesAccrued delivery service partner fees$39,421 $34,067 Accrued delivery service partner fees$35,111 $35,441 
Accrued compensation and benefitsAccrued compensation and benefits12,730 5,168 Accrued compensation and benefits6,036 4,189 
Professional and consulting feesProfessional and consulting fees709 1,806 
Accrued taxesAccrued taxes1,261 1,538 
OtherOther5,497 2,434 Other3,426 2,421 
Professional and consulting fees2,056 909 
Total accrued expenses and other current liabilitiesTotal accrued expenses and other current liabilities$59,704 $42,578 Total accrued expenses and other current liabilities$46,543 $45,395 
7.10.Line of Credit
In May 2012,On June 10, 2022, we entered into athe Second Amended and Restated Loan and Security Agreement with Pacific Western Bank (formerly Square 1) (the “Loan Agreement”) forrelated to a revolving line of credit with a maturity date of May 15, 2013. Sinceand term loan facility (the “Second Amended and Restated LSA”).
The Second Amended and Restated LSA amended and restated the original agreement, we have executed subsequent amendmentsAmended and Restated Loan and Security Agreement, dated February 11, 2020, as amended (the “Prior LSA”) to, extendamong other things, increase our available aggregate borrowing limit to $70.0 million and to provide the maturity date until February 2022. Advancesability to request Pacific Western Bank to enter into commitments to increase the credit extensions available to us under the Formula Line bearSecond Amended and Restated LSA to up to $125.0 million (the “Accordion Facility”).
Borrowings under the Second Amended and Restated LSA accrue interest at a variable annual rate equal to (i) in the case of Formula Advances (as defined in the Second Amended and Restated LSA), the greater of (A) 0.20% above Pacific Western Bank’s primethe variable rate then in effect; or (B) 4.50%. Advances under the Non-Formula Line bearof interest, equal to the greater of (A) 0.75% above Pacific Western Bank’s prime rate then in effect; or (B) 5.00%. Interest is due and payable monthly in arrears. We may prepay advances under the credit facility in whole or in part at any time without premium or penalty, and the credit facility matures on February 11, 2022. As of September 30, 2021, there were no outstanding borrowings and no interest incurred related to the Loan Agreement. The interest rate applicable




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Notes to the Condensed Consolidated Financial Statements
(Unaudited)
per annum, most recently announced by Pacific Western Bank (the “Prime Rate”) or 3.25% or (ii) in the case of Term Loans (as defined in the Second Amended and Restated LSA), the greater of the Prime Rate plus 0.25% or 3.50%. The Second Amended and Restated LSA provides for a success fee payable upon an acquisition of Olo or termination of the Second Amended and Restated LSA (a “Success Fee Trigger”), in an amount equal to: (i) $800,000, if the Success Fee Trigger occurs prior to June 10, 2023; (ii) $600,000, if the Success Fee Trigger occurs on anyor after June 10, 2023 and prior to June 10, 2024; (iii) $400,000, if the Success Fee Trigger occurs on or after June 10, 2024 and prior to June 10, 2025; (iv) $200,000, if the Success Fee Trigger occurs on or after June 10, 2025 and prior to June 10, 2026; and (v) $0, if the Success Fee Trigger occurs on or after June 10, 2026. We are also required to pay a fee of 1.0% of the difference between (i) the highest outstanding principal balance asduring the term of December 31, 2020 was 5.00%.the Second Amended and Restated LSA and (ii) $3.5 million if a Liquidity Event (as defined in the Second Amended and Restated LSA) occurs during the term and or within 24 months after the termination of the Second Amended and Restated LSA. Our obligations under the Loan AgreementSecond Amended and Restated LSA are secured by substantially all of our assets.assets, including certain securities owned by us in any subsidiary.
The Second Amended and Restated LSA includes a financial covenant requiring compliance with certain minimum revenue amounts. In April 2021, we amendedaddition, the Loan AgreementSecond Amended and Restated LSA contains representations and warranties generally consistent with Pacific Western Bank (the “First Amendment”) and exercisedthe Prior LSA, as well as certain non-financial covenants, including, but not limited to, limitations on our optionability to increase our available line of credit from $25.0 million to $35.0 million. Additionally, we amended our minimum EBITDA and minimum net revenue covenants, which reset each annual period. On May 6, 2021, we issued a letter of credit to DoorDash, Inc. (“DoorDash”) in the amount of $25.0 million in connection with our Restated Delivery Network Agreement. See Note 12 for further details. The First Amendment contains various affirmative and negative covenants and weincur additional indebtedness or liens, pay dividends, or make certain investments. We were in compliance with these covenants as of September 30, 2021. In August 2021, we further amended our Loan Agreement (the “Second Amendment”, and the Loan Agreement as amended by the First Amendment and the Second Amendment, the “Amended Loan Agreement”) to maintain the lesser of at least $75.0 million or an amount equal to 50% of all of our cash deposits with any bank and to extend certain reporting requirements from 30 to 45 days after each quarter end.
As of September 30, 2021, we had $8.6 million available under the revolving line of credit, after consideration of $25.0 million in our letter of credit towards DoorDash and $1.4 million in our letter of credit on the lease of our headquarters. As of September 30, 2021, we had no outstanding borrowings under the line of credit. As of September 30, 2021, no amounts have been drawn against any of our letters of credit.2022.
The credit facility contains customary affirmativeSecond Amended and negative covenants, including covenants that require Pacific Western Bank’s consent to, among other things, merge or consolidate or acquire assets outside the ordinary course of business, make investments, incur additional indebtedness or guarantee indebtedness of others, pay dividends and redeem and repurchase our capital stock, enter into transactions with affiliates outside the ordinary course of business and create liens on our assets. We are also required to comply with certain minimum EBITDA and minimum revenue covenants.
The credit facilityRestated LSA also contains events of default that ifinclude, among other things, non-payment defaults, covenant defaults, insolvency defaults, cross-defaults to other indebtedness and material obligations, judgment defaults, inaccuracy of representations and warranties, and a material adverse change. Any default that is not cured or waived could result in Pacific Western Bank exercising its rights and remedies under the Second Amended and Restated LSA, including, but not limited to, the acceleration of the obligations under the credit facility, an increase in the applicable interest rate under the credit facility to a per annum rate equal to 5.00% above the applicable interest rateSecond Amended and Restated LSA and related documentation, and would permit Pacific Western Bank to exercise remedies with respect to all of the collateral that is securing the credit facility.secured such obligations.
Pacific Western Bank has the right to terminate its obligation to make further advances to us immediately and without notice upon the occurrence and during the continuance of an event of default. We may terminate the Formula Line or the Non-Formula Line at any time prior to the maturity date, upon two business days written notice toUpon our request, Pacific Western Bank at which time allwill provide us a payoff letter providing for, among other things, repayment of our obligations then outstanding, including the success fee, and for termination of Pacific Western Bank’s obligations arisingto make additional credit extensions and termination of the liens under the Second Amended Loan Agreement, including any unpaid interest thereon, will accelerate and become immediately due and payable.Restated LSA.
Interest expense related
As of September 30, 2022, 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 headquarters. As of September 30, 2022, we had no outstanding borrowings under the line of credit, wasand no amounts have been drawn against any of our letters of credit.
Interest expense related to the Second Amended and Restated LSA was immaterial for the three and nine months ended September 30, 2022. No interest expense was recognized related to the Prior LSA for the nine months ended September 30, 2021. Interest expense related to the line of credit was also immaterial for the three and nine months ended September 30, 2020. Deferred financing costs related to the Second Amended Loan Agreementand Restated LSA were capitalized and are included within other current and non-current assets as of September 30, 2021.2022.
8.11.Leases
We have a non-cancelable operating lease for our corporate headquarters in New York City (“Headquarters Lease”), which expires in May 2030, and a non-cancelable operating lease for our former office (“Former Headquarters”), which expires in September 2023. As a result of the acquisition of Omnivore, we have a non-cancelable operating lease in Clearwater, Florida (“Omnivore Lease”), which expires in January 2025. Our lease terms under the Omnivore Lease include periods under options to extend or terminate the lease. Currently, there are no operating leases where we believe it is reasonably certain that we will exercise any option to extend the initial term.
In August 2022, we entered into a new sublease agreement for the remaining term of the Headquarters Lease. In accordance with ASC Topic 360, we evaluated the associated assets for impairment, which included the right-of-use asset and furniture and fixtures for the office space. We compared the expected future undiscounted cash flows attributable to the associated assets to the carrying value and determined that they were impaired. Based on this evaluation, we determined that a

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Notes to the Condensed Consolidated Financial Statements
(Unaudited)
portion of the right-of-use asset was no longer recoverable and recorded a right-of-use asset impairment charge of $2.2 million. We also determined that furniture and fixtures related to the space were no longer recoverable, and recorded an asset impairment charge for the carrying value of the assets of $0.1 million. We also recorded broker commission fees of $0.9 million in connection with the subleasing of our headquarters. These impairment charges and commission expenses were recorded in general and administrative expenses in the condensed consolidated statement of operations.

We also sublease a portion of our Former Headquarters, which we ceased using in connection with the signing of the Headquarters Lease. The sublease of our Former Headquarters expires in March 2023.
As disclosed in “Note 2—Significant Accounting Policies,” we adopted ASC 842 on January 1, 2022. We have elected the “package of practical expedients,” which permits us not to reassess under ASC 842 our prior conclusions on expired or existing leases about lease identification, lease classification, and initial direct costs. Payments of maintenance, utilities, and taxes are expensed as incurred and excluded from right-of-use assets and lease liabilities, and were immaterial for the three and nine months ended September 30, 2022. Furthermore, we elected to not capitalize leases with a term of 12 months or less and recognize the lease expense for such leases on a straight-line basis over the lease term.
The IBR is the rate of interest that we would have to pay to borrow on a collateralized basis over a similar term and amount equal to the lease payments in a similar economic environment. We determined our IBR by obtaining interest rates from various external financing sources and made certain adjustments to reflect the terms of the lease and type of the asset leased.
The elements of lease expense were as follows (in thousands):
Three Months Ended
September 30,		Nine Months Ended
September 30,
20222022
Operating lease costs$843 $2,513 
Other lease income(87)(261)
Total lease costs$756 $2,252 
Rent expense, excluding sublease income, under ASC 840, Leases, was $0.8 million and $2.5 million for the three and nine months ended September 30, 2021, respectively. Rental income was $0.1 million and $0.3 million for the three and nine months ended September 30, 2021, respectively.
Cash paid for amounts included in the initial measurement of lease liabilities were $2.7 million for the nine months ended September 30, 2022.
As of September 30, 2022, the total remaining operating lease payments included in the measurement of lease liabilities were as follows (in thousands):
2022 (remaining)$907 
20233,444 
20242,877 
20252,893 
20262,960 
Thereafter10,114 
Total future minimum lease payments23,195 
Less: imputed interest(4,201)
Total$18,994 

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OLO INC.
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
The weighted average remaining lease term and discount rate for the operating leases were as follows:
As of September 30,
2022
Weighted average remaining lease term (years)7.35
Weighted average discount rate5.40%
As of December 31, 2021, our future minimum payments under non-cancelable leases for operating facilities as determined prior to the adoption of ASC 842 were as follows (in thousands):
2022$3,559 
20233,352 
20242,780 
20252,885 
20262,960 
Thereafter10,113 
Total$25,649 
12.Stockholders’ Equity (Deficit)
Changes in Capital Structure
On March 5, 2021, our boardBoard of directorsDirectors and stockholders approved an amended and restated certificate of incorporation effecting a 17-for-1 forward stock split of our issued and outstanding shares of common stock and Series A, A-1, B, C, D, and E preferred stock. Additionally, all outstanding equity instruments, including our time-based stock options, performance-based SARs, and preferred stock warrants, were adjusted to reflect the 17-for-1 forward stock split. The stock split was effected on March 5, 2021. The par value of the Class B common stock and redeemable convertible preferred stock was not adjusted as a result of the stock split. All issued and outstanding Class B common stock, redeemable convertible preferred stock, warrants to purchase shares of redeemable convertible preferred stock, and stock options, as well as the per share amounts, included in the accompanying financial statements have been adjusted to reflect this stock split for all periods presented.
On March 5, 2021, our boardBoard of directorsDirectors and stockholders approved and we implemented a dual class common stock structure where all existing shares of common stock converted to Class B common stock and we authorized a new class of




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Notes to Condensed Financial Statements
(Unaudited)
common stock, Class A common stock. The authorized share capital for Class A common stock is 1,700,000,000 and the authorized share capital for Class B common stock is 185,000,000. The Class A common stock is entitled to 1one vote per share and the Class B common stock is entitled to 10ten votes per share. The Class A and Class B common stock have the same rights and privileges and rank equally, share ratably, and are identical in all respects and for all matters except for voting, conversion, and transfer rights. The Class B common stock converts to Class A common stock at any time at the option of the holder. References in the accompanying financial statements have been adjusted to reflect the dual class common stock structure and the changes in the number of authorized shares of common stock. We also authorized a total of 20,000,000 shares of undesignated preferred stock, par value $0.001 per share. Effective March 5, 2021, 124,012,926 outstanding shares of common stock were converted into an equivalent number of shares of our Class B common stock.
Class A common stock and Class B common stock reserved for future issuance consisted of the following:
As of September 30,
2021		As of December 31,
2020		As of September 30,
2022		As of December 31,
2021
Redeemable convertible preferred stock— 98,514,932 
Redeemable convertible preferred stock warrants— 1,682,847 
Shares available for grant under employee stock purchase planShares available for grant under employee stock purchase plan3,900,000 — Shares available for grant under employee stock purchase plan5,145,300 3,760,115 
Shares available for grant under stock option planShares available for grant under stock option plan20,067,705 1,687,947 Shares available for grant under stock option plan22,597,825 18,994,572 
Restricted stock unitsRestricted stock units155,422 — Restricted stock units4,710,098 1,082,980 
Options issued and outstanding under stock option planOptions issued and outstanding under stock option plan39,815,982 40,807,939 Options issued and outstanding under stock option plan31,960,236 36,716,816 
Total common stock reserved for future issuanceTotal common stock reserved for future issuance63,939,109 142,693,665 Total common stock reserved for future issuance64,413,459 60,554,483 
Redeemable Convertible Preferred

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Notes to the Condensed Consolidated Financial Statements
(Unaudited)
Repurchases of Common Stock
AllOn 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 outstanding redeemable convertible preferred stock converted into shares of Class B common stock upon completionmay 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, if any, will be determined by a committee established by the Board of Directors and depend 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 IPO.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. As of December 31, 2020, redeemable convertible preferred stock, authorized, issued, outstanding and liquidation values are as follows (in thousands, except share and per share amounts):
December 31, 2020
Shares
Authorized		Shares Issued
and
Outstanding		Net Carrying
Value		Redemption
Price/Liquidation
Preference		Redemption
Value/Liquidation
Preference
Series A696,235 696,235 $957 $1.38 $957 
Series A-13,713,616 3,698,452 6,092 1.65 6,092 
Series B8,184,548 8,184,548 5,854 0.70 5,700 
Series C14,151,361 12,620,154 8,760 0.70 8,789 
Series D24,172,487 24,172,487 40,276 1.67 40,350 
Series E9,590,873 9,590,873 49,798 $5.21 50,000 
Total60,509,120 58,962,749 $111,737 $111,888 
September 30, 2022, we have not repurchased any shares under the Stock Buyback Program.
Charitable Contributions

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 $1.4 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, 2022.
We donated 172,918 and 345,836 shares of our Class A common stock to a charitable donor-advised fundthe Olo for Good Fund at Tides Foundation and recognized $8.0 million and $13.1 million as a non-cash general and administrative expense in our Condensed Statementcondensed consolidated statement of Operationsoperations for the three and nine months ended September 30, 2021, respectively. In March 2021, our board

Through September 30, 2022, we have donated a total of directors authorized the issuance of 1,729,189518,754 shares of our Class A common stockstock. We expect to this fund in conjunction with our Olo for Good initiative. We may donate 1/10th of the total remaining approved shares authorized into the fund on or about each anniversary of such date.annually.




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OLO INC.
Notes to Condensed Financial Statements
(Unaudited)
9.13.Stock-Based Compensation
Equity Incentive Plans
On March 5, 2021, our boardBoard of directorsDirectors adopted our 2021 Equity Incentive Plan (“2021 Plan”). Prior to that date, we had established our 2015 Equity Incentive Plan (“2015 Plan”) and 2005 Equity Incentive Plan (“2005 Plan” and togethercollectively with the 20152021 Plan and 20212015 Plan, the “Plans”). The 2021 Plan serves as the successor to the 2015 Plan and 2005 Plan and provides for the issuance of incentive and nonqualified stock options, SARs, restricted stock, and RSUs,restricted stock units (“RSUs”), to employees, directors, consultants, and advisors.
Stock options under the Plans may be granted with contractual terms of up to ten years (or five years if granted to a greater than 10.0% stockholder) and at prices no less than 100.0% of the estimated fair value of the shares on the date of grant as determined by the boardour Board of directors;Directors; provided, however, that (i) the exercise price of an incentive stock option (“ISO”) and nonqualified stock option (“NSO”) granted to a greater than 10.0% stockholder shall not be less than 110.0% of the estimated fair value of the shares on the date of grant. Awards granted under the Plans generally vest over four years.
Certain stock options have an early exercise feature. Shares purchased pursuant to the early exercise of stock options are subject to repurchase until those shares vest; therefore, cash received in exchange for unvested shares exercised is recorded as a liability on the accompanying condensed balance sheets, and areis reclassified to Class B common stock and additional paid-in capital as the shares vest. There were 141,27056,508 and 204,850120,088 early exercised shares outstanding as of September 30, 20212022 and December 31, 2020,2021, respectively. As of September 30, 2021,2022, there iswas a liability in the amount of $0.4 million, of which $0.2 million was recorded in accrued expenses and other current liabilities in our balance sheet because vesting is within the next 12 months, and $0.2 million was recorded in other liabilities, non-current, because vesting is beyond the next 12 months.
On March 13, 2021, our boardBoard of directorsDirectors adopted a non-employee director compensation policy that became effective upon our IPO. The policy provides for annual cash retainerretainers for non-employee directors and an additional cash retainer for those non-employee directors that serve as chairpersons or members of our audit, compensation, and nominating and corporate governance, and other committees. Additionally, directors will have the option to receive their annual retainer

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Notes to the Condensed Consolidated Financial Statements
(Unaudited)
amounts in cash or equity. Each new non-employee director appointed to the boardBoard of directorsDirectors after the IPO date will be granted an initial RSU award with a value of $0.3 million subject to vesting over a three-year period. Certain non-employee directors who served for at least six months prior to the IPO effective date and did not have unvested equity awards, were granted 39,870 RSU awards on March 17, 2021 with a total value of approximately $1.0 million, which will fully vest on the day immediately prior to our 2022 annual meeting of stockholders.
As of September 30, 20212022 and December 31, 20202021 the maximum number of shares authorized for issuance to participants under the Plans is 20,396,975was 29,445,392 and 46,170,691,20,615,612, respectively. As of September 30, 20212022 and December 31, 20202021, the number of shares available for issuance to participants under the Plans is 20,067,705was 22,597,825 and 1,687,947,18,994,572, respectively.

During the three and nine months ended September 30, 20212022 and 2020,2021, no SARs were granted to employees. The SARs outstanding as of the time of the IPO arewere equity-classified and arewere measured at theirthe grant date fair value. The SARs were vested and settled upon completion of the IPO and 1,642,570 shares of Class B common stock were issued in connection with this event. Compensation expense of $2.8 million was recognized for the nine months ended September 30, 2021. The aggregate intrinsic value of the SARs as of December 31, 2020 was $17.7 million.




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Notes to Condensed Financial Statements
(Unaudited)
Restricted Stock Units
The following summarizes the activity for the unvested RSUs during the nine months ended September 30, 2021:
SharesWeighted-
Average
Grant Date Fair Value
Unvested at December 31, 2020— $— 
Granted166,371 31.21 
Vested(788)34.28 
Forfeited and canceled(10,161)33.42 
Unvested at September 30, 2021155,422 $31.05 
2022:
SharesWeighted-
Average
Grant Date Fair Value
Unvested at December 31, 20211,082,980 $27.70 
Granted4,699,191 15.48 
Vested(503,371)20.40 
Forfeited and canceled(568,702)19.80 
Unvested at September 30, 20224,710,098 $17.24 
The total fair value of RSUs vested during the nine months ended September 30, 2022 was $5.1 million. Future stock-based compensation for unvested RSUs awarded as of September 30, 2021 is2022 was approximately $3.8$73.6 million and willis expected to be recognized over a weighted-average period of 2.983.26 years.
Stock Options
The following summarizes our stock option activity for the nine months ended September 30, 2021:2022 (in thousands, except share and per share amounts):
Number of
options
outstanding		Weighted-
average
exercise
price
(Per share)		Weighted-
average
remaining
contractual
term
(In years)		Aggregate
intrinsic
value
(In thousands)
As of December 31, 202039,161,438 $1.93 5.89$347,574 
Granted6,951,470 10.28 
Exercised(5,649,135)1.52 
Forfeited and canceled(647,791)6.20 
Vested and expected to vest as of September 30, 202139,815,982 $3.38 5.92$1,061,145 
Exercisable as of September 30, 202127,783,097 $1.80 4.64$784,263 
Number of
options
outstanding		Weighted-
average
exercise
price		Weighted-
average
remaining
contractual
term
(In years)		Aggregate
intrinsic
value
As of December 31, 202136,716,816 $3.55 5.76$633,730 
Granted1,100,118 14.72 
Exercised(4,915,101)1.56 
Forfeited(941,597)6.77 
Vested and expected to vest as of September 30, 202231,960,236 $4.15 5.32$144,435 
Exercisable as of September 30, 202224,706,582 $2.73 4.47$134,287 

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OLO INC.
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
The following table summarizes the weighted-average grant date fair value of options granted, intrinsic value of options exercised, and grant date fair value of options vested for the three and nine months ended September 30, 20212022 and 20202021 (in thousands, except per share amounts):
Three Months Ended
September 30,		Nine Months Ended
September 30,		Three Months Ended
September 30,		Nine Months Ended
September 30,
20212020202120202022202120222021
Weighted-average grant date fair value of options grantedWeighted-average grant date fair value of options granted$— $4.96 $10.70 $3.16 Weighted-average grant date fair value of options granted$4.45 N/A$4.87 $10.70 
Intrinsic value of options exercisedIntrinsic value of options exercised$97,370 $11,240 $169,450 $13,469 Intrinsic value of options exercised$18,074 $97,370 $59,212 $169,450 
Total grant date fair value of options vested$10,709 $1,633 $29,355 $10,331 
Total fair value of options vestedTotal fair value of options vested$6,027 $10,709 $20,604 $29,355 
Future stock-based compensation for unvested employee options granted and outstanding as of September 30, 2021 is $77.62022 was $49.7 million and willis expected to be recognized over a weighted-average period of 3.062.07 years. Future stock-based compensation for unvested employee options granted and outstanding as of December 31, 2020 is $29.6 million and will be recognized over a weighted-average period of 3.12 years.




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Notes to Condensed Financial Statements
(Unaudited)
Valuation Assumptions
We estimated the fair value of stock options granted using the Black-Scholes option pricing model with the following weighted-average assumptions:
Three Months Ended
September 30,		Nine Months Ended
September 30,		Three Months Ended
September 30,		Nine Months Ended
September 30,
20212020202120202022202120222021
Expected term (in years)Expected term (in years)0.005.94 - 6.085.48 - 6.075.52 - 6.08Expected term (in years)6.00N/A5.24 - 6.005.48 - 6.07
VolatilityVolatility—%66%52% - 65%43% - 66%Volatility36%N/A32% - 36%52% - 65%
Risk-free interest rateRisk-free interest rate0.00%0.37% - 0.39%0.50% - 1.06%0.37% - 1.63%Risk-free interest rate2.87%N/A1.62% - 2.87%0.50% - 1.06%
Dividend yieldDividend yield0%0%0%0%Dividend yield0%N/A0%0%
Fair value of underlying common stockFair value of underlying common stock$—$7.32$16.78 - $30.02$4.06 - $7.32Fair value of underlying common stock$11.07N/A$11.07 - $15.75$16.78 - $30.02
We elected to use the midpoint practical expedient to calculate the expected term.
Stock-Based Compensation Expense
The classification of stock-based compensation expense by line item within the statements of operations and comprehensive loss is as follows (in thousands):
Three Months Ended
September 30,		Nine Months Ended
September 30,
2021202020212020
Cost of revenue - platform$762 $140 $1,942 $348 
Cost of revenue - professional services and other116 33 362 72 
Research and development2,570 413 8,522 940 
General and administrative3,907 681 12,002 1,884 
Sales and marketing512 111 1,436 221 
Total stock-based compensation expense$7,867 $1,378 $24,264 $3,465 
2021 Employee Stock Purchase Plan
On March 5, 2021, our boardBoard of directorsDirectors and stockholders adopted our ESPP.employee stock purchase plan (“ESPP”). The ESPP became effective immediately prior to the IPO. The ESPP authorized the issuance of 3,900,000 shares of our Class A common stock pursuant to purchase rights granted to our employees or to employees of any of our designated affiliates. The number of shares of our Class A common stock reserved for issuance will automatically increase on January 1 of each calendar year, commencing on January 1, 2022 through January 1, 2031, by the lesser of (1) 1.0% of the total number of shares of our Class A common stock outstanding on December 31 of the preceding calendar year, or (2) 11,700,000 Class A common shares; provided, that prior to the date of any such increase, our boardBoard of directorsDirectors may determine that such increase will be less than the amount set forth in clauses (1) and (2). Employees may contribute, normally through payroll deductions, up to 15% of their earnings for the purchase of our Class A common stock under the ESPP. Our Class A common stock will be purchased for the accounts of employees participating in the ESPP at a price per Class A common share equal to the lower of (a) 85% of the fair market value of our Class A common stock on the first trading date of an offering, or (b) 85% of the fair market value of our Class A common stock on the date of purchase. The current offering period began in March 2021June 2022 and ends in December 2021.2022. For the three and nine months ended September 30, 2021,2022, we have recorded approximately $0.4 million and $0.9$1.2 million of compensation expense associated with our ESPP.


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OLO INC.
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
Stock-Based Compensation Expense
The classification of stock-based compensation expense, which includes expense for stock options, RSUs, SARs, and ESPP respectively.charges, by line item within the condensed consolidated statements of operations was as follows (in thousands):
Three Months Ended
September 30,		Nine Months Ended
September 30,
2022202120222021
Cost of revenue - platform$1,367 $762 $4,269 $1,942 
Cost of revenue - professional services and other167 116 565 362 
Research and development3,571 2,570 10,382 8,522 
General and administrative5,442 3,907 15,567 12,002 
Sales and marketing1,372 512 4,321 1,436 
Total stock-based compensation expense$11,919 $7,867 $35,104 $24,264 
10.
14.Warrants 
Redeemable Convertible Preferred Stock Warrants
Prior to the IPO, warrants to purchase 1,682,847 shares of our outstanding redeemable convertible preferred stock were exercised and converted into redeemable convertible preferred stock. Upon completion of the IPO, all shares of our outstanding redeemable convertible preferred stock, inclusive of the shares issued pursuant to these warrant exercises,




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OLO INC.
Notes to Condensed Financial Statements
(Unaudited)
converted into 100,196,780 shares of Class B common stock. The redeemable convertible preferred stock warrant liability was reclassified to additional paid-in capital in connection with the IPO.
The following table summarizes the activity of the redeemable convertible preferred stock warrants since December 31, 2020:
Issuance
Date
Expiration
Date
Exercise PriceWarrants Outstanding at December 31,
2020		Warrants Exercised in The Nine Months Ended September 30, 2021Warrants Outstanding at September 30,
2021
Series A-120125/14/2022$0.17 151,640 151,640 — 
Series B20121/31/20190.70 — — — 
Series C201410/10/20240.70 562,241 562,241 — 
Series C20161/12/2026— 968,966 968,966 — 
 Total1,682,847 1,682,847 — 
The estimated fair value of the redeemable preferred stock underlying the warrants was approximately $12.77 per share as of December 31, 2020.
At December 31, 2020, given the significant increase in fair value of each series of redeemable convertible preferred stock relative to the warrant’s exercise price, we estimated the preferred stock warrant liability using the intrinsic value of each warrant as the warrants were significantly in-the-money and the Black-Scholes input had a de minimis impact on their value. For the nine months ended September 30, 2021, we recorded a fair value adjustment of approximately $18.9 million using the intrinsic value of each warrant on the date of the conversion immediately prior to the IPO, as the warrants were significantly in-the-money and the Black-Scholes inputinputs have a de minimis impact on their value.
The following table represents the current period’s activity of the redeemable convertible preferred stock warrant liability (in thousands):
Fair Value
Balance at January 1, 2021$19,735 
Change in fair value18,930 
Exercise of warrants(38,665)
Balance at September 30, 2021$— 
11.15.Income Taxes
The Company hasWe had an effective tax rate benefit of 2.61% and expense of (0.27)% and 0.92% for the nine months ended September 30, 20212022 and 2020,2021, respectively. The effective tax rate benefit for the nine months ended September 30, 2022 is driven primarily by the release of a portion of our valuation allowance for deferred tax assets following the recording of a deferred income tax liability as part of our accounting for the acquisition of Omnivore and adjustments to the full valuation allowance on the Company’sour deferred tax assets, partially offset by state taxes. 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.
The Company hasWe evaluated the available evidence supporting the realization of itsour deferred tax assets, including the amount and timing of future taxable income, and hashave determined that it is more likely than not that itsour net deferred tax assets will not be realized. Due to uncertainties surrounding the realization of the deferred tax assets, the Company maintainswe maintain a full valuation allowance against substantially all of itsour net deferred tax assets. When the Company determineswe determine that itwe will be able to realize some portion or all of itsour deferred tax assets, an adjustment to itsour valuation allowance on itsour deferred tax assets would have the effect of increasing net income in the period such determination is made.
The Company hasWe applied ASC 740, Income Taxes, and has determined that it doeswe do not have any uncertain positions that would result in a tax reserve for each of the nine months ended September 30, 20212022 and 2020. The Company’s2021. Our policy is to recognize interest and penalties related to uncertain tax positions in income tax expense. The Company isWe are subject to U.S. federal tax authority and state tax authority examinations.




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Notes to the Condensed Consolidated Financial Statements
(Unaudited)
12.
16.Commitments and Contingencies
Commitments
We have a non-cancelable operating lease for our headquarters in New York City (“Headquarter Lease”) that expires in 2030. Total rental payments to be paid over the course of the lease are approximately $28.8 million, which excludes our option to exercise a renewal for an additional five years commencing on the last day of the initial term. We received a rent abatement for the first eleven months of the lease arrangement. Upon the conclusion of the abatement period, annual rental payments are consistent for five years and then increase 6% for the remaining five years. We were also required to issue a letter of credit in the amount of $1.4 million as a security deposit to the landlord. We also sublease a portion of our former office space which, in connection with the signing of the Headquarter Lease, we ceased use and subsequently subleased a portion of our former office space. Rental income escalates yearly and ranges from approximately $0.3 million to $0.4 million annually for total rental income of $1.3 million. As the rental income is expected to exceed our remaining lease obligations, we will continue to record our remaining lease obligations over the course of the initial lease term. The sublease expires in March 2023.
Rent expense, excluding sublease income, for each of the three months ended September 30, 2021 and 2020 was $0.8 million and rental income for the each of the three months ended September 30, 2021 and 2020 was $0.1 million. Rent expense, excluding sublease income, for each of the nine months ended September 30, 2021 and 2020 was $2.5 million and rental income for each of the nine months ended September 30, 2021 and 2020 was $0.3 million.
The following represents our future minimum payments under non-cancelable leases for operating facilities as of September 30, 2021 for each of the next five years and thereafter (in thousands):
2021 (remaining)$880 
20223,533 
20233,352 
20242,780 
20252,885 
Thereafter13,074 
Total$26,504 
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.
As previously disclosedOn September 26, 2022, a putative securities class action lawsuit was filed in the final prospectusUnited States District Court for our IPO filed withthe Southern District of New York against us and certain executive officers, captioned Pompano Beach Police and Firefighters Retirement System v. Olo Inc., et. al. (Case 1:22-cv-08228). The lawsuit asserts claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Exchange Commission pursuantalleges 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. We believe the case is without merit and are vigorously defending this matter. We are unable to Rule 424(b)(4) on March 18, 2021, onpredict the outcome, or about October 21, 2020, DoorDash filedthe possible loss or range of loss, if any, related to this matter.
We are a lawsuit against us in New York State Supreme Court, New York County, in a dispute over fees chargedparty to DoorDash. On April 22, 2021, we entered into a definitive settlement agreement with DoorDash. Pursuant to the settlement, wevarious lawsuits and DoorDash agreed to a dismissal of this case in full without any amounts payable by us to DoorDash in connection with the settlement. Additionally, the parties exchanged releases. On April 22, 2021, we entered into a Restated Delivery Network Agreement (the “Restated Agreement”) with DoorDash, which replaced and superseded the Delivery Network Agreement and Rails Network Addendum, dated March 30, 2017, as previously amended on November 15, 2017 and November 12, 2020, between the Company and DoorDash. Under the terms of the Restated Agreement, we agreed to issue DoorDash a letter of creditclaims in the amountordinary course of $25.0 million to guarantee any future unpaid and amounts owed to DoorDash underbusiness, including the Restated Agreement, principally related to our Dispatch module where our restaurant customers are the merchant of record and we collect funds from our restaurant customers. The letter of credit was issued on May 6, 2021. In the event that the letter of credit is drawn down by DoorDash pursuant to the terms of the Restated Agreement, we must increase the amount of such letter of credit up to a maximum of three times during the term so that the available, undrawn amount is once more in the amount of $25.0 million. See Note 7 for further details.
We have also received, and may in the future continue to receive, claims from third parties asserting, among other things, infringement of their intellectual property rights.matter described above. Future litigation may be necessary to defend ourselves or our




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OLO INC.
Notes to Condensed Financial Statements
(Unaudited)
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.
13.17.Net (Loss) IncomeLoss per Share Attributable to Common Stockholders
A reconciliation of net (loss) incomeloss available to common stockholders and the number of shares in the calculation of basic (loss) incomenet loss per share is as follows (in thousands)thousands, except share and per share data):
Three Months Ended September 30,Nine Months Ended September 30,Three Months Ended
September 30,		Nine Months Ended
September 30,
20212020202120202022202120222021
Numerator:Numerator:Numerator:
Net (loss) income and comprehensive (loss) income$(11,308)$5,107 $(40,202)$6,019 
Net lossNet loss$(14,560)$(11,308)$(37,742)$(40,202)
Less: accretion of redeemable convertible preferred stock to redemption valueLess: accretion of redeemable convertible preferred stock to redemption value— (17)(14)(52)Less: accretion of redeemable convertible preferred stock to redemption value— — — (14)
Less: undeclared 8% non-cumulative dividend on participating securities— (5,090)— (5,967)
Net loss attributable to Class A and Class B common stockholders—basic and dilutedNet loss attributable to Class A and Class B common stockholders—basic and diluted$(11,308)$— $(40,216)$— Net loss attributable to Class A and Class B common stockholders—basic and diluted$(14,560)$(11,308)$(37,742)$(40,216)
Three Months Ended September 30,Nine Months Ended September 30,Three Months Ended
September 30,		Nine Months Ended
September 30,
20212020202120202022202120222021
Denominator:Denominator:Denominator:
Weighted-average Class A and Class B common shares outstanding—basic and dilutedWeighted-average Class A and Class B common shares outstanding—basic and diluted148,452,987 20,856,530 113,451,378 19,401,927 Weighted-average Class A and Class B common shares outstanding—basic and diluted162,364,654 148,452,987 160,667,412 113,451,378 
Net loss per share attributable to Class A and Class B common stockholders—basic and diluted$(0.08)$— $(0.35)$— 
Net loss per share attributable to Class A and Class B common stockholders––basic and dilutedNet loss per share attributable to Class A and Class B common stockholders––basic and diluted$(0.09)$(0.08)$(0.23)$(0.35)


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OLO INC.
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
The following participating securities were excluded from the computation of diluted net (loss) incomeloss 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,
2021202020212020
Redeemable convertible preferred stock— 98,514,932 — 98,514,932 
Outstanding stock options39,815,982 39,760,450 39,815,982 39,760,450 
Outstanding shares estimated to be purchased under ESPP143,815 — 143,815 — 
Outstanding SARs— 1,646,501 — 1,646,501 
Outstanding redeemable convertible preferred stock warrants— 1,682,847 — 1,682,847 
Outstanding restricted stock units155,422 — 155,422 — 
Total40,115,219 141,604,730 40,115,219 141,604,730 
14.Related Party Transactions
NaN of our board members have ownership interests in companies to which we provide services, including 1 of our executive officers who serves on the board of 1 of these companies and receives an annual cash retainer for service on such board. The Company generated approximately $0.3 million of revenue from these customers identified as related parties for both the three months ended September 30, 2021 and 2020. During the nine months ended September 30, 2021 and 2020, the Company generated approximately $0.8 million and $0.7 million of revenue from these customers identified as related
Three Months Ended
September 30,		Nine Months Ended
September 30,
2022202120222021
Outstanding stock options31,960,236 39,815,982 31,960,236 39,815,982 
Outstanding restricted stock units4,710,098 155,422 4,710,098 155,422 
Outstanding shares estimated to be purchased under ESPP125,128 143,815 125,128 143,815 
Total36,795,462 40,115,219 36,795,462 40,115,219 


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OLO INC.
Notes to Condensed Financial Statements
(Unaudited)
parties. As of September 30, 2021, the outstanding accounts receivable from the related parties was $0.3 million. As of December 31, 2020, the outstanding accounts receivable from the related parties was $0.4 million.
15.Subsequent Events
Acquisition
On October 21, 2021, we signed a definitive agreement to acquire all of the outstanding shares of Wisely Inc. (“Wisely”), a leading customer intelligence and engagement platform for restaurants. We closed the acquisition on November 4, 2021 for approximately $187 million, consisting of $77 million in cash and $110 million of our Class A common stock, based on a price per share of $29.85, which is equal to the daily volume-weighted average sales price of our Class A common stock for each of the twenty (20) consecutive trading days ended on and including October 18, 2021. On November 4, 2021, we issued approximately 3.5 million shares of our Class A common stock and granted approximately 0.2 million fully vested stock options. In contemplation of the acquisition, on October 1, 2021, we entered into a Convertible Promissory Note (“Note”) with Wisely in the amount of $7 million. The Note was settled in conjunction with the close of the acquisition.




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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q. The discussion contains forward-looking statements, including with respect to the durability of the acceleration we have experienced in the near term on consumer preferences for digital ordering,our transaction volumes, our net revenue retention rate, and customer adoption of multi-modules, that are based on the beliefs of management, as well as assumptions made by, and information currently available to, our management. Actual results could differ materially from those discussed in or implied by forward-looking statements as a result of various factors, including those discussed below and elsewhere in this Quarterly Report on Form 10-Q, particularly in the sectionssection entitled “Risk Factors” and “Special Note Regarding Forward-Looking Statements.Statements,” and our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the Securities and Exchange Commission, or SEC, on February 25, 2022 and our other filings with the SEC.
Overview
We are Olo, a leading open SaaS platform for restaurants.
Our platform powers restaurant brands’ on-demand digital commerce platform powering the restaurant industry’s digital transformation.
Restaurant brands rely on our platform to enableoperations, enabling digital ordering, delivery, front-of-house, or FOH, management and delivery,payments, while further strengthening and enhancing theirrestaurants’ direct consumer relationships. Consumers 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-consumer, enterprise-grade, open SaaS platform to manage their complex digital businesses and enable fast and more personalized experiences for their customers.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 and in-storeomni-channel sales, maximize profitability, establish and maintain direct consumer relationships, and collect, protect, and leverage valuable consumer data. As a result of our ability to meet restaurant brands’ growing needs, gross merchandise value, or GMV, which we define as the gross value of orders processed through our platform, has increased on an annual basis, reaching more than $20 billion in GMV during the year ended December 31, 2021. We believe that GMV is an important metric to provide management with an indication of demand for our products. 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 high dollar-based net revenue retention rate.retention. See the section titled “Key Factors Affecting Our Performance” below for additional information on how we calculate dollar-based net revenue retention. Further, industry-recognized outlets, including Restaurant Business Online, QSR Magazine, and AP 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. Our platform initially focused on our Order Management solutions, a suite of fully-integrated, white-label, on-demand digital commerce and channel management solutions, enabling guests to order and pay directly from restaurants via mobile, web, kiosk, voice, and other digital ordering,channels, through the deployment of white label on-demand commerce websitesour Ordering, Network, Switchboard, Kiosk, and applications, and tools for digital order management.Virtual Brands modules. We then expanded our platform by launching our Delivery Enablement solutions, including Dispatch, our delivery enablement module, and Rails, our aggregator and channel management module. We believeIn 2021, we acquired Wisely Inc, or Wisely. This acquisition added our solution is the only independent SaaS platform forGuest Engagement solutions (formerly known as Customer Engagement) and our FOH solutions to our product offerings. Our Guest Engagement solutions encompass a suite of restaurant-centric marketing and sentiment solutions that enable restaurants to provide seamless digital orderingcollect, analyze, and efficient delivery enablement, offering centralized managementact on guest data to deepen relationships, boost revenue, and increase Guest Lifetime Value, or LTV (formerly known as Customer Lifetime Value). Our Guest Engagement solutions include the Marketing Automation, Sentiment, and Guest Data Platform, or GDP (formerly known as Customer Data Platform) modules. Our FOH solutions enable restaurants to streamline queue orders from multiple sales channels, optimize seat utilization in the dining room, and increase flow-through of a restaurant’s entire digital business. reservation and waitlist parties through the Host 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 renamed our productbegan rebranding as Olo“Olo” and shifted our focus to enterprise customers.
•2013: We surpassed $50 million in GMV and expanded our executive leadership team.

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•2014: We surpassed $100 million in GMV, and restaurateur Danny Meyer joined our boardBoard of directors.Directors.
•2015: We launched Dispatch, our first significant product extension.
•2016: We surpassed $500 million in GMV.
•2017: We launched Rails and surpassed $1 billion in GMV.
•2018: We surpassed $2 billion in GMV.
•2019: We surpassed $5 billion in GMV.
•2020: We reached nearly $14.6 billion in GMV.
•2021: We completed our initial public offering, or IPO, executed our first acquisition, and listed on the New York Stock Exchange.

surpassed $20 billion in GMV.

•

2022: We announced commercial availability of Olo Pay.

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Leading restaurant brands trust ourOlo’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. In 2021, more than 85 million guests transacted on our platform. 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. WeTo our knowledge, we have never experienced a material breach of customer or consumer data. Our open SaaS platform integrates with over 100300 restaurant technology solutions including point-of-sale, or POS, systems, aggregators, delivery service providers, or DSPs, payment processors, user experience, or UX, and user interface, or UI, providers, and loyalty programs, on-premise ordering providers, kitchen display systems, or KDS, labor management providers, inventory management providers, and reservation and customer relationship management, or CRM, giving our customers significant control over the configuration and features of their distinct digital offering.
We are the exclusive direct digital ordering provider for our 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 averagecontracts typically have initial contract length is generallyterms of three years or longer, with continuous one-yearone-to-two-year automatic renewal periods, providing visibility into our future financial performance. Our enterprise brands meaning those brands having 50 or more locations, are alsotend 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 company-owned and franchise 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 consumers 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 primarily from our Ordering, moduleSwitchboard, Kiosk, Virtual Brands, Marketing Automation, Sentiment, GDP, and transaction revenue from our Rails and DispatchHost modules. We charge our customers a fixed monthly subscription fee per restaurant location for access to our Ordering module. 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 Rails, Dispatch, Virtual Brands, and DispatchOlo Pay modules. Customers who subscribe to our Rails and Dispatch modules pay a fee on a per transaction basis. 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 other products, including Network, which allows brands to take orders from non-aggregator digital channels (e.g., Order with Google, Food Ordering, which enables restaurants to fulfill orders directly through Google search results and Maps pages). These products generate fees predominantly through revenue sharing agreements with partners.
Acquisition of Wisely Inc.
On October 21, 2021, we entered into an Agreement and Plan of Reorganization, or the Merger Agreement, with Sparty Merger Sub I, Inc., a Delaware corporation and our wholly owned subsidiary, Sparty Merger Sub II, LLC, a Delaware limited liability company and our wholly owned subsidiary, Wisely Inc., a Delaware corporation, or Wisely, and Fortis Advisors LLC, solely in its capacity as the representative of Wisely’s security holders. The transaction, which we refer to as the Wisely Acquisition, closed on November 4, 2021 pursuant to the terms set forth in the Merger Agreement.
Wisely is a leading customer intelligence and engagement platform that enables restaurant brands to personalize the guest experience and maximize customer lifetime value. With a growing list of enterprise and emerging enterprise customers, Wisely’s leading software solutions include an all-in-one Customer Relationship Management system with email and SMS marketing automation features; Host, a table management, waitlist, and reservations solution; a guest sentiment tracker with aggregated and annotated guest reviews and feedback; and a Customer Data Platform purpose-built for restaurants. The Wisely Acquisition expands our platform capabilities, creating new offerings that will unlock our ability to directly serve restaurant brands’ marketing efforts, empowering restaurant brands to derive actionable insights from their data more readily in order to better understand their guests.
Upon the closing of the Wisely Acquisition, we paid to Wisely security holders approximately $187 million, consisting of $77 million in cash and $110 million in Class A common stock, based on a price per share of $29.85.




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Key Factors Affecting Our Performance

Add New Large Multi-Location and High-Growth Restaurant Brands

We believe there is a substantial opportunity to continue to grow our customer base across the U.S. restaurant industry, adding to our over 500 existing brands across approximately 76,000 active locations as of September 30, 2021, up from approximately 60,000 active locations as of September 30, 2020. We define active locations as a unique restaurant location that is utilizing one or more modules in a given quarterly period. We consider each specific restaurant brand to be a customer, even if owned by a parent organization that owns multiple restaurant brands, and define active locations as a location where at least one of our modules is deployed. 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.

Expand Within Our Existing Customer Base

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 exclusive, 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 averagecontracts typically have initial contract length is generallyterms 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, or ARPU. We calculate average revenue per unitARPU 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.
Add New Large Multi-Location and High-Growth Restaurant Brands
We believe there is a substantial opportunity to continue to grow our customer base across the U.S. restaurant industry, adding to our over 600 existing brands across approximately 84,000 active locations as of September 30, 2022, up from approximately 76,000 active locations as of September 30, 2021. We define an “active location” as a unique restaurant location that is utilizing one or more modules in a given quarterly period. 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 ARPU and approximate number of active locations for the three months ended, or as of, each of the dates presented.
Three Months Ended September 30,Three Months Ended September 30,
2021202020222021
Average Revenue Per UnitAverage Revenue Per Unit$484 $450 Average Revenue Per Unit$558 $484 
Ending Active LocationsEnding Active Locations76,000 60,000 Ending Active Locations84,000 76,000 
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 rate, or NRR, which compares our revenue from the same set of active customers in one period to the prior year period. We calculate dollar-based NRR 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 netNRR. We believe that NRR is an important metric demonstrating our ability to retain our customers and expand their use of our modules over time, proving the stability of our revenue retention. base and the long-term value of our customer relationships.
For the period endingquarter ended September 30, 2022, NRR was approximately 107%, an increase of 100 basis points as compared to the quarter ended June 30, 2022. While we maintained an NRR over 120% throughout 2021, 2020, and 2019, we continuedobserved a decline in NRR beginning in the first quarter of 2022 and continuing through the third quarter of 2022, as we lapped the last pre-vaccination period of the COVID-19 pandemic, during which time order volumes were elevated, and the final quarter operating under our prior DoorDash agreement. We expect to maintain an NRR above 120%. While we have maintained this high NRR overin excess of 100% in the past three years, we are also seeing a trend wherenear term as customers are purchasing all of our products at signing, which provides us with more platform revenue from the beginning of the arrangement, but leaves less room for expansion.continue to adopt additional product modules such as Olo Pay, FOH, and Guest Engagement solutions.

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Enable Higher Transaction Volume

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 off-premise 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 we expect that the industry’s secular tailwinds willto help increase transaction order volume as more consumers order food for off-premise consumption.through digital means, including on- and off-premise. As transaction volume increases, the subscription revenue we receive from our Ordering modulecertain subscription-based modules may also increase as customers subscribe for higher tier ordering packages to enable more transactions. Additionally, as we continue




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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 revenues. Our ability to increase transaction volume is dependent on the continued shift to digital ordering for off-premise food consumption and our ability to capture a meaningful portion of that shift.

Investment in Innovation and Growth

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, catering,data analytics, and data analytics.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 our transition torequirements 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.
Grow Our Ecosystem

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, KDSs, labor management providers, inventory management providers, and loyalty programs.reservation and CRM 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 expandswould expand our capabilities and facilitatesfacilitate 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.

Expand Our Longer-Term Market Opportunity

While we have not made any significant investments in this area to date, we believe there is an opportunity to partner with smallsmall- and mediummedium-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 consumers. For example, we currently partner with a number of grocery chains who use our Ordering module to help their consumers 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.



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Components of Results of Operations
Revenue
We generate revenue primarily from platform fees and professional services.
Platform
Platform revenue primarily consists of fees that provide customers access to one or more of our modules and standard customer support. Our contracts typically beginhave initial terms of three years or longer, with a minimum three-year term and auto-renew on an annual basis thereafter.continuous one-year automatic renewal periods. We generally bill monthly in arrears. A majority of our platform revenue is derived from subscription fees fromour Order Management solutions, which consist of our Ordering, module. Customers with subscriptions to our Ordering module can pay either a monthly flat fee or a reduced flat fee with a minimum, fixed number of monthly orders for a monthly fee once active with a module. Customers who elect the fixed number of monthly orders pay an additional fee for each excess order, which is also treated as subscription revenue.
Switchboard, Kiosk, Network, and Virtual Brands modules. We also generate platform revenue primarily from transaction revenue from our Rails,Delivery Enablement solutions, which include our Dispatch and other modules. Customers who subscribe to our Rails and Dispatch modules, pay a fee on a per transaction basis.as well as from Olo Pay. We may also charge third-party aggregators and other service providers in our ecosystem a per transactionper-transaction fee for access to our Dispatch and Rails modules. Subsequent to the Wisely Acquisition, we also generate revenue from our Guest Engagement and Dispatch modules.
With the onset of COVID-19, we saw an increase in transaction volumes as consumers turned to online ordering as compared to in-person dining. This shift began at the end of the first quarter of 2020 and has continued through the balance of the third quarter of 2021. We have also experienced an increase in our penetration of our Rails and Dispatch modules, as evidenced by an increase from 44% in 2019 to 71% in 2020 of our customers using all three of our modules. The combination of increased transaction volumes and increased multi-module adoption resulted in an increase in transaction revenue as a percentage of platform revenue. While we have benefited from the acceleration of demand for off-premise dining, our business and financial results could be materially adversely affected in the future if these trends do not continue. For example, as the effects of shelter-in-place orders abate with the continued roll-out of vaccines in the United States and consumers potentially return to pre-COVID digital ordering preferences and habits, the trends we experienced in 2020 and through the third quarter of 2021 on multi-module adoption, number of active locations, and transaction volume may not continue and our revenue may fluctuate in the near term.FOH solutions.
Professional Services and Other
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.
Cost of Revenue
Platform
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 intangible assets, 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
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.




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Gross Profit
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.
Operating Expenses
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
Research and development expenses primarily consist of engineering and product development personnel costs and allocated overhead costs. Research and development costs exclude capitalizedinternal-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 on aan absolute dollar basis and as a percentpercentage of revenue in the short-term as we continue to invest in innovative solutions to support our customerscustomers’ rapidly evolving needs.

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General and Administrative
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 intangible assets, travel-related expenses, and allocated overhead. We expect that our general and administrative expenses will continue to grow on a dollar basis while decline as a percentage of revenue as we continue to scale our operations over time. We also expect to incur additional 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 lap the initial increase in costs associated with operating as a public company and continue to scale our operations over time.
Sales and Marketing
Sales and marketing expenses primarily consist of sales, marketing, and other personnel costs, commissions, general marketing, andamortization of intangible assets, 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 percentpercentage 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 Expenses
Interest Expense
Interest expense consists of interest incurred on our outstanding borrowings under our outstanding debt facility. In 2021, we amended our loan agreement for our revolving line of credit. See—“Income (Expenses), NetLiquidity and Capital Resources.”
Other (Expense) Income, Net
Other (expense) income (expenses), net consists primarily of income earned on our investments and money-market funds in cash and cash equivalents.equivalents and interest expense related to any outstanding debt.
Change in Fair Value of Redeemable Convertible Preferred Stock Warrant Liability
The change in the fair value of warrant liability relates to warrants issued to purchase our redeemable convertible preferred stock that are classified as liabilities on the balance sheet. Prior to the IPO, warrants to purchase 1,682,847 shares of our outstanding redeemable convertible preferred stock were exercised and converted into redeemable convertible preferred stock. Upon completion of the IPO, all shares of our outstanding redeemable convertible preferred stock, inclusive of the shares issued




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pursuant to these warrant exercises, converted into 100,196,780 shares of Class B common stock. As a result, we will no longer have a change in fair value of redeemable convertible preferred stock warrant liability.
Provision for Income Taxes
Provision for income taxes primarily relates to U.S. state income taxes where we conduct business.

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Results of Operations
The following tables set forth our results of operations for the periods presented.
Three Months Ended
September 30,		Nine Months Ended
September 30,		Three Months Ended
September 30,		Nine Months Ended
September 30,
20212020202120202022202120222021
(in thousands)(in thousands)
Revenue:Revenue:Revenue:
PlatformPlatform$36,084 $26,197 $105,533 $63,525 Platform$46,357 $36,084 $132,361 $105,533 
Professional services and otherProfessional services and other1,306 1,307 3,876 4,352 Professional services and other909 1,306 3,262 3,876 
Total revenueTotal revenue37,390 27,504 109,409 67,877 Total revenue47,266 37,390 135,623 109,409 
Cost of revenue:Cost of revenue:  Cost of revenue:  
Platform (1)(2)
Platform (1)(2)
6,632 3,583 18,419 10,191 
Platform (1)(2)
13,920 6,632 37,693 18,419 
Professional services and other (1)(2)
Professional services and other (1)(2)
1,532 1,196 3,958 3,191 
Professional services and other (1)(2)
1,346 1,532 4,543 3,958 
Total cost of revenueTotal cost of revenue8,164 4,779 22,377 13,382 Total cost of revenue15,266 8,164 42,236 22,377 
Gross ProfitGross Profit29,226 22,725 87,032 54,495 Gross Profit32,000 29,226 93,387 87,032 
Operating expenses:Operating expenses:  Operating expenses:  
Research and development (1)(2)
Research and development (1)(2)
14,485 7,871 42,872 22,715 
Research and development (1)(2)
19,101 14,485 53,159 42,872 
General and administrative (1) (2)
21,270 5,461 53,034 15,137 
General and administrative (1) (2) (3)
General and administrative (1) (2) (3)
20,894 21,270 56,090 53,034 
Sales and marketing (1)(2)
Sales and marketing (1)(2)
4,728 2,002 12,265 6,089 
Sales and marketing (1)(2)
7,923 4,728 24,890 12,265 
Total operating expensesTotal operating expenses40,483 15,334 108,171 43,941 Total operating expenses47,918 40,483 134,139 108,171 
(Loss) income from operations(11,257)7,391 (21,139)10,554 
Other expenses, net:  
Loss from operationsLoss from operations(15,918)(11,257)(40,752)(21,139)
Other income (expenses), net:Other income (expenses), net:  
Interest incomeInterest income1,525 — 2,110 — 
Interest expenseInterest expense— — — (157)Interest expense(70)— (116)— 
Other (expense) income, net(15)(3)(23)15 
Other (expense) incomeOther (expense) income(7)(15)6 (23)
Change in fair value of warrant liabilityChange in fair value of warrant liability— (2,234)(18,930)(4,251)Change in fair value of warrant liability— — — (18,930)
Total other expenses, net(15)(2,237)(18,953)(4,393)
(Loss) income before taxes(11,272)5,154 (40,092)6,161 
Provision for income taxes36 47 110 142 
Net (loss) income and comprehensive (loss) income(11,308)5,107 (40,202)6,019 
Total other income (expenses), netTotal other income (expenses), net1,448 (15)2,000 (18,953)
Loss before income taxesLoss before income taxes(14,470)(11,272)(38,752)(40,092)
Provision (benefit) for income taxesProvision (benefit) for income taxes90 36 (1,010)110 
Net lossNet loss(14,560)(11,308)(37,742)(40,202)
Accretion of redeemable convertible preferred stock to redemption valueAccretion of redeemable convertible preferred stock to redemption value— (17)(14)(52)Accretion of redeemable convertible preferred stock to redemption value— — — (14)
Undeclared 8% dividend on participating securities— (5,090)— (5,967)
Net loss attributable to Class A and Class B common stockholdersNet loss attributable to Class A and Class B common stockholders$(11,308)$— $(40,216)$— Net loss attributable to Class A and Class B common stockholders$(14,560)$(11,308)$(37,742)$(40,216)
(1) Includes stock-based compensation expense as follows (in thousands):
Three Months Ended
September 30,		Nine Months Ended
September 30,
2021202020212020
Cost of revenue - platform$762 $140 $1,942 $348 
Cost of revenue - professional services and other116 33 362 72 
Research and development2,570 413 8,522 940 
General and administrative3,907 681 12,002 1,884 
Sales and marketing512 111 1,436 221 
Total stock-based compensation expense$7,867 $1,378 $24,264 $3,465 




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(2) Includes charitable donation expense of $8.0$1.4 million for both the three and $13.1nine months ended September 30, 2022. Also includes $8.0 million and $13.1 million of charitable donation expense for the three and nine months ended September 30, 2021, respectively.
(2) Includes stock-based compensation expense as follows (in thousands):
Three Months Ended
September 30,		Nine months Ended
September 30,
2022202120222021
Cost of revenue - platform$1,367 $762 $4,269 $1,942 
Cost of revenue - professional services and other167 116 565 362 
Research and development3,571 2,570 10,382 8,522 
General and administrative5,442 3,907 15,567 12,002 
Sales and marketing1,372 512 4,321 1,436 
Total stock-based compensation expense$11,919 $7,867 $35,104 $24,264 
(3) Includes non-cash impairment charge of $2.3 million related to our right-of-use asset and furniture and fixtures and broker commission fees of $0.9 million in connection with the subleasing of our headquarters.


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The following table sets forth our statements of operations data expressed as a percentage of total revenue for the periods presented:
Three Months Ended
September 30,		Nine Months Ended
September 30,
2021202020212020
Revenue:
Platform96.5 %95.2 %96.5 %93.6 %
Professional services and other3.5 4.8 3.5 6.4 
Total revenue100.0 100.0 100.0 100.0 
Cost of revenue:
Platform17.7 13.0 16.8 15.0 
Professional services and other4.1 4.3 3.6 4.7 
Total cost of revenue21.8 17.4 20.5 19.7 
Gross Profit78.2 82.6 79.5 80.3 
Operating expenses:
Research and development38.7 28.6 39.2 33.5 
General and administrative56.9 19.9 48.5 22.3 
Sales and marketing12.6 7.3 11.2 9.0 
Total operating expenses108.3 55.8 98.9 64.7 
(Loss) income from operations(30.1)26.9 (19.3)15.5 
Other expenses, net:
Interest expense0.0 0.0 0.0 (0.2)
Other (expense) income, net0.0 0.0 0.0 0.0 
Change in fair value of warrant liability0.0 (8.1)(17.3)(6.3)
Total other expenses, net0.0 (8.1)(17.3)(6.5)
(Loss) income before taxes(30.1)18.7 (36.6)9.1 
Provision for income taxes0.1 0.2 0.1 0.2 
Net (loss) income and comprehensive (loss) income(30.2)18.6 (36.7)8.9 
Accretion of redeemable convertible preferred stock to redemption value0.0 (0.1)0.0 (0.1)
Undeclared 8% dividend on participating securities0.0 (18.5)0.0 (8.8)
Net loss attributable to Class A and Class B common stockholders(30.2)%0.0 %(36.8)%0.0 %

Three Months Ended
September 30,		Nine Months Ended
September 30,
2022202120222021
Revenue:
Platform98.1 %96.5 %97.6 %96.5 %
Professional services and other1.9 3.5 2.4 3.5 
Total revenue100.0 100.0 100.0 100.0 
Cost of revenue:
Platform29.5 17.7 27.8 16.8 
Professional services and other2.8 4.1 3.3 3.6 
Total cost of revenue32.3 21.8 31.1 20.5 
Gross Profit67.7 78.2 68.9 79.5 
Operating expenses:
Research and development40.4 38.7 39.2 39.2 
General and administrative44.2 56.9 41.4 48.5 
Sales and marketing16.8 12.6 18.4 11.2 
Total operating expenses101.4 108.3 98.9 98.9 
Loss from operations(33.7)(30.1)(30.0)(19.3)
Other income (expenses), net:
Interest income3.2 0.0 1.6 0.0 
Interest expense(0.1)0.0 (0.1)0.0 
Other (expense) income0.0 0.0 0.0 0.0 
Change in fair value of warrant liability0.0 0.0 0.0 (17.3)
Total other income (expenses), net3.1 0.0 1.5 (17.3)
Loss before income taxes(30.6)(30.1)(28.6)(36.6)
Provision (benefit) for income taxes0.2 0.1 (0.7)0.1 
Net loss(30.8)(30.2)(27.8)(36.7)
Accretion of redeemable convertible preferred stock to redemption value0.0 0.0 0.0 0.0 
Net loss attributable to Class A and Class B common stockholders(30.8)%(30.2)%(27.8)%(36.8)%


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Comparison of the Three Months Ended September 30, 20212022 and 20202021
Revenue
Three Months Ended
September 30,		ChangeThree Months Ended
September 30,		Change
20212020$%20222021$%
(in thousands, except percentages)(in thousands, except percentages)
Revenue:Revenue:Revenue:
PlatformPlatform$36,084 $26,197 $9,887 37.7 %Platform$46,357 $36,084 $10,273 28.5 %
Professional services and otherProfessional services and other1,306 1,307 (1)(0.1)Professional services and other909 1,306 (397)(30.4)
Total RevenueTotal Revenue$37,390 $27,504 $9,886  35.9 %Total Revenue$47,266 $37,390 $9,876 26.4 %
Platform
Total platformplatform revenue increased $9.9$10.3 million, or 37.7%28.5%, to $46.4 million for the three months ended September 30, 2022 from $36.1 million for the three months ended September 30, 2021. This increase was primarily the result of an increase in new active locations coming onto the platform, an increase in module adoption within our existing customer base, and increased transaction volumes. Active locations increased to approximately 84,000 as of September 30, 2022 from approximately 76,000 as of September 30, 2021, from $26.2 millionand ARPU increased to approximately $558 for the three months ended September 30, 2020. This increase was primarily the result of continued increases in active locations coming onto the platform, as well as increases in ARPU due to increased multi-product adoption and increased transaction volumes. Active customer locations increased to approximately 76,000 as of September 30, 20212022 from approximately 60,000 as of September 30, 2020, and ARPU increased to approximately $484 for the three months ended September 30, 2021 from approximately $450 for the three months ended September 30, 2020.2021. For the three months ended September 30, 2022 and 2021, 51.6% and 2020, 47.2% and 44.9% of our platform revenue was subscription revenue, respectively, and 48.4% and 52.8% and 55.1% waswas transaction revenue, respectively.
Professional Services and Other
Total professional services and other revenue were flat atdecreased $0.4 million, or 30.4%, to $0.9 million for the three months ended September 30, 2022 from $1.3 million for the three months ended September 30, 2021, primarily due to labor shortages affecting our restaurant customers at both the operator and 2020.brand levels, elongating the sales cycle and delaying the start of deployments. While we generally expect professional services and other revenue to increase primarily as a result of continued deployment of additional active locations, we also expect this increase willto be offset as our deployment teams become more efficient and more familiar with customer systems and shorten deployment periods.
Cost of Revenue, Gross Profit, and Gross Margin
Three Months Ended
September 30,		ChangeThree Months Ended
September 30,		Change
20212020$%20222021$%
(in thousands, except percentages)(in thousands, except percentages)
Cost of revenue:
Cost of revenues:Cost of revenues:
PlatformPlatform$6,632 $3,583 $3,049 85.1 %Platform$13,920 $6,632 $7,288 109.9 %
Professional services and otherProfessional services and other1,532 1,196 336 28.1 Professional services and other1,346 1,532 (186)(12.1)
Total cost of revenueTotal cost of revenue$8,164 $4,779 $3,385 70.8 %Total cost of revenue$15,266 $8,164 $7,102 87.0 %
Percentage of revenue:Percentage of revenue:Percentage of revenue:
PlatformPlatform17.7 %13.0 %Platform29.5 %17.7 %
Professional services and otherProfessional services and other4.1 4.3 Professional services and other2.8 4.1 
Total cost of revenueTotal cost of revenue21.8 %17.4 %Total cost of revenue32.3 %21.8 %
Gross ProfitGross Profit$29,226 $22,725 $6,501 28.6 %Gross Profit$32,000 $29,226 $2,774 9.5 %
Gross MarginGross Margin78.2 %82.6 %Gross Margin67.7 %78.2 %
Platform
Total platform cost of revenue increased $3.0$7.3 million, or 85.1%109.9%, to $13.9 million for the three months ended September 30, 2022 from $6.6 million for the three months ended September 30, 2021 from $3.6 million for the three months ended September 30, 2020.2021. This increase was primarily the result of




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higher hosting costs due to increased transaction volume as well as higher compensation costs associated with additional personnel to support our revenue growth as well as higher hosting costs due to increased transaction volume and the addition of features and modules. Also contributing to the increase were the near-

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term impacts due to our recent acquisitions of Wisely in active locations.late 2021 and Omnivore, Inc. in the first quarter of 2022, the intangible amortization costs related to these acquisitions, and the processing costs associated with Olo Pay.
Professional Services and Other
Total professional services and other cost of revenue increased $0.3decreased $0.2 million, or 28.1%12.1%, to $1.3 million for the three months ended September 30, 2022 from $1.5 million for the three months ended September 30, 2021 from $1.2 million2021. This decrease was primarily the result of a decrease in third party consulting costs, partially offset by increased compensation costs to support the previously-mentioned growth in new active locations.
Gross Profit
Gross margin decreased to 67.7% for the three months ended September 30, 2020. This increase was primarily the result of increased compensation costs to support growth in active locations.
Gross Profit
Gross profit margin decreased to2022 from 78.2% for the three months ended September 30, 2021 from 82.6% for the three months ended September 30, 2020. Decreases2021. The decrease in gross profit margin werewas driven by higher platform and professional services and other compensation costs to support rapid growth in transactions, the increase in new active locations coming onto the platform.platform, and the addition of features and modules, as well as by the near-term impacts due to our recent Wisely and Omnivore acquisitions, and the processing costs associated with Olo Pay.
Operating Expenses
Research and Development
Three Months Ended
September 30,		ChangeThree Months Ended
September 30,		Change
20212020$%20222021$%
(in thousands, except percentages)(in thousands, except percentages)
Research and developmentResearch and development$14,485 $7,871 $6,614  84.0 %Research and development$19,101 $14,485 $4,616 31.9 %
Percentage of total revenuePercentage of total revenue38.7 %28.6 %Percentage of total revenue40.4 %38.7 %
Research and development expense increased $6.6$4.6 million, or 84.0%31.9%, to $19.1 million for the three months ended September 30, 2022 from $14.5 million for the three months ended September 30, 2021 from $7.9 million for the three months ended September 30, 2020.2021. This increase was primarily the result of higher compensation costs associated with additional personnel and an increase in the use of software tools to support further investments in our platform development and continued product innovation. As a percentpercentage of total revenue, research and development expenses increased to 40.4% for the three months ended September 30, 2022 from 38.7% for the three months ended September 30, 2021 from 28.6%2021.
General and Administrative
Three Months Ended
September 30,		Change
20222021$%
(in thousands, except percentages)
General and administrative$20,894 $21,270 $(376)(1.8)%
Percentage of total revenue44.2 %56.9 %
General and administrative expense decreased $0.4 million, or 1.8%, to $20.9 million for the three months ended September 30, 2020.
General and Administrative
Three Months Ended
September 30,		Change
20212020$%
(in thousands, except percentages)
General and administrative$21,270 $5,461 $15,809  289.5 %
Percentage of total revenue56.9 %19.9 %

General and administrative expense increased $15.8 million, or 289.5%, to2022 from $21.3 million for the three months ended September 30, 20212021. This decrease was primarily a result of the reduction of $6.6 million related to the donation of shares of our Class A common stock to an independent donor-advised fund sponsor, Tides Foundation, partially offset by: (i) costs and an impairment expense associated with the sublease of our corporate headquarters; and (ii) severance costs, including those related to the departure of our Chief Customer Officer. As a percentage of total revenue, general and administrative expenses decreased to 44.2% for the three months ended September 30, 2022 from $5.556.9% for the three months ended September 30, 2021.


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Sales and Marketing
Three Months Ended
September 30,		Change
20222021$%
(in thousands, except percentages)
Sales and marketing$7,923 $4,728 $3,195 67.6 %
Percentage of total revenue16.8 %12.6 %
Sales and marketing expense increased $3.2 million, or 67.6%, to $7.9 million for the three months ended September 30, 2020. This increase was primarily a result of increased compensation costs due to increased headcount to support the growth and stage of the organization, as well as, increased insurance costs and professional fees incurred due to operating as a public company. Additionally, we incurred a non-cash charge of $8.0 million for the three months ended September 30, 2021 related to the donation of 172,918 shares of our Class A common stock to a charitable donor-advised fund. We intend to donate additional shares to this fund in conjunction with our Olo for Good initiative. As a percent of total revenue, general and administrative expenses increased to 56.9% for the three months ended September 30, 20212022 from 19.9% for the three months ended September 30, 2020.
Sales and Marketing
Three Months Ended
September 30,		Change
20212020$%
(in thousands, except percentages)
Sales and marketing$4,728 $2,002 $2,726  136.2 %
Percentage of total revenue12.6 %7.3 %




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Sales and marketing expense increased $2.7 million, or 136.2%, to $4.7 million for the three months ended September 30, 2021 from $2.0 million for the three months ended September 30, 2020.2021. This increase was primarily the result of additional compensation costs, inclusive of commission costs, professional and consulting services, and associated technology spend due to increases in headcount, and intangible amortization costs related to supportour recent acquisitions. This increase was partially offset by decreased professional and consulting fees for the growth and stage of the organization.three months ended September 30, 2022. As a percentpercentage of total revenue, sales and marketing expense increased to 16.8% for the three months ended September 30, 2022 from 12.6% for the three months ended September 30, 2021 from 7.3%2021.
Other Income (Expenses), net
Three Months Ended
September 30,		Change
20222021$%
(in thousands, except percentages)
Other income (expenses), net:
Interest income$1,525 $— $1,525 — 
Percentage of total revenue3.2 %— %
Interest expense$(70)$— $(70)— 
Percentage of total revenue(0.1)%— %
Other (expense) income$(7)$(15)$8 (53.3)%
Percentage of total revenue— %— %
Total other income (expenses), net$1,448 $(15)$1,463 (9,753.3)%
Percentage of total revenue3.1 %— %
Other income for the three months ended September 30, 2020.
Other Expenses
Three Months Ended
September 30,		Change
20212020$%
(in thousands, except percentages)
Other expenses, net:— 
Other (expense) income, net(15)(3)(12)400.0 %
Percentage of total revenue— %— %
Change in fair value of warrant liability— (2,234)2,234 (100.0)%
Percentage of total revenue— % (8.1)%
Total other expenses, net$(15)$(2,237)$2,222 (99.3)%
Percentage of total revenue— %(8.1)%

Change in Fair Value of Warrant Liability
We had no warrants outstanding during the three months ended September 30, 2021. For the three months ended September 30, 2020, the $2.2 million in the fair value of warrant liability2022 was the result of an increase in value ofprimarily driven by income earned on our redeemable convertible preferred stock warrant liability which is directly related to our stock valuation increase over the same period.investments and money-market funds.
Provision for Income Taxes
Three Months Ended
September 30,		ChangeThree Months Ended
September 30,		Change
20212020$%20222021$%
(in thousands, except percentages)(in thousands, except percentages)
Provision for income taxesProvision for income taxes$36 $47 $(11) (23.4)%Provision for income taxes$90 $36 $54 150.0 %
Percentage of total revenuePercentage of total revenue0.1 %0.2 %Percentage of total revenue0.2 %0.1 %
Provision for income taxes primarily consists of state income taxes for the three months ended September 30, 2021 and 2020.2022 primarily consists of state income taxes. We maintain a full valuation allowance on our net federal and state deferred tax assets as we have concluded that it is not more likely than not that the deferred tax assets will not be realized.




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Comparison of the Nine Months Ended September 30, 20212022 and 20202021
Revenue
Nine Months Ended
September 30,		ChangeNine Months Ended
September 30,		Change
20212020$%20222021$%
(in thousands, except percentages)(in thousands, except percentages)
Revenue:Revenue:Revenue:
PlatformPlatform$105,533 $63,525 $42,008 66.1 %Platform$132,361 $105,533 $26,828 25.4 %
Professional services and otherProfessional services and other3,876 4,352 (476)(10.9)Professional services and other3,262 3,876 (614)(15.8)
Total RevenueTotal Revenue$109,409 $67,877 $41,532  61.2 %Total Revenue$135,623 $109,409 $26,214 24.0 %
Platform
Total platform revenue increased $42.0$26.8 million, or 66.1%25.4%, to $132.4 million for the nine months ended September 30, 2022 from $105.5 million for the nine months ended September 30, 2021. This increase was primarily the result of an increase in new active locations coming onto the platform, an increase in module adoption within our existing customer base, and increased transaction volumes. Active locations increased to approximately 84,000 as of September 30, 2022 from approximately 76,000 as of September 30, 2021, from $63.5 millionand ARPU increased to approximately $1,622 for the nine months ended September 30, 2020. This increase was primarily the result of continued increases in active locations coming onto the platform, as well as increases in ARPU due to increased multi-product adoption and increased transaction volumes. Active customer locations increased to approximately 76,000 as of September 30, 20212022 from approximately 60,000 as of September 30, 2020, and ARPU increased to approximately $1,509 for the nine months ended September 30, 2021 from approximately $1,242 for the nine months ended September 30, 2020.2021. For the nine months ended September 30, 2022 and 2021, 51.2% and 2020, 45.4% and 50.0% of our platform revenue was subscription revenue, respectively, and 54.6%48.8% and 50.0%54.6% was transaction revenue, respectively.
Professional Services and Other
Total professional services and other revenue decreased $0.5$0.6 million, or 10.9%15.8%, to $3.3 million for the nine months ended September 30, 2022 from $3.9 million for the nine months ended September 30, 2021, from $4.4 million forprimarily due to labor shortages affecting our restaurant customers at both the nine months ended September 30, 2020.operator and brand levels, elongating the sales cycle and delaying the start of deployments. While we generally expect professional services and other to increase primarily as a result of continued deployment of additional active locations, we also expect this increase willto be offset as our deployment teams become more efficient resulting in shortenedand shorten deployment periods.
Cost of Revenue, Gross Profit, and Gross Margin
Nine Months Ended
September 30,		ChangeNine Months Ended
September 30,		Change
20212020$%20222021$%
(in thousands, except percentages)(in thousands, except percentages)
Cost of revenue:— 
Cost of revenues:Cost of revenues:
PlatformPlatform$18,419 $10,191 $8,228 80.7 %Platform$37,693 $18,419 $19,274 104.6 %
Professional services and otherProfessional services and other3,958 3,191 767 24.0 Professional services and other4,543 3,958 585 14.8 
Total cost of revenueTotal cost of revenue$22,377 $13,382 $8,995 67.2 %Total cost of revenue$42,236 $22,377 $19,859 88.7 %
Percentage of revenue:Percentage of revenue:Percentage of revenue:
PlatformPlatform16.8 %15.0 %Platform27.8 %16.8 %
Professional services and otherProfessional services and other3.6 4.7 Professional services and other3.3 3.6 
Total cost of revenueTotal cost of revenue20.5 %19.7 %Total cost of revenue31.1 %20.5 %
Gross ProfitGross Profit$87,032 $54,495 $32,537 59.7 %Gross Profit$93,387 $87,032 $6,355 7.3 %
Gross MarginGross Margin79.5 %80.3 %Gross Margin68.9 %79.5 %
Platform
Total platform cost of revenue increased $8.2$19.3 million, or 80.7%104.6%, to $37.7 million for the nine months ended September 30, 2022 from $18.4 million for the nine months ended September 30, 2021 from $10.2 million for the nine months ended September 30, 2020.2021. This increase was primarily the result




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of higher hosting costs due to increased transaction volume as well as higher compensation costs associated with additional personnel to support the revenue growth in active locations.mentioned previously as well as higher hosting costs due to increased transaction volume and the addition of features and modules. Also contributing to the

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increase were the near-term impacts due to our recent Wisely and Omnivore acquisitions, the intangible amortization costs related to these acquisitions, and the processing costs associated with Olo Pay.
Professional Services and Other
Total professional services and other cost of revenue increased $0.8$0.6 million, or 24.0%14.8%, to $4.5 million for the nine months ended September 30, 2022 from $4.0 million for the nine months ended September 30, 2021 from $3.2 million for the nine months ended September 30, 2020.2021. This increase was primarily the result of increased consulting costs and higher compensation costs to support the previously-mentioned growth in new active locations.locations, partially offset by a decrease in third party consulting costs.
Gross Profit
Gross profit margin decreased to 68.9% for the nine months ended September 30, 2022 from 79.5% for the nine months ended September 30, 2021 from 80.3% for the nine months ended September 30, 2020. Decreases2021. The decrease in gross profit margin werewas driven by higher platform and professional services and other compensation costs to support rapid growth in transactions, andthe increase in new active locations coming onto the platform.platform, and the addition of features and modules, as well as by the near-term impacts due to our recent Wisely and Omnivore acquisitions and the processing costs associated with Olo Pay.
Operating Expenses
Research and Development
Nine Months Ended
September 30,		ChangeNine Months Ended
September 30,		Change
20212020$%20222021$%
(in thousands, except percentages)(in thousands, except percentages)
Research and developmentResearch and development$42,872 $22,715 $20,157  88.7 %Research and development$53,159 $42,872 $10,287 24.0 %
Percentage of total revenuePercentage of total revenue39.2 %33.5 %Percentage of total revenue39.2 %39.2 %
Research and development expense increased $20.2$10.3 million, or 88.7%24.0%, to $53.2 million for the nine months ended September 30, 2022 from $42.9 million for the nine months ended September 30, 2021 from $22.7 million for the nine months ended September 30, 2020.2021. 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. Additionally, we incurred a non-cash charge of $1.8 million in March 2021 related to the vesting and settlement of SARs in connection with the IPO. As a percentpercentage of total revenue, research and development expenses increased toremained steady at 39.2% for the nine months ended September 30, 2021 from 33.5%2022 compared to the nine months ended September 30, 2021.
General and Administrative
Nine Months Ended
September 30,		Change
20222021$%
(in thousands, except percentages)
General and administrative$56,090 $53,034 $3,056 5.8 %
Percentage of total revenue41.4 %48.5 %
General and administrative expense increased $3.1 million, or 5.8%, to $56.1 million for the nine months ended September 30, 2020.
General and Administrative
Nine Months Ended
September 30,		Change
20212020$%
(in thousands, except percentages)
General and administrative$53,034 $15,137 $37,897  250.4 %
Percentage of total revenue48.5 %22.3 %

General and administrative expense increased $37.9 million, or 250.4%, to2022 from $53.0 million for the nine months ended September 30, 2021 from $15.1 million for the nine months ended September 30, 2020.2021. This increase was primarily a result of increasedhigher compensation costs due to increased headcount to support the growth and stage of the organization, IPO-relatedseverance costs, including those related to the departure of our Chief Customer Officer, costs and an impairment expense associated with the sublease of our corporate headquarters, and increased insurance costs and professional fees incurred as a result of us being a public company. These increases were partially offset by the reduction of $11.7 million related to the donation of shares of our Class A common stock to an independent donor-advised fund sponsor, Tides Foundation, and the absence in the nine months ended September 30, 2022 of IPO related bonus awards and vesting and settlement of stock appreciation rights, or SARs, in connection with the IPO, as well as increased insurance costs and professional fees incurred in preparation for becoming and operating as a public company. Additionally, we incurredresult of the IPO. As a non-cash chargepercentage of $13.1total revenue, general and administrative expenses decreased to 41.4% for the nine months ended September 30, 2022 from 48.5% for the nine months ended September 30, 2021.

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Sales and Marketing
Nine Months Ended
September 30,		Change
20222021$%
(in thousands, except percentages)
Sales and marketing$24,890 $12,265 $12,625 102.9 %
Percentage of total revenue18.4 %11.2 %
Sales and marketing expense increased $12.6 million, or 102.9%, to $24.9 million for the nine months ended September 30, 2021 related to the donation of 345,836 shares of our Class A common stock to a charitable donor-advised fund. We intend to donate additional shares to this fund in conjunction with our Olo for Good initiative. As a percent of total revenue, general and administrative expenses increased to 48.5% for the nine months ended September 30, 20212022 from 22.3% for the nine months ended September 30, 2020.




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Sales and Marketing
Nine Months Ended
September 30,		Change
20212020$%
(in thousands, except percentages)
Sales and marketing$12,265 $6,089 $6,176  101.4 %
Percentage of total revenue11.2 %9.0 %
Sales and marketing expense increased $6.2 million, or 101.4%, to $12.3 million for the nine months ended September 30, 2021 from $6.1 million for the nine months ended September 30, 2020.2021. This increase was primarily the result of additional compensation costs, inclusive of commission costs, due to increases in headcount, as well as increased marketing spendcosts associated with our annualin-person user conference, professional services fees, various software,Beyond4, which we held in the second quarter of 2022 for the first time in two years, and IPO-related costs. Sales and marketing spend increases wereintangible amortization costs related to our recent acquisitions. This increase was partially offset by a reduction in traveldecreased professional and entertainment costs as of April 2020 due to travel restrictions as a result of COVID-19.consulting fees for the nine months ended September 30, 2021. As a percentpercentage of total revenue, sales and marketing expense increased to 18.4% for the nine months ended September 30, 2022 from 11.2% for the nine months ended September 30, 2021 from 9.0%2021.
Other Income (Expenses), net
Nine Months Ended
September 30,		Change
20222021$%
(in thousands, except percentages)
Other income (expenses), net:
Interest income$2,110 $— $2,110 — 
Percentage of total revenue1.6 %— %
Interest expense$(116)$— $(116)— 
Percentage of total revenue(0.1)%— %
Other (expense) income$6 $(23)$29 (126.1)%
Percentage of total revenue— %— %
Change in fair value of warrant liability$— $(18,930)$18,930 (100.0)%
Percentage of total revenue— %(17.3)%
Total other income (expenses), net$2,000 $(18,953)$20,953 (110.6)%
Percentage of total revenue1.5 %(17.3)%
Other income for the nine months ended September 30, 2020.
Other Expenses
Nine Months Ended
September 30,		Change
20212020$%
(in thousands, except percentages)
Other expenses, net:— 
Interest expense$— $(157)$157 (100.0)%
Percentage of total revenue— %(0.2)%
Other (expense) income, net(23)15 (38)(253.3)%
Percentage of total revenue— %— %
Change in fair value of warrant liability(18,930)(4,251)(14,679)345.3 %
Percentage of total revenue(17.3)%(6.3)%
Total other expenses, net$(18,953)$(4,393)$(14,560)331.4 %
Percentage of total revenue(17.3)%(6.5)%
Interest Expense
We had no debt outstanding during the nine months ended September 30, 2021. As of March 31, 2020, we had an outstanding balance of $18.5 million2022 was primarily driven by income earned on the line of credit, resulting in interest expense of $0.2 million. All outstanding debt was repaid by April 30, 2020.
Change in Fair Value of Warrant Liabilityour investments and money-market funds.
The increase of $14.7$18.9 million in the fair value of warrant liability for the nine months ended September 30, 2021 was the result ofdirectly related to an increase in the value of our redeemable convertible preferred stock warrant liability which is directly related to our stock valuation increaseunderlying the warrants during the first quarter of 2021. Prior to our IPO, all outstanding warrants were exercised to purchase shares of our outstanding redeemable convertible preferred stock and converted into redeemable convertible preferred stock. Upon completion of the IPO, all shares of our outstanding redeemable convertible preferred stock, inclusive of the shares issued pursuant to these warrant exercises, converted into shares of Class B common stock.





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(Benefit) Provision for Income Taxes
Nine Months Ended
September 30,		ChangeNine Months Ended
September 30,		Change
20212020$%20222021$%
(in thousands, except percentages)(in thousands, except percentages)
Provision for income taxes$110 $142 $(32) (22.5)%
(Benefit) provision for income taxes(Benefit) provision for income taxes$(1,010)$110 $(1,120)(1018.2)%
Percentage of total revenuePercentage of total revenue0.1 %0.2 %Percentage of total revenue(0.7)%0.1 %
Provision forThe income taxes primarily consists of state income taxestax benefit for the nine months ended September 30, 20212022 was driven primarily by the release of a portion of our valuation allowance for deferred tax assets following the recording of a deferred income tax liability as part of our accounting for the acquisition of Omnivore and 2020.adjustments to the full valuation allowance on our deferred tax assets, partially

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offset by state taxes. We maintain a full valuation allowance on our net federal and state deferred tax assets as we have concluded that it is not more likely than not that the deferred tax assets will not be realized.




39

Liquidity and Capital Resources
General
As of September 30, 2021,2022, our principal sourcesources of liquidity waswere cash and cash equivalents and short-term and long-term investments in marketable securities totaling $597.7$469.2 million, which was held for working capital purposes and to fund repurchases of our common stock (as described more fully below), as well as the available balance of our revolving line of credit, described further below.

We have financedfinance our operations primarily through sales of our equity securities in our completed IPO, conversions of our redeemable preferred stock, payments received from customers and borrowings undersales of our credit facility.equity securities.
On March 19, 2021, we completed our IPO, in which we issued and sold 20,700,000 shares of our Class A common stock at the public offering price of $25.00 per share. We received net proceeds of approximately $485.5 million after deducting underwriting discounts and commissions.
On September 7, 2022, the Board of Directors authorized a program to repurchase up to $100 million of our Class A common stock. 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 timing and actual number of shares repurchased, if any, will be 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. As of September 30, 2022, we have not repurchased any shares 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.administrative expenses.
Credit Facility
In May 2012,On June 10, 2022, we entered into athe Second Amended and Restated Loan and Security Agreement with Pacific Western Bank (formerly Square 1),related to a revolving credit and term loan facility, or the Second Amended and Restated LSA.
The Second Amended and Restated LSA amended and restated the Amended and Restated Loan and Security Agreement, for a revolving line ofdated February 11, 2020, as amended, or the Prior LSA, to, among other things, increase our available aggregate borrowing limit to $70.0 million and to provide the ability to request Pacific Western Bank to enter into commitments to increase the credit with a maturity date of May 15, 2013. Since the original agreement, we have executed subsequent amendmentsextensions available to extend the maturity date until February 2022. Advancesus under the Formula Line bearSecond Amended and Restated LSA to up to $125.0 million, or the Accordion Facility.
Borrowings under the Second Amended and Restated LSA accrue interest at a variable annual rate equal to (i) in the case of Formula Advances (as defined in the Second Amended and Restated LSA), the greater of (A) 0.20% abovethe variable rate of interest, per annum, most recently announced by Pacific Western Bank’s prime rate thenBank, or the Prime Rate. or 3.25% or (ii) in effect; or (B) 4.50%. Advances under the Non-Formula Line bear interest equal tocase of Term Loans (as defined in the Second Amended and Restated LSA), the greater of (A) 0.75% above Pacific Western Bank’s prime rate thenthe Prime Rate plus 0.25% or 3.50%. The Second Amended and Restated LSA provides for a success fee payable upon an acquisition of Olo or termination of the Second Amended and Restated LSA, or a Success Fee Trigger, in effect;an amount equal to: (i) $800,000, if the Success Fee Trigger occurs prior to June 10, 2023; (ii) $600,000, if the Success Fee Trigger occurs on or (B) 5.00%. Interest is dueafter June 10, 2023 and payable monthlyprior to June 10, 2024; (iii) $400,000, if the Success Fee Trigger occurs on or after June 10, 2024 and prior to June 10, 2025; (iv) $200,000, if the Success Fee Trigger occurs on or after June 10, 2025 and prior to June 10, 2026; and (v) $0, if the Success Fee Trigger occurs on or after June 10, 2026. We are also required to pay a fee of 1.0% of the difference between (i) the highest outstanding principal balance during the term of the Second Amended and Restated LSA and (ii) $3.5 million if a Liquidity Event (as defined in arrears. We may prepay advances under the credit facility in wholeSecond Amended and Restated LSA) occurs during the term and or in part at any time without premium or penalty,within 24 months after the termination of the Second Amended and the credit facility matures on February 11, 2022. As of September 30, 2021, there were no outstanding borrowings. The interest rate applicable on any outstanding balance as of December 31, 2020 was 5.00%.

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Restated LSA. Our obligations under the Loan AgreementSecond Amended and Restated LSA are secured by substantially all of our assets.assets, including certain securities owned by us in any subsidiary.
The Second Amended and Restated LSA includes a financial covenant requiring compliance with certain minimum revenue amounts. In April 2021, we amendedaddition, the Loan AgreementSecond Amended and exercisedRestated LSA contains representations and warranties generally consistent with the Prior LSA, as well as certain non-financial covenants, including, but not limited to, limitations on our optionability to increase our available line of credit from $25.0 million to $35.0 million,incur additional indebtedness or the First Amendment. Additionally, we amended our minimum EBITDA and minimum net revenue covenants which reset each annual period. On May 6, 2021, we issued a letter of credit to DoorDash, Inc.,liens, pay dividends, or DoorDash, in the amount of $25.0 million in connection with our Restated Delivery Network Agreement. The First Amendment contains various affirmative and negative covenants and wemake certain investments. We were in compliance with these covenants as of September 30, 2021. See Note 12 to the notes to our condensed financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for further details. In August 2021, we further amended the Loan Agreement to maintain the lesser of at least $75.0 million or an amount equal to 50% of all of our cash deposits with any bank and to extend certain reporting requirements from 30 to 45 days after each quarter end. The foregoing description of the material terms of the Second Amendment does not purport to be complete and is subject to, and is qualified in its entirety by, reference to the full terms of the Second Amendment, which we have filed as an exhibit to this Quarterly Report on Form 10-Q. We refer to the Loan Agreement as amended by the First Amendment and the Second Amendment as the Amended Loan Agreement.

We currently have $8.6 million available under the revolving line of credit due to our outstanding $25.0 million letter of credit to DoorDash and our outstanding $1.4 million letter of credit on the lease of our headquarters. As of September 30, 2021, we had no outstanding borrowings under the line of credit. As of September 30, 2021, no amounts have been drawn against any of our letters of credit.2022.
The Second Amended Loan Agreement contains customary affirmative and negative covenants, including covenants that require Pacific Western Bank’s consent to, among other things, merge or consolidate or acquire assets outside the ordinary course of business, make investments, incur additional indebtedness or guarantee indebtedness of others, pay dividends and redeem and repurchase our capital stock, enter into transactions with affiliates outside the ordinary course of business and create liens on our assets. We are also required to comply with certain minimum EBITDA and minimum revenue covenants.


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The Amended Loan AgreementRestated LSA also contains events of default that include, among other things, non-payment defaults, covenant defaults, insolvency defaults, cross-defaults to other indebtedness and material obligations, judgment defaults, inaccuracy of representations and warranties, and a material adverse change default.change. Any default that is not cured or waived could result in Pacific Western Bank exercising its rights and remedies under the Second Amended and Restated LSA, including, but not limited to, the acceleration of the obligations under the credit facility, an increase in the applicable interest rate under the credit facility to a per annum rate equal to 5.00% above the applicable interest rate,Second Amended and Restated LSA and related documentation, and would permit Pacific Western Bank to exercise remedies with respect to all of the collateral that is securing the credit facility.secured such obligations.

The Amended Loan Agreement will continue in full force and effect for so long as any obligations remain outstanding thereunder, provided, that, Pacific Western Bank has the right to terminate its obligation to make further advances to us immediately and without notice upon the occurrence and during the continuance of an event of default. We may terminate the formula revolving line or the non-formula revolving line at any time prior to the maturity date, upon two business days written notice toUpon our request, Pacific Western Bank at which time allwill provide us a payoff letter providing for, among other things, repayment of our obligations then outstanding, including the success fee, and for termination of Pacific Western Bank’s obligations arisingto make additional credit extensions and termination of the liens under the Second Amended Loan Agreement, includingand Restated LSA.
As of September 30, 2022, 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 headquarters. As of September 30, 2022, we had no outstanding borrowings under the line of credit, and no amounts have been drawn against any unpaid interest thereon, will accelerate and become immediately due and payable.of our letters of credit.
Cash Flows
The following table summarizes our cash flows for the periods presented:
Nine Months Ended
September 30,		Nine Months Ended
September 30,
2021202020222021
(in thousands)(in thousands)
Net cash provided by operating activitiesNet cash provided by operating activities$26,209 $3,390 Net cash provided by operating activities$2,398 $26,209 
Net cash used in investing activitiesNet cash used in investing activities(1,195)(989)Net cash used in investing activities$(159,310)$(1,195)
Net cash provided by financing activitiesNet cash provided by financing activities$496,972 $46,869 Net cash provided by financing activities$8,866 $496,972 
Operating Activities
For the nine months ended September 30, 2022, net cash provided by operating activities was $2.4 million, primarily due to net loss of $37.7 million adjusted for non-cash charges of $43.6 million, partially offset by a net decrease attributable to our operating assets and liabilities of $3.4 million. The non-cash adjustments primarily relate to stock-based compensation charges of $35.1 million, depreciation and amortization expense of $4.3 million, non-cash impairment charges of $2.8 million, and a charge related to a charitable donor-advised fund of $1.4 million. The net decrease attributable to our operating assets and liabilities was primarily driven by a decrease in operating lease liabilities of $1.9 million due to payments on our leases, a decrease in unearned revenue of $0.6 million due to the timing of payment from customers and revenue recognition, increases in contract assets and deferred contract costs of $0.6 million primarily due to growth of our revenue, and an increase in prepaid expenses of $0.4 million, primarily attributable to increased prepayments for software licensing fees.
For the nine months ended September 30, 2021, net cash provided by operating activities was $26.2 million, primarily due to a net loss of $40.2 million adjusted for non-cash charges of $57.4 million and a net increase in our operating assets and liabilities of $9.0 million. The non-cash adjustments primarily relaterelated to stock-based charges of $24.3 million, inclusive of vesting of SARs of $2.8 million, as well as the change in the fair value of redeemable convertible preferred stock warrants of $18.9 million and a charge related to a charitable donor-advised fund of $13.1 million. The net increase in operating assets and liabilities iswas primarily driven by a net increase in accrued expenses and accounts payable of $6.6 million related primarily to

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higher fees owed to delivery service providers and vendors as well as employee compensation accruals, inclusive of payables related to our 2021 Employee Stock Purchase Plan, and a decrease in accounts receivable of $5.0 million due to improved collections. This increase was offset by an increase in prepaid expenses of $3.3 million primarily due to insurance payments, and increases in contract assets and deferred contractscontract costs of $1.5 million primarily due to the growth our revenue.
For the nine months ended September 30, 2020, net cash provided by operating activities was $3.4 million, primarily due to a net income of $6.0 million adjusted for non-cash charges of $8.7 million and a net decrease in our operating assets and liabilities of $11.3 million. The non-cash adjustments primarily relate to the change in the fair value of redeemable convertible preferred stock warrants of $4.3 million and stock-based compensation of $3.5 million. The net decrease in operating assets and liabilities is primarily driven by a net increase in accounts payable and accrued expenses of $20.5 million related primarily to higher fees owed to delivery service providers and vendors, and an increase in deferred rent of $0.7 million related to timing of rent cash payments. This increase is offset by an increase in accounts receivable of $30.4 million and an increase in deferred contract costs of $1.6 million due to the growth in our revenue.
Investing Activities
Cash used in investing activities was $1.2$159.3 million during the nine months ended September 30, 2021,2022, primarily due to $102.6 million of net purchases of investments, $49.2 million to acquire Omnivore, and $7.5 million for the development of internalinternal-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 in investing activities was $1.0$1.2 million during the nine months ended September 30, 2020,2021, primarily due to the development of internalinternal-use software and purchases of computer and office equipment to support further product development and to expand our employee base to support our operations.

41Financing Activities

Cash provided by financing activities was $8.9 million during the nine months ended September 30, 2022, primarily driven by

net
Financing Activities proceeds from the exercise of stock options and purchases under our employee stock purchase plan.
Cash provided by financing activities was $497.0 million during the nine months ended September 30, 2021, reflecting $485.5 million of net proceeds from the issuance of Class A common stock in our IPO (net of underwriters’ discounts and commissions), $8.3 million of net proceeds from the exercise of stock options, $7.0 million of net proceeds received from employee tax withholdings as a result of the exercise of stock options, and $0.4 million of net proceeds from the exercise of warrants. Increases were partially offset by payment of deferred offering costs of $4.1 million during the nine months ended September 30, 2021.

Cash provided by financing activities was $46.9 million during the nine months ended September 30, 2020, primarily related to $50.0 million in proceeds from the issuance of preferred stock and $1.7 million of net proceeds from the exercise of stock options, offset by $3.5 million net repayment of proceeds borrowed in March 2020 under the Amended Loan Agreement and payment of deferred offering costs of $1.1 million during the nine months ended September 30, 2020.
Certain Non-GAAP Financial Measures

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

locations, NRR, and ARPU.
Non-GAAP Operating Income (Loss)We use 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.
Non-GAAP operating income (loss) is defined as operating income (loss), adjustedWe adjust our GAAP financial measures for the impact offollowing items to calculate non-GAAP operating income: stock-based compensation expense (non-cash expense calculated by companies using a variety of valuation methodologies and subjective assumptions) and related payroll tax expense, equity expense related to charitable donationscontributions (non-cash expense), intangible and internal-use software amortization (non-cash expense), other non-cash charges, severance costs, including those related to the departure of common stock, amortizationour Chief Customer Officer, costs and impairment charges associated with the sublease of internally developed software expense,our corporate headquarters, and transaction costs incurred within one year of the related to acquisition and integration costs.acquisition. Management believes that it is useful to exclude certain non-cash charges and non-core operational charges from non-GAAP operating income (loss) becausebecause: (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 periodsperiods. Effective as a result of the timingfirst quarter fiscal 2022, payroll tax expenses related to equity compensation awards were added to our calculation of newnon-GAAP operating income. We have historically excluded stock-based awards. The presentation of the non-GAAP financial measures is not intended to be considered in isolation, or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.
The following table presents a reconciliation of GAAP operating (loss) income tocompensation expense from non-GAAP operating income, forand management believes that excluding the following periods:related payroll tax expense is important and consistent, as such payroll tax expenses are directly impacted by unpredictable fluctuations in our stock price. Prior period amounts have been revised to conform with the current year presentation.
Three Months Ended
September 30,		Nine Months Ended
September 30,
2021202020212020
(in thousands)
Operating Income (loss) reconciliation:
Operating (loss) income, GAAP$(11,257)$7,391 $(21,139)$10,554 
Plus: Stock-based compensation expense7,867 1,378 24,264 3,465 
Plus: Charitable donation of Class A common stock7,982 — 13,107 — 
Plus: Internally developed software amortization138 65 413 130 
Plus: Transaction costs343 — 343 — 
Operating income, non-GAAP$5,073 $8,834 $16,988 $14,149 
Percentage of revenue:
Operating margin, GAAP(30)%27 %(19)%16 %
Operating margin, non-GAAP14 %32 %16 %21 %

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Non-GAAP Free Cash Flow
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Free cash flow represents net cash used inprovided by operating activities, reduced by purchases of property and equipment and capitalization of internally developedinternal-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 and excludes items that we do not consider to be indicative of our liquidity.basis. We believe thatproviding free cash flow is a measure of liquidity that 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

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business infrom the same manner asperspective of our management and boardBoard of directors. Nevertheless, ourDirectors.
Our use of free cash flownon-GAAP financial measures and key performance indicators has limitations as an analytical tool, and youthese measures should not consider itbe considered in isolation or as a substitute for analysis of our financial results as reported under GAAP. Further,Because our definition of free cash flownon-GAAP financial measures and key performance indicators are not calculated in accordance with GAAP, they may differ from the definitions usednot necessarily be comparable to similarly titled measures employed by other companiescompanies.
Non-GAAP Operating Income
The following table presents a reconciliation of GAAP operating loss to non-GAAP operating income for the following periods:
Three Months Ended
September 30,		Nine Months Ended
September 30,
2022202120222021
(in thousands, except percentages)
Operating income (loss) reconciliation:
Operating loss, GAAP$(15,918)$(11,257)$(40,752)$(21,139)
Plus: Stock-based compensation expense and related payroll tax expense (1)
12,106 7,867 35,824 24,885 
Plus: Charitable donation of Class A common stock1,406 7,982 1,406 13,107 
Plus: Costs and impairment charge associated with sublease of corporate headquarters3,272 — 3,272 — 
Plus: Non-cash capitalized software impairment— — 475 — 
Plus: Amortization1,513 138 3,838 413 
Plus: Severance costs623 — 1,178 — 
Plus: Transaction costs(19)343 1,467 343 
Operating income, non-GAAP$2,983 $5,073 $6,708 $17,609 
Percentage of revenue:
Operating margin, GAAP(34)%(30)%(30)%(19)%
Operating margin, non-GAAP6 %14 %5 %16 %
(1) For 2022, payroll tax expenses related to equity compensation awards were added to our calculation of non-GAAP operating income. We have historically excluded stock-based compensation expense from non-GAAP operating income, and therefore comparability may be limited. You should consider free cash flow alongsidemanagement believes that excluding the related payroll tax expense is important and consistent, as such payroll tax expenses are directly impacted by unpredictable fluctuations in our other GAAP-based financial performance measures, such as net cash provided by operating activities, and our other GAAP financial results. stock price. Prior period amounts have been revised to conform with the current year presentation.
Non-GAAP Free Cash Flow
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.indicated:
Three Months Ended
September 30,		Nine Months Ended
September 30,		Three Months Ended
September 30,		Nine Months Ended
September 30,
20212020202120202022202120222021
(in thousands)(in thousands)
Net cash provided by operating activitiesNet cash provided by operating activities$10,738 $4,091 $26,209 $3,390 Net cash provided by operating activities$3,268 $10,738 $2,398 $26,209 
Purchase of property and equipmentPurchase of property and equipment(53)(152)(324)(268)Purchase of property and equipment(45)(53)(454)(324)
Capitalization of internally developed software(482)(439)(871)(721)
Capitalization of internal-use softwareCapitalization of internal-use software(1,872)(482)(6,997)(871)
Non-GAAP free cash flowNon-GAAP free cash flow$10,203 $3,500 $25,014 $2,401 Non-GAAP free cash flow$1,351 $10,203 $(5,053)$25,014 

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ContractualObligations and Commitments
There were no material changes in our contractual obligation and commitments as ofduring the nine months ended September 30, 20212022 from the contractual obligations and commitments disclosed in our final prospectusAnnual Report on Form 10-K filed with the Securities and Exchange Commission, or SEC on March 18, 2021, or the Prospectus, pursuant to Rule 424(b) under the Securities Act of 1933, as amended, or the Securities Act.February 25, 2022. See Note 12“Note 11—Leases” and “Note 16—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 for additional information regarding contractual obligations and commitments.
Off-Balance Sheet Arrangements
We did not have during the periods presented, and we do not currently have, any off-balance sheet financing arrangements or any relationships with unconsolidated entities or financial partnerships, including entities sometimes referred to as structured finance or special purpose entities, that were established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
Critical Accounting Policies and Estimates
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 expenses.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 nine months ended September 30, 2022, 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 Prospectus.Annual Report on Form 10-K filed with the SEC on February 25, 2022.
Recent Accounting Pronouncements
See Note 2“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.
JOBS Act Accounting Electionand Smaller Reporting Company Status
We currently qualify as an “emerging growth company” pursuant to the provisions of the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. For as long as we are an “emerging growth company,” we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404(b), or Section 404, of the Sarbanes-Oxley Act of 2002, or Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, exemptions from the requirements of holding advisory “say-on-pay” votes on executive compensation and stockholder advisory votes on golden parachute compensation.

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The JOBS Act also permits an emerging growth company like us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. We have elected to “opt-in” to this extended transition period for complying with new or revised accounting standards and, therefore, we will not be subject to the same new or revised accounting standards as other public companies that comply with such new or revised accounting standards on a non-delayed basis. As a result, our financial statements may not be comparable to financial statements of issuers that are required to comply with the effective dates for new or revised accounting standards based on public company effective dates.

We are also a smaller reporting companyHowever, as defined in the Securities Exchange Act of 1934, as amended, or the Exchange Act. We may continue to be a smaller reporting company even after we are no longer an emerging growth company. We may take advantage of certain of the scaled disclosures available to smaller reporting companies and will be able to take advantage of these scaled disclosures for so long as (i) the market value of our voting and non-voting common stock held by non-affiliates is less than $250 million measured on the last business day of our second fiscal quarter or (ii) our annual revenue is less than $100 million during the most recently completed fiscal year andof 2022, the market value of our voting and non-votingClass A common stock that was held by non-affiliates is less thanexceeded $700 million, measured on the last business day of our second fiscal quarter. We expect to cease toand as a result, we will no longer qualify as a smaller reportingan emerging growth company atas of the end of 2021.the current fiscal year ending December 31, 2022, and we will be subject to certain requirements that apply to other public companies but did not previously apply to us due to our status as an emerging growth company, including the provisions of Section 404, which require that our independent registered public accounting firm provide an attestation report on the effectiveness of our internal control over financial reporting. In addition, we will no longer be able to take advantage of the extended transition period as of the end of the current fiscal year ending December 31, 2022, and we will be required to adopt new or revised accounting standards when they are applicable to public companies that are not emerging growth companies.
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

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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.
Interest Rate Risk
Our primary market risk exposure is changing interest rates in connection with our investments and the Second Amended Loan Agreement.and Restated LSA 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 September 30, 2021,2022, advances under the formula revolving line of the Second Amended and Restated LSA bear interest equal to the greater of (A) 0.75%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) 5.00%3.50%. As of September 30, 2021,2022, 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 September 30, 2021,2022, we had cash and cash equivalents of $597.7$366.4 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 September 30, 2022, we invested $141.0 million in money market funds and $102.8 million in other securities, of which $102.0 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.
Foreign Currency Exchange Risks
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.
Inflation Risk
WeInflation 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.
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Item 4. Controls and Procedures.
Evaluation of Disclosure 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 September 30, 2021.2022.
Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of September 30, 2021, our disclosure controls and procedures were not effective as of September 30, 20212022 due to the material weaknessesweakness in our internal control over financial reporting described below. In light of this fact, our management has performed additional analyses, reconciliations, and other post-closing procedures and has concluded that, notwithstanding the material weakness in our internal control over financial reporting, the condensed consolidated financial statements for the periods covered by and included in this Quarterly Report on Form 10-Q fairly present, in all material respects, our financial position, results of operations, and cash flows for the periods presented in conformity with GAAP.
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Previously Reported Material Weakness
We previously identified a material weaknessesweakness in our internal control over financial reporting related to insufficient written policies and procedures for accounting and financial reporting and the lack of properly designed controls related toaround complex technical accounting for revenue recognition in accordance with standards under Accounting Standards Codification Topic 606, Revenue from Contracts with Customers.matters within our financial statement close process. We have concluded that thesethis material weaknessesweakness arose because, as a previously private company, we did not have the necessary business processes, systems, personnel, and related internal controls necessary to satisfy the accounting and financial reporting requirements of a public company.
Accordingly, we have determined that these control deficiencies constituted a material weaknessesweakness in our internal control over financial reporting. A material weakness is a deficiency or combination of deficiencies in our internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our condensedconsolidated financial statements would not be prevented or detected on a timely basis. These deficiencies could result in additional misstatements to our condensed financial statements that would be material and would not be prevented or detected on a timely basis.
Remediation Plans
We have commencedbeen implementing and will continue to implement measures to remediate the identified material weaknesses.weakness. Specifically, we have:
•initiated the process of implementing a new revenue recognition system which will significantly reduce the number of manual controls currently required to recognize revenue;
•engaged external resources to assist with remediation efforts and internal control execution as well as to provide additional training to existing personnel; and
•hired additional internal resources with appropriate knowledge and technical expertise to effectively operate financial reporting processes and internal controls.
We intend to continue to take steps to remediate the material weaknessesweakness described above and further evolve our accounting processes.processes and internal resources. We will not be able to fully remediate thesethis material weaknessesweakness until these steps have been completed and have been operating effectively for a sufficient period of time.
While we believe that these efforts will improve our internal control over financial reporting, the implementation of our remediation is ongoing and will require validation and testing of the design and operating effectiveness of internal controls over a sustained period of financial reporting cycles.
We believe we are making progress toward achieving the effectiveness of our internal controls and disclosure controls. The actions that we are taking are subject to ongoing senior management review as well as audit committee oversight. We will not be able to conclude whether the steps we are taking will fully remediate the material weaknessesweakness in our internal control over financial reporting until we have completed our remediation efforts and subsequent evaluation of their effectiveness. We may also conclude that additional measures may be required to remediate the material weaknessesweakness in our internal control over financial reporting, which may necessitate additional remediation time.
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Changes in Internal Control over Financial Reporting
We are taking actions to remediate the material weaknessesweakness 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.
Inherent Limitations on Effectiveness of Controls
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
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Table Of Contents
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.
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Table Of Contents
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
We have also received, and may in the future continue to receive, claims from third parties asserting, among other things, infringementA description of their intellectual property rights. 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 suchlegal proceedings is costlyincluded in and can impose a significant burden on managementincorporated by reference to “Note 16—Commitments and employees. The results of any current or future litigation cannot be predicted with certainty, and regardlessContingencies” of the outcome, litigation can have an adverse impactnotes to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on us because of defense and settlement costs, diversion of management resources and other factors.Form 10-Q.
Item 1A. Risk Factors.
A descriptionInvesting in our securities involves a high degree of the risks and uncertainties associated with our business is set forth below.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 Part I, Item 2,the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our condensed consolidated financial statements and related notes, appearing elsewhereas well as in this Quarterlyour Annual Report on Form 10-Q. Additional10-K filed with the SEC on February 25, 2022 and our other filings with the SEC, before making any investment decision with respect to our securities. The risks and uncertainties thatdescribed below and in our other filings with the SEC, including our Annual Report on Form 10-K filed with the SEC on February 25, 2022, may not be the only ones we are unaware of, or that we currently believe are not material, may also become important factors that adversely affect our business.face. If any of the risks actually occur, our business financial condition, results of operations and prospects could be materially and adversely affected. In that event, the trading price of our Class A common stock could decline.
Risks Related to Our Business and Our Industry
The COVID-19 pandemic, including variants of COVID-19, and/or the impact of vaccinations and increased demand for in-person dining could materially adversely affect our business, financial condition, and results of operations.
The COVID-19 pandemic, the measures attempting to contain and mitigate the effects of the COVID-19 pandemic, including stay-at-home, business closures, indoor dining restrictions, and other restrictive orders, and the resulting changes in consumer behaviors, have disrupted the restaurant industry, our normal operations and impacted our employees, partners, and customers. While certain regions have started re-opening as a result of increased vaccination rates, we expect these disruptions and impacts to continue. In addition, we face risks related to resurgences of COVID-19, including the emergence of new variant strains of COVID-19 in regions that have reopened which have and may in the future necessitate renewed government restrictions.
In response to the COVID-19 pandemic, we have taken a number of actions that have impacted and continue to impact our business, including transitioning employees across our offices (including our corporate headquarters) to remote work-from-home arrangements, cancelling business development events, and imposing travel and related restrictions. Given the continued spread of COVID-19 and the resultant personal, economic, and governmental reactions, we may have to take additional actions in the future that could harm our business, financial condition, and results of operations. We continue to monitor the situation and may adjust our current policies as more information and guidance become available. We have adjusted our policies to allow our New York City headquarter employees to work remotely on an optional basis, which may lead to decreased workforce productivity and business disruptions. We have had to expend, and expect to continue to expend, significant time, attention, and resources to respond to the COVID-19 pandemic and associated global economic uncertainty, including to develop and implement internal policies and procedures and track changes in laws and government guidelines and restrictions. The remote working environment may also create increased vulnerability to cybersecurity incidents, including breaches of information systems security, which could damage our reputation and commercial relationships. Over time, such remote operations may decrease the cohesiveness of our teams and our ability to maintain our culture, both of which are critical to our success. Additionally, a remote working environment could negatively impact our marketing efforts, our ability to enter into customer and business development contracts in a timely manner, our international expansion efforts, and our ability to recruit and retain employees across the organization.
With the onset of COVID-19, we began to see an increase in transaction volumes as consumers turned to online ordering as compared to in-person dining. This shift began at the end of the first quarter of 2020 and continued through the third quarter of 2021. We have also experienced an increase in our penetration of our Rails and Dispatch modules, as evidenced by an increase from 44% in 2019 to 71% in 2020 of our customers using all three of our modules. The combination of increased transaction volumes and increased multi-module adoption resulted in an increase in transaction revenue as a percentage of platform revenue. For the three months ended September 30, 2021 and 2020, 47.2% and 44.9% of our platform revenue was subscription revenue, respectively, and 52.8% and 55.1% was transaction revenue, respectively. For the nine months ended
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September 30, 2021 and 2020, 45.4% and 50.0% of our platform revenue was subscription revenue, respectively, and 54.6% and 50.0% was transaction revenue, respectively. While we have benefited from the acceleration of demand for off-premise dining, our business and financial results could be materially adversely affected in the future if these trends do not continue. For example, as the effects of shelter-in-place orders abate with the continued roll-out of vaccines in the United States and consumers potentially return to pre-COVID digital ordering preferences and habits, the trends we experienced in 2020 and through the third quarter of 2021 on multi-module adoption, number of active locations, and transaction volume may not continue and our revenue may fluctuate in the near term.
The degree to which COVID-19 will affect our business and results of operations will depend on future developments that are highly uncertain and cannot currently be predicted. These development include but are not limited to the duration, extent, and severity of the COVID-19 pandemic, actions taken to contain the COVID-19 pandemic, including restrictions on indoor dining that could impact our customers, the impact of the COVID-19 pandemic and related restrictions on economic activity and domestic and international trade, the timing of the vaccine rollout and acceptance of the vaccine, and the extent of the impact of these and other factors on our employees, partners, vendors, and customers. The COVID-19 pandemic and related restrictions could limit our customers’ ability to continue to operate, serve customers, or make timely payments to us. It could disrupt or delay the ability of employees to work because they become sick or are required to care for those who become sick, or for dependents for whom external care is not available. It could cause delays or disruptions in services provided by key suppliers and vendors, increase vulnerability of us and our partners and service providers to security breaches, denial of service attacks or other hacking or phishing attacks, or cause other unpredictable effects. It could also result in declines in order volume as consumers potentially return to pre-COVID digital ordering preferences and habits.

The COVID-19 pandemic also has caused heightened uncertainty in the global economy. If economic conditions further deteriorate, consumers may not have the financial means to make purchases from our customers and may delay or reduce discretionary purchases, negatively impacting our customers and our results of operations. Uncertainty from the pandemic may cause prospective or existing customers to defer purchasing decisions in anticipation of new modules or enhancements by us or our competitors. Our small and medium business, or SMB, brands may be more susceptible to general economic conditions than our enterprise brands, which may have greater liquidity and access to capital. Uncertain and adverse economic conditions also may lead to increased refunds and chargebacks, reduced demand for our platform, lengthening of sales cycles, loss of customers, and difficulty in collections. Since the impact of COVID-19 is ongoing, the effect of the COVID-19 pandemic and the related impact on the global economy may not be fully reflected in our results of operations until future periods. Volatility in the capital markets has been heightened during recent months and such volatility may continue, which may cause declines in the price of our Class A common stock.
Further, to the extent there is a sustained general economic downturn and our solutions are perceived by customers and potential customers as costly, or too difficult to deploy or migrate to, our revenue may be disproportionately affected by delays or reductions in on-demand commerce spending. Competitors may respond to market conditions by lowering prices and attempting to lure away our customers. In addition, the increased pace of consolidation in the restaurant industry, the labor shortage faced by the restaurant industry, and the loss of partners that may have gone out of business or may have merged with other of our partners, may result in reduced overall spending on our platform. We cannot predict the timing, strength, or duration of any economic slowdown, instability, or recovery, generally or within the restaurant industry. If the economic conditions of the general economy or markets in which we operate worsen from present levels, our business, results of operations, and financial condition could be materially and adversely affected.

Our rapid growth may not be sustainable and depends on our ability to attract new customers, retain revenue from existing customers, and increase sales to both new and existing customers.

We principally generate revenue through subscription revenue from our Ordering module, transaction fees associated with the use of our Rails and Dispatch modules, and professional service fees from the deployment and integration of our platform. While the number of customers using our platform, the number of modules that each customer uses, and the volume of transactions on our platform have grown rapidly in recent years, there can be no assurance that we will be able to retain these customers or acquire new customers, deploy additional modules to these customers, or that the volume of transactions on our platform will continue to increase. Our costs associated with subscription renewals and additional module deployments are substantially lower than costs associated with generating revenue from new customers. Therefore, if we are unable to retain or increase revenue from existing customers, even if such losses are offset by an increase in new customers or an increase in other revenues, our operating results could be adversely impacted.

The circumstances that have accelerated the growth of our business stemming from the effects of the COVID-19 may not continue and our revenue may fluctuate in the near term. You should not rely on our revenue or other operating and
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liquidity metrics for any previous quarterly or annual period as any indication of our revenue or revenue growth or other operating and liquidity metrics or their growth in future periods.

We may also fail to attract new customers, increase the volume of transactions on our platform, retain or increase revenue from existing customers, or increase sales of our modules to both new and existing customers as a result of a number of factors, including:

•reductions in our current or potential customers’ spending levels;
•reduction in the number of transactions using our Ordering, Rails, and Dispatch modules due to the abatement of the effects of COVID-19, including the continued widespread rollout of the COVID-19 vaccine and the reopening of indoor dining;
•actions taken to contain the COVID-19 pandemic, including restrictions that could impact our customers;
•the labor shortage facing the restaurant industry;
•the absence of ongoing U.S. federal government stimulus directed at consumers;
•competitive factors affecting the software as a service, or SaaS, or restaurant brand software applications markets, including the introduction of competing platforms, discount pricing, and other strategies that may be implemented by our competitors;
•our ability to execute on our growth strategy and operating plans;
•a decline in our customers’ level of satisfaction with our platform and customers’ usage of our platform;
•the difficulty and cost to switch to a competitor may not be significant for many of our customers;
•changes in our relationships with third parties, including our delivery service provider, or DSP, ordering aggregator, or aggregator, customer loyalty, and payment processor partners;
•failure to maintain compatibility with third party systems or failure to integrate with new systems;
•the timeliness and success of new modules we may develop;
•concerns relating to actual or perceived security breaches;
•the frequency and severity of any system outages; and
•technological changes or problems.

Additionally, we anticipate that our revenue growth rate will decline over time to the extent that the number of customers using our platform increases and we achieve higher market penetration rates. Furthermore, to the extent our market penetration among larger potential customers increases, we may be required to target smaller customers to maintain our revenue growth rates, which could result in lower gross profits. As our growth rate declines, investors’ perception of our business may be adversely affected and the trading price of our Class A common stock could decline, as a result. To the extent our growth rate slows, our business performance will become increasingly dependent on our ability to retain revenue from existing customers and increase sales to existing customers.
Our limited operating history with our new modules in a new and developing market makes it difficult to evaluate our current business and future prospects, and may increase the risk that we will not be successful.
In 2015 and 2017, we launched our Dispatch and Rails modules, respectively, and in 2016 we began to offer a transactional-based pricing model for our Ordering module. While the recent introductionyou could lose part or all of these new offerings, this new pricing model, and an increase in transaction volumes have contributed significantly to our recent growth in revenue, we have little experience with these new modules and transactional-based pricing model, which makes it difficult to accurately assess our future prospects. You should consider our future prospects in light of the challenges and uncertainties that we face, including:your investment.

•the fact thatThe following description includes new risk factors and material changes to risk factors associated with our business has grown rapidly and it may not be possible to fully discern the trends that we are subject to, including negative trends we may experience related to the continued widespread rollout of the COVID-19 vaccine, reopening of indoor dining, and other actions and restrictions imposed to contain the COVID-19 pandemic;
•that we operatepreviously disclosed in a new and developing market with a rapidly changing competitive landscape;
•that we may be unable to accurately predict our revenue and operating expenses for new modules that we release;
•our ability to enhance or retain our brand among customers and potential customers;
•that we may in the future enter into additional new and developing markets that may not develop as we expect or that our platform or modules may not adequately address; and
•that elementsPart I, Item 1A of our business strategy are new and subject to ongoing development.
We have encountered and will continue to encounter risks and difficulties frequently experienced by growing companies in rapidly changing industries, including increasing and unforeseen expenses as we continue to grow our business. If our
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assumptions regarding these risks and uncertainties, which we use to plan and operate our business, are incorrect or change, or if we do not manage these risks successfully, our reputation, business, results of operations, and prospects will be harmed.
Our business could be harmed if we fail to manage our growth effectively.
The rapid growth we have experienced in our business places significant demandsAnnual Report on our operational infrastructure. The scalability and flexibility of our platform depends onForm 10-K for the functionality of our technology and cloud infrastructure and its ability to handle increased traffic and demand. The growth in the number of third-party ecosystem partners, customers using our platform, and the number of orders processed, coordinated, and delivered through our Ordering, Rails, and Dispatch modules has increased the amount of data and requests that we process. Additionally, new modules, solutions, services, and restaurant ecosystem partners that we integrate may significantly increase the load on our technology infrastructure. Any problemsfiscal year ended December 31, 2021, filed with the transmission or storage of increased dataSEC on February 25, 2022, and requests could result in harm to our brand or reputation. Moreover, as our business grows, we will need to devote additional resources to improving our operational infrastructure and continuing to enhance its scalability in order to maintainother Reports on Form 10-Q under the performance of our platform, including by improving or expanding cloud infrastructure.
This rapid growth has also placed, and will likely continue to place, a significant strain on our managerial, administrative, operational, financial, and other resources. As a result, we intend to increase headcount significantly in the near future to further expand our overall business, with no assurance that our revenue will continue to grow. As we grow, we will be required to continue to improve our operational and financial controls and reporting procedures and we may not be able to do so effectively. In addition, our management team has little experience leading a large, potentially global business operation, so our management may not be able to lead any such growth effectively.
We may make acquisitions or enter into joint ventures or other partnerships, which could divert management’s attention, result in operating difficulties and dilution to our shareholders and otherwise disrupt our operations and adversely affect our business, operating results, or financial position.
From time to time, we may evaluate potential strategic acquisition, joint venture, or partnership opportunities, such as our acquisition of Wisely Inc., or Wisely. Any transactions that we enter into could be material to our financial condition and results of operations. The process of acquiring and integrating another company or technology could create unforeseen operating difficulties and expenditures. Acquisitions and other partnerships involve a number of risks, such as:heading “Risk Factors.”

•diversion of management timeLegal, Regulatory, Compliance, and focus from operating our business;
•use of resources that are needed in other areas of our business;
•in the case of an acquisition, implementation or remediation of controls, procedures, and policies of the acquired company;
•in the case of an acquisition, difficulty integrating the accounting systems and operations of the acquired company and maintaining the quality and security standards consistent with our brand, including potential risks to our corporate culture;
•coordination of product, engineering, and selling and marketing functions, including difficulties and additional expenses associated with supporting legacy services and platform and hosting infrastructure of the acquired company and difficulty converting the customers of the acquired company onto our platform and contract terms, including disparities in the revenue, licensing, support, or professional services model of the acquired company;
•in the case of an acquisition, retention and integration of employees from the acquired company;
•unforeseen costs or liabilities, including potential legal liability for violations of applicable law, industry rules, or regulations arising from prior or ongoing acts or omissions by the acquired company or partner that are not discovered by due diligence during the acquisition or partnership process;
•adverse effects to our existing business relationships with partners and/or customers as a result of the acquisition or joint venture;
•the possibility of adverse tax consequences;
•the assumption or incurrence of additional debt obligations or expenses, or use of substantial portions of our cash;
•the issuance of equity securities to finance or as consideration for any acquisitions that dilute the ownership of our stockholders;
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•the issuance of equity securities to finance or as consideration for any acquisitions may not be an option if the price of our common stock is low or volatile which could preclude us from completing any such acquisitions;
•litigation or other claims arising in connection with the acquired company or partner; and
•in the case of foreign acquisitions, the need to integrate operations across different cultures and languages and to address the particular economic, currency, political, and regulatory risks associated with specific countries.
In addition, a significant portion of the purchase price of companies we acquire may be allocated to acquired goodwill and other intangible assets, which must be assessed for impairment at least annually. In the future, if our acquisitions do not yield expected returns, we may be required to take charges to our operating results based on this impairment assessment process, which could adversely affect our results of operations.
We may not be able to identify acquisition or investment opportunities that meet our strategic objectives, or to the extent such opportunities are identified, we may not be able to negotiate terms with respect to the acquisition or investment that are acceptable to us.Reputational Risks

On November 4, 2021, we consummated our acquisition of Wisely, or the Wisely Acquisition. The Wisely Acquisition may create numerous risks and uncertainties, which could adversely affect our financial condition and operating results. Further, the addition of Wisely to our business will entail many changes, including the integration of Wisely, its technology and products and certain of its personnel as well as changes in systems and employee benefit plans. These integration activities are complex, and we may encounter unexpected difficulties and incur unexpected costs or experience business disruptions. In addition, we may be required to spend additional time or money on integration that otherwise would be spent on the development and expansion of our existing business. There can be no assurance that any of the acquisitions we may make, including the Wisely Acquisition, will be successful or will be, or will remain, profitable.

Wisely may have unknown liabilities or liabilities that exceed our estimates. Any such liabilities could adversely affect the financial position of the combined company.

Prior to the Wisely Acquisition, Wisely’s activities may have exposed the company to various potential liabilities relating to the conduct of its business, including, but not limited to, potential contract claims, historical tax matters, and other potential liabilities that could adversely affect the financial position of the combined company. Upon consummation of the Wisely Acquisition, we assumed these potential liabilities. While we continue to evaluate what we believe to be the most significant of these potential liabilities, it is possible that these liabilities may exceed our expectations or that other liabilities, whether currently known or unknown to us, result in substantial losses to us. Wisely’s obligations to indemnify us for certain representations and warranties under the definitive agreement are limited to specified maximum dollar amounts and subject in certain instances to our inability to recover first from the escrow account and subsequently under the representation and warranty insurance policy, or the R&W Policy. If any issues arise post-closing, we may not be entitled to sufficient, or any, indemnification or recourse from Wisely or under the R&W Policy, which could have a materially adverse impact on our business and results of operations.
We have a history of losses and we may be unable to sustain profitability.
We have incurred significant losses since inception and we may not maintain profitability. We incurred a net loss of $40.2 million for the nine months ended September 30, 2021. We incurred net losses of $8.3 million and $11.6 million for the years ended 2019 and 2018, respectively. As of September 30, 2021, we had an accumulated deficit of $109.5 million. These losses and accumulated deficit are a result of the substantial investments we made to grow our business and we expect to make significant expenditures to expand our business in the future. We anticipate that we will continue to incur losses in the near-term as we increase our operating expenses, including, without limitation, as a result of expected increases in:
•sales and marketing expenses, as we continue to spend on marketing activities and expand our sales efforts;
•research and development expenses, as we continue to introduce new modules to extend the functionality of our platform;
•expenses related to customer service and support, which is critical to our continued success and ability to maintain a strong reputation for our brand;
•expenses related to the successful integration of any acquired businesses, including sales and marketing, research and development, finance, legal, and information technologies expenses;
•expenses related to further investments in our network infrastructure in order to support the continued growth of our business and to meet the demands of continuously changing security and operational requirements; and
•general costs and administrative expenses as a result of our continued growth and the increased costs associated with being a public company.
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These increased expenditures will make it harder for us to achieve or sustain profitability and we cannot predict if we will achieve or sustain profitability in the near term or at all. Historically, our costs have increased each year due to these investments and we expect to continue to incur increasing costs to support our anticipated future growth. In addition, the costs associated with acquiring new customers may materially rise in the future, including if we expand international sales efforts outside of the United States and Canada, increase our efforts to pursue SMB restaurant brands, or increase sales efforts to other verticals. If we are unable to generate adequate revenue growth and manage our expenses, we may continue to incur significant losses and may not achieve or sustain profitability.
We may also make decisions that would reduce our short-term operating results if we believe those decisions will improve the experiences of our customers and consumers and if we believe such decisions will improve our operating results over the long-term. These decisions may not be consistent with the expectations of investors and may not produce the long-term benefits that we expect, in which case our business may be materially harmed.
Our sales cycles can be long and unpredictable, and our sales efforts require considerable investment of time and expense. If our sales cycle lengthens or we invest substantial resources pursuing unsuccessful sales opportunities, our operating results and growth would be harmed.
We have historically incurred significant costs and experienced long sales cycles when selling to customers. In the restaurant brand market segment, the decision to adopt our modules may require the approval of multiple technical and business decision makers, including security, compliance, operations, finance and treasury, marketing, and IT. In addition, while restaurant brand customers may more quickly deploy our modules on a limited basis, before they will commit to deploying our modules at scale, they often require extensive education about our modules and significant customer support time or pilot programs, engage in protracted pricing negotiations and seek to secure development resources. In addition, sales cycles for restaurant brand customers in general and larger restaurant brands in particular are inherently complex and unpredictable. These complex and resource intensive sales efforts could place additional strain on our development and engineering resources. Further, even after our customers contract to use our platform, they may require extensive integration or deployment resources from us before they become active customers, which have at times extended to multiple quarterly periods following the execution of the agreement. Because we generally only generate Ordering, Rails, and Dispatch module revenue after our platform is deployed, if we are unable to deploy our platform with our customers in a timely manner, our results of operations and financial condition may be harmed. Finally, our customers may choose to develop their own solutions that do not include any or all of our modules. They also may demand reductions in pricing as their usage of our modules increases, which could have an adverse impact on our gross margin. If we are unable to increase the revenue that we derive from these customers, then our business, results of operations and financial condition may be adversely affected.
We expect fluctuations in our financial results, making it difficult to project future results, and if we fail to meet the expectations of securities analysts or investors with respect to our results of operations, our stock price and the value of your investment could decline.
Our results of operations have fluctuated in the past and are expected to fluctuate in the future due to a variety of factors, many of which are outside of our control. As a result, our past results may not be indicative of our future performance. In addition to the other risks described herein, factors that may affect our results of operations include the following:

•fluctuations in demand for or pricing of our platform, or any of our modules;
•fluctuations in usage of our platform, or any of our modules, including due to the potential lack of durability of the growth we have experienced in the near term due to COVID-19 and the associated shelter-in-place orders on consumer preferences for digital ordering and customer adoption of multi-modules as COVID-19 associated restrictions continue to abate;
•our ability to attract new customers;
•our ability to retain our existing customers;
•the timing of our customer purchases and deployments;
•customer expansion rates and the pricing and quantity of subscriptions renewed and transactions processed through our platform;
•timing and amount of our investments to expand the capacity of our third-party cloud infrastructure providers;
•the investment in new modules relative to investments in our existing infrastructure and platform;
•fluctuations or delays in purchasing decisions in anticipation of new modules or enhancements by us or our competitors;
•changes in customers’ budgets and in the timing of their budget cycles and purchasing decisions;
•our ability to control costs, including our operating expenses;
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•the amount and timing of payment for operating expenses, particularly research and development and sales and marketing expenses, including sales commissions;
•the amount and timing of non-cash expenses, including stock-based compensation, goodwill impairments and other non-cash charges;
•the amount and timing of costs associated with recruiting, training and integrating new employees and retaining and motivating existing employees;
•the effects of acquisitions and their integration;
•general economic conditions, both domestically and internationally, as well as economic conditions specifically affecting industries in which our customers participate;
•health epidemics or pandemics, such as the COVID-19 pandemic;
•the impact of new accounting pronouncements;
•changes in regulatory or legal environments that may cause us to incur, among other elements, expenses associated with compliance;
•changes in the competitive dynamics of our market, including consolidation among competitors or customers; and
•significant security breaches of, technical difficulties with, or interruptions to, the delivery and use of our modules and platform capabilities or third-party applications or point of sale or management systems that our platform integrates with.
Any of these and other factors, or the cumulative effect of some of these factors, may cause our results of operations to vary significantly. If our quarterly results of operations fall below the expectations of investors and securities analysts who follow our stock, the price of our Class A common stock could decline substantially, and we could face costly lawsuits, including securities class action suits.
Our business depends on customers increasing their use of our platform, and any loss of customers or decline in their use of our platform could materially and adversely affect our business, results of operations, and financial condition.
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 Ordering, Rails, and Dispatch 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 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 build their own solution internally or if they decide to temporarily or permanently close their restaurants in a location then affected by the COVID-19 pandemic. Additionally, consumers 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.
If we fail to continue to improve and enhance the functionality, performance, reliability, design, security, or scalability of our platform in a manner that responds to our customers’ evolving needs, our business may be adversely affected.
The on-demand commerce and digital ordering markets are characterized by rapid technological change, frequent new product and service introductions, and evolving industry standards. Our success has been based on our ability to identify and anticipate the needs of our customers and design and maintain a platform that provides them with the tools they need to operate their businesses in a manner that is productive and meets or exceeds their expectations. Our ability to attract new customers, retain revenue from existing customers, and increase sales to both new and existing customers will depend in large part on our ability to continue to improve and enhance the functionality, performance, reliability, design, security, and scalability of our platform. Additionally, to achieve and maintain market acceptance for our platform, we must effectively integrate with new or existing software solutions that meet changing customer demands in a timely manner.
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As we expand our platform and services, and as the number of our customers with higher volume sales increases, we expect that we will need to offer increased functionality, scalability and support, including to keep our platform, systems, and services secure, which requires us to devote additional resources to such efforts. To the extent we are not able to enhance our platform’s functionality in order to maintain its utility and security, enhance our platform’s scalability in order to maintain its performance and availability, or improve our support functions in order to meet increased customer service demands, our business, operating results, and financial condition could be adversely affected.
We may experience difficulties with software development that could delay or prevent the development, deployment, introduction, or implementation of new modules and enhancements. Software development involves a significant amount of time, as it can take our developers months to update, code, and test new and upgraded modules, and integrate those modules into our platform. We must also continually update, test, certify, maintain, and enhance our software platform. We may make significant investments in new modules or enhancements that may not achieve expected returns. The continual improvement and enhancement of our platform requires significant investment and we may not have the resources to make such investment. Our improvements and enhancements may not result in our ability to recoup our investments in a timely manner, or at all. The improvement and enhancement of the functionality, performance, reliability, design, security, and scalability of our platform is expensive and complex, and to the extent we are not able to perform it in a manner that responds to our customers’ evolving needs, our business, operating results, and financial condition will be adversely affected.
Our growth depends in part on the success of our strategic relationships with third parties and our ability to integrate with third-party applications and software.
The success of our platform depends, in part, on our ability to integrate third-party applications, software, and other offerings into our platform. We anticipate that the growth of our business will continue to depend on third-party relationships, including relationships with our point of sale, or POS, systems, DSPs, aggregators, digital agencies, payment processors, loyalty providers, and other partners. In addition to growing our third-party partner ecosystem, we have entered into agreements with, and intend to pursue additional relationships with, other third parties, such as search engine and social media, location services, voice ordering, autonomous vehicle, and virtual kitchen providers. Identifying, negotiating, and documenting relationships with third parties and integrating third-party content and technology requires significant time and resources, and third-party providers may choose to terminate their relationship with us, compete directly against us, enter into exclusive arrangements with our competitors, or make material changes to their businesses, solutions, or services that could be detrimental to our business.
Third-party developers may change the features of their offering of applications and software or alter the terms governing the use of their offerings in a manner that is adverse to us. We may also be unable to maintain our relationships with certain third-parties if we are unable to integrate our platform with their offerings. In addition, third-parties may refuse to partner with us or limit or restrict our access to their offerings. We may not be able to adapt to the data transfer requirements of third party offerings. If third-party applications or software change such that we do not, or cannot, maintain the compatibility of our platform with these applications and software, or if we fail to ensure there are third-party applications and software that our customers desire to add to their ordering or delivery portals, demand for our platform could decline. If we are unable to maintain technical interoperability, our customers may not be able to effectively integrate our platform with other systems and services they use. If we fail to integrate our platform with new third-party offerings that our customers need to operate their businesses, or to provide the proper support or ease of integration our customers require, we may not be able to offer the functionality that our customers and their consumers expect, which would harm our business.
The third party service providers we integrate with may not perform as expected under our agreements or under their agreements with our customers, we or our customers may in the future have disagreements or disputes with such providers, or such providers may experience reduced growth, reduce incentives for our customers’ consumers to make delivery orders or otherwise change their business models in ways that are disadvantageous to us or our customers. For example, if the DSP providers we partner with for our Dispatch module were to increase prices of the delivery to customers, the number of orders made through our platform could be reduced and our business may be harmed. In addition, if our Rails providers were to reduce incentives for consumers to order through those respective aggregators, our revenue and business may be harmed. If we lose access to solutions or services from a particular partner, or experience a significant reduction or disruption in the supply of services from a current partner, it could have an adverse effect on our business and operating results.
Our Dispatch module currently relies on a limited number of DSPs.
The availability of DSPs generally, and of specific DSPs in certain markets, is integral to the value that our Dispatch module provides to our customers and our ability to generate revenue from orders fulfilled through Dispatch. However, the delivery service provider market has not yet fully developed and could be adversely affected by various conditions, including
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industry consolidation, changes in labor and independent contractor laws and changes in pricing models, the success of competitors or competing solutions for customers, and general economic conditions. In general, there is more than one DSP available to fulfill delivery orders through Dispatch. In certain markets, however, delivery orders are fulfilled by one or a limited number of DSPs, with a subset of such DSPs being responsible for fulfilling a majority of orders in that market. In addition, certain of these DSPs may be, or may be perceived to be, in competition with us with respect to some of our offerings and, as a result, may be less incentivized to continue to partner with us. If one or more DSPs that represents a significant volume of our Dispatch transactions overall, or DSPs that represent a significant volume of our Dispatch transactions in any single market, are no longer able to continue to provide timely and reliable delivery services, including as a result of a shortage in the labor market or changes in the labor laws, or if we or a DSP terminate our partnership, we could experience significant interruptions in the delivery of orders through our Dispatch module, which could have an adverse effect on our business, financial condition, and results of operations.
Our Rails module currently relies on a limited number of aggregators.
Our Rails module integrates with a limited number of digital ordering aggregators to fulfill third-party ordering transactions on our platform. These aggregators could decide to create new software that is incompatible with our platform, enter into agreements that are exclusive or on terms that are more favorable than those we offer directly with our customers or potential customers, or enter into agreements directly with our competitors or potential future competitors of ours that are exclusive or on terms that are more favorable than those we offer to our customers. Certain of these aggregators may be, or may be perceived to be, in competition with us with respect to some of our offerings and, as a result, may be less incentivized to continue to partner with us.

Factors impacting the pricing strategies of our aggregators, including operating costs, legal and regulatory requirements, constraints or changes, could also impact our business. For example, in connection with the COVID-19 pandemic, jurisdictions across the United States implemented price controls on some food delivery logistics platforms. These price controls have caused, and may in the future cause, aggregators to increase the fees charged to consumers. Such increase in the fees charged by aggregators could result in reduced demand for services by consumers, and our transactional revenue from our Rails module may decline. Moreover, recently a number of aggregators have merged, consolidated, or gone out of business, which could reduce the number of aggregators on our Rails module, reduce our revenue, and limit the effectiveness of Rails. In the event that any of the largest digital ordering aggregators do not integrate with our platform, or create software that is incompatible or competes with our platform by directly integrating with one of our customers, our ability to generate transactional revenue using our Rails module will decline, which could harm our business and results of operation. If we or one or more of these aggregators that represents a significant volume of our Rails transactions overall terminate our partnership, it could have an adverse effect on our business, financial condition, and results of operations.
For the three months ended September 30, 2021, and 2020, Rails module transaction revenue from our largest digital ordering aggregator, DoorDash, accounted for an aggregate of 14.3% and 21.8% our total revenue, respectively, and DoorDash accounted for a majority of our transaction revenue from our Rails module during the three months ended September 30, 2021 and 2020. For the nine months ended September 30, 2021, and 2020, Rails module transaction revenue from DoorDash accounted for an aggregate of 17.1% and 18.2% of our total revenue, respectively, and a majority of our transaction revenue from our Rails module.

Security breaches, denial of service attacks, or other hacking and phishing attacks on our systems or the systems with which our platform integrates could harm our reputation or subject us to significant liability, and adversely affect our business and financial results.
We operate in the on-demand commerce industry, which is prone to cyber-attacks. Our board of directors reviews cybersecurity risks brought to its attention by members of senior management who report up to our board of directors. We have an established in-house security team which is responsible for reviewing and overseeing our cybersecurity program and bringing any cybersecurity risks to the attention of the board of directors and the audit committee at regular meetings of the audit committee. Failure to prevent or mitigate security breaches and improper access to or disclosure of our data, our customers’ data, or their consumers’ data, could result in the loss or misuse of such data, which could harm our business and reputation. The security measures we have integrated into our systems and processes, which are designed to prevent or minimize security breaches, may not function as expected or may not be sufficient to protect our internal networks and platform against attacks. Further, our platform also integrates with third-party applications and POS and management systems over which we exercise no control. Such third-party applications and POS and management systems are also susceptible to security breaches, which could directly or indirectly result in a breach of our platform. The failure of a customer’s third-party front-end provider to adequately protect their systems could result in an attack that we are unable to prevent from the back-end, which could result in a service outage for all customers, and may require us to take the affected customer offline to restore service to
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the platform for other customers. In addition, techniques used to sabotage or to obtain unauthorized access to data change frequently. As a result, we may be unable to anticipate these techniques or implement adequate measures to prevent an intrusion into our networks directly, or into our platform through the third-party applications or POS and management systems with which our platform integrates. Our exposure to security breaches may be heightened because our platform is accessible through hundreds of our customers’ white label domains and mobile applications.
Our storage and use of our customers’ data concerning their restaurants and consumers is essential to their use of our platform, which stores, transmits and processes our customers’ proprietary information and information relating to them and consumers. If a security breach were to occur, as a result of third-party action, employee error, malfeasance, or otherwise, and the confidentiality, integrity or availability of our customers’ data was disrupted, we could incur significant liability to our customers and their consumers, and our platform may be perceived as less desirable, which could negatively affect our business and damage our reputation. In addition, any loss of customer or individual consumer data could create significant monetary damages for us that may harm our ability to operate the business.
A security vulnerability in our platform or point of sale integration software could compromise our customers’ in-store networks, which could expose customer or consumer information beyond what we collect through our platform. As a multitenant SaaS provider, despite our logical separation of data between customers, we may face an increased risk of accidentally commingling data between customers due to employee error, a software bug, or otherwise, which may result in unauthorized disclosure of data between customers. We have in the past, and may in the future, be subject to distributed denial of service, or DDoS, attacks, a technique used by hackers to take an internet service offline by overloading its servers. A DDoS attack could delay or interrupt service to our customers and their consumers and may deter consumers from ordering or engaging with our customers’ restaurants. Our platform and third-party applications may also be subject to DDoS attacks in the future and we cannot guarantee that applicable recovery systems, security protocols, network protection mechanisms and other procedures are or will be adequate to prevent network and service interruption, system failure, or data loss. In addition, computer malware, viruses, hacking, credential stuffing, social engineering, phishing, physical theft, and other attacks by third parties are prevalent in our industry. While we have not experienced any material attack on our systems to date, we have in the past, and may in the future, experience such attacks and, as a result of our increased visibility, we believe that we are increasingly a target for such breaches and attacks.
Moreover, our platform and third-party applications, services, or POS and management systems integrated with our platform could be breached if vulnerabilities in our platform or third-party applications or POS and management systems are exploited by unauthorized third parties or due to employee error, malfeasance, or otherwise. Further, third parties may attempt to fraudulently induce employees or customers into disclosing sensitive information such as user names, passwords, or other information or otherwise compromise the security of our internal networks, electronic systems and/or physical facilities in order to gain access to our data or our customers’ data. Because techniques used to obtain unauthorized access change frequently and the size and severity of DDoS attacks and security breaches are increasing, we may be unable to implement adequate preventative measures or stop DDoS attacks or security breaches while they are occurring. In addition to our own platform and applications, some of the third parties we work with may receive information provided by us, by our customers, or by our customers’ consumers through web or mobile applications integrated with our platform. If these third parties fail to adhere to adequate data security practices, or in the event of a breach of their networks, our own and our customers’ data may be improperly accessed, used, or disclosed.
Any actual or perceived DDoS attack or security breach of our platform, systems, and networks could damage our reputation and brand, expose us to a risk of litigation and possible liability and require us to expend significant capital and other resources to respond to and alleviate problems caused by the DDoS attack or security breach. Our ability to retain adequate cyber-crime and liability insurance may be reduced. Some jurisdictions have enacted laws requiring companies to notify individuals of data security breaches involving certain types of personal data and our agreements with certain customers and partners require us to notify them in the event of a security incident. Such mandatory disclosures are costly, could lead to negative publicity, and may cause our customers to lose confidence in the effectiveness of our data security measures. Moreover, if a high-profile security breach occurs with respect to another SaaS provider or one of the service providers we partner with, customers may lose trust in the security of the SaaS business model generally, which could adversely impact our ability to retain revenue from existing customers or attract new ones. Any of these events could harm our reputation or subject us to significant liability, and materially and adversely affect our business and financial results.
If our software contains serious errors or defects, we may lose revenue and market acceptance and may incur costs to defend or settle claims with our customers.
Software or APIs such as ours may contain errors, defects, security vulnerabilities, or software bugs that are difficult to detect or correct, particularly when first introduced or when new versions or enhancements are released. Despite internal
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testing, our platform may contain serious errors or defects, security vulnerabilities, or software bugs that we may be unable to successfully correct in a timely manner or at all, which could result in lost revenue, significant expenditures of capital, a delay or loss in market acceptance, and damage to our reputation and brand, any of which could have an adverse effect on our business and results of operations. For example, our payment processing code may contain a software bug or other misconfiguration, resulting in failure to collect payment for orders that are otherwise fulfilled, which could result in significant refunds owed to our customers. A software or API bug could also result in a customer receiving an item other than what they ordered or an ingredient to which they are allergic, causing reputational harm to us. In addition, our tax calculation code may also contain errors or defects, which may result in differences payable by us or fines owed by us, or our fraud detection software could identify false positives in the system, and in turn could reduce transactional revenue. Furthermore, our platform allows us to deploy new versions and enhancements to all of our customers simultaneously. To the extent we deploy new versions or enhancements that contain errors, defects, security vulnerabilities, or software bugs to all of our customers simultaneously, the consequences would be more severe than if such versions or enhancements were only deployed to a smaller number of our customers.
Because our customers use our platform for processes that are critical to their businesses, errors, defects, security vulnerabilities, service interruptions, or software bugs in our platform and APIs could result in losses to our customers. Although we endeavor to limit our liability in customer agreements, our customers may be entitled to significant compensation from us in the form of service level credits or to pursue litigation against us for any losses they suffer or cease conducting business with us altogether. Further, a customer could share information about bad experiences on social media, at industry conferences, or with peer companies, which could result in damage to our reputation and loss of future sales. There can be no assurance that provisions typically included in our agreements with our customers that attempt to limit our exposure to claims against us would be enforceable or adequate or would otherwise protect us from liabilities or damages with respect to any particular claim. Even if not successful, a claim brought against us by any of our customers would likely be time-consuming and distracting to our management team and costly to defend, and such a claim could seriously damage our reputation and brand, making it harder for us to sell our modules.
We and certain of our third-party partners, service providers, and subprocessors transmit and store personal information of our customers and consumers. If the security of this information is compromised or is otherwise accessed without authorization, our reputation may be harmed and we may be exposed to liability and loss of business.
We transmit and store personal information and other confidential information of our partners, our customers, and consumers. Third-party applications integrated with our platform may also handle or store personal information, credit card information, including cardholder data and sensitive authentication data, or other confidential information. We do not proactively monitor the content that our customers upload and store, or the information provided to us through the applications integrated with our platform, and, therefore, we do not control the substance of the content on our servers, which may include personal information. Additionally, we use dozens of third-party service providers and subprocessors to help us deliver services to customers and consumers. These service providers and subprocessors may handle or store personal information, credit card information, or other confidential information. There may in the future be successful attempts by third parties to obtain unauthorized access to the personal information of our partners, our customers, and consumers. This information could also be otherwise exposed through human error, malfeasance, or otherwise. The unauthorized release, unauthorized access, or compromise of this information could have an adverse effect on our business, financial condition, and results of operations. Even if such a data breach did not arise out of our actions or inactions, or if it were to affect one or more of our competitors or our customers’ competitors, the resulting consumer concern could negatively affect our customers and our business.

We integrate with a number of third-party service providers in order to meet our customers’ needs, and although we contractually require our customers to ensure the security of such service providers, a security breach of one of these providers could become negatively associated with our brand, or our assistance in responding to such a breach could tie up our internal resources. By the nature of the integrations, we could also get directly drawn into any resulting lawsuits. We are also subject to federal, state, and provincial laws regarding cybersecurity and the protection of data. Some jurisdictions have enacted laws requiring companies to notify individuals of security breaches involving certain types of personal information and our agreements with customers and partners require us to notify them in the event of certain security incidents. Additionally, some jurisdictions, as well as our contracts with certain customers, require us to use industry-standard or reasonable measures to safeguard personal information or confidential information. As cardholder data and sensitive authentication data is transmitted through our platform, we may be required by card networks and our contracts with payment processors to adhere to the Payment Card Industry Data Security Standards, or PCI-DSS.

Our failure to comply with legal, regulatory or contractual requirements, and the rules of payment card networks and self-regulatory organizations, including PCI-DSS, around the security of personal information, cardholder data, or sensitive authentication data, could lead to significant fines and penalties imposed by regulators and card networks, as well as claims by
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our customers, consumers, or other relevant stakeholders. These proceedings or violations could force us to spend money in defense or settlement of these proceedings, result in the imposition of monetary liability or injunctive relief, divert management’s time and attention, increase our costs of doing business, and materially adversely affect our reputation and the demand for our platform. In addition, if our security measures fail to protect credit card information adequately, we could be liable to our partners, our customers and, consumers for their losses. As a result, we could be subject to fines, we could face regulatory or other legal action, and our customers could end their relationships with us. There can be no assurance that the limitations of liability in our contracts would be enforceable or adequate or would otherwise protect us from any such liabilities or damages with respect to any particular claim. We also cannot be sure that our existing insurance coverage and coverage for errors and omissions will continue to be available on acceptable terms or will be available in sufficient amounts to cover one or more large claims, or that our insurers will not deny coverage as to any future claim. The successful assertion of one or more large claims against us that exceeds our available insurance coverage, or changes in our insurance policies, including premium increases, or the imposition of large deductible or co-insurance requirements, could have an adverse effect on our business and results of operations.
We are subject to stringent and changing privacy laws, regulations and standards, and contractual obligations related to data privacy and security. Our actual or perceived failure to comply with such obligations could harm our reputation, subject us to significant fines and liability, or adversely affect our business.
The regulatory framework for privacy and security issues in the United States is rapidly evolving. Laws in all 50 states require us to provide notice to customers when certain sensitive personal information has been disclosed as a result of a data breach. These laws are frequently inconsistent, and compliance in the event of a widespread data breach is costly. Moreover, states regularly enact new laws and regulations, which require us to provide consumers with certain disclosures related to our privacy practices, as well as maintain systems necessary to allow customers to invoke their rights. For example, on January 1, 2020, California adopted the California Consumer Privacy Act of 2018, or CCPA, which provides new data privacy rights for consumers and new operational requirements for covered businesses. The CCPA gives California residents more control over their personal information and includes a statutory damages framework and private right of action imposing civil penalties against businesses that fail to comply with certain security practices. Although the CCPA’s implementation standards and enforcement practices are likely to remain uncertain for the foreseeable future, the CCPA may increase our compliance costs and exposure to liability. More so, additional states that adopt privacy laws that differ from the CCPA may require us to do unanticipated and unbudgeted work in order to comply with additional privacy and data security requirements. The costs associated with compliance may impede our development and could limit the adoption of our services. Finally, any failure by our vendors to comply with applicable law or regulations could result in proceedings against us by governmental entities or others.
Additionally, virtually every foreign jurisdiction in which our current or potential future customers may operate has established privacy and data security laws, rules, and regulations. The European Union, or E.U., has adopted the General Data Protection Regulation, or GDPR, which went into effect on May 25, 2018. Among other requirements, the GDPR regulates transfers of personally identifiable information from the E.U. to non-E.U. countries, such as the United States. Under the GDPR, fines of up to €20 million or up to 4% of the annual global revenue of the noncompliant company, whichever is greater, could be imposed for violations of certain GDPR requirements. Moreover, individuals can claim damages as a result of GDPR violations. Other jurisdictions outside the E.U. are similarly introducing or enhancing privacy and data security laws, rules, and regulations, which may increase the risks associated with non-compliance.
Certain current or potential future customers are subject to the GDPR and we may be required to assist such customers with their compliance obligations. While we are not currently subject to the GDPR ourselves, many of our customers are subject to the GDPR. We may be required to expend resources to assist our customers with such compliance obligations. Assisting our customers in complying with the GDPR or complying with the GDPR ourselves if we expand our business to the E.U. in the future may cause us to incur substantial operational costs or require us to change our business practices to maintain such information in the European Economic Area.
We publish privacy policies, self-certifications, such as the E.U.-U.S. Privacy Shield, and other documentation regarding our collection, processing, use and disclosure of personal information, credit card information, and other confidential information. Recently the E.S.-U.S. Privacy Shield was declared insufficient by the Court of Justice of the European Union and the E.U.-U.S. Privacy Shield is no longer a valid mechanism to comply with E.U. data protection requirements relating to data transfers. We do not know when, or if, the E.U.-U.S. Privacy Shield will become an effective mechanism for data transfers. Although we endeavor to comply with our published policies, certifications, and documentation, we may at times fail to do so or may be perceived to have failed to do so. Such failures can subject us to potential international, local, state, and federal action if they are found to be deceptive, unfair, or misrepresentative of our actual practices, resulting in reputational or financial harm to the company. Globally, there have been numerous lawsuits brought against technology companies related to their
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privacy and data security practices. If those lawsuits are successful, it could increase the risk that we may be exposed to liability for similar practices. Furthermore, if customer concerns regarding data security increase, customers may be hesitant to provide us with the data necessary to provide our service effectively. This could generally limit the adoption of our product and the growth of our company.
Payment transactions processed on our platform and through the Olo Pay module may subject us to regulatory requirements and the rules of payment card networks, and other risks that could be costly and difficult to comply with or that could harm our business.

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, the networks could fine us, cancel or suspend our registration as a payment service provider, or prohibit us from processing payment cards, which wouldcould 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 could 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.

We released a beta version of our Payment solution, Olo Pay, to select restaurant brands in October 2020. We began commercially offering Olo Pay in the first quarter of 2022. We also released a new feature, Borderless, to a limited number of customers in July 2022, which is now commercially available, to allow guests to securely speed through an accelerated checkout process across brands within the Olo Pay network.

If we fail to comply with the rules and regulations adopted by the payment card networks, we would 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 consumer 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.

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Table Of Contents
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.
We currently generate significant revenue from our largest restaurant customers, and the loss or decline in revenue from any of these customers could harm our business, results of operations, and financial condition.
For the year ended December 31, 2020, our 10 largest restaurant customers generated an aggregate of approximately 21% of our revenue. Although these customers enter into long-term contracts with us, they may reduce or terminate their usage of our platform or decide not to renew their agreements with us.
We have in the past, and we may in the future, lose one or more of our largest restaurant customers. While no such losses have been material to date, in the event that any of our largest restaurant customers do not continue to use our platform, use fewer of our modules, use our modules in a more limited capacity, or not at all, or if the volume of transactions processed on our platform declines, our business, results of operations, and financial condition could be adversely affected in the future.
Our business is highly competitive. We may not be able to compete successfully against current and future competitors.
We face competition in various aspects of our business and we expect such competition to intensify in the future, as existing and new competitors, including some of our current ecosystem partners, introduce new solutions or enhance existing solutions that are directly competitive with our modules. Our platform combines functionality from numerous product categories, and we may compete againstdelivery service providers in each of these categories including white-label digital ordering solution providers, restaurant-focused POS platforms, aggregators that provide direct digital ordering solutions, and custom software providers. Our potential new or existing competitors may be able to develop solutions that are better received by customers or may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, regulations, or customer requirements. Some ordering aggregators sell solutions that are competitive with our core platform and they may become more aggressive in their sales tactics, including by bundling competitive solutions with their delivery or aggregator
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products. If competitors, many of which are much better capitalized than we are, are successful in providing our customers with a more attractive solution or pricing, our business and results of operation may be harmed.
Competition may intensify as current or future competitors enter into business combinations or alliances or raise additional capital, or as established companies in other market segments or geographic markets expand into our market segments or geographic markets. For instance, current or future competitors could use strong or dominant positions in one or more markets to gain a competitive advantage against us in areas where we operate including by integrating additional or competing platforms or features into solutions they control, such as additional payment, rewards, or delivery platforms or features. In addition, certain customers may choose to partner with our competitors in a specific geographic market, or choose to engage exclusively with our competitors. Further, our current ecosystem partners could add features to their solutions, including point of sale functionality, limit or terminate the availability of their products on our platform, or directly compete with our solutions by expanding their product offerings. Current and future competitors may also choose to offer a different pricing model or to undercut prices in an effort to increase their market share. If we cannot compete successfully against current and future competitors, our business, results of operations, and financial condition could be negatively impacted.
Mergers of or other strategic transactions by our competitors, our customers, or our partners could weaken our competitive position or reduce our revenue.
If one or more of our competitors, aggregator partners, or DSPs were to consolidate or partner with another one of our competitors, aggregator partners, or DSPs, the change in landscape could adversely affect our ability to compete effectively. Our competitors may also establish or strengthen cooperative relationships with our third party ecosystem partners, thereby limiting our ability to promote our platform. In addition, we may lose customers that merge with or are acquired by companies using a competitor’s or an internally developed solution. Disruptions in our business caused by these events could adversely affect our revenue growth and results of operations.
If we fail to maintain a consistently high level of customer service or if we fail to manage our reputation, our brand, business, and financial results may be harmed.
We believe our focus on customer service and support is critical to onboarding new customers, retaining our existing customers and growing our business. As a result, we have invested heavily in the quality and training of our support team along with the tools they use to provide this service. If we are unable to maintain a consistently high level of customer service, we may lose existing customers or fail to increase revenue from existing customers. In addition, our ability to attract new customers is highly dependent on our reputation and on positive recommendations from our existing customers. Any failure to maintain a consistently high level of customer service, or a market perception that we do not maintain high-quality customer service, could adversely affect our reputation and the number of positive customer referrals that we receive.
We are dependent on the continued services and performance of our senior management and other key employees, the loss of any of whom could adversely affect our business, operating results, and financial condition. We may also engage the services of third parties who provide consulting services to support our business and the failure to identify and/or retain such third parties could adversely affect our business, operating results and financial condition.
Our future performance depends on the continued services and contributions of our senior management, including our Founder and Chief Executive Officer, Noah H. Glass, and other key employees to execute on our business plan, keep our platform stable and secure, and to identify and pursue new opportunities and platform innovations. The failure to properly manage succession plans or the loss of services of senior management or other key employees could significantly delay or prevent the achievement of our strategic objectives. From time to time, there may be changes in our senior management team resulting from the hiring or departure of executives, which could disrupt our business. We do not maintain key person life insurance policies on any of our employees with the exception of Noah H. Glass, our Founder and Chief Executive Officer. The loss of the services of one or more of our senior management or other key employees for any reason could adversely affect our business, financial condition, and operating results, and require significant amounts of time, training, and resources to find suitable replacements and integrate them within our business, and could affect our corporate culture.
We engage the services of third parties who provide us with certain consulting services to support our business. Any failure to identify and/or retain such third parties could adversely affect our business, operating results and financial condition and could require significant amounts of time and resources to find suitable replacements.
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If we cannot maintain our corporate culture as we grow, our success and our business and competitive position may be harmed.
We believe that a key contributor to our success to date has been our corporate culture, which is based on transparency, innovation, and entrepreneurial spirit. Any failure to preserve our culture could negatively affect our ability to retain and recruit personnel, which is critical to our growth, and to effectively focus on and pursue our corporate objectives. Our substantial anticipated headcount growth, our transition from a private company to a public company, and our transition to permit our New York City headquarter employees to work remotely on an optional basis may make it difficult to maintain these important aspects of our culture. If we fail to maintain our corporate culture, or if we are unable to retain or hire key personnel, our business and competitive position may be harmed.
If we are unable to hire, retain, and motivate qualified personnel, our business may be adversely affected.
Our future success depends, in part, on our ability to continue to attract and retain highly skilled personnel. Competition for these personnel is intense, especially for engineers experienced in designing and developing SaaS or on-demand commerce applications, products managers and designers, and experienced enterprise sales professionals.
Further, our ability to increase our customer base, especially among restaurant brands, SMBs, potential international customers and other customers we may pursue, or to achieve broader market acceptance of our platform will depend, in part, on our ability to effectively organize, focus and train our sales, marketing and customer success personnel.
Our ability to convince restaurant brands to use our platform or adopt additional modules will depend, in part, on our ability to attract and retain sales personnel with experience selling to large enterprises. We believe that there is significant competition for experienced sales professionals with the skills and technical knowledge that we require. Our ability to achieve significant revenue growth in the future will depend, in part, on our ability to recruit, train, and retain a sufficient number of experienced sales professionals, particularly those with experience selling to restaurant brands or large enterprises. In addition, even if we are successful in hiring qualified sales personnel, new hires require significant training and experience before they achieve full productivity, particularly for sales efforts targeted at restaurant brands and new territories. Our recent hires and planned hires may not become as productive as quickly as we expect and we may be unable to hire or retain sufficient numbers of qualified individuals in the future in the markets where we do business.
In the past we have experienced, and we expect to continue to experience, difficulty in hiring employees with the appropriate qualifications, particularly if we significantly expand headcount in the near-term. Many of the companies with which we compete for experienced personnel have greater resources than we have. If we hire employees from competitors or other companies, their former employers may attempt to assert that these employees or we have breached their legal obligations, resulting in a diversion of our time and resources. In addition, prospective and existing employees often consider the value of the equity awards they receive in connection with their employment. If the perceived value of our equity awards declines, experiences significant volatility, or increases such that prospective employees believe there is limited upside to the value of our equity awards, it may adversely affect our ability to recruit and retain key employees. If we fail to attract new personnel or fail to retain and motivate our current personnel, our business and future growth prospects would be harmed.
Additionally, many of our employees continue to work remotely, which has allowed us to reduce certain office related costs. We have adjusted our policies to allow our New York City headquarter employees to continue to work remotely on an optional basis. If an increasing number of employees choose to work from our corporate headquarters, we could incur increased costs and expenses in order to provide the appropriate office infrastructure for these personnel.
We rely upon Amazon Web Services and other infrastructure to operate our platform, and any disruption of or interference with our use of these providers would adversely affect our business, results of operations, and financial condition.
We outsource substantial portions of our cloud infrastructure to Amazon Web Services, or AWS, Cloudflare, and other infrastructure providers. Our customers need to be able to access our platform at any time, without interruption or degradation of performance. Their failure to access our platform could make us liable for service credits or, in more severe cases, contractual breaches. We are, therefore, vulnerable to service interruptions at AWS, Cloudflare, and other infrastructure providers, which could decrease the number of transactions we process on our platform and negatively impact our revenue. We have experienced, and expect that in the future we may experience interruptions, delays and outages in service and availability due to a variety of factors, including infrastructure changes, human or software errors, website hosting disruptions, and capacity constraints including those related to the complexity and number of order permutations. Capacity constraints could be due to a number of potential causes, including technical failures, natural disasters, fraud, or security attacks. In addition, if an infrastructure provider’s security is compromised, or our modules or platform are unavailable or our customers or their
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consumers are unable to use our platform within a reasonable amount of time or at all, then our business, results of operations, and financial condition could be adversely affected. In some instances, we may not be able to identify the cause or causes of these performance problems within a period of time acceptable to our customers. It may become increasingly difficult to maintain and improve our platform performance, especially during peak usage times, as our platform become more complex and the usage of our platform increases. To the extent that we do not effectively address capacity constraints, either through AWS or alternative providers of cloud infrastructure, our business, results of operations, and financial condition may be adversely affected. In addition, any changes in service levels from AWS may adversely affect our ability to meet our customers’ requirements.
In addition, AWS provides us with service pursuant to an agreement that continues until terminated by either party. Pursuant to our agreement with AWS, we have committed to spending $3.4 million over the two-year period of November 2019 through November 2021. AWS may terminate the agreement by providing 90 days prior written notice, and it may, in some cases, terminate the agreement immediately for cause upon notice. Although we expect that we could receive similar services from other third parties, arranging alternative cloud infrastructure services could be costly, complicated, and time-consuming, and we could experience interruptions on our platform and in our ability to make our modules available to customers. Our agreement with AWS also includes a minimum spending commitment, part of which may be forfeited if we were to switch providers.
Any of the above circumstances or events may harm our reputation, cause customers to stop using our platform, impair our ability to increase revenue from existing customers, impair our ability to grow our customer base, subject us to financial penalties and liabilities under our service level agreements and otherwise harm our business, results of operations, and financial condition.
We may be unable to achieve or maintain data transmission capacity.
Our customers often draw significant numbers of consumers to their websites and mobile applications over short periods of time, including during key television events, marketing events, holidays, or during peak delivery times, which significantly increases the traffic on our servers and the volume of transactions processed on our platform. Our infrastructure or software may be unable to achieve or maintain capacity high enough to handle increased traffic or process transactions in a timely manner. Our failure to achieve or maintain high capacity could significantly reduce demand for our platform. Further, as we continue to attract larger restaurant customers, the volume of data stored and transactions processed on our platform will increase, especially if such customers draw significant numbers of consumers over short periods of time. In the future, we may be required to allocate resources, including spending substantial amounts of money, to build, purchase, or lease additional infrastructure in order to handle the increased load. Our ability to deliver our platform also depends on the development and maintenance of internet and mobile application infrastructure by third parties, including by our cloud service provider. Such development and maintenance includes the maintenance of reliable networks with the necessary speed, data capacity, and bandwidth. If one of these third parties suffers from capacity constraints, our business may be adversely affected.
Our business and prospects would be harmed if changes to technologies used in our platform or new versions or upgrades of operating systems or applications adversely impact the process by which customers and consumers interface with our platform.
We believe that our platform’s functionality, simplicity, positive user experience, and ability to integrate with multiple technology partners in the restaurant ecosystem have helped us to expand and offer our platform to customers who may have limited technical personnel. In the future, providers of mobile, website, or other operating systems or applications could introduce new features, policies or rules that would make it difficult for customers to use our platform. In addition, mobile devices, websites, operating systems, or other applications could introduce new features, change existing operating systems, APIs, or other specifications such that they would be incompatible with our platform, or prevent delivery or aggregator partners from accessing customers who are using our platform. Any changes to technologies used in our platform, existing features that we rely on, or operating systems, APIs, or applications that make it difficult for customers to access our platform or consumers to access our customers’ ordering applications or websites, may make it more difficult for us to maintain or increase our revenue and could adversely impact our business and prospects.
Our future success depends in part on our ability to drive the adoption of our platform by international and SMB customers, and to expand into new, on-demand commerce verticals.
Although we currently do not derive significant revenue from customer accounts located outside the United States, and do not derive any revenue from customer accounts outside of North America, the future success of our business may depend, in part, on our ability to expand our customer base worldwide. However, because we have limited experience with international customers or in selling our platform internationally, our business model may not be successful or have the same traction outside
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the United States. As a result, our investment in marketing our platform to these potential customers may not be successful. Additionally, our success may depend in part on our ability to increase our partnerships with SMB customers. These customers may have different requirements than our larger restaurant brand customers, and therefore may not find our platform to be as attractive as our existing customers. They may also be unwilling to agree to pay subscription or transactional fees for our platform or modules at the levels required to make these transaction profitable, or they may request additional functionality, training, customer service, or software integrations. We also believe that our platform can be applied to other on-demand commerce verticals beyond the restaurant industry, and plan to focus on sectors or opportunities that are also undergoing the digital transformations. If we are unable to increase the revenue that we derive from international and SMB restaurant customers, or deploy our platform in other on-demand commerce verticals, then our business, results of operations, and financial condition may be adversely affected.
We may be subject to claims by third parties of intellectual property infringement.pricing, licensing, and data regulations, which may impact our business.
The software industry
Our delivery service providers, or DSPs, and other partners’ revenue is characterized bydependent on the existence of a largepricing models they use to calculate earnings. In particular, the DSPs’ pricing models have been, and will likely continue to be, challenged, banned, limited in emergencies, and capped in certain jurisdictions. An increasing number of patents and frequent claims and related litigation regarding patents and other intellectual property rights. Third partiesmunicipalities have proposed delivery network fee caps with respect to DSPs’ delivery offerings. For example, in the past asserted, and may in the future assert, that our platform, modules, technology, methods or practices infringe, misappropriate, or otherwise violate their intellectual property or other proprietary rights. Such claims may be made by our competitors seeking2022, New York City began requiring DSPs to obtain a competitive advantagelicense in order to do business within the city; instituted a percentage cap on service, transaction, and other fees that DSPs may charge food service establishments; and began allowing food delivery workers to unilaterally cap the distances they are required to travel for delivery. Additional regulation of the DSPs, including with regard to licensing, sharing of end user data, and classifying workers as employees or by other parties. Additionally, non-practicing entities purchasing intellectual property assets for the purpose of making claims of infringementindependent contractors, could increase their operating costs and adversely affect their business, which may attempt to extract settlements from us. The risk of claims may increase as the number of modules that we offer and competitors in our market increases and overlaps occur. In addition, to the extent that we gain greater visibility and market exposure, we face a higher risk of being the subject of intellectual property infringement claims.
Any such claims, regardless of merit, that result in litigation could result in substantial expenses, divert the attention of management, cause significant delays in introducing new or enhanced services or technology, materially disrupt the conduct of our business and have a material and adverse effect on our brand, business, financial condition and results of operations. Although we do not believe that our proprietary technology, processes and methods have been patented by any third party, it is possible that patents have been issued to third parties that cover all or a portion ofturn adversely affect our business. As a consequence of any patent or other intellectual property claims, weFor instance, DSPs could be required to pay substantial damages, develop non-infringing technology, entertreat their workers as employees if the Department of Labor October 2022 proposed rule goes into royalty-bearing licensing agreements, stop sellingeffect. The proposed rule revises the standard for determining when a worker is an employee or marketing somean independent contractor under the Fair Labor Standards Act. Furthermore, our partners may be forced to change their pricing models, or all of our modulesotherwise limit or re-brand our modules. We may also be obligated to indemnify our customers against intellectual property claims, and we may have to pay substantial settlement costs, including royalty payments,abandon their business operations altogether, in connection with any such claimjurisdictions where laws or litigation and to obtain licenses, or modify applications,regulations significantly impact their business, which could be costly. If it appears necessary, we may seek to secure license rights to intellectual property that we are alleged to infringe at a significant cost, potentially even if we believe such claims to be without merit. If required licenses cannot be obtained, or if existing licenses are not renewed, litigation could result. Litigation is inherently uncertain and can cause us to expend significant money, time and attention to it, even if we are ultimately successful. Any adverse decision could result in a loss ofharm our proprietary rights, subject us to significant liabilities, require us to seek licenses for alternative technologies from third parties, prevent us from offering all or a portion of our modules and otherwise negatively affect our business and operating results.revenue.
We could incur substantial costs in protecting or defending our intellectual property rights, and any failure to protect our intellectual property or prevent third parties from making unauthorized use of our technology could adversely affect our business, results of operations, and financial condition.
Our success depends, in part, on our ability to protect our brand and the proprietary methods and technologies that we develop under the intellectual property laws of the United States and, potentially in the future, foreign jurisdictions so that we can prevent others from using our inventions and proprietary information. Although we own four registered trademarks in the United States, as of September 30, 2021, we hold no issued patents and therefore would not be entitled to exert patents to exclude or prevent our competitors from using our proprietary technology, methods, and processes to the extent independently developed by our competitors.
We rely primarily on trade secret laws and confidentiality agreements with our business partners, employees, consultants, advisors, customers, and other current or prospective partners in our efforts to protect our proprietary technology, confidential information, processes, methods, and intellectual property. These confidentiality agreements may not effectively prevent disclosure of our confidential information or the unauthorized use of our technology, and it may be possible for unauthorized parties to copy our software or other proprietary technology or information, or to develop similar software independently without our having an adequate remedy for unauthorized use or disclosure of our confidential information. In addition, others may independently discover our trade secrets and proprietary information, and in these cases, we would not be able to assert any trade secret rights against those parties. Costly and time-consuming litigation could be necessary to enforce
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Industry Risks
and determine the scope of our proprietary rights, and failure to obtain or maintain trade secret protection could adversely affect our competitive business position.
In addition, the laws of some countries do not protect intellectual property and other proprietary rights to the same extent as the laws of the United States. To the extent we expand our international activities, our exposure to unauthorized copying, transfer and use of our proprietary technology or information may increase.
We cannot be certain that our means of protecting our intellectual property and proprietary rights will be adequate or that our competitors will not independently develop similar technology. If we fail to meaningfully protect our intellectual property and proprietary rights, our business, results of operations, and financial condition could be adversely affected.
Any future litigation against us could be costly and time-consuming to defend.
We may become subject to legal proceedings and claims that arise in the ordinary course of business, such as claims brought by our customers, our partners, or third parties in connection with commercial disputes or our technology or employment claims made by our current or former employees. Litigation might result in substantial costs and may divert management’s attention and resources, which might seriously harm our business, financial condition, and results of operations. Insurance might not cover such claims, might not provide sufficient payments to cover all the costs to resolve one or more such claims, and might not continue to be available on terms acceptable to us. A claim brought against us that is uninsured or underinsured could result in unanticipated costs, potentially harming our business, financial position, and results of operations.
We use open source software in our platform, which could negatively affect our ability to sell our services or subject us to litigation or other actions.
We rely on open source software in our proprietary platforms and we expect to continue to rely on open source software in our platform in the future. The terms of certain open source licenses to which we are subject have not been interpreted by U.S. or foreign courts, and there is a risk that these licenses could be construed in a manner that could impose unanticipated conditions or restrictions on our ability to commercialize our platforms. Certain open source projects also include other open source software and there is a risk that those dependent open source libraries may be subject to inconsistent licensing terms. This could create further uncertainties as to the governing terms for the open source software. Moreover, we cannot ensure that we have not incorporated and are currently relying on additional open source software in our platform in a manner that is inconsistent with the terms of the applicable license or our current policies and procedures. Although we employ open source software license screening measures, if we were to combine our proprietary software platform with open source software in a certain manner we could, under certain open source licenses, be required to release the source code of our proprietary platform, which could allow our customers and competitors to freely use such software solutions without compensation to us. Additionally, we may from time to time face claims from third parties claiming ownership of, or demanding release of, the open source software or derivative works that we developed using such software, which could include our proprietary source code, or otherwise seeking to enforce the terms of the applicable open source license. These claims could result in litigation and we could be required to incur significant legal expenses defending against such allegations and could be subject to significant damages, required to comply with onerous conditions or restrictions, required to make our proprietary source code for our platform and any modifications and derivative works developed using such open source software generally available at no cost, purchase a costly license or cease offering the implicated services unless and until we can re-engineer them to avoid use of the open source software in dispute, which could disrupt the business dependent on the affected platforms. This re-engineering process could require significant additional research and development resources, and we may not be able to complete it successfully. In addition to risks related to license requirements, use of certain open source software can lead to greater risks than use of third-party commercial software, as open source licensors generally do not provide warranties or controls on the origin of software. From time to time, there have been claims challenging the ownership rights in open source software against companies that incorporate it into their products and the licensors of such open source software provide no warranties or indemnities with respect to such claims. As a result, we and our customers could be subject to lawsuits by parties claiming ownership of what we believe to be open source software. Some open source projects have known vulnerabilities and architectural instabilities and are provided on an “as-is” basis which, if not properly addressed, could negatively affect the performance of our platform. Any of these risks could be difficult to eliminate or manage, and if not addressed, could have a negative effect on our business, results of operations, and financial condition.
Our brand is integral to our success. If we fail to effectively maintain, promote, and enhance our brand, our business and competitive advantage may be harmed.
We believe that maintaining, promoting, and enhancing the Olo brand is critical to expanding our business. Maintaining and enhancing our brand will depend largely on our ability to continue to provide high-quality, well-designed, useful, reliable, and innovative modules, which we may not do successfully in the future.
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Errors, defects, security incidents, disruptions, or other performance problems with our platform, including with third-party applications, services, or partners, may harm our reputation and brand. We may introduce new modules or terms of service that our customers or consumers do not like, which may negatively affect our brand. Additionally, if our customers or consumers have a negative experience using our modules or third-party solutions integrated with our platform, such an experience may affect our brand, especially as and if we continue to attract multi-location restaurant customers to our platform.
We receive significant media coverage in the United States, especially in the restaurant trade press. Any unfavorable media coverage or negative publicity about our company, for example, the quality and reliability of our platform, our privacy and security practices or the loss or misuse of our customer data or consumers’ personal information, our platform changes, litigation, or regulatory activity, or regarding the actions of our partners or our customers, could seriously harm our reputation. Such negative publicity could also adversely affect the size, demographics, engagement, and loyalty of our customers, and result in decreased revenue, which could seriously harm our business.
We believe that the importance of brand recognition will increase as competition in our market increases. In addition to our ability to provide reliable and useful modules at competitive prices, successful promotion of our brand will depend on the effectiveness of our marketing efforts. While we primarily market our platform through direct sales efforts, our platform is also marketed through a number of free traffic sources, including customer referrals and word-of-mouth. Our efforts to market our brand have involved significant expenses, which we intend to increase, and as our market becomes increasingly competitive, these marketing initiatives may become increasingly difficult and expensive. Our marketing spend may not yield increased revenue, and even if it does, any increased revenue may not offset the expenses we incur in building and maintaining our brand.
Activities of customers or partners or the content of our customers’ websites or mobile applications could damage our brand, subject us to liability, and harm our business and financial results.
Our terms of service and acceptable use policy prohibit our customers and partners from using our platform to engage in illegal or otherwise prohibited activities and our terms of service and acceptable use policy permit us to terminate a customer’s or partner’s account if we become aware of such use. Customers or partners may nonetheless engage in prohibited or illegal activities including in connection with their use of our products and services, which could subject us to civil or governmental liability or enforcement. We do not proactively monitor or review the appropriateness of the content of our customers’ websites or mobile applications and we do not have control over such content or our customers’ activities. The safeguards we have in place may not be sufficient for us to avoid liability, including through litigation, or avoid harm to our brand, especially if such inappropriate or illegal use is high profile, which could adversely affect our business and financial results. In addition, if we expand internationally, we may be subject to similar actions in foreign jurisdictions alleging that customers’ store content violates laws in foreign jurisdictions.
Unfavorable conditions in our industry or the global economy, or reductions in digital ordering transaction volume or technology spending, could adversely impact the health of our customers and limit our ability to grow our business and negatively affect our results of operations.

Our results of operations have in the past and may in the future vary based on the impact of changes in our industry or the global economy on us or our customers and potential customers. In recent months, we have observed increased economic uncertainty in the United States and abroad. Negative conditions in the general economy both in the United States and abroad, including conditions resulting from changes in gross domestic product growth, decreases in restaurant and digital ordering spending, inflationary pressures, rising interest rates, lower consumer confidence or uneven or lower spending, volatile equity capital markets, the impact of a housing crisis and other conditions in the residential real estate and mortgage markets, gasoline prices, energy and other utility costs, inclement weather, health care costs, access to credit, disposable consumer income, availability of continued federal economic stimulus and other governmental efforts, financial and credit market fluctuations, international trade relations, political turmoil, natural catastrophes, epidemics, warfare, including the ongoing war in Ukraine, and terrorist attacks on the United States, Canada, or elsewhere, couldhave caused, and in the future may cause, a reduction in customer locations and digital ordering transaction volumes, a decrease in business investments, including spending on technology, or business interruptions, resulting from a destruction of our headquarters, and negatively affect the growth of our business.business, revenue, and earnings.

More specifically, we are heavily reliant on the restaurant, food, and delivery industries, and any downturn or fundamental shift in those industries could significantly impact our results. Reports,In poor or uncertain economic conditions, restaurant guest traffic could be adversely impacted if guests choose to dine out or order less frequently or reduce the amount they spend on meals. In addition, inflation and the rising costs of food and labor have caused some businesses in the restaurant food and delivery industries to raise their prices which could cause a decline in guest traffic. Further, to the extent there is a sustained general economic downturn and our solutions are perceived by restaurant customers and potential restaurant customers as costly, or too difficult to deploy or migrate to, our revenue may be disproportionately affected by delays or reductions in on-demand digital commerce spending. Competitors may respond to market conditions by lowering prices and attempting to lure away our customers. Additionally, reports, whether true or not, of foodborne illnesses and injuries caused by food tampering have severely injured the reputations of participants in the food business and the restaurant industry generally, and could continue to do so in the future.future, and those reports could harm our business and results of operations. The potential for acts of terrorism on the United States’ food supply also exists and, if such an event occurs, it could harm our business and results of operations. In addition, reports of foodborne illnesses or food tampering could, as a result of negative publicity about the restaurant industry, harm our business and results of operations.

In addition, we contract directly with our DSPs to provide delivery services to our restaurant customers through our Dispatch module and then invoice our restaurant customers for the cost associated with DSP services. As a result, we may be required to make payments to DSPs prior to receiving payment from our restaurant customers for DSP transactions, which could reduce the amount of cash and cash equivalents we have available for the period between payment to the DSPs and receipt of payment from the restaurant customer. In addition, if any of our restaurant customers were to go out of business, become insolvent, or
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become insolvent, or otherwise be unable to pay for DSP transactions, we would be responsible for making payments to the DSPs that our customers otherwise would have made, which could adversely affect our business. Furthermore, our DSPs and other vendors, suppliers, or partners may raise prices due to inflation, rising costs, or changing regulations. If this occurs, we may not be able to pass on these increased costs to our restaurant customers. This may materially and adversely affect our business, including our competitive position, market share, revenues, and earnings.

Lastly, the increased pace of consolidation in certain industriesthe restaurant industry, the loss of partners that may have gone out of business or may have merged with other of our partners, or if any of our customers are acquired by another company that does not use our solutions, may result in reduced overall spending on our platform and modules.platform. We cannot predict the timing, strength, or duration of any economic slowdown, instability, or recovery, generally or within any particularthe restaurant industry.
Increases in food, labor, rent, energy, and occupancy costs could adversely affect results of operations.
Our financial success is dependent, in part, on If the ability of our restaurant customers to increase digital ordering and maintain profitability. These customers may experience increased operating costs, including as a result of changes to food, labor, rent, energy, occupancy, insurance, and supply costs, as well as costs of safety equipment related to the COVID-19 pandemic, and they may be unable to recover these costs through increased menu prices, and as a result, may cease operations. Additionally, if our restaurant customers raise prices in light of these factors, order volume may decline, which could harm our revenue and results of operations.

Various factors beyond our control, including government regulations relating to independent contractor classifications, price controls on food delivery logistics platforms, labor shortages, and minimum wage increases, may also affect the total cost of digital food orders to consumers. If our current or future customers and/or partners are unable to maintain or increase digital orders, or maintain profitability, our business, financial condition, and results of operations could be harmed.
We rely on software licensed from, and services rendered by, third parties in order to provide our modules and run our business.
We rely on software licensed from, and services rendered by, third parties in order to provide our modules and run our business. Third-party software and services may not continue to be available on commercially reasonable terms, or at all. Any losseconomic conditions of the right to use,general economy or any failures of, third-party software or services could result in delays in our ability to provide our modules or run our business until equivalent software or services are developed by us or, if available, identified, obtained and integrated, which could be costly and time-consuming and may not result in an equivalent module, any of which could cause an adverse effect on our business and operating results. Further, customers could assert claims against us in connection with such service disruption or cease conducting business with us altogether. Even if not successful, a claim brought against us by any of our customers would likely be time-consuming and costly to defend and could seriously damage our reputation and brand, making it harder for us to sell our modules.
Our pricing decisions and pricing models may adversely affect our ability to attract new customers and retain existing customers.
In 2015 and 2017, we launched our Dispatch and Rails modules, respectively, and in 2016 we began to offer a transactional-based pricing model for our Ordering module. As a result, we have limited experience determining the optimal prices for our modules and may be unable to convert existing customers from a flat-fee model to our transactional based pricing models. We have changed our pricing model from time to time and expect to do so in the future or sell new modules. However, given our limited experience with selling new modules, it may turn out that the new pricing models, or the pricing for any other modules we may develop, is not optimal, which may result in our modules not being profitable or not gaining market share. As competitors introduce new solutions that compete with ours, especially in the digital ordering and delivery spaces where we face significant competition, we may be unable to attract new customers at the same price or based on the same pricing models that we have used historically. Pricing decisions and pricing models may also impact the mix of adoption among our modules and negatively impact our overall revenue. Moreover, restaurant brands may be sensitive to price increases or to the prices offered by competitors. As a result, in the future we may be required to reduce our prices, which could adversely affect our revenue, profitability, financial position, and cash flows.
Provisions of our financial instruments may restrict our ability to pursue our business strategies.
We currently have a credit facility, which requires us, and any debt instruments we may enter into in the future may require us, to comply with various covenants that limit our ability to, among other things:

•dispose of or encumber assets;
•complete mergers or acquisitions;
•incur additional indebtedness;
•pay dividends or make other distributions to holders of our shares;
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•make specified investments;
•change certain key management personnel; and
•engage in any business other than the businesses we currently engage in; and engage in transactions with affiliates.
These restrictions could inhibit our ability to pursue our business strategies. If we default under our credit facility, and such event of default is not cured or waived, the lender could terminate commitments to lend and cause all amounts outstanding with respect to the debt to be due and payable immediately. Our assets and cash flow may not be sufficient to fully repay borrowings under our outstanding debt instruments if some or all of these instruments are accelerated upon a default.
We may also incur additional indebtedness in the future. The instruments governing such indebtedness could contain provisions that are as, or more, restrictive than our existing debt instruments. If we are unable to repay, refinance, or restructure our indebtedness when payment is due, the lenders could proceed against the collateral granted to them to secure such indebtedness, as applicable, or force us into bankruptcy or liquidation.
Changes in our effective tax rate or tax liability may have an adverse effect on our results of operations.
Our effective tax rate could increase due to several factors, including:

•changes in the relative amounts of income before taxes in the various jurisdictionsmarkets in which we operate that have differing statutory tax rates;
•changes in tax laws, tax treaties, and regulations or the interpretation of them, including the Tax Cuts and Jobs Act;
•changes toworsen, our assessment about our ability to realize our deferred tax assets that are based on estimates of our future results, the prudence and feasibility of possible tax planning strategies, and the economic and political environments in which we do business;
•the outcome of current and future tax audits, examinations, or administrative appeals; and
•limitations or adverse findings regarding our ability to do business, in some jurisdictions.

Any of these developments could adversely affect our results of operations.
We could be required to collect additional sales taxes or be subject to other tax liabilities that may increase the costs our customers would have to pay for our modules and adversely affect our results of operations.
An increasing number of states have considered or adopted laws that attempt to impose tax collection obligations on out-of-state companies. Additionally, the Supreme Court of the United States recently ruled in South Dakota v. Wayfair, Inc. et al, or Wayfair, that online sellers can be required to collect sales and use tax despite not having a physical presence in the buyer’s state. In response to Wayfair, or otherwise, states or local governments may adopt, or begin to enforce, laws requiring us to calculate, collect, and remit taxes on sales in their jurisdictions. A successful assertion by one or more states requiring us to collect taxes where we presently do not do so, or to collect more taxes in a jurisdiction in which we currently do collect some taxes, could result in substantial tax liabilities, including taxes on past sales, as well as penalties and interest. The imposition by state governments or local governments of sales tax collection obligations on out-of-state sellers could also create additional administrative burdens for us, put us at a competitive disadvantage if they do not impose similar obligations on our competitors, and decrease our future sales, which could have a material adverse effect on our business and results of operations.
Our ability to use our net operating losses to offset future taxable income may be subject to certain limitations.
As of December 31, 2020 and 2019, we had approximately $31.7 million and $46.8 million of federal net operating losses, or NOLs. Approximately $12.6 million of the federal NOLs will expire at various dates beginning in 2035 through 2037 if not utilized, while the remaining amount will have an indefinite life. As of December 31, 2020 and 2019, we had approximately $26.2 million and $38.0 million of state NOLs. Of the state NOLs, some may follow the Tax Cut and Jobs Act and are indefinite life and most are definite life with various expiration dates beginning in 2025 through 2039. The federal research and development tax credits were approximately $1.3 million as of each of December 31, 2020 and 2019, respectively. The federal research credits will begin to expire in 2026. In general, under Section 382 of the Internal Revenue Code of 1986, as amended, or the Code, a corporation that undergoes an “ownership change,” as defined under Section 382 of the Code and applicable Treasury Regulations, is subject to limitations on its ability to utilize its pre-change NOLs to offset future taxable income. We may experience a future ownership change, including, potentially, in connection with our IPO, under Section 382 of the Code that could affect our ability to utilize the NOLs to offset our income. Furthermore, our ability to utilize NOLs of companies that we have acquired or may acquire in the future may be subject to limitations. There is also a risk that due to regulatory changes, such as suspensions on the use of NOLs or other unforeseen reasons, our existing NOLs could expire or otherwise be unavailable to reduce future income tax liabilities, including for state tax purposes. For these reasons, we may not
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be able to utilize a material portion of the NOLs reflected on our balance sheet, even if we attain profitability, which could potentially result in increased future tax liability to us and could adversely affect our operating results and financial condition.
Our reported financial results may be adversely affected by changes in accounting principles generally accepted in the United States.
U.S. generally accepted accounting principles, or GAAP, are subject to interpretation by the Financial Accounting Standards Board, or FASB, the SEC, and various bodies formed to promulgate and interpret appropriate accounting principles. A change in these principles or interpretations could have a significant effect on our reported results of operations, and could affect the reporting of transactions already completed before the announcement of a change.
If our estimates or judgments relating to our critical accounting policies prove to be incorrect, our results of operationsfinancial condition could be materially and adversely affected.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in our condensed financial statements and accompanying notes appearing elsewhere in this Quarterly Report on Form 10-Q. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, as provided in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates.” The results of these estimates form the basis for making judgments about the carrying values of assets, liabilities and equity, and the amount of revenue and expenses that are not readily apparent from other sources. Significant estimates and judgments involve revenue recognition, and the valuation of our stock-based compensation awards, including the determination of fair value of our Class A common stock, among others. Our results of operations may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our results of operations to fall below the expectations of securities analysts and investors, resulting in a decline in the market price of our Class A common stock.
We identified a material weakness in our internal control over our financial reporting process. If we are unable to remediate this material weakness, we may not be able to accurately or timely report our financial condition or results of operations.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis. We identified a material weakness in our internal control over our financial statement close process specifically related to insufficient written policies and procedures for accounting and financial reporting and the lack of properly designed controls related to accounting for revenue recognition in accordance with standards under Accounting Standards Codification Topic 606, Revenue from Contracts with Customers. These control deficiencies could result in a misstatement of our accounts or disclosures that would result in a material misstatement of our financial results that would not be prevented or detected, and accordingly, we determined that these control deficiencies constitute a material weakness.
We are working to remediate this material weakness through the development and implementation of processes and controls over the financial reporting process. Specifically, we have:
•initiated the process of implementing a new revenue recognition system which will significantly reduce the number of manual controls currently required to recognize revenue;
•engaged external resources to assist with remediation efforts and internal control execution as well as to provide additional training to existing personnel; and
•hired additional internal resources with appropriate knowledge and expertise to effectively operate financial reporting processes and internal controls.
While we have designed and are implementing new controls to remediate this material weakness, they have not operated for a sufficient period of time to demonstrate the material weakness has been remediated. We cannot assure you that the measures we have taken to date will be sufficient to remediate the material weakness we identified or avoid the identification of additional material weaknesses in the future. If the steps we take do not remediate the material weakness in a timely manner, there could continue to be a reasonable possibility that this control deficiency or others could result in a material misstatement of our annual or interim financial statements that would not be prevented or detected on a timely basis.
Furthermore, investors’ perceptions that our internal controls are inadequate or that we are unable to produce accurate financial statements on a timely basis may harm our stock price.
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As a result of being a public company, we are obligated to develop and maintain proper and effective internal controls over financial reporting, and any failure to maintain the adequacy of these internal controls may adversely affect investor confidence in our company and, as a result, the value of our Class A common stock.
We are required, pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting for the fiscal year ending December 31, 2021. This assessment will need to include disclosure of any material weaknesses identified by our management in our internal control over financial reporting. In addition, our independent registered public accounting firm will be required to attest to the effectiveness of our internal control over financial reporting in our first annual report required to be filed with the SEC following the date we are no longer an “emerging growth company” or after we are no longer a “smaller reporting company.” We have recently commenced the costly and challenging process of compiling the system and processing documentation necessary to perform the evaluation needed to comply with Section 404, but we may not be able to complete our evaluation, testing, and any required remediation in a timely fashion once initiated. Our compliance with Section 404 will require that we incur substantial expenses and expend significant management efforts. We have only recently established an internal audit group, and we will need to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge and compile the system and process documentation necessary to perform the evaluation needed to comply with Section 404.
During the evaluation and testing process of our internal controls, if we identify one or more material weaknesses in our internal control over financial reporting, we will be unable to certify that our internal control over financial reporting is effective. We cannot assure you that there will not be material weaknesses or significant deficiencies in our internal control over financial reporting in the future. As we have had a material weakness in the past, any failure to maintain internal control over financial reporting could severely inhibit our ability to accurately report our financial condition or results of operations. If we are unable to conclude that our internal control over financial reporting is effective, or if our independent registered public accounting firm determines we have a material weakness or significant deficiency in our internal control over financial reporting, we could lose investor confidence in the accuracy and completeness of our financial reports, the market price of our Class A common stock could decline, and we could be subject to sanctions or investigations by the SEC or other regulatory authorities. Failure to remedy any material weakness in our internal control over financial reporting, or to implement or maintain other effective control systems required of public companies, could also restrict our future access to the capital markets.
We may require additional capital, which additional financing may result in restrictions on our operations or substantial dilution to our stockholders, to support the growth of our business, and this capital might not be available on acceptable terms, if at all.
We have financed our operations since inception primarily through sales of our equity securities including our completed IPO, payments received from customers, and borrowings under our credit facility. We cannot be certain when or if our operations will generate sufficient cash to fully fund our ongoing operations or the growth of our business. We intend to continue to make investments to support our business, which may require us to engage in equity or debt financings to secure additional funds. Additional financing may not be available on terms favorable to us, if at all. In particular, the current COVID-19 pandemic has caused disruption in the global financial markets, which may reduce our ability to access capital and negatively affect our liquidity in the future. If adequate funds are not available on acceptable terms, we may be unable to invest in future growth opportunities, which could harm our business, operating results, and financial condition. If we incur additional debt, the debt holders would have rights senior to holders of common stock to make claims on our assets, and the terms of any debt could restrict our operations, including our ability to pay dividends on our Class A common stock. Furthermore, if we issue additional equity securities, stockholders will experience dilution, and the new equity securities could have rights senior to those of our Class A common stock. Because our decision to issue securities in the future will depend on numerous considerations, including factors beyond our control, we cannot predict or estimate the amount, timing, or nature of any future issuances of debt or equity securities. As a result, our stockholders bear the risk of future issuances of debt or equity securities reducing the value of our Class A common stock and diluting their interests.
We recognize revenue from customer subscriptions over the term of the subscription agreement and, therefore, a significant downturn in our business may not be immediately reflected in our operating results.
We recognize revenue from subscription agreements monthly over the terms of these agreements, which is typically three years or longer. As a result, a significant portion of the revenue we report in each quarter is generated from customer agreements entered into during previous periods. Consequently, a decline in new subscriptions or renewed subscriptions in any one quarter may not impact our financial performance in that quarter, but might negatively affect our revenue in future quarters. If a number of contracts expire and are not renewed in the same quarter, our revenue may decline significantly in that quarter
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and subsequent quarters. Accordingly, the effect of significant declines in sales of our platform or modules may not be reflected in our short-term results of operations.
We experience significant seasonal fluctuations in our financial results, which could cause our stock price to fluctuate.
Our business is highly dependent on the behavior patterns of restaurant brands and consumers. We may experience a relative increase or decrease in the use of our Ordering, Rails, and Dispatch modules depending on the season and customer type, which may be difficult to assess. Additionally, our revenue can also be impacted by sales cycles and seasonality, which vary depending on customer type. Finally, even after we have executed a contract with a customer, deployment of our platform and the related modules is typically lower than average in the fourth quarter. As a result, seasonality will likely cause fluctuations in our financial results on a quarterly basis, and other seasonality trends may develop may similarly impact our results of operation.
Risks Related to Ownership of Our Class A Common Stock

We expect fluctuations in our financial results, making it difficult to project future results, and if we fail to meet the expectations of securities analysts or investors with respect to our results of operations, our stock price and the value of your investment could decline.

Our quarterly operating results, including our revenues, operating margin, profitability, cash flow, number of locations, and transaction volumes have in the past and may in the future vary significantly and period-to-period comparisons of our operating results may not be meaningful. Accordingly, the results of any one quarter should not be relied upon as an indication of future performance. Our quarterly financial results may fluctuate as a result of a variety of factors, many of which are outside of our control, and as a result, may not fully reflect the underlying performance of our business. Fluctuations in our quarterly results and related impacts to any earnings guidance we may issue from time to time, including any modification or withdrawal thereof, may negatively impact the value of our securities. Additional factors that may cause fluctuations in our quarterly financial results include, without limitation, those listed below:

•fluctuations in demand for or pricing of our platform, or any of our modules, including any governmental regulations that restrict the amount we can charge;
•fluctuations in usage of our platform, or any of our modules, including due to the potential lack of durability of the growth we previously experienced due to the impact of COVID-19 and the associated measures to contain the spread of COVID-19 on consumer preferences for digital ordering and customer adoption of multi-modules as COVID-19 associated restrictions continue to abate;
•our ability to attract new customers;
•our ability to retain our existing customers;
•our ability to retain and increase revenue, locations, and transaction volumes from existing customers;
•fluctuations in the amount of revenue from our existing customers, the number of existing customers, and the number of locations that we serve for our existing customers;
•delays in our customers’ adoption of new products, including Olo Pay;
•the timing of our customer purchases and deployments;
•the amount of time it takes for our customers to be onboarded to our platform and modules;
•customer expansion rates and the pricing and quantity of subscriptions renewed and transactions processed through our platform;
•competition and the actions of our competitors, including pricing changes and the introduction of new products, services, and geographies;
•reductions in pricing or customer locations, including as a result of negotiations with our larger customers;
•changes in the size and complexity of our customer relationships;
•actions by our customers related to implementation of internal or competitive products and tools that may displace their need for our services;
•changes in spending by our existing or prospective customers;
•pricing our platform subscriptions effectively so that we are able to attract and retain customers without compromising our profitability;
•customer renewal rates and the amounts for which agreements are renewed;
•timing and amount of our investments to expand the capacity of our third-party cloud infrastructure providers;
•the investment in and success of new modules relative to our existing infrastructure and platform;
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•fluctuations or delays in purchasing decisions in anticipation of new modules or enhancements by us or our competitors;
•changes in customers’ budgets and in the timing of their budget cycles and purchasing decisions;
•our ability to control costs, including our operating expenses;
•the amount and timing of payment for operating expenses, particularly research and development and sales and marketing expenses, including sales commissions;
•the amount and timing of non-cash expenses, including stock-based compensation, goodwill impairments, and other non-cash charges;
•the amount and timing of costs associated with recruiting, training and integrating new employees, and retaining and motivating existing employees;
•the effects of acquisitions and their integration;
•the inability to execute on our Stock Buyback Program as planned, including failure to meet internal or external expectations around the timing or price of share repurchases, and any reductions or discontinuations of repurchases thereunder;
•general economic conditions, both domestically and internationally, as well as economic conditions (including rising inflation and interest rates) specifically affecting industries in which our customers participate;
•health epidemics or pandemics, such as the COVID-19 pandemic;
•the impact of new accounting pronouncements;
•changes in regulatory or legal environments that may cause us to incur, among other elements, expenses associated with compliance;
•changes in the competitive dynamics of our market, including consolidation among competitors or customers; and
•significant security breaches of, technical difficulties with, or interruptions to, the delivery and use of our modules and platform capabilities or third-party applications or point of sale or management systems with which our platform integrates.

Any of these and other factors, or the cumulative effect of some of these factors, may cause our results of operations to vary significantly. If our results of operations or key performance indicators fall below the expectations of investors and securities analysts who follow our stock, the price of our Class A common stock could decline substantially, and we could face costly lawsuits, including securities class action suits, such as the class action lawsuit filed on September 26, 2022. A description of our legal proceedings can be found in “Note 16—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.

Our stock price may be volatile, and the value of our Class A common stock may decline.

The market price of our Class A common stock may be highly volatile and may fluctuate or decline substantially as a result of a variety of factors, some of which are beyond our control, including:

•price and volume fluctuations in the overall stock market from time to time, including fluctuations due to general economic uncertainty or negative market sentiment, in particular related to the COVID-19 pandemic;rising inflation, and interest rates;
•actual or anticipated fluctuations in our financial condition or results of operations;
•variance in our financial performance from expectations of securities analysts;
•changes in the pricing and adoption rates of our modules;
•changes in our projected operating and financial results;
•changes in laws or regulations applicable to our platform and modules;
•investor sentiment and the public’s reaction to announcements by us or our competitors of significant business developments, acquisitions, or new offerings;
•the trading volume of our involvement in litigation;Class A common stock;
•future sales of our Class A common stock by us or our stockholders, as well as the anticipation of lock-up releases;stockholders;
•our involvement in litigation;
•significant data breaches, disruptions to or other incidents involving our software;
•changes in senior management or key personnel;
•the trading volume of our Class A common stock;
•changes in the anticipated future size and growth rate of our markets; and
•general economic conditions and slow or negative growth of our markets.

Broad market and industry fluctuations, as well as general economic, political, regulatory, and market conditions, may also negatively impact the market price of our Class A common stock. In addition, the stock market in general, and the market for technology stocks have historicallycompanies in particular, has experienced high levels of volatility. In the past, companiesextreme price and volume fluctuations that have experienced volatility in the market price of their securities haveoften been subject to securities class action litigation. We may be the target of this type of litigation in the future, which could result in substantial expenses and divert our management’s attention.
The dual-class structure of our common stock has the effect of concentrating voting control with our existing stockholders, executive officers, directors, and their affiliates, which will limit your ability to influence the outcome of important transactions and to influence corporate governance matters, such as electing directors, and to approve material mergers, acquisitions, or other business combination transactions that may not be aligned with your interests.
Our Class B common stock has ten votes per share, whereas our Class A common stock has one vote per share. As of September 30, 2021, holders of our Class B common stock collectively owned shares representing approximately 95% of the voting power of our outstanding capital stock. As of September 30, 2021, our directors and executive officers and their affiliates collectively beneficially owned, in the aggregate, shares representing approximately 87.7% of the voting power of our outstanding capital stock.
As a result, the holders of our Class B common stock are able to exercise considerable influence over matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions, such as a merger or other sale of our company or our assets, even if their stock holdings represent less than a majority of the outstanding shares of our capital stock. This concentration of ownership limits the ability of other stockholders to influence corporate matters andunrelated
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or disproportionate to the operating performance of those companies. Broad market and industry factors may cause us to make strategic decisions that could involve risks to you or that may not be aligned with your interests. This control may adverselyseriously affect the market price of our Class A common stock.
Further, future transfers by holdersstock, regardless of our Class B common stock will generally result in those shares converting into sharesactual operating performance.

In the past, following periods of our Class A common stock, subject to limited exceptions, such as certain transfers effected for tax or estate planning purposes. The conversion of shares of our Class B common stock into shares of our Class A common stock will have the effect, over time, of increasing the relative voting power of those holders of Class B common stock who retain their sharesvolatility in the long-term.
In addition, while we do not expect to issue any additional shares of Class B common stock, any future issuances of Class B common stock would be dilutive to holders of Class A common stock. Such issuances would also reduce the voting power of our Class A common stock as compared to Class B common stockoverall market and could further concentrate the voting power of holders of our Class B common stock relative to holders of our Class A common stock.
We cannot predict the impact our dual-class structure may have on the market price of a particular company’s securities, securities class action litigation has often been instituted against these companies. Securities litigation against us, such as the class action lawsuit filed on September 26, 2022, could result in substantial costs, divert our Classmanagement’s attention and resources from our business, and, if the claims are successful, our business could be harmed. This risk could materially adversely affect our business, results of operations, and financial condition. A common stock.description of our legal proceedings can be found in “Note 16—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.

We cannot predict whetherThe occurrence of one or more of the foregoing and other factors may cause our dual-class structure, combined with the concentrated controlresults of operations to vary significantly. In addition, a significant percentage of our stockholders who heldoperating expenses is fixed in nature and is based on forecasted revenue and trends. Accordingly, in the event of a revenue shortfall, we may not be able to mitigate the negative impact on our capital stock priorincome (loss) and margins in the short term. If we fail to meet or exceed the completionexpectations of our IPO, including our executive officers, employees, and directors and their affiliates, will result in a lowerinvestors or more volatile market price of our Class A common stock or in adverse publicity or other adverse consequences. For example, certain index providers have announced restrictions on including companies with multiple class share structures in certain of their indices. In July 2017, FTSE Russell and Standard & Poor’s announced that they would cease to allow most newly public companies utilizing dual or multi-class capital structures to be included in their indices. Undersecurities analysts, then the announced policies, our dual class capital structure would make us ineligible for inclusion in any of these indices. Given the sustained flow of investment funds into passive strategies that seek to track certain indexes, exclusion from stock indexes would likely preclude investment by many of these funds and could make our Class A common stock less attractive to other investors. As a result, the markettrading price of our Class A common stock could be adversely affected.fall substantially.
An active public trading market
We may not develop or be sustained.realize the anticipated long-term stockholder value of our Stock Buyback Program, and any failure to repurchase our Class A common stock after we have announced our intention to do so may negatively impact our stock price. Share repurchases could also increase the volatility of our stock price and diminish our cash reserves.
Prior
On September 7, 2022, our Board of Directors authorized the Stock Buyback Program, under which we may repurchase up to our IPO, there was no public market for$100 million of our Class A common stock. An active public tradingSuch repurchases may be made from time to time on a discretionary basis through open market forrepurchases, privately negotiated transactions, block purchases, or other means, and will be structured to occur in compliance with applicable securities laws. Our repurchase program does not have an expiration date and does not obligate us to repurchase any specific dollar amount or to acquire any specific number of shares. Further, the program may be modified, suspended or terminated at any time by the Board of Directors at its discretion.

Any failure to repurchase our Class A common stock after we have announced our intention to do so may not continue to develop or, if further developed, it may not be sustained. The lack of an active market may impair your ability to sell your shares at the time you wish to sell them or at a price that you consider reasonable. The lack of an active market may also reduce the fair value of your shares. An inactive market may also impairnegatively impact our ability to raise capital to continue to fund operations by selling sharesreputation and investor confidence in us and may impairnegatively impact our ability to acquire other companies or technologies by using our shares as consideration.stock price.
Future sales
The existence of our Class A common stock in the public marketStock Buyback Program could cause our stock price to trade higher than it otherwise would. Although the market price of our Class A common stockprogram is intended to decline.
Sales of a substantial number of shares of our Class A common stock in the public market, or the perception that these sales might occur, could depress the market price of our Class A common stock and could impair our ability to raise capital through the sale of additional equity securities. Many of our existing equity holders have substantial unrecognized gains on theenhance long-term stockholder value, of the equity they hold, and therefore they may take steps to sell their shares or otherwise secure the unrecognized gains on those shares. We are unable to predict the timing of or the effect that such sales may have on the prevailing market price of our Class A common stock.
There were 39,815,982 shares of common stock issuable upon the exercise of options outstanding as of September 30, 2021. We have registered all of the shares of Class A common stock and Class B common stock issuable upon exercise of outstanding options or other equity incentives we may grant in the future, for public resale under the Securities Act. The shares of Class A common stock and Class B common stockthere is no assurance it will become eligible for sale in the public market to the extent such options are exercised, subject to compliance with applicable securities laws.
As of September 30, 2021, holders of a substantial number of shares of our capital stock outstanding as of such date, had rights, subject to some conditions, to require us to file registration statements covering the sale of their shares or to include their shares in registration statements that we may file for ourselves or other stockholders.
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Our issuance of additional capital stock in connection with financings, acquisitions, investments, our equity incentive plans, or otherwise will dilute all other stockholders.
We expect to issue additional capital stock in the future that will result in dilution to all other stockholders. We expect to grant equity awards to employees, directors, and consultants under our equity incentive plans. We may also raise capital through equity financings in the future. As part of our business strategy, we may acquire or make investments in companies, products, or technologies and issue equity securities to pay for any such acquisition or investment. Any such issuances of additional capital stock may cause stockholders to experience significant dilution of their ownership interests and the per share value of our Class A common stock to decline.
If our operating and financial performance in any given period does not meet the guidance that we provide to the public or the expectations of investment analysts, the market price of our Class A common stock may decline.
We may, but are not obligated to, provide public guidance on our expected operating and financial results for future periods. Any such guidance will comprise forward-looking statements, subject to the risks and uncertainties described in this Quarterly Report on Form 10-Q and in our other public filings and public statements. Our ability to provide this public guidance, and our ability to accurately forecast our results of operations, may be impacted by the COVID-19 pandemic. Our actual results may not always be in line with or exceed any guidance we have provided, especially in times of economic uncertainty, such as the current global economic uncertainty being experienced as a result of the COVID-19 pandemic. If, in the future, our operating or financial results for a particular period do not meet any guidance we provide or the expectations of investment analysts, or if we reduce our guidance for future periods,so because the market price of our Class A common stock may decline as well. Even ifbelow the levels at which we do issue public guidance, there can be no assurance that we will continue to do so inrepurchased shares and short-term stock price fluctuations could reduce the future.effectiveness of the program.
If securities or industry analysts do not publish research or publish unfavorable or inaccurate research about our business, the market price and trading volume of
Repurchasing our Class A common stock could decline.
The market price and trading volumewill reduce the amount of our Class A common stock is heavily influenced by the way analysts interpret our financial informationcash we have available to fund working capital, capital expenditures, strategic acquisitions, or business opportunities, and other disclosures. We do not have control over these analysts. If few securities analysts commence coverage of us, or if industry analysts cease coverage of us, our stock price would be negatively affected. If securities or industry analysts do not publish research or reports about our business, downgrade our Class A common stock, or publish negative reports about our business, our stock price would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, demand for our Class A common stock could decrease, which might cause our stock price to decline and could decrease the trading volume of our Class A common stock.
We do not intend to pay dividends for the foreseeable future and, as a result, your ability to achieve a return on your investment will depend on appreciation in the price of our Class A common stock.
We have never declared or paid any cash dividends on our capital stock, and we do not intend to pay any cash dividends in the foreseeable future. Any determination to pay dividends in the future will be at the discretion of our board of directors. Accordingly, you may need to rely on sales of our Class A common stock after price appreciation, which may never occur, as the only way to realize any future gains on your investment.
We are an “emerging growth company” and a “smaller reporting company,” and we cannot be certain if the reduced reporting and disclosure requirements applicable to emerging growth companies and smaller reporting companies will make our Class A common stock less attractive to investors.
We are an “emerging growth company” and a “smaller reporting company,” as defined in the JOBS Act,general corporate purposes, and we may take advantagefail to realize the anticipated long-term stockholder value of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies”the Stock Buyback Program. Furthermore, the timing and “smaller reporting companies,” including the auditor attestation requirements of Section 404, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approvalamount of any golden parachute payments not previously approved. Pursuantrepurchases, if any, will be subject to Section 107 of the JOBS Act,liquidity, market and economic conditions, compliance with applicable legal requirements such as an emerging growth company, we have elected to use the extended transition period for complying with new or revised accounting standards until those standards would otherwise apply to private companies. As a result, our condensed financial statements may not be comparable to the financial statements of issuers who are required to comply with the effective dates for new or revised accounting standards that are applicable to public companies, which may make our Class A common stock less attractive toDelaware surplus and solvency tests, and other relevant factors.

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investors. In addition, if we cease to be an emerging growth company, we will no longer be able to use the extended transition period for complying with new or revised accounting standards.

We will remain an emerging growth company until the earliest of: (1) December 31, 2026; (2) the last day of the first fiscal year in which our annual gross revenue is $1.07 billion or more; (3) the date on which we have, during the previous rolling three-year period, issued more than $1 billion in non-convertible debt securities; and (4) the last day of the fiscal year in which the market value of our equity securities, which includes Class A common stock and Class B common stock held by non-affiliates exceeds $700 million as of June 30 of such fiscal year.
We may continue to be a smaller reporting company even after we are no longer an emerging growth company. We may take advantage of certain of the scaled disclosures available to smaller reporting companies and will be able to take advantage of these scaled disclosures for so long as (i) the market value of our voting and non-voting common stock held by non-affiliates is less than $250 million measured on the last business day of our second fiscal quarter or (ii) our annual revenue is less than $100 million during the most recently completed fiscal year and the market value of our voting and non-voting common stock held by non-affiliates is less than $700 million measured on the last business day of our second fiscal quarter.
We cannot predict if investors will find our Class A common stock less attractive if we choose to rely on these exemptions. For example, if we do not adopt a new or revised accounting standard, our future results of operations may not be as comparable to the results of operations of certain other companies in our industry that adopted such standards. If some investors find our Class A common stock less attractive as a result, there may be a less active trading market for our Class A common stock, and our stock price may be more volatile.
Our management team has limited experience managing a public company.
Our management team has limited experience managing a publicly-traded company, interacting with public company investors and securities analysts, and complying with the increasingly complex laws pertaining to public companies. These new obligations and constituents require significant attention from our management team and could divert their attention away from the day-to-day management of our business, which could harm our business, results of operations, and financial condition.
We will incur increased costs as a result of operating as a public company, and our management will be required to devote substantial time to compliance with our public company responsibilities and corporate governance practices.
As a public company, we will incur significant legal, accounting, and other expenses that we did not incur as a private company, which we expect to further increase after we are no longer an “emerging growth company.” The Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of the NYSE and other applicable securities rules and regulations impose various requirements on public companies. Our management and other personnel devote a substantial amount of time to compliance with these requirements. Moreover, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly. We cannot predict or estimate the amount of additional costs we will incur as a public company or the specific timing of such costs.
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Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of our company more difficult, limit attempts by our stockholders to replace or remove our current management, and limit the market price of our Class A common stock.
Provisions in our amended and restated certificate of incorporation and amended and restated bylaws, may have the effect of delaying or preventing a change of control or changes in our management. Our amended and restated certificate of incorporation and amended and restated bylaws include provisions that:
•authorize our board of directors to issue, without further action by the stockholders, shares of undesignated preferred stock with terms, rights, and preferences determined by our board of directors that may be senior to our common stock;
•require that any action to be taken by our stockholders be affected at a duly called annual or special meeting and not by written consent;
•specify that special meetings of our stockholders can be called only by our board of directors, the chairperson of our board of directors, or our chief executive officer;
•establish an advance notice procedure for stockholder proposals to be brought before an annual meeting, including proposed nominations of persons for election to our board of directors;
•establish that our board of directors is divided into three classes, with each class serving three-year staggered terms;
•prohibit cumulative voting in the election of directors;
•provide that our directors may be removed for cause only upon the vote of at least 66 2/3% of our outstanding shares of common stock;
•provide that vacancies on our board of directors may be filled only by a majority of directors then in office, even though less than a quorum; and
•require the approval of our board of directors or the holders of at least 66 2/3% of our outstanding shares of voting stock to amend our bylaws and certain provisions of our certificate of incorporation.
These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors, which is responsible for appointing the members of our management. In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which generally, subject to certain exceptions, prohibits a Delaware corporation from engaging in any of a broad range of business combinations with any “interested” stockholder for a period of three years following the date on which the stockholder became an “interested” stockholder. Any of the foregoing provisions could limit the price that investors might be willing to pay in the future for shares of our Class A common stock, and they could deter potential acquirers of our company, thereby reducing the likelihood that you would receive a premium for your shares of our Class A common stock in an acquisition.
Our amended and restated certificate of incorporation designates the Court of Chancery of the State of Delaware and, to the extent enforceable, the federal district courts of the United States of America as the exclusive forums for substantially all disputes between us and our stockholders, which may restrict our stockholders’ ability to choose the judicial forum for disputes with us or our directors, officers, or employees.
Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for the following types of claims or causes of action under Delaware statutory or common law: any derivative claims or causes of action brought on our behalf; any claims or causes of action asserting a breach of a fiduciary duty; any action asserting a claim against us arising pursuant to the Delaware General Corporation Law, our amended and restated certificate of incorporation, or our amended and restated bylaws; or any action asserting a claim against us that is governed by the internal affairs doctrine. The provisions would not apply to suits brought to enforce a duty or liability created by the Exchange Act. In addition, our amended and restated certificate of incorporation provides that the federal district courts of the United States of America will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act, subject to and contingent upon a final adjudication in the State of Delaware of the enforceability of such exclusive forum provision.
These choice of forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, or other employees. If a court were to find either choice of forum provision contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions. For example, the Court of Chancery of
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the State of Delaware recently determined that the exclusive forum provision of federal district courts of the United States of America for resolving any complaint asserting a cause of action arising under the Securities Act is not enforceable.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Unregistered Sales of Equity Securities
Wisely Acquisition
On October 21, 2021, we entered into an Agreement and Plan of Reorganization, or the Merger Agreement, with Sparty Merger Sub I, Inc., a Delaware corporation and our wholly owned subsidiary, Sparty Merger Sub II, LLC, a Delaware limited liability company and our wholly owned subsidiary, Wisely Inc., a Delaware corporation, or Wisely, and Fortis Advisors LLC, solely in its capacity as the representative of Wisely’s securityholders. The transaction, which we refer to as the Wisely Acquisition, closed on November 4, 2021 pursuant to the terms set forth in the Merger Agreement.
On November 4, 2021, as part of the consideration for the Wisely Acquisition, we issued 3,460,168 unregistered shares of our Class A common stock. Such shares of Class A common stock were issued in a private placement pursuant to an exemption from registration under the Securities Act of 1933, as amended, or the Securities Act, provided by Section 4(a)(2) of the Securities Act.None.
Use of Proceeds from our IPO
On March 19,16, 2021, we closed our IPO of 20,700,000 shares of our Class A common stock at a price to the public of $25.00 per share, including the full exercise by the underwriters of their option to purchase up to an additional 2,700,000 shares of Class A common stock, resulting in net proceeds to us of approximately $485.5 million, after deducting underwriting discounts and commissions. All of the shares issued and sold in our IPO were registered under the Securities Act pursuant to a registration statement on Form S-1 (File No. 333-253314), which was declared effective by the SEC on March 16, 2021.
for our IPO. There has been no material change in the planned use of proceeds from our IPO from those disclosed in our Prospectus.final prospectus dated March 16, 2021 and filed with the SEC pursuant to Rule 424(b) under the Securities Act.

Share Repurchases
We did not repurchase any shares of our common stock in the third quarter of 2022. As of September 30, 2022, there was $100.0 million remaining under the open-ended Stock Buyback Program authorized by the Board of Directors on September 7, 2022.
Item 3. Defaults Upon Senior Securities.
Not applicable.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
Not applicable.

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Item 6. Exhibits.
The documents listed in the Exhibit Index of this Quarterly Report on Form 10-Q are incorporated by reference or are filed with this Quarterly Report on Form 10-Q, in each case as indicated therein.
EXHIBIT INDEX
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Exhibit NumberDescriptionFiling Date
3.1
March 22, 2021
3.2
March 22, 2021
4.1
March 15,8, 2021
10.1
Filed herewith
31.1
Filed herewith
31.2
Filed herewith
32.1*
Furnished herewith
101.INSXBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.Filed herewith
101.SCHXBRL Taxonomy Extension Schema DocumentFiled herewith
101.CALXBRL Taxonomy Extension Calculation Linkbase DocumentFiled herewith
101.DEFXBRL Taxonomy Extension Definition Linkbase DocumentFiled herewith
101.LABXBRL Taxonomy Extension Label Linkbase DocumentFiled herewith
101.PREXBRL Taxonomy Extension Presentation Linkbase DocumentFiled herewith
104Cover Page with Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101).
_____________________________
*The certifications furnished in Exhibit 32.1 hereto are deemed to accompany this Quarterly Report on Form 10-Q and will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that the registrant specifically incorporates it by reference.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Olo Inc.
November 9, 20212022
_____________________/s/ Noah H. Glass_____________________
Noah H. Glass
Chief Executive Officer (Principal Executive Officer)
November 9, 20212022
_____________________/s/ Peter Benevides__________________
Peter Benevides
Chief Financial Officer (Principal Accounting and Financial Officer)
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