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Digital-ordering solutions company Olo files for IPO

$100M IPO a barometer of digital marketplace for restaurants

Olo, a technology company that provides order integration and fulfillment technology to restaurants, has filed for an initial public offering valued at $100M. The leading food-ordering open-SAAS platform architecture company has experienced incredible demand for its products as restaurant companies have turned to digital ordering, propelled by customers seeking off-premises meal consumption.

The company will use the proceeds from the IPO to increase its financial flexibility, providing increased liquidity and access to the capital markets, according to the Securities and Exchange Commission S-1 filing. As Olo’s revenue has grown, so too has its profitability with gross profit increasing from 66 percent in 2019 to 81 percent in 2020. Meanwhile, revenue nearly doubled in 2020 to $98.4M as operating income grew to $20.8M.

The New York-based company has no debt and is well-positioned for increased demand of digital ordering in the near future, which it believes is a $400B market.

Olo’s IPO will act as a litmus test, decisively grading the value and prospect of companies that help restaurants fulfill on-demand, off-premises business. It also serves as a broader barometer of the future of digital ordering within the restaurant enterprise environment.

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In 2005, Noah Glass founded the company as Mobo, which was renamed in 2010 to Olo as the firm’s strategy shifted to supporting enterprise customers. A prospectus summary indicates that the company serves 64,000 restaurants and 400 brands. Applebee’s, Denny’s, Five Guys, Shake Shack and Wingstop are among these customers.

The three main solution modules Olo created are Ordering, Dispatch and Rails. Ordering and order integration are realized through a white-label commerce solution that allows Olo’s customers to accept payment and ordering from nearly any digital device. Dispatch is a solution to help restaurants fulfill direct-delivery orders, and Rails serves as an aggregator and channel management solution connecting restaurants to a digital marketplace and speeding orders from third-party providers to restaurant point-of-sale systems.

The technology company’s revenues come primarily through subscription revenue and transaction revenue derived from its technology solutions to restaurants. Much of its future growth will depend on the growth of off-premises business within the industry and will pivot off the general restaurant environment, currently impacted by COVID. Thus far, the pandemic’s impact appears to be highly-beneficial to Olo’s prospects as the pandemic has accelerated off-premises consumption, and with it, digital ordering.

Currently, more than 40 percent of the company’s revenue comes from transaction revenue stemming from Dispatch and Rails, growing from less than 7 percent two years ago.

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“Olo’s mission is to help our restaurant customers thrive by best meeting the needs of on-demand consumers,” wrote Glass in a letter included in the S-1 filing. “Olo is a software platform for restaurants. We are not an aggregator or marketplace for consumers. Our business-to-business-to-consumer (B2B2C) approach means that we are truly partners with our restaurant customers. We enable our restaurant customers to better serve their consumers, rather than competing with them for those same consumers.”

The vision of the founder was connecting digital devices and smartphones to a cloud-based system for seamless and efficient fulfillment for customers ordering food.

Nearly a decade ago, Glass communicated to this writer, “I think the big thing we saw with Olo and other companies in the space is that customers are carrying a kiosk in their pockets, which is the smartphone, and that is a way for the restaurant industry to tap into this self-service world in which other consumer-oriented segments have been operating for many, many years now.”

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Goldman Sachs & Co. LLC and J.P. Morgan Securities LLC are the lead underwriters for the IPO.

Photo credit: Louis Hansel (featured preview image)

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