10-Q 1 olo-20220930.htm 10-Q olo-20220930
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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, 2022
¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 001-40213
olo-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
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x  No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes x  No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer¨Accelerated filer¨
Non-accelerated filerxSmaller reporting company¨
 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
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Item 1A.
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Item 6.



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, 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 past due to the COVID-19 pandemic and the associated government-imposed restrictions on consumer preferences for digital ordering and customer adoption of multi-modules;
our ability to acquire new customers and successfully retain existing customers;
our ability to develop and release new products and 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 pandemic or other public health 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 significant 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 the 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 elsewhere in this Quarterly Report on Form 10-Q and those listed in the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 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 that “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.


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,
2022
As of
December 31,
2021
ASSETS  
Current assets:  
Cash and cash equivalents$366,399 $514,445 
Short-term investments101,956  
Accounts receivable, net of allowances of $612 and $657, respectively
43,108 42,319 
Contract assets402 568 
Deferred contract costs2,729 2,567 
Prepaid expenses and other current assets6,644 5,718 
Total current assets521,238 565,617 
Property and equipment, net10,540 3,304 
Intangible assets, net22,688 19,635 
Goodwill207,540 162,956 
Contract assets, noncurrent619 387 
Deferred contract costs, noncurrent3,991 3,616 
Operating lease right-of-use assets14,568  
Long-term investments804  
Other assets, noncurrent452 361 
Total assets$782,440 $755,876 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$1,930 $2,184 
Accrued expenses and other current liabilities46,543 45,395 
Unearned revenue2,608 1,190 
Operating lease liabilities, current2,666  
Total current liabilities53,747 48,769 
Unearned revenue, noncurrent1,121 3,014 
Operating lease liabilities, noncurrent16,328  
Other liabilities, noncurrent243 2,343 
Total liabilities71,439 54,126 
Commitments and contingencies (Note 16)
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, respectively
163 158 
Preferred stock, $0.001 par value; 20,000,000 shares authorized at September 30, 2022 and December 31, 2021
  
Additional paid-in capital860,574 813,166 
Accumulated deficit(149,316)(111,574)
Accumulated other comprehensive loss(420) 
Total stockholders’ equity711,001 701,750 
Total liabilities and stockholders’ equity$782,440 $755,876 
The accompanying notes are an integral part of these financial statements.

1

OLO INC.
Condensed Consolidated Statements of Operations (Unaudited)
(in thousands, except share and per share amounts)

Three Months Ended
September 30,
Nine Months Ended
September 30,
2022202120222021
Revenue:
Platform$46,357 $36,084 $132,361 $105,533 
Professional services and other909 1,306 3,262 3,876 
Total revenue47,266 37,390 135,623 109,409 
Cost of revenue:
Platform13,920 6,632 37,693 18,419 
Professional services and other1,346 1,532 4,543 3,958 
Total cost of revenue15,266 8,164 42,236 22,377 
Gross Profit32,000 29,226 93,387 87,032 
Operating expenses:
Research and development19,101 14,485 53,159 42,872 
General and administrative20,894 21,270 56,090 53,034 
Sales and marketing7,923 4,728 24,890 12,265 
Total operating expenses47,918 40,483 134,139 108,171 
Loss from operations(15,918)(11,257)(40,752)(21,139)
Other income (expenses), net:
Interest income1,525  2,110  
Interest expense(70) (116) 
Other (expense) income(7)(15)6 (23)
Change in fair value of warrant liability   (18,930)
Total other income (expenses), net1,448 (15)2,000 (18,953)
Loss before income taxes(14,470)(11,272)(38,752)(40,092)
Provision (benefit) for income taxes90 36 (1,010)110 
Net loss$(14,560)$(11,308)$(37,742)$(40,202)
Accretion of redeemable convertible preferred stock to redemption value   (14)
Net loss attributable to Class A and Class B common stockholders$(14,560)$(11,308)$(37,742)$(40,216)
Net loss per share attributable to Class A and Class B common stockholders:
Basic$(0.09)$(0.08)$(0.23)$(0.35)
Diluted$(0.09)$(0.08)$(0.23)$(0.35)
Weighted-average Class A and Class B common shares outstanding:
Basic162,364,654 148,452,987 160,667,412 113,451,378 
Diluted162,364,654 148,452,987 160,667,412 113,451,378 
The accompanying notes are an integral part of these financial statements.

2

OLO INC.
Condensed Consolidated Statements of Comprehensive Loss (Unaudited)
(in thousands)

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.

3

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 

4

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.

5

OLO INC.
Condensed Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
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 withholdings 7,083 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 


6

OLO INC.
Condensed Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
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.

7

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, our Board of Directors and stockholders approved our name change from Mobo Systems, Inc. to Olo Inc. Unless the context otherwise indicates or requires, references to “we,” “us,” “our,” and “the Company” shall refer to Olo Inc.
We are an open SaaS platform for restaurants powering the industry’s digital transformation. Our platform powers restaurant brands’ on-demand digital commerce operations, enabling digital ordering, delivery, front-of-house management, and payments, while further strengthening and enhancing restaurants’ direct consumer relationships. 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 guests. Our platform and application programming interfaces seamlessly integrate with a wide range of solutions, unifying disparate technologies across the restaurant ecosystem. Restaurant brands rely on us to increase their digital omni-channel sales, maximize profitability, establish and maintain direct guest relationships, and collect, protect, and leverage valuable customer data.
Emerging Growth Company Status
We currently 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. 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.
However, as of the last business day of our second fiscal quarter of 2022, the market value of our Class A common stock that was held by non-affiliates exceeded $700 million, and as a result, we will no longer qualify as an emerging growth company as of the end of 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(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 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.

8

OLO INC.
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
2.Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements and accompanying notes were prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and in accordance with the rules and regulations of the United States Securities and Exchange Commission (the “SEC”). Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been omitted pursuant to such rules and regulations. The December 31, 2021 condensed consolidated balance sheet was derived from the audited financial statements as of that date, but may not include all disclosures including certain footnotes required by U.S. GAAP on an annual reporting basis.
These unaudited condensed consolidated financial statements have been prepared on a basis consistent with our annual financial statements and, in the opinion of management, reflect all adjustments, which include all normal recurring adjustments necessary to fairly state our financial position as of September 30, 2022, our results of operations and comprehensive loss for the three and nine months ended September 30, 2022 and 2021 and our cash flows for the nine months ended September 30, 2022 and 2021, respectively. The results of operations for the three and nine months ended September 30, 2022 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2022 or for any other future annual or interim period.
The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the consolidated financial statements and related notes included in our Annual Report on Form 10-K filed with the SEC on February 25, 2022. All intercompany balances and transactions have been eliminated in consolidation.
Certain prior period amounts have been reclassified to conform to the 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, stock-based compensation including the determination of the fair value of our stock-based awards, realization of deferred tax assets, estimated life of our long-lived assets, purchase price allocations for business combinations, valuation of the acquired intangibles purchased in a business combination, valuation of goodwill, estimated standalone selling price of our performance obligations, and estimated consideration for implementation services and transactional revenue in certain arrangements. We base these estimates on historical experience and on various other market-specific and relevant assumptions that we believe to be reasonable under the circumstances. Actual results could differ from these estimates and such differences could be material to our financial position and results of operations.
Significant Accounting Policies
Our significant accounting policies are outlined in Note 2, “Significant Accounting Policies” in the Notes to Consolidated Financial Statements included in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2021. During the 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, 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, no customer had a balance over 10% of our accounts

9

OLO INC.
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
receivable. For the three months ended September 30, 2022 and 2021, one customer accounted for 12% and 16% of our revenue, respectively. For the nine months ended September 30, 2022 and 2021, one customer accounted for 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

10

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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OLO INC.
Notes to the Condensed Consolidated Financial Statements
(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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OLO INC.
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 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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OLO INC.
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
The following tables present the costs, net unrealized losses, and fair value by major security type for our investments as of September 30, 2022 and December 31, 2021 (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