Restaurant software company (NYSE:OLO) reported Q4 CY2024 results topping the market’s revenue expectations , with sales up 20.7% year on year to $76.07 million. Guidance for next quarter’s revenue was better than expected at $77.45 million at the midpoint, 1.4% above analysts’ estimates. Its non-GAAP profit of $0.06 per share was in line with analysts’ consensus estimates.
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Olo (OLO) Q4 CY2024 Highlights:
“Team Olo put together a fantastic 2024 that included strong financial performance, new and expansion deployments with marquee restaurant brands, and platform reliability and innovation that powered $29 billion in gross merchandise volume and $2.8 billion in gross payment volume for the year,” said Noah Glass, Olo’s Founder and CEO.
Company Overview
Founded by Noah Glass, who wanted to get a cup of coffee faster on his way to work, Olo (NYSE:OLO) provides restaurants and food retailers with software to manage food orders and delivery.
Hospitality & Restaurant Software
Enterprise resource planning (ERP) and customer relationship management (CRM) are two of the largest software categories dominated by the likes of Microsoft, Oracle, and Salesforce.com. Today, the secular trend of mass customization is driving vertical software that customizes ERP and CRM functions for specific industry requirements. Restaurants are a prime example where a set of customized software providers have sprung up in recent years to create unique operating systems that blend tax and accounting software, order management and delivery, along with supply chain management. Hotels and other hospitality providers are another example.
Sales Growth
A company’s long-term sales performance is one signal of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Over the last three years, Olo grew its sales at a solid 24% compounded annual growth rate. Its growth beat the average software company and shows its offerings resonate with customers.
This quarter, Olo reported robust year-on-year revenue growth of 20.7%, and its $76.07 million of revenue topped Wall Street estimates by 4.5%. Company management is currently guiding for a 16.4% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 14.4% over the next 12 months, a deceleration versus the last three years. Still, this projection is healthy and implies the market is factoring in success for its products and services.
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Billings
Billings is a non-GAAP metric that is often called “cash revenue” because it shows how much money the company has collected from customers in a certain period. This is different from revenue, which must be recognized in pieces over the length of a contract.
Olo’s billings punched in at $76.17 million in Q4, and over the last four quarters, its growth was fantastic as it averaged 26.1% year-on-year increases. This performance aligned with its total sales growth, indicating robust customer demand. The high level of cash collected from customers also enhances liquidity and provides a solid foundation for future investments and growth.
Customer Retention
One of the best parts about the software-as-a-service business model (and a reason why they trade at high valuation multiples) is that customers typically spend more on a company’s products and services over time.
Olo’s net revenue retention rate, a key performance metric measuring how much money existing customers from a year ago are spending today, was 119% in Q4. This means Olo would’ve grown its revenue by 18.8% even if it didn’t win any new customers over the last 12 months.
Despite falling over the last year, Olo still has a good net retention rate, proving that customers are satisfied with its software and getting more value from it over time, which is always great to see.
Key Takeaways from Olo’s Q4 Results
We enjoyed seeing Olo beat analysts’ billings expectations this quarter. We were also happy its revenue outperformed Wall Street’s estimates. On the other hand, its net revenue retention fell and its revenue guidance for next year suggests a slowdown in demand. Overall, this quarter was mixed but still had some key positives. The stock traded up 13.9% to $7.51 immediately following the results.
Olo put up rock-solid earnings, but one quarter doesn’t necessarily make the stock a buy. Let’s see if this is a good investment. The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free .