OLO INC. 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 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 elsewhere in this Quarterly Report on Form 10-Q, particularly in the section entitled "Special Note Regarding Forward-Looking Statements," and in our Annual Report on Form 10-K for the year endedDecember 31, 2021 , filed with theSecurities and Exchange Commission , orSEC , onFebruary 25, 2022 . Overview
We are Olo, a leading open SaaS platform for restaurants.
Our platform powers restaurant brands' on-demand digital commerce operations, enabling digital ordering, delivery, front-of-house, or FOH, management and payments, while further strengthening and enhancing restaurants' 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 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 omni-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 endedDecember 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, inthe United States to work with us and has been a factor in our high dollar-based net revenue 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 , andAP 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 channels, through our Ordering, Network, Switchboard, Kiosk, and 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. In 2021, we acquiredWisely Inc , or Wisely. This acquisition added our Guest Engagement solutions, formerly known as Customer Engagement, a suite of restaurant-centric marketing and sentiment solutions enabling restaurants to collect, analyze, and act on guest data to deepen relationships, boost revenue, and increase Customer Lifetime Value, or CLV, through the Marketing Automation, Sentiment, and Guest Data Platform, or GDP, formerly known as Customer Data Platform, modules, as well as our FOH solutions which enable restaurants to streamline the queue orders from multiple sales channels, optimize seat utilization in the dining room, and increase flow-through of reservation and waitlist parties through the Host module. The key milestones in our corporate history are the following:
•2005: Olo Founder and CEO
•2010: We began rebranding as "Olo" and shifted our focus to enterprise customers.
•2013: We surpassed
•2014: We surpassed
•2015: We launched Dispatch, our first significant product extension.
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•2016: We surpassed
•2017: We launched Rails and surpassed
•2018: We surpassed
•2019: We surpassed
•2020: We reached nearly
•2021: We completed our IPO, executed our first acquisition, and surpassed
•2022: We announced commercial availability of
Leading restaurant brands trust Olo'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 consumers 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. To our knowledge, we have never experienced a material breach of customer or consumer data. Our open SaaS platform integrates with over 300 restaurant technology solutions including point-of-sale, or POS, systems, aggregators, delivery service providers, or DSPs, payment processors, user experience, or UX, user interface, or UI, providers, 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 contracts typically have initial terms of three years or longer, with continuous one-year automatic renewal periods, providing visibility into our future financial performance. Our enterprise brands, meaning those brands having 100 or more locations, tend 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 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 from our Ordering, Switchboard, Kiosk, Virtual Brands, Marketing Automation, Sentiment, GDP, and Host modules. 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 includes revenue generated from our Rails, Dispatch, Virtual Brands, andOlo Pay modules. 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.,
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 theU.S. restaurant industry, adding to our over 600 existing brands across approximately 82,000 active locations as ofJune 30, 2022 , up from 27 -------------------------------------------------------------------------------- approximately 74,000 active locations as ofJune 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.
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 contracts typically have initial terms of three years or longer, with continuous one-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 ARPU 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.
The following summarizes our ARPU and number of active locations for the three months ended, or as of, each of the dates presented.
Three Months Ended June 30,
2022 2021
Average Revenue Per Unit $ 544 $ 486
Ending Active Locations 82,000 74,000
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
NRR. 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 base and the long-term value of our customer
relationships.
For the period ending June 30, 2022 , we maintained an NRR of approximately 106%.
While we maintained an NRR over 120% throughout 2021, 2020, and 2019, we
observed a decline in NRR in the first and second quarters 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 return to NRR in excess of 120% in the near
term as customers continue to adopt additional product modules such as Olo Pay ,
FOH and Guest Engagement solutions.
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 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
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we also expect the industry's secular tailwinds to help increase transaction
order volume as more consumers order food through digital means, including on-
and off-premise. As transaction volume increases, the subscription revenue we
receive from certain subscription-based modules may also increase as customers
subscribe for higher tier ordering packages to enable more transactions.
Additionally, as we continue 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 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, data analytics, and 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 requirements 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, OSPs, aggregators, payment processors, loyalty programs, on-premise ordering providers, KDSs, labor management providers, inventory management providers, and 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 expands our capabilities and facilitates 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 small- and medium-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 ofthe 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. 29 --------------------------------------------------------------------------------
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 have initial terms of three years or longer, with continuous one-year automatic renewal periods. We bill monthly in arrears. A majority of our platform revenue is derived from our Order Management solutions, which consist of our Ordering, Switchboard, Kiosk, Network, and Virtual Brands modules. We also generate platform revenue from our Delivery Enablement solutions, which include our Dispatch and Rails modules, as well as fromOlo Pay . We may also charge third-party aggregators and other service providers in our ecosystem a per-transaction fee for access to our Dispatch and Rails modules. Subsequent to the Wisely Acquisition, we also generate revenue from our Guest Engagement and 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.
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 internal-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 an absolute dollar basis and
as a percentage of revenue in the short-term as we continue to invest in
innovative solutions to support our customers' 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, amortization of intangible assets, and other administrative functions. In addition, general and administrative expenses include travel-related expenses and allocated overhead. 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, amortization 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 percentage 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 Income (Expenses), Net
Other income (expenses), net consists primarily of income earned on our investments and money-market funds in cash and cash 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 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
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Results of Operations
The following tables set forth our results of operations for the periods
presented.
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 2022 2021
(in thousands)
Revenue:
Platform $ 44,538 $ 34,526 $ 86,004 $ 69,449
Professional services and other 1,063 1,370 2,353 2,570
Total revenue 45,601 35,896 88,357 72,019
Cost of revenue:
Platform (2) 12,749 6,180 23,773 11,787
Professional services and other (2) 1,419 1,183 3,197 2,426
Total cost of revenue 14,168 7,363 26,970 14,213
Gross Profit 31,433 28,533 61,387 57,806
Operating expenses:
Research and development (2) 17,233 13,931 34,058 28,387
General and administrative (2) (1) 17,235 13,310 35,196 31,764
Sales and marketing (2) 8,897 3,701 16,967 7,537
Total operating expenses 43,365 30,942 86,221 67,688
Loss from operations (11,932) (2,409) (24,834) (9,882)Other income (expenses), net: Interest income 533 - 585 - Interest expense (46) - (46) - Other income (expense) 7 10 13 (8) Change in fair value of warrant liability - - - (18,930) Total other income (expenses), net 494 10 552 (18,938) Loss before income taxes (11,438) (2,399) (24,282) (28,820) Provision (benefit) for income taxes 235 38 (1,100) 74 Net loss (11,673) (2,437) (23,182) (28,894) Accretion of redeemable convertible preferred stock to redemption value - - - (14) Net loss attributable to Class A and Class B common stockholders$ (11,673) $ (2,437) $ (23,182) $ (28,908)
(1) Includes charitable donation expense of
(2) Includes stock-based compensation expense as follows (in thousands):
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 2022 2021
Cost of revenue - platform $ 1,432 $ 744 $ 2,902 $ 1,180
Cost of revenue - professional services and
other 188 131 398 246
Research and development 3,413 2,500 6,811 5,952
General and administrative 5,087 4,237 10,125 8,095
Sales and marketing 1,357 536 2,949 924
Total stock-based compensation expense
$ 23,185 $ 16,397 32
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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 Six Months Ended
June 30, June 30,
2022 2021 2022 2021
Revenue:
Platform 97.7 % 96.2 % 97.3 % 96.4 %
Professional services and other 2.3 3.8 2.7 3.6
Total revenue 100.0 100.0 100.0 100.0
Cost of revenue:
Platform 28.0 17.2 26.9 16.4
Professional services and other 3.1 3.3 3.6 3.4
Total cost of revenue 31.1 20.5 30.5 19.7
Gross Profit 68.9 79.5 69.5 80.3
Operating expenses:
Research and development 37.8 38.8 38.5 39.4
General and administrative 37.8 37.1 39.8 44.1
Sales and marketing 19.5 10.3 19.2 10.5
Total operating expenses 95.1 86.2 97.6 94.0
Loss from operations (26.2) (6.7) (28.1) (13.7)
Other income (expenses), net:
Interest income 1.2 0.0 0.7 0.0
Interest expense (0.1) 0.0 (0.1) 0.0
Other income (expense) 0.0 0.0 0.0 0.0
Change in fair value of warrant liability 0.0 0.0 0.0 (26.3)
Total other income (expenses), net 1.1 0.0 0.6 (26.3)
Loss before income taxes (25.1) (6.7) (27.5) (40.0)
Provision (benefit) for income taxes 0.5 0.1 (1.2) 0.1
Net loss and comprehensive loss (25.6) (6.8) (26.2) (40.1)
Accretion of redeemable convertible
preferred stock to redemption value 0.0 0.0 0.0 0.0
Net loss attributable to Class A and Class
B common stockholders (25.6) % (6.8) % (26.2) % (40.1) %
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Comparison of the Three Months Ended
Revenue
Three Months Ended
June 30, Change
2022 2021 $ %
(in thousands, except percentages)
Revenue:
Platform $ 44,538 $ 34,526 $ 10,012 29.0 %
Professional services and other 1,063 1,370 (307) (22.4)
Total Revenue $ 45,601 $ 35,896 $ 9,705 27.0 %
Platform
Total platform revenue increased $10.0 million , or 29.0%, to $44.5 million for
the three months ended June 30, 2022 from $34.5 million for the three months
ended June 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 82,000 as of June 30, 2022 from
approximately 74,000 as of June 30, 2021 , and ARPU increased to approximately
$544 for the three months ended June 30, 2022 from approximately $486 for the
three months ended June 30, 2021 . For the three months ended June 30, 2022 and
2021, 51.6% and 47.2% of our platform revenue was subscription revenue,
respectively, and 48.4% and 52.8% was transaction revenue, respectively.
Professional Services and Other
Total professional services and other revenue decreased$0.3 million , or 22.4%, to$1.1 million for the three months endedJune 30, 2022 from$1.4 million for the three months endedJune 30, 2021 , primarily due to due to labor shortages affecting our restaurant customers at both the 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 to be offset as our deployment teams become more efficient and shorten deployment periods.
Cost of Revenue, Gross Profit, and Gross Margin
Three Months Ended
June 30, Change
2022 2021 $ %
(in thousands, except percentages)
Cost of revenues:
Platform $ 12,749 $ 6,180 $ 6,569 106.3 %
Professional services and other 1,419 1,183 236 19.9
Total cost of revenue $ 14,168 $ 7,363 $ 6,805 92.4 %
Percentage of revenue:
Platform 28.0 % 17.2 %
Professional services and other 3.1 3.3
Total cost of revenue 31.1 % 20.5 %
Gross Profit $ 31,433 $ 28,533 $ 2,900 10.2 %
Gross Margin 68.9 % 79.5 %
Platform
Total platform cost of revenue increased $6.6 million , or 106.3%, to $12.7
million for the three months ended June 30, 2022 from $6.2 million for the three
months ended June 30, 2021 . This increase was primarily the result of 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-term
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impacts due to our recent acquisitions of Wisely in 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$0.2 million , or 19.9%, to$1.4 million for the three months endedJune 30, 2022 from$1.2 million for the three months endedJune 30, 2021 . This increase was primarily the result of increased compensation costs to support the previously-mentioned growth in new active locations.
Gross Profit
Gross margin decreased to 68.9% for the three months endedJune 30, 2022 from 79.5% for the three months endedJune 30, 2021 . The decrease in gross profit margin was driven by higher platform and professional services and other compensation costs to support growth in transactions, the increase in new active locations coming onto the 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 withOlo Pay . Operating Expenses Research and Development Three Months Ended June 30, Change 2022 2021 $ % (in thousands, except percentages) Research and development$ 17,233 $ 13,931 $ 3,302 23.7 % Percentage of total revenue 37.8 % 38.8 % Research and development expense increased$3.3 million , or 23.7%, to$17.2 million for the three months endedJune 30, 2022 from$13.9 million for the three months endedJune 30, 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 percentage of total revenue, research and development expenses decreased to 37.8% for the three months endedJune 30, 2022 from 38.8% for the three months endedJune 30, 2021 .
General and Administrative
Three Months Ended
June 30, Change
2022 2021 $ %
(in thousands, except percentages)
General and administrative $ 17,235 $ 13,310 $ 3,925 29.5 %
Percentage of total revenue 37.8 % 37.1 %
General and administrative expense increased $3.9 million , or 29.5%, to $17.2
million for the three months ended June 30, 2022 from $13.3 million for the
three months ended June 30, 2021 . This increase was primarily a result of higher
compensation costs due to increased headcount to support the growth and stage of
the organization, as well as severance costs related to the departure of our
Chief Customer Officer. As a percentage of total revenue, general and
administrative expenses increased to 37.8% for the three months ended June 30,
2022 from 37.1% for the three months ended June 30, 2021 .
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Sales and Marketing
Three Months Ended
June 30, Change
2022 2021 $ %
(in thousands, except percentages)
Sales and marketing $ 8,897 $ 3,701 $ 5,196 140.4 %
Percentage of total revenue 19.5 % 10.3 %
Sales and marketing expense increased $5.2 million , or 140.4%, to $8.9 million
for the three months ended June 30, 2022 from $3.7 million for the three months
ended June 30, 2021 . This increase was primarily the result of additional
compensation costs, inclusive of commission costs, due to increases in
headcount, as well as costs associated with our in-person user conference,
Beyond4, which we held in the second quarter of 2022 for the first time in two
years, and intangible amortization costs related to our recent acquisitions. As
a percentage of total revenue, sales and marketing expense increased to 19.5%
for the three months ended June 30, 2022 from 10.3% for the three months ended
June 30, 2021 .
Other Income (Expenses), net
Three Months Ended
June 30, Change
2022 2021 $ %
(in thousands, except percentages)
Other income (expenses), net:
Interest income $ 533 $ - $ 533 -
Percentage of total revenue 1.2 % - %
Interest expense $ (46) $ - $ (46) -
Percentage of total revenue (0.1) % - %
Other income (expense) $ 7 $ 10 $ (3) (30.0) %
Percentage of total revenue - % - %
Total other income (expenses), net $ 494 $ 10 $ 484 4,840.0 %
Percentage of total revenue 1.1 % - %
Other income for the three months ended
Provision for Income Taxes
Three Months Ended
June 30, Change
2022 2021 $ %
(in thousands, except percentages)
Provision for income taxes $ 235 $ 38 $ 197 518.4 %
Percentage of total revenue 0.5 % 0.1 %
Provision for income taxes for the three months ended June 30, 2022 primarily
consist 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 more
likely than not that the deferred tax assets will not be realized.
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Comparison of the Six Months Ended
Revenue
Six Months Ended
June 30, Change
2022 2021 $ %
(in thousands, except percentages)
Revenue:
Platform $ 86,004 $ 69,449 $ 16,555 23.8 %
Professional services and other 2,353 2,570 (217) (8.4)
Total Revenue $ 88,357 $ 72,019 $ 16,338 22.7 %
Platform
Total platform revenue increased $16.6 million , or 23.8%, to $86.0 million for
the six months ended June 30, 2022 from $69.4 million for the six months ended
June 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 82,000 as of June 30, 2022 from approximately 74,000
as of June 30, 2021 , and ARPU increased to approximately $1,072 for the six
months ended June 30, 2022 from approximately $1,008 for the six months ended
June 30, 2021 . For the six months ended June 30, 2022 and 2021, 50.9% and 44.4%
of our platform revenue was subscription revenue, respectively, and 49.1% and
55.6% was transaction revenue, respectively.
Professional Services and Other
Total professional services and other revenue decreased$0.2 million , or 8.4%, to$2.4 million for the six months endedJune 30, 2022 from$2.6 million for the six months endedJune 30, 2021 , primarily due to labor shortages affecting our restaurant customers at both the 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 to be offset as our deployment teams become more efficient and shorten deployment periods.
Cost of Revenue, Gross Profit, and Gross Margin
Six Months Ended
June 30, Change
2022 2021 $ %
(in thousands, except percentages)
Cost of revenues:
Platform $ 23,773 $ 11,787 $ 11,986 101.7 %
Professional services and other 3,197 2,426 771 31.8
Total cost of revenue $ 26,970 $ 14,213 $ 12,757 89.8 %
Percentage of revenue:
Platform 26.9 % 16.4 %
Professional services and other 3.6 3.4
Total cost of revenue 30.5 % 19.7 %
Gross Profit $ 61,387 $ 57,806 $ 3,581 6.2 %
Gross Margin 69.5 % 80.3 %
Platform
Total platform cost of revenue increased $12.0 million , or 101.7%, to $23.8
million for the six months ended June 30, 2022 from $11.8 million for the six
months ended June 30, 2021 . This increase was primarily the result of higher
compensation costs associated with additional personnel to support the revenue
growth mentioned previously 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 Wisely and Omnivore acquisitions, the intangible
amortization costs related to these acquisitions, and the processing costs
associated with
Professional Services and Other
Total professional services and other cost of revenue increased$0.8 million , or 31.8%, to$3.2 million for the six months endedJune 30, 2022 from$2.4 million for the six months endedJune 30, 2021 . This increase was primarily the result of increased compensation costs to support the previously-mentioned growth in new active locations. Gross Profit Gross margin decreased to 69.5% for the six months endedJune 30, 2022 from 80.3% for the six months endedJune 30, 2021 . The decrease in gross profit margin was driven by higher platform and professional services and other compensation costs to support growth in transactions, the increase in new active locations coming onto the 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 withOlo Pay . Operating Expenses Research and Development Six Months Ended June 30, Change 2022 2021 $ % (in thousands, except percentages) Research and development$ 34,058 $ 28,387 $ 5,671 20.0 % Percentage of total revenue 38.5 % 39.4 % Research and development expense increased$5.7 million , or 20.0%, to$34.1 million for the six months endedJune 30, 2022 from$28.4 million for the six months endedJune 30, 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 percentage of total revenue, research and development expenses decreased to 38.5% for the six months endedJune 30, 2022 from 39.4% for the six months endedJune 30, 2021 . General and Administrative Six Months Ended June 30, Change 2022 2021 $ % (in thousands, except percentages) General and administrative$ 35,196 $ 31,764 $ 3,432 10.8 % Percentage of total revenue 39.8 % 44.1 % General and administrative expense increased$3.4 million , or 10.8%, to$35.2 million for the six months endedJune 30, 2022 from$31.8 million for the six months endedJune 30, 2021 . This increase was primarily a result of higher compensation costs due to increased headcount to support the growth and stage of the organization, as well as severance costs related to the departure of our Chief Customer Officer and increased insurance costs and professional fees incurred as a result of us being a public company. These increases were partially offset by the absence in the six months endedJune 30, 2022 of the following costs incurred during the six months endedJune 30, 2021 : (i) IPO related bonus awards, vesting and settlement of stock appreciation rights, or SARs, award as a result of the IPO; and (ii) a$5.1 million non-cash charge related to the donation of 172,918 shares of our Class A common stock to an independent donor-advised fund sponsor,Tides Foundation . As a percentage of total revenue, general and administrative expenses decreased to 39.8% for the six months endedJune 30, 2022 from 44.1% for the six months endedJune 30, 2021 . We did not donate any shares during the six months endedJune 30, 2022 to the Olo forGood Fund atTides Foundation , but we expect to donate additional shares in the future in conjunction with our Olo for Good initiative. 38 --------------------------------------------------------------------------------
Sales and Marketing
Six Months Ended
June 30, Change
2022 2021 $ %
(in thousands, except percentages)
Sales and marketing $ 16,967 $ 7,537 $ 9,430 125.1 %
Percentage of total revenue 19.2 % 10.5 %
Sales and marketing expense increased $9.4 million , or 125.1%, to $17.0 million
for the six months ended June 30, 2022 from $7.5 million for the six months
ended June 30, 2021 . This increase was primarily the result of additional
compensation costs, inclusive of commission costs, due to increases in
headcount, as well as costs associated with our in-person user conference,
Beyond4, which we held in the second quarter of 2022 for the first time in two
years, and intangible amortization costs related to our recent acquisitions.
This increase was partially offset by decreased marketing spend associated with
our IPO-related costs for the six months ended June 30, 2021 . As a percentage of
total revenue, sales and marketing expense increased to 19.2% for the six months
ended June 30, 2022 from 10.5% for the six months ended June 30, 2021 .
Other Income (Expenses), net
Six Months Ended
June 30, Change
2022 2021 $ %
(in thousands, except percentages)
Other income (expenses), net:
Interest income $ 585 $ - $ 585 -
Percentage of total revenue 0.7 % - %
Interest expense $ (46) $ - $ (46) -
Percentage of total revenue (0.1) % - %
Other income (expense) $ 13 $ (8) $ 21 (262.5) %
Percentage of total revenue - % - %
Change in fair value of warrant liability $ - $ (18,930) $ 18,930 (100.0) %
Percentage of total revenue - % (26.3) %
Total other income (expenses), net $ 552 $ (18,938) $ 19,490 (102.9) %
Percentage of total revenue 0.6 % (26.3) %
Other income for the six months ended
The increase of$18.9 million in the fair value of warrant liability for the six months endedJune 30, 2021 was the result of an increase in value of our redeemable convertible preferred stock warrant liability, which is directly related to an increase in the value of our stock underlying 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.
(Benefit) Provision for Income Taxes
Six Months Ended
June 30, Change
2022 2021 $ %
(in thousands, except percentages)
(Benefit) provision for income taxes $ (1,100) $ 74 $ (1,174) (1586.5) %
Percentage of total revenue (1.2) % 0.1 %
The income tax benefit for the six months ended June 30, 2022 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 adjustments to the full
valuation allowance on our deferred tax assets, partially offset by
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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.
Liquidity and Capital Resources
General
As ofJune 30, 2022 , our principal sources of liquidity were cash and cash equivalents and short-term and long-term investments in marketable securities totaling$464.7 million , which was held for working capital purposes, as well as the available balance of our revolving line of credit, described further below.
We have financed our operations primarily through sales of our equity securities, payments received from customers, and borrowings under our credit facility.
OnMarch 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. 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 expenses.
Credit Facility
On
The Second Amended and Restated LSA amended and restated the Amended and Restated Loan and Security Agreement, datedFebruary 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 requestPacific Western Bank to enter into commitments to increase the credit extensions available to us under the Second 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 the variable rate of interest, per annum, most recently announced byPacific Western Bank , or 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, or a SuccessFee Trigger , in an amount equal to: (i)$800,000 , if the SuccessFee Trigger occurs prior toJune 10, 2023 ; (ii)$600,000 , if the SuccessFee Trigger occurs on or afterJune 10, 2023 and prior toJune 10, 2024 ; (iii)$400,000 , if the SuccessFee Trigger occurs on or afterJune 10, 2024 and prior toJune 10, 2025 ; (iv)$200,000 , if the SuccessFee Trigger occurs on or afterJune 10, 2025 and prior toJune 10, 2026 ; and (v)$0 , if the SuccessFee Trigger occurs on or afterJune 10, 2026 . We 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 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 Second Amended and Restated LSA are secured by substantially all of our 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 addition, the Second Amended and Restated 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 ability to incur additional indebtedness or liens, pay dividends, or make certain investments. We were in compliance with these covenants as ofJune 30, 2022 . 40 -------------------------------------------------------------------------------- The Second Amended and Restated 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. Any default that is not cured or waived could result inPacific 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 Second Amended and Restated LSA and related documentation, and would permitPacific Western Bank to exercise remedies with respect to all of the collateral that 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. Upon our request,Pacific Western Bank will provide us a payoff letter providing for, among other things, repayment of our obligations then outstanding, including the success fee, and for termination ofPacific Western Bank's obligations to make additional credit extensions and termination of the liens under the Second Amended and Restated LSA. As ofJune 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 ofJune 30, 2022 , we had no outstanding borrowings under the line of credit, and no amounts have been drawn against any of our letters of credit.
Cash Flows
The following table summarizes our cash flows for the periods presented:
Six Months Ended
June 30,
2022 2021
(in thousands)
Net cash (used in) provided by operating activities
$ (132,930) $
(660)
Net cash provided by financing activities$ 6,025 $ 484,669 Operating Activities For the six months endedJune 30, 2022 , net cash used in operating activities was$0.9 million , primarily due to net loss of$23.2 million adjusted for non-cash charges of$26.3 million and a net decrease attributable to our operating assets and liabilities of$4.0 million . The non-cash adjustments primarily relate to stock-based compensation charges of$23.2 million and depreciation and amortization expense of$2.6 million . The net decrease attributable to our operating assets and liabilities was primarily driven by an increase in prepaid expenses of$2.0 million , primarily attributable to increased prepayments for software licensing fees, and a decrease in operating lease liabilities of$1.2 million due to payments on our leases. For the six months endedJune 30, 2021 , net cash provided by operating activities was$15.5 million , primarily due to a net loss of$28.9 million adjusted for non-cash charges of$41.2 million and a net increase in our operating assets and liabilities of$3.0 million . The non-cash adjustments primarily related to the change in the fair value of redeemable convertible preferred stock warrants of$18.9 million , stock-based charges of$16.4 million , inclusive of vesting of SARs of$2.8 million , and a charge related to a charitable donor-advised fund of$5.1 million in connection with the IPO. The net increase in operating assets and liabilities was primarily driven by a net increase in accrued expenses and accounts payable of$2.5 million related primarily to higher fees owed to delivery service providers and vendors as well as employee compensation accruals and a decrease in accounts receivable of$5.7 million due to improved collections. This increase was offset by an increase in prepaid expenses of$4.8 million primarily due to insurance payments, and increases in contract assets and deferred contract costs of$0.9 million primarily due to the growth of our revenue.
Investing Activities
Cash used in investing activities was$132.9 million during the six months endedJune 30, 2022 , primarily due to$78.1 million of net cash paid for investments,$49.3 million to acquire Omnivore, and$5.5 million for the development of internal-use software and purchases of computer and office equipment to support further product development and to expand our employee base to support our operations. 41 -------------------------------------------------------------------------------- Cash used in investing activities was$0.7 million during the six months endedJune 30, 2021 , primarily due to the development of internal-use software and purchases of computer and office equipment to support further product development and to expand our employee base to support our operations.
Financing Activities
Cash provided by financing activities was$6.0 million during the six months endedJune 30, 2022 , primarily driven by net proceeds from the exercise of stock options and purchases under our employee stock purchase plan. Cash provided by financing activities was$484.7 million during the six months endedJune 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),$3.0 million of net proceeds from 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 six months endedJune 30, 2021 .
Certain Non-GAAP Financial Measures
We report our financial results in accordance with generally accepted accounting principles inthe 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, and certain key performance indicators, including GMV, active locations, NRR, and ARPU. 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. We adjust our GAAP financial measures for the following items to calculate non-GAAP operating income (loss): 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 contributions (non-cash expense), intangible and internal-use software amortization (non-cash expense), other non-cash charges, severance related to the departure of our Chief Customer Officer, and transaction costs incurred within one year of the related acquisition. Management believes that it is useful to exclude certain non-cash charges and non-core operational charges from non-GAAP operating income (loss) because: (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 periods. Effective as of the first quarter fiscal 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 management 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 stock price. Prior period amounts have been revised to conform with the current year presentation. Free cash flow represents net cash provided by operating activities, reduced by purchases of property and equipment and capitalization of internal-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. We believe providing free cash flow 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 business from the perspective of our management and Board of Directors. Our use of non-GAAP financial measures and key performance indicators has limitations as an analytical tool, and these measures should not be considered in isolation or as a substitute for analysis of financial results as reported under GAAP. Because our non-GAAP financial measures and key performance indicators are not calculated in accordance with GAAP, they may not necessarily be comparable to similarly titled measures employed by other companies. 42 --------------------------------------------------------------------------------
Non-GAAP Operating Income (Loss)
The following table presents a reconciliation of GAAP operating loss to non-GAAP operating income (loss) for the following periods:
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 2022 2021
(in thousands, except percentages)
Operating Income (loss) reconciliation:
Operating loss, GAAP $ (11,932) $ (2,409) $ (24,834) $ (9,882)
Plus: Stock-based compensation expense and
related payroll tax expense (1) 11,640 8,769 23,718 17,018
Plus: Charitable donation of Class A common
stock - - - 5,125
Plus: Impairment of internal-use software - - 475 -
Plus: Amortization 1,365 138 2,325 275
Plus: Severance costs (2) 555 - 555 -
Plus: Transaction costs 351 - 1,486 -
Operating income, non-GAAP $ 1,979 $ 6,498 $ 3,725 $ 12,536
Percentage of revenue:
Operating margin, GAAP (26) % (7) % (28) % (14) %
Operating margin, non-GAAP 4 % 18 % 4 % 17 %
(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
management 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 stock price. Prior period amounts have been
revised to conform with the current year presentation.
(2) Includes costs related to the departure of our Chief Customer Officer.
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:
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 2022 2021
(inthousands)
Net cash provided by (used in) operating activities$ 19 $ 11,262 $ (870) $ 15,471 Purchase of property and equipment (333) (165) (409) (271) Capitalization of internal-use software (2,663) (317) (5,125) (389) Non-GAAP free cash flow$ (2,977) $ 10,780 $ (6,404) $ 14,811
Contractual Obligations and Commitments
There were no material changes in our contractual obligation and commitments during the six months endedJune 30, 2022 from the contractual obligations and commitments disclosed in our Annual Report on Form 10-K filed with theSEC onFebruary 25, 2022 . See "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.
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
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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 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 six months ended June 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 Annual
Report on Form 10-K filed with the SEC on February 25, 2022 .
Recent Accounting Pronouncements
See "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 Election
We currently qualify as an "emerging growth company" pursuant to the provisions of 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. 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. 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 endingDecember 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 endingDecember 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.
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