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Noah Glass -- Founder and Chief Executive Officer

Thank you, Gary. Hi, everyone. Thank you for spending time with us today. Team Olo executed well on our top priorities in the third quarter and positioned Olo to complete a successful 2024.

With customers, we continue to win, retain and expand. In product, we drove further innovation across our three product suites and ecosystem, including a deeper partnership with ezCater to provide an additional demand channel for our fast-growing Catering+ module. In Olo Pay, we announced the general availability of card-present functionality on Qu POS and we expect to deploy multiple Olo Pay card-present pilots with enterprise and emerging enterprise brand customers on Qu and NCR Voyix POS before year-end. Financially, we hit our 2024 location growth target one quarter ahead of schedule and delivered yet another beat and raise quarter for revenue and non-GAAP operating income.

I'll discuss our customer, product, and partnership highlights for the quarter, and Peter will review our Q3 financial performance and updated guidance. We ended the quarter with approximately 85,000 active locations, adding approximately 3,000 net new locations since the end of Q2. ARPU for Q3 was $850, an increase of 15% year over year, and net revenue retention was above 120% for the fourth quarter in a row. We're particularly proud of our locations performance.

We reached our 5,000 net new location additions target for 2024 one quarter ahead of schedule. The Olo restaurant network has never been stronger. In Enterprise, Q3 implementations included the full launch of Dutch Bros on Olo Ordering and Olo Pay card-not-present across its 800-plus locations. We deployed multiple order modules and Olo Pay card-not-present with bakery cafe brand, Paris Baguette, who went from signing to launch within two quarters.

We also deployed with Long John Silver's on Rails and Nothing Bundt Cakes on Dispatch, two great examples of how Olo's modular platform can meet brands where they are on their tech journeys and offer expansion opportunities as we deliver value. We also saw momentum with existing enterprise customers eager to realize the power of Guest Data. Both Another Broken Egg Cafe and P.F. Chang's deployed Olo Engage's Guest Data Platform during the quarter.

In emerging enterprise, we had a strong quarter of multi-suite deployments, including Papa Gino's and Pizza Inn, who both deployed Ordering, Dispatch, Rails, and Olo Pay card-not-present. We're also pleased to welcome Oakberry, a provider of healthy organic acai bowls, who is one of multiple emerging enterprise flywheel customers that launched with all three Olo product suites in the quarter. We're also seeing the same momentum with existing emerging enterprise customers regarding Olo Engage, with Kolache Factory and Thompson Restaurants each deploying multiple modules from the Engage suite. We are landing and expanding with brands through the strength of our open platform, and this was on display at our inaugural Partner Summit in Chicago.

Attendance was at capacity, and the event brought together select members of our 400-plus ecosystem partners alongside some of our most innovative customers. Discussions focused on how we can collaborate to solve the industry's biggest challenges like proving ROI, creating a seamless guest experience, and moving beyond the limitations of in-house development and data silos. We remain committed to the philosophy that open beats closed and that our open platform approach can accelerate technological advancements in our industry. And we delivered further innovation through direct investment in our platform.

In our October fall release, we announced over a dozen product enhancements to help brands increase orders, streamline operations, and improve the guest experience. In Borderless, we integrated loyalty program sign-in so guests can now enjoy the benefits of both their Borderless accounts and their loyalty rewards through one password-less experience. Borderless continues to scale at a rapid pace with more than 10 million accounts, up 10 times from 1 million accounts just one year ago. And we believe this new loyalty program integration will further increase Borderless adoption and improve the guest experience.

When we began this journey, it was because we believed that Borderless could be the true manifestation of a scaled two-sided network to connect enterprise restaurants and their guests, a unique offering that only Olo could bring to life. We're thrilled to see Borderless and its network effect proving out our thesis and scaling 10x over the past year. We added functionality to Catering+ to help operators manage complex business accounts within their existing Olo dashboard and give sales managers a comprehensive view of their guest data. And today, we announced a new menu integration with ezCater to make it easier for brands to manage their third-party marketplace catering demand and scale this increasingly important channel.

Catering+ continues to ramp within our base with new Q3 deployments with brands of all sizes and service models like Bojangles, Cowboy Chicken, and Mendocino Farms. Catering+ adoption has been a strong expansion driver, and we believe it sets us up well to sell additional Olo modules like Olo Pay, Dispatch, and Rails to support a brand's catering channel. And most importantly, we've made great progress toward bringing Olo Pay card present to market. As we shared in our fall release, brands on Qu POS can now use Olo Pay to process card-present transactions and aggregate the associated basket-level data into the Olo Engage GDP.

Qu is our first generally available direct POS integration for Olo Pay. We're completing our integration work with NCR Voyix, and we have discussions underway with additional providers to further expand our Olo Pay and Engage integrations. We've been running the Olo Pay go-to-market motion in parallel with our technical work, and we're excited to share that we expect to launch five Olo Pay card-present pilots in Q4 with brands on Qu and NCR Voyix. We're working with brands across multiple restaurant categories, and the majority of these pilots are with enterprise brands.

We see this as a great start, and the Olo Pay pipeline is building with our existing brand customers as well as with new enterprise brands interested in Olo's full-stack payments offering. We have work ahead of us. However, the early signs are encouraging for Olo Pay's product market fit for off- and on-premise transactions. We listened to our brands when they told us they needed a payment solution purpose-built for enterprise restaurants, and we're bringing it to market.

We also have news regarding Team Olo. We're excited to welcome Jason Ordway as our new chief technology officer, overseeing Olo's engineering function as part of COO, Jo Lambert's, leadership team. Jason brings a wealth of technology leadership experience to Olo, particularly in the areas of enterprise-scale platforms and the management of remote engineering teams. For the last seven years, Jason was CTO at Slice, a restaurant tech platform used by 20,000 pizzeria locations, where he led a fully distributed team of 225 professionals across 9 countries.

Jason is a great fit for Olo in terms of cross-functional leadership, experience and culture, and we're looking forward to him helping Olo deliver even greater innovation to our restaurant brands and their guests. Finally, we shared in today's 8-K filing that Chief Revenue Officer, Diego Panama, will be leaving Olo at the end of the year. Diego joined us in July 2022 and has led all aspects of the customer journey for our brands, including sales, marketing, customer success and business development and partnerships. He built our sales engineering team to support the increased technical selling required as we added the Pay and Engage suites, succeeded in ramping up our emerging enterprise sales motion and streamlined operations to shorten deployment time lines and more efficiently support our customers.

As we look to 2025 and beyond, Diego and I concluded that Olo needs an executive to focus solely on driving bookings, and we mutually agreed to part ways. Diego will help us execute on our Q4 plan, assist with a smooth transition and act as an advisor to me. Sales leadership will report to me on an interim basis, and we will initiate a search for a new sales leader shortly. Additionally, COO, Jo Lambert, will expand her role to oversee the marketing, customer success and business development, and partnerships functions going forward.

We believe this will strengthen the connective tissue between product development and commercialization. We thank Diego for his contributions to Olo and wish him continued success in his career. Q3 was another strong quarter across the board. As we move to the end of the year and begin setting our sights on 2025, I'm energized by Team Olo's ability to serve our customers, drive further product innovation and industry collaboration, and deliver financial results.

We are winning with the strength of our open enterprise-grade platform while setting the table for future success by enabling data-driven personalization of the guest experience. As other verticals have shown, personalization drives profitable traffic and true customer loyalty. At Olo, we're laser-focused on being the clear leader in guest personalization for enterprise restaurants. I'll now turn the call over to Peter, who will review our third-quarter financial highlights and updated guidance.

Peter?

Peter Benevides -- Chief Financial Officer

Thanks, Noah. Today, I'll review our third-quarter results as well as provide guidance for the fourth quarter and the full year 2024. In the third quarter, total revenue was $71.9 million, an increase of 24% year over year. Platform revenue in the third quarter was $71 million, an increase of 24% year over year.

Olo Pay had another strong revenue quarter and we generated year-over-year subscription revenue growth of 10%. Active locations were approximately 85,000, up approximately 3,000 locations sequentially due to the deployment activity Noah mentioned. We've added approximately 5,000 net new locations year to date through September 30th, meeting our full-year target for net new locations one quarter ahead of schedule. Based on our location performance year to date and line of sight into Q4, we now expect to add approximately 6,000 net new locations this year.

ARPU for the third quarter was approximately $850, up 15% year over year and flat sequentially. The year-over-year increase in ARPU was driven by increased order volumes and modules per location, in particular, Olo Pay. And net revenue retention was above 120%, the fourth consecutive quarter where NRR was at or above 120%. For the remainder of the Q3 financial metrics disclosed, unless otherwise noted, I will be referencing non-GAAP financial measures.

Gross profit for the third quarter was $43.6 million, up 12% year over year. Gross margin for the third quarter was approximately 60.7%, down about 200 basis points sequentially and in line with the expectations we set on our prior call. Gross profit and gross margin performance reflect the impact of this quarter's revenue outperformance as well as the increasing mix of Olo Pay revenue. We continue to exercise operating expense discipline.

In Q3, all three operating expense line items improved year over year on a percentage of revenue basis. Sales and marketing expense for the third quarter was $11 million or 15% of total revenue. This compares to $9.4 million and 16% a year ago. Research and development expense for the third quarter was $14.3 million or 20% of total revenue.

This compares to $14.3 million or 25% of total revenue a year ago. General and administrative expense for the third quarter was $10.1 million or 14% of total revenue. This compares to $9.4 million and 16% a year ago. Operating income for the third quarter was $8.2 million, up from $5.7 million a year ago.

Operating margin was approximately 11% in Q3, an increase of approximately 160 basis points year over year. This strong performance reflects a combination of continued expense discipline and revenue outperformance. The workforce reduction we announced on September 20, which I'll speak to when we discuss guidance, was an immaterial contributor to the non-GAAP operating income performance. Net income in the third quarter was $10.4 million or $0.06 per share based on approximately 171.9 million fully diluted weighted average shares outstanding.

Turning our attention to the balance sheet and cash flow statement. Our cash, cash equivalents and short- and long-term investments totaled approximately $392 million as of September 30, 2024. We did not repurchase any shares in the third quarter due to related shareholder litigation discussed in our SEC filing. This matter was settled in early August.

In Q4, we expect to initiate a 10b5-1 plan for our $100 million share repurchase program. Net cash provided by operating activities was $6.2 million in the quarter compared to a negative $21.6 million in the quarter a year ago. Free cash flow was $3.2 million compared to negative $24.4 million a year ago. Q3 cash flow metrics primarily reflect operating income performance and working capital timing.

I'll wrap up by providing our guidance for the fourth quarter and full year 2024. For the fourth quarter of 2024, we expect revenue in the range of $72.5 million and $73 million and non-GAAP operating income in the range of $8.7 million and $9 million. For the fiscal year 2024, we are again raising revenue and non-GAAP operating income guidance. We now expect revenue in the range of $281.4 million and $281.9 million and non-GAAP operating income in the range of $30.2 million and $30.5 million.

A few things to keep in mind as you consider our updated outlook for the year. We continue to expect trends in the restaurant industry to be similar to what we saw in 2023, consistent growth in digital ordering, a continued need to improve efficiency to offset rising costs, and macro uncertainty. We now expect Olo Pay to contribute revenue in the high $60 million range in fiscal year 2024, up from the mid-$60 million range we shared on our Q2 call. We continue to expect Olo Pay revenue for the year to be essentially all card-not-present revenue.

We also continue to expect full-year 2024 gross margin to be in the low 60% range and that full-year 2024 will be the trough in annual year-over-year gross profit growth. We anticipate Q4 2024 gross margin will be flat compared to Q3 2024. Non-GAAP gross profit and operating income for Q4 and full-year 2024 reflect the impact of the workforce reduction we announced on September 20, 2024, where we lowered total headcount by approximately 9%. We consistently review our cost structure, and we took this action to streamline operations prior to our 2025 budget process.

We primarily consolidated teams and reduced spans and layers across implementation and customer success, marketing, and sales. This action lowered our total annual cost base by approximately $8 million. We expect about 60% of the cost savings to flow to NGOI with the remainder being reinvested into the business. To wrap up, third-quarter financial performance continued to build on our first-half momentum, and our updated guidance reflects our increased confidence in the business.

We're adding logos and expanding with existing brands to drive the top line, doing the work to accelerate gross profit growth in 2025 and driving greater operating leverage through disciplined expense management. With that, I'd now like to turn the call over to the operator to begin the Q&A session. Operator?

Questions & Answers:

Operator

Great. Thank you. [Operator instructions] Your first question is from Terry Tillman from Truist Securities. Please go ahead.

Connor Passarella -- Analyst

Great. Good afternoon, guys. Connor Passarella on for Terry. First one, I just want to start with Olo Pay.

That business looks like it will more than double again with the new guidance here. Lots of opportunities still with card-present and the POS partnerships. Just curious on how we should be, I guess, thinking about the continued growth trajectory of that business as more of these drivers start to play out through the end of this year and into next year?

Noah Glass -- Founder and Chief Executive Officer

Connor, this is Noah. Yes, we're very excited about the progress, the continued progress with Olo Pay. Looking back now over two years, we were about $250 million in our first year in market with Olo Pay, just card-not-present in gross processing volume. Then up to $1 billion last year.

And now projecting $2.5 billion in processing volume this year. And as you heard, going from $30 million in revenue last year up to now the high $60 million range. So very excited about that opportunity, and especially when we compare it to the fact that our brands are processing in GMV about $26 billion through the Olo platform on an annual basis. So on that basis, we're just about 10% or less than 10% from a gross payments volume running through Olo Pay as compared to that gross merchandise value.

But especially as we make this jump into card-present payments, that's when we see the full GMV of the brands we work with being addressable to Olo. So that takes us -- because of the fact that card-present and card-not-present together are about 6x the size of card-not-present alone, up to about $160 billion of GMV addressable as gross payments volume ultimately for Olo Pay. So from that standpoint, the $2.5 billion of gross payment volume on Olo Pay is quite substantial, but very early in the overall opportunity, under 2%. And we're very excited to see that progress with Olo Pay card present in the form of these 5 pilots that we announced tonight on two different POS partners, Qu POS and NCR Voyix launching in the fourth quarter of this year.

We expect a lot of continued momentum heading into 2025 and we're very excited about that Olo Pay opportunity. I'd also say it's an exciting opportunity for Olo, but it's also an opportunity that our customers are very excited about because they see that when Olo Pay is processing the transactions for card-present, it's an opportunity to pull data about those transactions back into the guest data platform to understand what the guest is ordering and to collate that data back to a guest profile. So really understanding every transaction that a guest places, whether it's a digital transaction or a non-digital transaction. That is the Holy Grail opportunity that Olo Pay card-present represents in a time in this industry when brands are really looking to understand their guests to know all of their guests and to really personalize the guest experience as a way of standing out from their competition.

Connor Passarella -- Analyst

Great. It's really helpful. Just maybe as a follow-up, on the go-to-market motion with Diego departing, I guess, what are you looking for in terms of the next CRO that gets appointed to that role? And maybe what would you want to see from a go-to-market organization as you guys look toward the next phase of growth?

Noah Glass -- Founder and Chief Executive Officer

Yeah. It's a great question. I mean I'm excited for, in the interim period, myself getting closer to the go-to-market organization. It's something that I've been involved with from the very beginning of Olo, as you'd imagine, but especially co-selling into larger opportunities and going deeper with existing partners.

I think as we initiate the search, what we're really looking for is a greater focus on bookings and a sales leader who is a proven executive with industry experience, with relationships in this industry. And important that they are based in New York City and have a tight partnership with our New York City-based team, Peter, our CFO; Jo, our COO; and me. And we're excited about that focus and also for those non-sales activities to then be part of Jo Lambert's organization as our COO and really having innovation and commercialization at Olo living together. I think that's a very healthy combination, and we're looking forward to that change as well.

I should also say we're very excited about our sales leaders at the SVP level, Katie Cofer, Katie Lang, one layer down. I'm very excited to get closer to them and be working with them as they lead our sales team in the foreseeable future and especially as I'm working closely with them in this interim period before we brought on a new sales leader.

Connor Passarella -- Analyst

Thanks, Noah.

Operator

Our next question is from Steve Sheldon from William Blair. Please go ahead.

Patrick McIlwee -- Analyst

Hi, team. Pat McIlwee on this afternoon. My first question, so when you completed the September RIF, which included some heads in your go-to-market function, you noted plans to focus more on ARPU expansion in the existing client base. And this quarter, you added the most locations in a quarter since 2022 and ARPU was roughly flat sequentially.

So I wanted to ask if you feel that initiative will take time to materialize or if you've kind of remain focused more so on winning new business rather than account expansion? And just what you're seeing in terms of underlying momentum for upsell and cross-sell?

Peter Benevides -- Chief Financial Officer

Yes, I could take that one, yes. Peter here, Pat. So I mean, we're trying to accomplish both, right? So we want to grow both our ARPU as well as add more locations to the platform over time. The ARPU dynamic this quarter was driven by two factors.

One, this was the first quarter where you felt the full impact of Wingstop transitioning from three product modules down to one. And you had a subset of locations that did come on this quarter were single module locations. I think Noah called one out in the prepared remarks in Long John Silver, which when only utilizing one product module, you inherently have a lower ARPU. So through the combination of those two things, that's why you saw the deselling growth from an ARPU perspective.

That said, we've shared historically the number of product modules per location that average around three to three and a half product modules per location. We have now upwards of 16 product modules to sell within the installed base. So just the sheer magnitude of the ability to expand from where we are today up to that 16 product modules per location just has such an outsized impact on our ability to grow ARPU relative to our ability to grow location count, which is why we've shared. And it continues to be the case that ARPU will be a larger driver of growth in the near term than locations will be.

That doesn't mean to say that we're taking our eye off the ball as it relates to locations. We still want to do a great job there as well, which this quarter, in particular, was emblematic of that.

Patrick McIlwee -- Analyst

OK. That helps. Thanks, Peter. And it sounds like after the step down in gross margins this quarter, you're expecting this to be a pretty good baseline heading into year-end.

But my question is, how should we frame any further potential pressure on margins from the continued scaling of Olo Pay heading into 2025 and '26?

Peter Benevides -- Chief Financial Officer

Yes. So the sequential change in gross margin Q3 to Q4, what we messaged earlier on the prepared remarks, that's being driven by continued growth of Olo Pay revenue mix being offset by continued cost optimization, in particular, the portion of the costs pulled out of the business as part of the recent reduction in force, that being an offsetting factor to that continued revenue mix shift. In terms of how margins trend longer term, I think that's going to largely depend on how quickly we ramp into the Olo Pay opportunity, in particular, card-present. We haven't shared a perspective on that.

That's something I think we'll share as we set guidance for 2025. But in many ways -- if that were to happen faster, I think that would be a good thing because what that then means is we're ramping quickly into the pay opportunity and gross profit growth is reaccelerating, which is really what we're focused on and continue to believe that for 2025 on a full year basis, gross profit growth will reaccelerate as compared to 2024.

Patrick McIlwee -- Analyst

OK. That's helpful. Thank you, Peter. Appreciate the color.

Operator

The next question is from Bruce Goldfarb from Lake Street Capital. Please go ahead.

Bruce Goldfarb -- Analyst

Hey, Greg, Peter. Congrats on the results. Congratulations. Thanks for taking my call.

What's been the trend in -- what's been the trend for like emerging enterprise versus enterprise with regard to the pipeline?

Noah Glass -- Founder and Chief Executive Officer

This is Noah here. So I think a really good quarter, as you heard, on both fronts. Some great enterprise wins in Dutch Bros. That's a very exciting one that we talked about a bit past -- in the last quarter.

Parris Baggett. And as Peter mentioned, Long John Silver and Nothing Bundt Cakes coming on in the enterprise segment. And then in the emerging enterprise segment, a great set of wins this quarter. As a Boston native, I'm particularly excited about Papa Gino's coming on to the platform, Pizza Inn, Oakbererry, and more.

I think what's interesting to look at is kind of how we're landing in those different segments. In the emerging enterprise segment, we have noted for a couple of quarters now the tendency for brands to land with all three of our product suites. We call those flywheel customers, where they're using Order, they're using Pay and they're using Engage. They're really getting up the digital maturity curve quickly.

It's a little bit different in enterprise and also in top 25 when we tend to land with, more typically, a single module or a single suite for an engagement and then build that over time and continue to sell additional modules. As Peter noted, we're now up to 16 different modules across those three suites, our suite 16 of modules. And it gives us a lot of opportunity to continue to sell additional capabilities into brands once we've proven out Olo's capabilities as a partner for their digital maturity.

Bruce Goldfarb -- Analyst

Great. In terms of like technology, are there certain areas that you'd like to -- is M&A focused on?

Noah Glass -- Founder and Chief Executive Officer

I'm sorry. I missed that. Could you repeat the last part?

Bruce Goldfarb -- Analyst

Yes. Are there certain areas of technology you guys would like to acquire, either developing or through M&A?

Noah Glass -- Founder and Chief Executive Officer

I think we feel pretty good when we look at our product road map and the things that we're planning over the coming year and really three years on that time horizon about what we plan to build from an R&D standpoint. Very excited about Jason Ordway joining Olo as our CTO and leading our engineering team and accelerating those innovation efforts. And we also have a great partner ecosystem of over 400 ecosystem partners who are integrated into Olo and enable us to really experiment with additional capabilities beyond what we do ourselves. And that's historically been a really interesting opportunity for us to watch what brands are using and deriving value from and to learn from that and lean into those partnerships.

So I think that's really how we think about R&D and innovation at Olo and how we can sometimes accelerate R&D through potential M&A of those partners that we work with closely and where we see our common customers experiencing a lot of value.

Bruce Goldfarb -- Analyst

And then my last question. When you announced the 9% growth in September, you said you were going to reinvest $6 million in growth. Are there certain areas where you're hiring or you're running marketing campaigns?

Peter Benevides -- Chief Financial Officer

Yes. Just to clarify that. So the reduction in force that we announced in September removed about $8 million of cost annualized. Of that, we are dropping 60% of that to the bottom line.

So about $4.8 million of that will be savings going forward, with the remainder of the $3.2 million being reinvested into the business. And that's really broadly across various areas of opex and a bit within cost of revenue as well. But for the most part, throughout various areas of opex.

Bruce Goldfarb -- Analyst

Great. Thanks for that clarification. Great. Those were my questions.

Congrats on the results.

Operator

This concludes the question-and-answer session. I'd like to turn the floor back over to Noah Glass for any closing comments.

Noah Glass -- Founder and Chief Executive Officer

OK. Well, thank you for joining us tonight. While we're pleased with our Q3 and year-to-date performance in 2024, we're by no means satisfied. We remain laser-focused on doing more to help brands convert their transaction data into personalized guest experiences and profitable traffic.

We're committed to achieving this objective as an open platform that serves as a force multiplier for hospitality and through operating discipline that drives profitable growth. Have a great evening.

Operator

[Operator signoff]

Duration: 0 minutes

Call participants:

Gary Fuges -- Senior Vice President, Investor Relations

Noah Glass -- Founder and Chief Executive Officer

Peter Benevides -- Chief Financial Officer

Connor Passarella -- Analyst

Patrick McIlwee -- Analyst

Bruce Goldfarb -- Analyst

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Olo (OLO) Q3 2024 Earnings Call Transcript was originally published by The Motley Fool