Grubhub Reports Second Quarter 2019 Results

July 30, 2019

Grubhub generates 36% revenue growth in the second quarter

CHICAGO, July 30, 2019 /PRNewswire/ — Grubhub Inc. (NYSE: GRUB), the nation’s leading online and mobile food-ordering and delivery marketplace, today announced financial results for the second quarter ended June 30, 2019. The Company posted revenues of $325 million, which is a 36% year-over-year increase from $240 million in the second quarter of 2018. Gross Food Sales grew 20% year-over-year to $1.5 billion, up from $1.2 billion in the same period last year.

“The team continued executing in the second quarter, adding thousands of new, high-quality independent and enterprise restaurants and growing our active diner base to more than 20 million,” said Matt Maloney, Grubhub founder and CEO. “We are excited about the trajectory of our two-sided marketplace – both in terms of geographic diversity and depth in individual markets. Restaurants are increasingly valuing the incremental sales and products we provide, while diners highly regard our robust restaurant selection and consistently low transaction fees.”

Second Quarter 2019 Highlights

The following results reflect the financial performance and key operating metrics of our business for the three months ended June 30, 2019, as compared to the same period in 2018.

Second Quarter Financial Highlights

  • Revenues: $325.1 million, a 36% year-over-year increase from $239.7 million in the second quarter of 2018.
  • Net Income: $1.3 million, or $0.01 per diluted share, a 96% year-over-year decrease from $30.1 million, or $0.33 per diluted share, in the second quarter of 2018.
  • Non-GAAP Adjusted EBITDA: $54.7 million, a 19% year-over-year decrease from $67.4 million in the second quarter of 2018.
  • Non-GAAP Net Income: $24.9 million, or $0.27 per diluted share, a 46% year-over-year decrease from $46.3 million, or $0.50 per diluted share, in the second quarter of 2018.

Second Quarter Key Business Metrics Highlights1

  • Active Diners: 20.3 million, a 30% year-over-year increase from 15.6 million Active Diners in the second quarter of 2018.
  • Daily Average Grubs (DAGs): 488,900, a 16% year-over-year increase from 423,200 DAGs in the second quarter of 2018.
  • Gross Food Sales: $1.5 billion, a 20% year-over-year increase from $1.2 billion in the second quarter of 2018.

“Our Adjusted EBITDA per order increased by $0.14 from the first quarter to $1.23 despite the headwind of the seasonally slower second quarter. This sequential improvement was primarily driven by increasing delivery efficiency, especially in our quickly ramping recently launched markets,” said Adam DeWitt, Grubhub president and CFO. “We have achieved this profitability improvement while extending our delivery business into smaller and less dense markets, setting us up for continued unit economic improvement as we head into our seasonally stronger months at the end of the year.”

Third Quarter and Full Year 2019 Guidance

Based on information available as of July 30, 2019, the Company is providing the following financial guidance for the third quarter and full year of 2019.

Third Quarter 2019

Full Year 2019

(in millions)

Expected Revenue range

$320 – $340

$1,340 – $1,390

Expected Adjusted EBITDA range

$53 – $60

$235 – $250

Second Quarter 2019 Financial Results Conference Call

Grubhub will webcast a conference call today at 9:00 a.m. CT to discuss the second quarter 2019 financial results. The webcast can be accessed on the Grubhub Investor Relations website at https://investors.grubhub.com, along with the Company’s earnings press release and financial tables. A replay of the webcast will be available at the same website.

About Grubhub

Grubhub (NYSE: GRUB) is the nation’s leading online and mobile food-ordering and delivery marketplace with the largest and most comprehensive network of restaurant partners, as well as the largest diner base. Dedicated to connecting diners with the food they love from their favorite local restaurants, Grubhub strives to elevate food ordering through innovative restaurant technology, easy-to-use platforms and an improved delivery experience. Grubhub is proud to work with more than 125,000 restaurant partners in over 2,400 U.S. cities and London. The Grubhub portfolio of brands includes Grubhub, Seamless, LevelUp, Tapingo, AllMenus and MenuPages.

Use of Forward Looking Statements

This press release contains forward-looking statements regarding Grubhub, “the Company’s” or our management’s future expectations, beliefs, intentions, goals, strategies, plans and prospects, including the expected benefits to, and financial performance of, Grubhub including its acquisitions. Such statements constitute “forward-looking statements”, which are subject to the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve substantial known and unknown risks, uncertainties and assumptions that could cause actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by the forward-looking statements. Such risks and uncertainties include, but are not limited to, the matters set forth in the filings that we make with the Securities and Exchange Commission from time to time, including those set forth in the section entitled “Risk Factors” in our Annual Report on Form 10-K filed on February 28, 2019, which is on file with the SEC and is available on the Investor Relations section of our website at https://investors.grubhub.com. Additional information will be set forth in our Quarterly Report on Form 10-Q that will be filed for the quarter ended June 30, 2019, which should be read in conjunction with these financial results. Please also note that forward-looking statements represent management’s beliefs and assumptions only as of the date of this press release. Except as required by law, we disclaim any intention to, and undertake no obligation to, publicly update these forward-looking statements, or to update the reasons actual results could differ materially from those anticipated in the forward-looking statements, even if new information becomes available in the future.

Use of Non-GAAP Financial Measures

Adjusted EBITDA, non-GAAP net income and non-GAAP net income per diluted share attributable to common stockholders are financial measures that are not calculated in accordance with accounting principles generally accepted in the United States, or GAAP.

We define Adjusted EBITDA as net income adjusted to exclude acquisition, restructuring and certain legal costs, income taxes, net interest expense, depreciation and amortization and stock-based compensation expense. Non-GAAP net income and non-GAAP net income per diluted share attributable to common stockholders exclude acquisition, restructuring and certain legal costs, amortization of acquired intangible assets, stock-based compensation expense and other nonrecurring items as well as the income tax effects of these non-GAAP adjustments. We use these non-GAAP financial measures as key performance measures because we believe they facilitate operating performance comparisons from period to period by excluding potential differences primarily caused by variations in capital structures, tax positions, the impact of acquisitions, restructuring and certain legal costs, the impact of depreciation and amortization expense on our fixed assets and the impact of stock-based compensation expense. Adjusted EBITDA, non-GAAP net income and non-GAAP net income per diluted share attributable to common stockholders are not measurements of our financial performance under GAAP and should not be considered as an alternative to performance measures derived in accordance with GAAP.

See “Non-GAAP Financial Measures Reconciliation” below for a reconciliation of net income to Adjusted EBITDA, non-GAAP net income and non-GAAP net income per diluted share attributable to common stockholders.

_____________________________
1 Key Business Metrics are defined on page 29 of our Annual Report on Form 10-K filed on February 28, 2019.

GRUBHUB INC.

STATEMENTS OF OPERATIONS

(in thousands, except per share data)

Three Months Ended

June 30,

Six Months Ended
June 30,

2019

2018

2019

2018

Revenues

$

325,058

$

239,741

$

648,828

$

472,311

Costs and expenses:

Operations and support

162,406

102,445

323,756

198,728

Sales and marketing

74,128

46,231

152,582

94,987

Technology (exclusive of amortization)

29,400

18,717

56,650

36,048

General and administrative

25,784

18,180

48,571

35,877

Depreciation and amortization

27,223

19,849

52,312

40,800

Total costs and expenses

318,941

205,422

633,871

406,440

Income from operations

6,117

34,319

14,957

65,871

Interest expense – net

5,467

8

8,279

1,030

Income before provision for income taxes

650

34,311

6,678

64,841

Income tax (benefit) expense

(602)

4,191

(1,464)

3,955

Net income attributable to common stockholders

$

1,252

$

30,120

$

8,142

$

60,886

Net income per share attributable to common stockholders:

Basic

$

0.01

$

0.34

$

0.09

$

0.69

Diluted

$

0.01

$

0.33

$

0.09

$

0.67

Weighted-average shares used to compute net income per share attributable to common stockholders:

Basic

91,177

89,503

91,064

88,294

Diluted

92,786

92,503

92,852

91,297

 

KEY BUSINESS METRICS

Three Months Ended
June 30,

Six Months Ended
June 30,

2019

2018

2019

2018

Active Diners (000s)

20,288

15,581

20,288

15,581

Daily Average Grubs

488,900

423,200

504,900

430,000

Gross Food Sales (millions)

$

1,459

$

1,220

$

2,962

$

2,465

 

GRUBHUB INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

June 30, 2019

December   31,   2018

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

$

358,847

$

211,245

Short-term investments

18,190

14,084

Accounts receivable, less allowances for doubtful accounts

123,801

110,855

Income tax receivable

9,520

9,949

Prepaid expenses and other current assets

23,752

17,642

Total current assets

534,110

363,775

PROPERTY AND EQUIPMENT:

Property and equipment, net of depreciation and amortization

148,995

119,495

OTHER ASSETS:

Other assets

23,166

14,186

Operating lease right-of-use asset

104,078

—

Goodwill

1,005,477

1,019,239

Acquired intangible assets, net of amortization

527,423

549,013

Total other assets

1,660,144

1,582,438

TOTAL ASSETS

$

2,343,249

$

2,065,708

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES:

Restaurant food liability

$

124,261

$

127,344

Accounts payable

21,527

26,656

Accrued payroll

21,296

18,173

Current portion of long-term debt

—

6,250

Current operating lease liability

6,875

—

Other accruals

46,697

44,745

Total current liabilities

220,656

223,168

LONG-TERM LIABILITIES:

Deferred taxes, non-current

32,695

46,383

Noncurrent operating lease liability

114,724

—

Long-term debt

492,723

335,548

Other accruals

751

18,270

Total long-term liabilities

640,893

400,201

STOCKHOLDERS’ EQUITY:

Common stock, $0.0001 par value

9

9

Accumulated other comprehensive loss

(1,980)

(1,891)

Additional paid-in capital

1,126,174

1,094,866

Retained earnings

357,497

349,355

Total Stockholders’ Equity

$

1,481,700

$

1,442,339

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

$

2,343,249

$

2,065,708

 

GRUBHUB INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Six Months Ended June 30,

2019

2018

CASH FLOWS FROM OPERATING ACTIVITIES

Net income

$

8,142

$

60,886

Adjustments to reconcile net income to net cash from operating activities:

Depreciation

13,626

10,526

Deferred taxes

298

(3,308)

Amortization of intangible assets and developed software

38,686

30,274

Stock-based compensation

36,527

22,170

Other

3,240

3,042

Change in assets and liabilities, net of the effects of business acquisitions:

Accounts receivable

(13,349)

3,888

Income taxes receivable

429

1,882

Prepaid expenses and other assets

(14,857)

(8,446)

Restaurant food liability

(3,078)

(9,870)

Accounts payable

(10,216)

(107)

Accrued payroll

3,122

(1,961)

Other accruals

7,219

7,041

Net cash provided by operating activities

69,789

116,017

CASH FLOWS FROM INVESTING ACTIVITIES

Purchases of investments

(25,526)

(44,271)

Proceeds from maturity of investments

21,636

29,116

Capitalized website and development costs

(22,188)

(13,145)

Purchases of property and equipment

(23,140)

(19,266)

Acquisition of other intangible assets

(8,889)

—

Acquisitions of businesses, net of cash acquired

127

737

Other cash flows from investing activities

—

24

Net cash used in investing activities

(57,980)

(46,805)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from the issuance of senior notes

500,000

—

Repayments of borrowings under the credit facility

(342,313)

(51,562)

Proceeds from the issuance of common stock

—

200,000

Taxes paid related to net settlement of stock-based compensation awards

(15,360)

(18,717)

Proceeds from exercise of stock options

2,930

9,958

Payments for debt issuance costs

(8,954)

—

Net cash provided by financing activities

136,303

139,679

Net change in cash, cash equivalents, and restricted cash

148,112

208,891

Effect of exchange rates on cash, cash equivalents and restricted cash

(2)

(318)

Cash, cash equivalents, and restricted cash at beginning of year

215,802

238,239

Cash, cash equivalents, and restricted cash at end of the period

$

363,912

$

446,812

SUPPLEMENTAL DISCLOSURE OF NON-CASH ITEMS

Cash paid for income taxes

$

567

$

7,426

 

GRUBHUB INC.

NON-GAAP FINANCIAL MEASURES RECONCILIATION

(in thousands, except per share data)

Three Months Ended
June 30,

Six Months Ended

June 30,

2019

2018

2019

2018

Net income

$

1,252

$

30,120

$

8,142

$

60,886

Income taxes

(602)

4,191

(1,464)

3,955

Interest expense – net

5,467

1 

8

8,279

1

1,030

Depreciation and amortization

27,223

19,849

52,312

40,800

EBITDA

33,340

54,168

67,269

106,671

Acquisition, restructuring and legal costs

1,341

1,312

1,827

2,641

Stock-based compensation

20,049

 2

11,939

36,527

 2

22,170

Adjusted EBITDA

$

54,730

$

67,419

$

105,623

$

131,482

Three Months Ended
June 30,

Six Months Ended
June 30,

2019

2018

2019

2018

Net income

$

1,252

$

30,120

$

8,142

$

60,886

Stock-based compensation

20,049

2

11,939

36,527

2

22,170

Amortization of acquired intangible assets

11,828

9,527

23,770

21,070

Acquisition, restructuring and legal costs

1,341

1,312

1,827

2,641

Income tax adjustments

(9,595)

(6,628)

(17,457)

(13,305)

Non-GAAP net income

$

24,875

$

46,270

$

52,809

$

93,462

Weighted-average diluted shares used to compute net income per share attributable to common stockholders

92,786

92,503

92,852

91,297

Non-GAAP net income per diluted share attributable to common stockholders

$

0.27

$

0.50

$

0.57

$

1.02

 

Guidance

Three Months Ended
September 30, 2019

Year Ended
December 31, 2019

Low

High

Low

High

(in millions)

Net income (loss)

$

(1.6)

$

2.8

$

18.8

$

28.1

Income taxes

(0.9)

1.7

5.1

10.8

Interest expense ̶ net

6.5

6.5

21.3

21.3

Depreciation and amortization

30.0

30.0

114.0

114.0

EBITDA

34.0

41.0

159.2

174.2

Acquisition and restructuring costs

—

—

1.8

1.8

Stock-based compensation

19.0

19.0

74.0

74.0

Adjusted EBITDA

$

53.0

$

60.0

$

235.0

$

250.0

_____________________________
1 Interest expense for the three and six months ended June 30, 2019 included $1.8 million and $1.9 million, respectively, of expense for the write-off of unamortized debt issuance costs in February and June of 2019.
2 Stock-based compensation for the three and six months ended June 30, 2019 included $1.6 million of expense related to the accelerated vesting of equity awards to a terminated acquired employee.