Grubhub Reports Third Quarter 2019 Results

October 28, 2019

Grubhub generates 30% revenue growth in the third quarter

CHICAGO, Oct. 28, 2019 /PRNewswire/ — Grubhub Inc. (NYSE: GRUB), the nation’s leading online and mobile food-ordering and delivery marketplace, today announced financial results for the third quarter ended September 30, 2019 and also posted a letter to shareholders on its investor relations website. The Company reported revenues of $322 million, which is a 30% year-over-year increase from $247 million in the third quarter of 2018. Gross Food Sales grew 15% year-over-year to $1.4 billion, up from $1.2 billion in the same period last year.

“Our teams had another strong quarter of execution, adding nearly one million active diners and 15,000 restaurants to our platform,” said Matt Maloney, Grubhub founder and CEO. “As we detail in our shareholder letter, we are entering the next phase of growth in the U.S. online food ordering industry where it is increasingly important to create a differentiated experience for diners and long-term value for restaurants. We are excited to leverage the robust profitability of our core business and best-in-class restaurant-facing products to grow our two-sided marketplace in a sustainable manner.”

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

Third Quarter Financial Highlights

  • Revenues: $322.1 million, a 30% year-over-year increase from $247.2 million in the third quarter of 2018.
  • Net Income: $1.0 million, or $0.01 per diluted share, a decrease from $22.7 million, or $0.24 per diluted share, in the third quarter of 2018.
  • Non-GAAP Adjusted EBITDA: $53.8 million, a 10% year-over-year decrease from $60.1 million in the third quarter of 2018.
  • Non-GAAP Net Income: $24.7 million, or $0.27 per diluted share, a decrease from $42.2 million, or $0.45 per diluted share, in the third quarter of 2018.

Third Quarter Key Business Metrics Highlights1

  • Active Diners: 21.2 million, a 29% year-over-year increase from 16.4 million Active Diners in the third quarter of 2018.
  • Daily Average Grubs (DAGs): 457,300, a 10% year-over-year increase from 416,000 DAGs in the third quarter of 2018.
  • Gross Food Sales: $1.4 billion, a 15% year-over-year increase from $1.2 billion in the third quarter of 2018.

 

_____________________

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

“Last year, in the fourth quarter, we made opportunistic investments to expand delivery market coverage, increase new diner advertising and accelerate our enterprise brand sales efforts. Through the third quarter of 2019, we believe all three of these initiatives had a positive impact on our business and long-term shareholder value,” said Adam DeWitt, Grubhub President and CFO. “Importantly, we demonstrated the ability to generate operating leverage consistently throughout 2019 with EBITDA per order increasing 31% from $0.98 in the fourth quarter of 2018 to $1.28 in the third quarter of 2019.  We are excited to embark on the initiatives detailed in the shareholder letter to further differentiate our marketplace for both restaurants and diners and position us for maintaining, and eventually improving, profitability.”

Fourth Quarter 2019 Guidance
Based on information available as of October 28, 2019, the Company is providing the following financial guidance for the fourth quarter of 2019.

Fourth Quarter 2019

(in millions)

Expected Revenue range

$315 – $335

Expected Adjusted EBITDA range

$15 – $25

Third Quarter 2019 Financial Results Conference Call
Grubhub will webcast a conference call tomorrow at 8:00 a.m. CT to discuss the third 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 letter to shareholders, 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 140,000 restaurant partners in over 2,700 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 including, but not limited to, achievement of the benefits of our planned additional investments, 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 September 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.

GRUBHUB INC.

STATEMENTS OF OPERATIONS

(in thousands, except per share data)

Three Months Ended
September 30,

Nine Months Ended
September 30,

2019

2018

2019

2018

Revenues

$

322,053

$

247,225

$

970,881

$

719,536

Costs and expenses:

Operations and support

161,387

111,511

485,143

310,239

Sales and marketing

71,617

49,426

224,199

144,413

Technology (exclusive of amortization)

29,483

21,258

86,133

57,306

General and administrative

25,329

22,195

73,900

58,072

Depreciation and amortization

30,649

20,987

82,961

61,787

Total costs and expenses

318,465

225,377

952,336

631,817

Income from operations

3,588

21,848

18,545

87,719

Interest expense – net

6,025

337

14,304

1,367

Income (loss) before provision for income taxes

(2,437)

21,511

4,241

86,352

Income tax (benefit) expense

(3,447)

(1,234)

(4,911)

2,721

Net income attributable to common stockholders

$

1,010

$

22,745

$

9,152

$

83,631

Net income per share attributable to common stockholders:

Basic

$

0.01

$

0.25

$

0.10

$

0.94

Diluted

$

0.01

$

0.24

$

0.10

$

0.91

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

Basic

91,349

90,494

91,159

89,027

Diluted

92,847

93,678

92,850

92,091

 

KEY BUSINESS METRICS

Three Months Ended
September 30,

Nine Months Ended
September 30,

2019

2018

2019

2018

Active Diners (000s)

21,197

16,379

21,197

16,379

Daily Average Grubs

457,300

416,000

488,800

425,300

Gross Food Sales (millions)

$

1,400

$

1,215

$

4,362

$

3,680

 

GRUBHUB INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

September 30,
2019

December   31,
2018

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

$

394,000

$

211,245

Short-term investments

32,214

14,084

Accounts receivable, less allowances for doubtful accounts

123,309

110,855

Income tax receivable

2,227

9,949

Prepaid expenses and other current assets

18,632

17,642

Total current assets

570,382

363,775

PROPERTY AND EQUIPMENT:

Property and equipment, net of depreciation and amortization

160,368

119,495

OTHER ASSETS:

Other assets

25,452

14,186

Operating lease right-of-use asset

100,736

Goodwill

1,007,968

1,019,239

Acquired intangible assets, net of amortization

513,848

549,013

Total other assets

1,648,004

1,582,438

TOTAL ASSETS

$

2,378,754

$

2,065,708

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES:

Restaurant food liability

$

130,544

$

127,344

Accounts payable

23,392

26,656

Accrued payroll

22,537

18,173

Current portion of long-term debt

6,250

Current operating lease liability

8,056

Other accruals

59,686

44,745

Total current liabilities

244,215

223,168

LONG-TERM LIABILITIES:

Deferred taxes, non-current

28,681

46,383

Noncurrent operating lease liability

111,554

Long-term debt

492,776

335,548

Other accruals

817

18,270

Total long-term liabilities

633,828

400,201

STOCKHOLDERS’ EQUITY:

Common stock, $0.0001 par value

9

9

Accumulated other comprehensive loss

(2,346)

(1,891)

Additional paid-in capital

1,144,541

1,094,866

Retained earnings

358,507

349,355

Total Stockholders’ Equity

$

1,500,711

$

1,442,339

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

$

2,378,754

$

2,065,708

 

GRUBHUB INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Nine Months Ended
September 30,

2019

2018

CASH FLOWS FROM OPERATING ACTIVITIES

Net income

$

9,152

$

83,631

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

Depreciation

21,665

16,189

Amortization of intangible assets and developed software

61,296

45,598

Stock-based compensation

54,806

36,445

Deferred taxes

(6,208)

2,048

Other

5,210

4,572

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

Accounts receivable

(13,335)

(17,969)

Income taxes receivable

7,722

(5,533)

Prepaid expenses and other assets

(11,955)

(15,455)

Restaurant food liability

3,247

1,608

Accounts payable

(50)

5,265

Accrued payroll

4,366

5,311

Other accruals

20,088

3,752

Net cash provided by operating activities

156,004

165,462

CASH FLOWS FROM INVESTING ACTIVITIES

Purchases of investments

(49,506)

(47,642)

Proceeds from maturity of investments

31,736

54,916

Capitalized website and development costs

(35,068)

(21,471)

Purchases of property and equipment

(42,702)

(31,984)

Acquisition of other intangible assets

(8,889)

Acquisitions of businesses, net of cash acquired

127

(366,856)

Other cash flows from investing activities

(250)

38

Net cash used in investing activities

(104,552)

(412,999)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from the issuance of long-term debt

500,000

175,000

Repayments of borrowings under the credit facility

(342,313)

(52,344)

Proceeds from the issuance of common stock

200,000

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

(20,503)

(28,238)

Proceeds from exercise of stock options

4,040

13,010

Payments for debt issuance costs

(9,136)

Net cash provided by financing activities

132,088

307,428

Net change in cash, cash equivalents, and restricted cash

183,540

59,891

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

(293)

(406)

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

$

399,049

$

297,724

SUPPLEMENTAL DISCLOSURE OF NON-CASH ITEMS

Cash paid for income taxes

$

567

$

7,508

 

GRUBHUB INC.

NON-GAAP FINANCIAL MEASURES RECONCILIATION

(in thousands, except per share and per order data)

Three Months Ended
September 30,

Nine Months Ended
September 30,

2019

2018

2019

2018

Net income

$

1,010

$

22,745

$

9,152

$

83,631

Income taxes

(3,447)

(1,234)

(4,911)

2,721

Interest expense – net

6,025

337

14,304

1,367

Depreciation and amortization

30,649

20,987

82,961

61,787

EBITDA

34,237

42,835

101,506

149,506

Acquisition, restructuring and legal costs

1,312

3,024

3,139

5,665

Stock-based compensation

18,279

14,275

54,806

36,445

Adjusted EBITDA

$

53,828

$

60,134

$

159,451

$

191,616

Net income per order

$

0.02

$

0.59

$

0.07

$

0.72

Adjusted EBITDA per order

$

1.28

$

1.57

$

1.19

$

1.65

Three Months Ended
September 30,

Nine Months Ended
September 30,

2019

2018

2019

2018

Net income

$

1,010

$

22,745

$

9,152

$

83,631

Stock-based compensation

18,279

14,275

54,806

36,445

Amortization of acquired intangible assets

13,575

10,037

37,345

31,107

Acquisition, restructuring and legal costs

1,312

3,024

3,139

5,665

Income tax adjustments

(9,510)

(7,854)

(26,967)

(21,160)

Non-GAAP net income

$

24,666

$

42,227

$

77,475

$

135,688

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

92,847

93,678

92,850

92,091

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

$

0.27

$

0.45

$

0.83

$

1.47

 

Guidance

Three Months Ended
December 31, 2019

Low

High

(in millions)

Net loss

$

(44.8)

$

(33.9)

Income taxes

3.8

2.9

Interest expense – net

6.0

6.0

Depreciation and amortization

31.0

31.0

EBITDA

(4.0)

6.0

Acquisition, restructuring and legal costs

Stock-based compensation

19.0

19.0

Adjusted EBITDA

$

15.0

$

25.0