Grubhub Reports Record Third Quarter Results

Grubhub generates 52% revenue growth in the third quarter

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Oct 25, 2018, 09:00 ET

CHICAGO, Oct. 25, 2018 /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 Sept. 30, 2018. The Company posted revenues of $247 million, which is a 52% year-over-year increase from $163 million in the third quarter of 2017. Gross Food Sales grew 40% year-over-year to $1.2 billion, up from $867 million in the year ago period.

"We added more organic new diners this quarter than ever before, helping drive the highest organic DAG growth we've seen in a year and a half. Better restaurant selection, a more intelligent diner platform, and more strategic marketing continue to bring more high quality diners to Grubhub," said Matt Maloney, Grubhub's founder and chief executive officer. "With solid traction in new diner acquisition over multiple quarters and increased coverage across the country from our delivery expansion, we are in prime position to invest incrementally in advertising and accelerate online ordering adoption."

Third Quarter 2018 Highlights
The following results reflect the financial performance and key operating metrics of our business for the three months ended Sept. 30, 2018, as compared to the same period in 2017.

Third Quarter Financial Highlights

Revenues: $247.2 million, a 52% year-over-year increase from $163.1 million in the third quarter of 2017.
Net Income: $22.7 million, or $0.24 per diluted share, a 75% year-over-year increase from $13.0 million, or $0.15 per diluted share, in the third quarter of 2017.
Non-GAAP Adjusted EBITDA: $60.1 million, a 41% year-over-year increase from $42.7 million in the third quarter of 2017.
Non-GAAP Net Income: $42.2 million, or $0.45 per diluted share, a 72% year-over-year increase from $24.5 million, or $0.28 per diluted share, in the third quarter of 2017.

Third Quarter Key Business Metrics Highlights (excludes LevelUp impact in 2018)

Active Diners were 16.4 million, a 67% year-over-year increase from 9.8 million Active Diners in the third quarter of 2017.
Daily Average Grubs (DAGs) were 416,000, a 37% year-over-year increase from 304,500 DAGs in the third quarter of 2017.
Gross Food Sales were $1.2 billion, a 40% year-over-year increase from $867 million in the third quarter of 2017.

"We are excited to invest behind the diner and order momentum of the last several quarters. We have significant opportunity to accelerate diner growth by broadening delivery coverage areas and increasing marketing spend," said Adam DeWitt, Grubhub's president and chief financial officer. "As a result, we are opportunistically investing an incremental $20–$30 million in marketing and delivery expansion in the fourth quarter, taking our total 2018 investment in growth to substantially more than $200 million. The 200 total delivery markets we will launch in 2018 plus accelerated diner growth put us in a great position to capture takeout orders as they move online."

Fourth Quarter 2018 Guidance
Based on information available as of Oct. 25, 2018, the Company is providing the following financial guidance for the fourth quarter of 2018. This guidance excludes any impact from the potential acquisitions of Tapingo and certain assets of OrderUp, which have not yet closed and are subject to standard closing conditions:

	Fourth Quarter 2018
	(in millions)
Expected Revenue range	$283 - $293
Expected Adjusted EBITDA range	$40 - $50

Third Quarter 2018 Financial Results Conference Call
Grubhub will webcast a conference call today at 9 a.m. CT to discuss the third quarter 2018 financial results. The webcast can be accessed on the Grubhub Investor Relations website at http://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 95,000 restaurant partners in over 1,700 U.S. cities and London. The Grubhub portfolio of brands includes Grubhub, Seamless, LevelUp, Eat24, 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 following the acquisitions of Eat24 and LevelUp and its commercial agreements with Yelp and Yum! Brands. 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, 2018, which is on file with the SEC and is available on the Investor Relations section of our website at http://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, 2018, 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, interest income and 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 "Schedule of 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,
	2018		2017		2018		2017
Revenues	$	247,225	$	163,059	$	719,536	$	477,987
Costs and expenses:
Operations and support		111,511		65,352		310,239		187,795
Sales and marketing		49,426		35,138		144,413		105,346
Technology (exclusive of amortization)		21,258		14,292		57,306		41,560
General and administrative		22,195		18,617		58,072		46,627
Depreciation and amortization		20,987		12,613		61,787		33,067
Total costs and expenses		225,377		146,012		631,817		414,395
Income from operations		21,848		17,047		87,719		63,592
Interest (income) expense - net		337		(373)		1,367		(908)
Income before provision for income taxes		21,511		17,420		86,352		64,500
Income tax (benefit) expense		(1,234)		4,432		2,721		19,043
Net income attributable to common stockholders	$	22,745	$	12,988	$	83,631	$	45,457
Net income per share attributable to common stockholders:
Basic	$	0.25	$	0.15	$	0.94	$	0.53
Diluted	$	0.24	$	0.15	$	0.91	$	0.52
Weighted-average shares used to compute net income per share attributable to common stockholders:
Basic		90,494		86,449		89,027		86,162
Diluted		93,678		88,543		92,091		87,788

KEY OPERATING METRICS

	Three Months Ended September 30,					Nine Months Ended September 30,
	2018_(a)		2017		2018_(a)		2017
Active Diners (000s)		16,379		9,806		16,379		9,806
Daily Average Grubs		416,000		304,500		425,300		314,200
Gross Food Sales (millions)	$	1,214.5	$	867.3	$	3,679.9	$	2,645.1

(a)	Excludes the impact of the LevelUp acquisition, which closed on September 13, 2018.

GRUBHUB INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)



	September 30, 2018		December 31, 2017
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	294,550	$	234,090
Short-term investments		16,687		23,605
Accounts receivable, less allowances for doubtful accounts		120,306		87,377
Income tax receivable		14,125		8,593
Prepaid expenses and other current assets		17,024		6,818
Total current assets		462,692		360,483
PROPERTY AND EQUIPMENT:
Property and equipment, net of depreciation and amortization		105,434		71,384
OTHER ASSETS:
Other assets		11,666		6,487
Goodwill		885,350		589,862
Acquired intangible assets, net of amortization		520,867		515,553
Total other assets		1,417,883		1,111,902
TOTAL ASSETS	$	1,986,009	$	1,543,769
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Restaurant food liability	$	122,900	$	119,922
Accounts payable		17,184		7,607
Accrued payroll		19,036		13,186
Taxes payable		1,566		3,109
Short-term debt		6,250		3,906
Other accruals		33,186		26,818
Total current liabilities		200,122		174,548
LONG-TERM LIABILITIES:
Deferred taxes, non-current		44,073		74,292
Other accruals		19,683		7,468
Long-term debt		290,073		169,645
Total long-term liabilities		353,829		251,405
STOCKHOLDERS' EQUITY:
Common stock, $0.0001 par value		9		9
Accumulated other comprehensive loss		(1,620)		(1,228)
Additional paid-in capital		1,079,165		849,043
Retained earnings		354,504		269,992
Total Stockholders' Equity	$	1,432,058	$	1,117,816
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	1,986,009	$	1,543,769

GRUBHUB INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

	Nine Months Ended September 30,
	2018		2017
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	83,631	$	45,457
Adjustments to reconcile net income to net cash from operating activities:
Depreciation		16,189		7,949
Provision for doubtful accounts		741		338
Deferred taxes		2,048		(2,162)
Amortization of intangible assets		45,598		25,118
Stock-based compensation		36,445		23,913
Deferred rent		3,975		130
Amortization of deferred loan costs		588		349
Other		(732)		(823)
Change in assets and liabilities, net of the effects of business acquisitions:
Accounts receivable		(17,969)		(15,903)
Income taxes receivable		(5,533)		3,795
Prepaid expenses and other assets		(15,455)		4,193
Restaurant food liability		1,608		4,591
Accounts payable		5,265		2,965
Accrued payroll		5,311		1,575
Other accruals		3,752		6,351
Net cash provided by operating activities		165,462		107,836
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of businesses, net of cash acquired		(366,856)		(51,859)
Purchases of investments		(47,642)		(145,667)
Proceeds from maturity of investments		54,916		164,733
Capitalized website and development costs		(21,471)		(15,281)
Purchases of property and equipment		(31,984)		(12,549)
Acquisition of other intangible assets		—		(25,147)
Other cash flows from investing activities		38		589
Net cash used in investing activities		(412,999)		(85,181)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of common stock		200,000		—
Proceeds from borrowings under the Credit Agreement		175,000		—
Repayments of borrowings under the Credit Agreement		(52,344)		—
Proceeds from exercise of stock options		13,010		12,505
Taxes paid related to net settlement of stock-based compensation awards		(28,238)		(7,696)
Payment for debt issuance costs		—		(285)
Net cash provided by financing activities		307,428		4,524
Net change in cash, cash equivalents, and restricted cash		59,891		27,179
Effect of exchange rates on cash, cash equivalents and restricted cash		(406)		709
Cash, cash equivalents, and restricted cash at beginning of year		238,239		242,214
Cash, cash equivalents, and restricted cash at end of the period	$	297,724	$	270,102
SUPPLEMENTAL DISCLOSURE OF NON-CASH ITEMS
Cash paid for income taxes	$	7,508	$	16,340

GRUBHUB INC.
NON-GAAP FINANCIAL MEASURES RECONCILIATION
(in thousands, except per share data)

	Three Months Ended September 30,					Nine Months Ended September 30,
	2018		2017		2018		2017
Net income	$	22,745	$	12,988	$	83,631	$	45,457
Income taxes		(1,234)		4,432		2,721		19,043
Interest (income) expense - net		337		(373)		1,367		(908)
Depreciation and amortization		20,987		12,613		61,787		33,067
EBITDA		42,835		29,660		149,506		96,659
Acquisition, restructuring and legal costs		3,024		4,539		5,665		6,443
Stock-based compensation		14,275		8,475		36,445		23,913
Adjusted EBITDA	$	60,134	$	42,674	$	191,616	$	127,015

	Three Months Ended September 30,					Nine Months Ended September 30,
	2018		2017		2018		2017
Net income	$	22,745	$	12,988	$	83,631	$	45,457
Stock-based compensation		14,275		8,475		36,445		23,913
Amortization of acquired intangible assets		10,037		6,455		31,107		16,828
Acquisition, restructuring and legal costs		3,024		4,539		5,665		6,443
Income tax adjustments		(7,854)		(7,936)		(21,160)		(19,770)
Non-GAAP net income	$	42,227	$	24,521	$	135,688	$	72,871
Weighted-average diluted shares used to compute net income per share attributable to common stockholders		93,678		88,543		92,091		87,788
Non-GAAP net income per diluted share attributable to common stockholders	$	0.45	$	0.28	$	1.47	$	0.83

	Guidance
	Three Months Ended December 31, 2018
	Low		High
	(in millions)
Net income	$	4.3	$	11.4
Income taxes		1.7		4.6
Interest expense ̶ net		(2.0)		(2.0)
Depreciation and amortization		22.0		22.0
EBITDA		26.0		36.0
Acquisition and restructuring costs		—		—
Stock-based compensation		14.0		14.0
Adjusted EBITDA	$	40.0	$	50.0