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Grubhub (GRUB) Q3 Earnings Surge Y/Y, Revenues Top Estimates
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Grubhub Inc. delivered third-quarter 2018 adjusted earnings of 45 cents per share, which soared 60.7% on a year-over-year basis. The Zacks Consensus Estimate was pegged at 41 cents per share.
Revenues climbed 51.6% year over year to $247.2 million, which comfortably beat the Zacks Consensus Estimate of $238 million. Excluding Eat24, which was acquired from Yelp (YELP - Free Report) in October 2017 and LevelUp, revenues increased 34%.
Quarter Details
Gross food sales surged 40% year over year to $1.2 billion. Excluding the acquisition of Eat24, gross food sales increased almost 23% year over year.
Net revenues as a percentage of gross food sales were 20.4%, up 160 basis points (bps) on a year-over-year basis and 80 bps sequentially. The increase was primarily due to favorable mix shift toward GrubHub Delivery and restaurants continuing to pay for more impressions on the platform.
As of Sep 30, active diners were 16.4 million compared with 9.8 million in the year-ago quarter. Daily average grubs (DAGs) were 416,000 compared with 304,500 reported in the year-ago quarter. Excluding Eat24, DAG growth was 21% year over year. Further excluding Foodler and OrderUp, organic growth was 300 basis points (bps) sequentially.
Organic DAGs reached a record high in a year and half period due to increase in organic diners in the quarter. New organic diners increased due to product improvements, better restaurant selection and increased marketing initiatives by the company.
Additionally, the newly launched Grubhub delivery markets to support the Yum! Brand (YUM - Free Report) partnership contributed to new diner growth. Notably, the company added record 800K organic active diners sequentially.
Grubhub noted that it added new restaurants during the quarter compared to any other quarter, taking the total count to 95K restaurants.
Moreover, the company launched delivery in more than 100 markets year to date on the back of new restaurant growth and the Yum! partnership, taking the total served markets count to 180. Notably, Grubhub exceeded its target of 100 new delivery markets for 2018.
In third-quarter 2018, total costs and expenses, as a percentage of revenues, increased 160 bps on a year-over-year basis to 91.2% in the reported quarter.
Adjusted EBITDA margin declined 180 bps to 24.3% mainly due to increased marketing initiatives. Adjusted EBITDA per order was $1.57, up 3% from the year-ago quarter.
Sales & marketing, technology, and general & administrative expenses decreased 160 bps, 20 bps and 240 bps, respectively. These were offset by 500 bps and 80 bps increase in operations & support and depreciation & amortization expenses, respectively.
Strong growth in operations & support expenses were driven by increased delivery orders, growing order volume and the inclusion of Eat24 orders. New delivery market launches negatively impacted driver pay per order in the reported quarter.
Increase in depreciation & amortization expenses was due to various acquisitions by the company.
Management noted that the LevelUp acquisition contributed about $2 million to revenues. However, there was a negative impact of less than $1 million on EBITDA.
Balance Sheet
As of Sep 30, the company’s cash and cash equivalents were $294.6 million compared with $481.1 million as of Jun 30. The decline was due to LevelUp acquisition for $390 million in cash.
Operating cash flow in the quarter was approximately $165.5 million.
Guidance
For fourth-quarter 2018, GrubHub forecasts revenues between $283 million and $293 million, up from the earlier guided range of $262 million and $271 million. The company revised guidance due to increased order volume growth and contribution from LevelUp acquisition.
Adjusted EBITDA is anticipated to be within $40-$50 million, down approximately $25 million from the earlier guided figure due to increased marketing spend.
Grubhub expects marketing spend to be in the range of $10 million to $20 million. Additionally, the company expects to invest $10 million in new delivery markets and $2 million to $3 million in LevelUp.
Grubhub plans to expand into 100 new delivery markets in fourth-quarter fiscal 2018.
Management stated that improving delivery mix will boost capture rate over the short-to- medium term. Moreover, the company expects strong growth opportunity from restaurants opting to pay more for more impressions in the long haul.
GrubHub expects increasing number of launch markets through the remainder of 2018 to limit further decreases in driver pay per order. It may even temporarily increase cost per order, while the company captures these newer markets.
LevelUp contribution to fourth-quarter 2018 revenues is expected to be a little less than $10 million. However, a negative impact of $2 million to $3 million is expected on EBITDA.
Zacks Rank & A Key Pick
Currently, GrubHub carries a Zacks Rank #4 (Sell).
Long term growth rate for Vishay is projected to be 9.2%.
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Grubhub (GRUB) Q3 Earnings Surge Y/Y, Revenues Top Estimates
Grubhub Inc. delivered third-quarter 2018 adjusted earnings of 45 cents per share, which soared 60.7% on a year-over-year basis. The Zacks Consensus Estimate was pegged at 41 cents per share.
Revenues climbed 51.6% year over year to $247.2 million, which comfortably beat the Zacks Consensus Estimate of $238 million. Excluding Eat24, which was acquired from Yelp (YELP - Free Report) in October 2017 and LevelUp, revenues increased 34%.
Quarter Details
Gross food sales surged 40% year over year to $1.2 billion. Excluding the acquisition of Eat24, gross food sales increased almost 23% year over year.
Net revenues as a percentage of gross food sales were 20.4%, up 160 basis points (bps) on a year-over-year basis and 80 bps sequentially. The increase was primarily due to favorable mix shift toward GrubHub Delivery and restaurants continuing to pay for more impressions on the platform.
As of Sep 30, active diners were 16.4 million compared with 9.8 million in the year-ago quarter. Daily average grubs (DAGs) were 416,000 compared with 304,500 reported in the year-ago quarter. Excluding Eat24, DAG growth was 21% year over year. Further excluding Foodler and OrderUp, organic growth was 300 basis points (bps) sequentially.
Organic DAGs reached a record high in a year and half period due to increase in organic diners in the quarter. New organic diners increased due to product improvements, better restaurant selection and increased marketing initiatives by the company.
Additionally, the newly launched Grubhub delivery markets to support the Yum! Brand (YUM - Free Report) partnership contributed to new diner growth. Notably, the company added record 800K organic active diners sequentially.
Grubhub noted that it added new restaurants during the quarter compared to any other quarter, taking the total count to 95K restaurants.
Moreover, the company launched delivery in more than 100 markets year to date on the back of new restaurant growth and the Yum! partnership, taking the total served markets count to 180. Notably, Grubhub exceeded its target of 100 new delivery markets for 2018.
GrubHub Inc. Price, Consensus and EPS Surprise
GrubHub Inc. Price, Consensus and EPS Surprise | GrubHub Inc. Quote
Operating Details
In third-quarter 2018, total costs and expenses, as a percentage of revenues, increased 160 bps on a year-over-year basis to 91.2% in the reported quarter.
Adjusted EBITDA margin declined 180 bps to 24.3% mainly due to increased marketing initiatives. Adjusted EBITDA per order was $1.57, up 3% from the year-ago quarter.
Sales & marketing, technology, and general & administrative expenses decreased 160 bps, 20 bps and 240 bps, respectively. These were offset by 500 bps and 80 bps increase in operations & support and depreciation & amortization expenses, respectively.
Strong growth in operations & support expenses were driven by increased delivery orders, growing order volume and the inclusion of Eat24 orders. New delivery market launches negatively impacted driver pay per order in the reported quarter.
Increase in depreciation & amortization expenses was due to various acquisitions by the company.
Management noted that the LevelUp acquisition contributed about $2 million to revenues. However, there was a negative impact of less than $1 million on EBITDA.
Balance Sheet
As of Sep 30, the company’s cash and cash equivalents were $294.6 million compared with $481.1 million as of Jun 30. The decline was due to LevelUp acquisition for $390 million in cash.
Operating cash flow in the quarter was approximately $165.5 million.
Guidance
For fourth-quarter 2018, GrubHub forecasts revenues between $283 million and $293 million, up from the earlier guided range of $262 million and $271 million. The company revised guidance due to increased order volume growth and contribution from LevelUp acquisition.
Adjusted EBITDA is anticipated to be within $40-$50 million, down approximately $25 million from the earlier guided figure due to increased marketing spend.
Grubhub expects marketing spend to be in the range of $10 million to $20 million. Additionally, the company expects to invest $10 million in new delivery markets and $2 million to $3 million in LevelUp.
Grubhub plans to expand into 100 new delivery markets in fourth-quarter fiscal 2018.
Management stated that improving delivery mix will boost capture rate over the short-to- medium term. Moreover, the company expects strong growth opportunity from restaurants opting to pay more for more impressions in the long haul.
GrubHub expects increasing number of launch markets through the remainder of 2018 to limit further decreases in driver pay per order. It may even temporarily increase cost per order, while the company captures these newer markets.
LevelUp contribution to fourth-quarter 2018 revenues is expected to be a little less than $10 million. However, a negative impact of $2 million to $3 million is expected on EBITDA.
Zacks Rank & A Key Pick
Currently, GrubHub carries a Zacks Rank #4 (Sell).
Vishay Intertechnology (VSH - Free Report) is a better-ranked stock in the same sector as it sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Long term growth rate for Vishay is projected to be 9.2%.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>