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Grubhub (GRUB) Q4 Earnings Miss, Costs & Expenses Jump Y/Y

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Grubhub Inc. (GRUB - Free Report) reported fourth-quarter 2018 earnings of 19 cents per share, which lagged the Zacks Consensus Estimate by 9 cents. The figure plunged 48.6% on a year-over-year basis.

The decline can be attributed to higher investments on marketing and advertisements that fully offset strong top-line growth. Revenues surged 40.3% year over year to $287.7 million, which also missed the consensus mark of $289 million. Notably, revenue growth was also hurt by weather issues in December.

Total costs & expenses jumped 62.3% year over year to $290.6 million. Operations & support, sales & marketing, technology, and general & administrative expenses increased 76.4%, 54%, 70.1% and 48.9%, respectively.

Notably, revenue per order less operations and support costs fell sequentially in the fourth quarter, primarily due to $10-million investments in new markets. Moreover, the company spent $10-$20 million on advertisements. Technology expenses increased due to the acquisitions of LevelUp and Tapingo.

Adjusted EBITDA decreased 26.1% from the year-ago quarter to $42.1 million. Adjusted EBITDA per order was 98 cents, down from $1.57 in the previous quarter. Incremental spending on delivery and advertisement were almost 70 cents per order.
 

Grubhub Inc. Price, Consensus and EPS Surprise

Grubhub Inc. Price, Consensus and EPS Surprise | Grubhub Inc. Quote

 

Quarter Details

Gross food sales climbed 20.9% year over year to $1.38 billion.

As of Dec 31, 2018, active diners were 17.7 million compared with 14.5 million in the year-ago quarter. Daily Average Grubs (DAGs) were 467,500 compared with 392,500 reported in the year-ago quarter. Excluding Eat24 orders, growth was 22%.

Further, the company launched GrubHub Delivery in 125 new markets compared with its original expectation of 100 new markets in the reported quarter.

Grubhub Delivery now accounts for approximately 30% of the company’s DAGs. Moreover, the company now has more than 105,000 restaurant partners in more than 2,000 cities in all the 50 states.

Guidance

For first-quarter 2019, GrubHub forecasts revenues between $310 million and $330 million. Adjusted EBITDA is anticipated to be $40-$50 million.

For 2019, GrubHub forecasts revenues between $1.315 billion and $1.415 billion. Adjusted EBITDA is expected to be $235-$265 million.

GrubHub delivery will continue to launch in new markets in 2019 but at a significantly slower rate than 2018.

Zacks Rank & Stocks to Consider

GrubHub currently has a Zacks Rank #3 (Hold).

Twilio (TWLO - Free Report) , ASGN (ASGN - Free Report) and Cogent Communications (CCOI - Free Report) are some better-ranked stocks in the broader computer and technology sector. All three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Twilio, ASGN and Cogent are expected to report quarterly results on Feb 12, 13 and 21, respectively.

 

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