It has been about a month since the last earnings report for GrubHub . Shares have added about 28.1% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is GrubHub due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Grubhub Q1 Earnings Beat Mark, Revenues Rise Y/Y
Grubhub reported a break-even in first-quarter 2020 results. The Zacks Consensus Estimate was of a loss of 5 cents per share.
Notably, the company had delivered earnings of 30 cents per share in the year-ago quarter.
Net loss per order of 71 cents in the first quarter came against the year-ago quarter’s net income per order of 15 cents.
Revenues increased 12.1% year over year to $363 million, beating the consensus mark by 0.7%.
The company’s capture rate, net revenues divided by gross food sales, was 22% and included nearly 85 basis points (bps) of technology-oriented revenues from LevelUp and Tapingo.
Excluding the technology-oriented revenues, Grubhub’s capture rate increased roughly 75 bps on a year-over-year basis. This upside was attributed to the mix shift toward delivering a greater percentage of orders on behalf of the company’s restaurant partners.
Operating Details
Total costs & expenses increased 29.8% year over year to $408.9 million. Operations & support; sales & marketing; technology; and general & administrative expenses grew 33%, 15.7%, 14.8% and 70.9%, respectively.
Revenues excluding operations and support costs were $3.16 per order, down from $3.26 in the previous quarter.
Adjusted EBITDA plunged 58.7% from the year-ago quarter to $21 million. Adjusted EBITDA per order was 45 cents, down from $1.09 in the year-ago quarter and 58 cents in the sequential quarter.
The sequential decline in adjusted EBITDA per order was due to Grubhub’s restaurant supply and diner-loyalty initiatives.
Grubhub successfully rolled out its GH+ subscription program that caters to myriad paying subscribers within its bounds. Besides, it added proceeds from independent restaurant-funded promotions and made a steady progress by integrating Enterprise loyalty programs in its marketplace.
The company also witnessed cohort stabilization in respect of diner quality across some of the most competitive markets.
GFS & Active Diners See a Spike
GFS rose 8.5% year over year to $1.6 billion. Average order size increased 8% year over year to $35. The coronavirus outbreak drove average order size in the quarter under review despite a double-digit decline in the year-over-year orders during the last two weeks of March.
Grubhub’s corporate business was adversely impacted by the pandemic situation as almost all its clients shifted to work-from-home models. New York, the company’s largest consumer market and the epicenter of the viral outbreak in the United States, saw the steepest decline with a number of residents having temporarily moved out of the city and many restaurants halting operations.
Active diners were 23.9 million, up 23.9% year over year. The company added 1.3 million net new active diners sequentially.
Daily Average Grubs (DAGs) were 516,300, down 0.9% year over year. Orders delivered on behalf of restaurant partners accounted for slightly more than 45% of Grubhub’s DAGs during the quarter.
Grubhub now has more than 300K restaurants on its platform including above 200K restaurant partners.
Balance Sheet & Cash Flow
As of Mar 31, 2020, cash and cash equivalents (including short-term investments) were $597.1 million compared with $375.9 as of Dec 31, 2019.
Long term debt, as of Mar 31, 2020 was $668.2 million compared with $493 million as of Dec 31, 2019.
In mid-March, Grubhub borrowed $175 million from its $225 million revolving credit facility as a precautionary measure following the coronavirus outbreak. The company recently repaid these borrowings.
Cash flow from operations was $37.5 million compared with $13.9 million in the year-ago quarter.
Outlook
Grubhub exited the first quarter with new diner wins and expansion in order volumes. The momentum has continued in the second quarter too. Moreover, Grubhub is experiencing solid growth in non-New York markets.
April 2020 DAGs were 20% higher than the April 2019-level. Moreover, average order size was roughly $40 compared with slightly more than $32 in April 2019.
However, as restaurants gradually open for dine-in, the company anticipates order rate to decline. Growing unemployment rate is also a huge concern.
Nevertheless, based on the current order trends, Grubhub expects a meaningful adjustment in second-quarter EBITDA, which it plans to spend on helping its restaurant partners survive the coronavirus woes. The company is aiding its restaurant partners to gain as many as orders possible.
Grubhub is also spending slightly more on advertising and much more on pricing, discounts and promotions for restaurants as well as diners. The incremental spending comprises protective equipment for the company’s drivers and new processes like contactless pickups and deliveries.
For second-quarter 2020, GrubHub anticipates adjusted EBITDA to be $5 million after spending more than $50+ million toward driving orders and safety. These initiatives are expected to generate more than $150 million in GFS for the company’s restaurant partners during the second quarter.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -10.82% due to these changes.
VGM Scores
Currently, GrubHub has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, GrubHub has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Image: Bigstock
GrubHub (GRUB) Up 28.1% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for GrubHub . Shares have added about 28.1% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is GrubHub due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Grubhub Q1 Earnings Beat Mark, Revenues Rise Y/Y
Grubhub reported a break-even in first-quarter 2020 results. The Zacks Consensus Estimate was of a loss of 5 cents per share.
Notably, the company had delivered earnings of 30 cents per share in the year-ago quarter.
Net loss per order of 71 cents in the first quarter came against the year-ago quarter’s net income per order of 15 cents.
Revenues increased 12.1% year over year to $363 million, beating the consensus mark by 0.7%.
The company’s capture rate, net revenues divided by gross food sales, was 22% and included nearly 85 basis points (bps) of technology-oriented revenues from LevelUp and Tapingo.
Excluding the technology-oriented revenues, Grubhub’s capture rate increased roughly 75 bps on a year-over-year basis. This upside was attributed to the mix shift toward delivering a greater percentage of orders on behalf of the company’s restaurant partners.
Operating Details
Total costs & expenses increased 29.8% year over year to $408.9 million. Operations & support; sales & marketing; technology; and general & administrative expenses grew 33%, 15.7%, 14.8% and 70.9%, respectively.
Revenues excluding operations and support costs were $3.16 per order, down from $3.26 in the previous quarter.
Adjusted EBITDA plunged 58.7% from the year-ago quarter to $21 million. Adjusted EBITDA per order was 45 cents, down from $1.09 in the year-ago quarter and 58 cents in the sequential quarter.
The sequential decline in adjusted EBITDA per order was due to Grubhub’s restaurant supply and diner-loyalty initiatives.
Grubhub successfully rolled out its GH+ subscription program that caters to myriad paying subscribers within its bounds. Besides, it added proceeds from independent restaurant-funded promotions and made a steady progress by integrating Enterprise loyalty programs in its marketplace.
The company also witnessed cohort stabilization in respect of diner quality across some of the most competitive markets.
GFS & Active Diners See a Spike
GFS rose 8.5% year over year to $1.6 billion. Average order size increased 8% year over year to $35. The coronavirus outbreak drove average order size in the quarter under review despite a double-digit decline in the year-over-year orders during the last two weeks of March.
Grubhub’s corporate business was adversely impacted by the pandemic situation as almost all its clients shifted to work-from-home models. New York, the company’s largest consumer market and the epicenter of the viral outbreak in the United States, saw the steepest decline with a number of residents having temporarily moved out of the city and many restaurants halting operations.
Active diners were 23.9 million, up 23.9% year over year. The company added 1.3 million net new active diners sequentially.
Daily Average Grubs (DAGs) were 516,300, down 0.9% year over year. Orders delivered on behalf of restaurant partners accounted for slightly more than 45% of Grubhub’s DAGs during the quarter.
Grubhub now has more than 300K restaurants on its platform including above 200K restaurant partners.
Balance Sheet & Cash Flow
As of Mar 31, 2020, cash and cash equivalents (including short-term investments) were $597.1 million compared with $375.9 as of Dec 31, 2019.
Long term debt, as of Mar 31, 2020 was $668.2 million compared with $493 million as of Dec 31, 2019.
In mid-March, Grubhub borrowed $175 million from its $225 million revolving credit facility as a precautionary measure following the coronavirus outbreak. The company recently repaid these borrowings.
Cash flow from operations was $37.5 million compared with $13.9 million in the year-ago quarter.
Outlook
Grubhub exited the first quarter with new diner wins and expansion in order volumes. The momentum has continued in the second quarter too. Moreover, Grubhub is experiencing solid growth in non-New York markets.
April 2020 DAGs were 20% higher than the April 2019-level. Moreover, average order size was roughly $40 compared with slightly more than $32 in April 2019.
However, as restaurants gradually open for dine-in, the company anticipates order rate to decline. Growing unemployment rate is also a huge concern.
Nevertheless, based on the current order trends, Grubhub expects a meaningful adjustment in second-quarter EBITDA, which it plans to spend on helping its restaurant partners survive the coronavirus woes. The company is aiding its restaurant partners to gain as many as orders possible.
Grubhub is also spending slightly more on advertising and much more on pricing, discounts and promotions for restaurants as well as diners. The incremental spending comprises protective equipment for the company’s drivers and new processes like contactless pickups and deliveries.
For second-quarter 2020, GrubHub anticipates adjusted EBITDA to be $5 million after spending more than $50+ million toward driving orders and safety. These initiatives are expected to generate more than $150 million in GFS for the company’s restaurant partners during the second quarter.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -10.82% due to these changes.
VGM Scores
Currently, GrubHub has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, GrubHub has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.