Grubhub Reports Record Second Quarter Results

Announces acquisition of LevelUp to accelerate technology integrations and provide the most comprehensive ordering and fulfillment solution

CHICAGO, July 25, 2018 — Grubhub Inc. (NYSE: GRUB), the nation’s leading online and mobile food-ordering and delivery marketplace, today announced financial results for the second quarter ended June 30, 2018. For the second quarter, the Company posted revenues of $240 million, which is a 51% year-over-year increase from $159 million in the second quarter of 2017. Gross Food Sales grew 39% year-over-year to $1.2 billion, up from $880 million in the year ago period. Grubhub today also announced it entered into an agreement to acquire Boston-based LevelUp, the leader in mobile diner engagement and payment solutions for national and regional restaurant brands.

“We had a standout quarter, highlighted by a record number of new diners trying Grubhub for the first time. We generated robust order growth, while continuing our rapid delivery expansion and adding thousands of high quality new restaurant partners,” said Matt Maloney, Grubhub’s founder and chief executive officer. “We’re also thrilled to announce the LevelUp acquisition. LevelUp’s leading restaurant-facing technology and the team they have built in Boston will help Grubhub provide the most comprehensive solution for restaurants, powering everything from online demand generation to fulfillment for restaurants.”

Second Quarter 2018 Highlights

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

Second Quarter Financial Highlights

  • Revenues: $239.7 million, a 51% year-over-year increase from $158.8 million in the second quarter of 2017.
  • Net Income: $30.1 million, or $0.33 per diluted share, a 104% year-over-year increase from $14.8 million, or $0.17 per diluted share, in the second quarter of 2017.
  • Non-GAAP Adjusted EBITDA: $67.4 million, a 61% year-over-year increase from $41.9 million in the second quarter of 2017.
  • Non-GAAP Net Income: $46.3 million, or $0.50 per diluted share, a 99% year-over-year increase from $23.2 million, or $0.26 per diluted share, in the second quarter of 2017.

Second Quarter Key Business Metrics Highlights

  • Active Diners were 15.6 million, a 70% year-over-year increase from 9.2 million Active Diners in the second quarter of 2017.
  • Daily Average Grubs (DAGs) were 423,200, a 35% year-over-year increase from 313,900 DAGs in the second quarter of 2017.
  • Gross Food Sales were $1.2 billion, a 39% year-over-year increase from $880 million in the second quarter of 2017.

LevelUp Acquisition

LevelUp’s world-class technology and team will simplify Grubhub’s integrations with the nation’s top restaurant brands, provide more channels to attract and engage diners, and position us to dramatically accelerate product development for valuable restaurant-facing tools.

With the addition of LevelUp, Grubhub will offer national and independent restaurants the industry’s most comprehensive solution to drive online delivery and pickup orders, from demand generation through fulfillment. In addition to making it easier for restaurants like KFC, Taco Bell, Bareburger, and Roti to integrate with the Grubhub marketplace, LevelUp accelerates Grubhub’s existing point-of-sale (POS) integration capabilities and provides restaurants with powerful CRM and analytical tools to help them drive more diners to their platform and increase volume from existing diners.

“For the last seven years, the LevelUp team has worked to provide our restaurant partners with a complete solution to engage customers in this rapidly evolving digital landscape,” said Seth Priebatsch, LevelUp’s founder and chief executive officer. “By becoming a part of Grubhub, we take our biggest and most exciting step in achieving that mission. Together, we will provide restaurants with everything they need to grow profitably as more and more diners opt for the convenience, transparency and control of ordering online.”

Grubhub has entered into a definitive agreement to acquire LevelUp for $390 million in cash, subject to standard closing conditions, including the expiration of U.S. antitrust waiting periods. The transaction is expected to be funded through cash on hand and Grubhub’s existing credit facility.

Foley Hoag is serving as legal counsel to LevelUp in connection with the acquisition and Kirkland & Ellis LLP is serving as legal counsel to Grubhub.

Third Quarter and Full Year 2018 Guidance

Based on information available as of July 25, 2018, the Company is providing the following financial guidance for the third quarter and full year of 2018. This guidance excludes any impact from the potential acquisition of LevelUp, which has not yet closed and is subject to standard closing conditions:

Third Quarter 2018

Full Year 2018

(in millions)

Expected Revenue range

$232 – $240

$966 – $983

Expected Adjusted EBITDA range

$58 – $64

$256 – $270

Second Quarter 2018 Financial Results Conference Call
Grubhub will webcast a conference call today at 9 a.m. CT to discuss the second 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 until August 8, 2018.

About Grubhub
Grubhub (NYSE: GRUB) is the nation’s leading online and mobile takeout food-ordering 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 85,000 restaurant partners in over 1,600 U.S. cities and London. The Grubhub portfolio of brands includes Grubhub, Seamless, 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 acquisition of Eat24 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 June 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
June 30,

Six Months Ended
June 30,

2018

2017

2018

2017

Revenues

$

239,741

$

158,794

$

472,311

$

314,928

Costs and expenses:

Operations and support

102,445

62,924

198,728

122,443

Sales and marketing

46,231

34,770

94,987

70,208

Technology (exclusive of amortization)

18,717

14,076

36,048

27,268

General and administrative

18,180

14,829

35,877

28,010

Depreciation and amortization

19,849

10,414

40,800

20,454

Total costs and expenses

205,422

137,013

406,440

268,383

Income from operations

34,319

21,781

65,871

46,545

Interest (income) expense – net

8

(314)

1,030

(535)

Income before provision for income taxes

34,311

22,095

64,841

47,080

Income tax expense

4,191

7,341

3,955

14,611

Net income attributable to common stockholders

$

30,120

$

14,754

$

60,886

$

32,469

Net income per share attributable to common stockholders:

Basic

$

0.34

$

0.17

$

0.69

$

0.38

Diluted

$

0.33

$

0.17

$

0.67

$

0.37

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

Basic

89,503

86,162

88,294

86,018

Diluted

92,503

87,700

91,297

87,410

 

KEY OPERATING METRICS

Three Months Ended
June 30,

Six Months Ended
June 30,

2018

2017

2018

2017

Active Diners (000s)

15,581

9,177

15,581

9,177

Daily Average Grubs

423,200

313,900

430,000

319,200

Gross Food Sales (millions)

$

1,220.4

$

879.7

$

2,465.4

$

1,777.8

 

GRUBHUB INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

June 30, 2018

December   31,   2017

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

$

442,678

$

234,090

Short-term investments

38,969

23,605

Accounts receivable, less allowances for doubtful accounts

98,254

95,970

Prepaid expenses and other current assets

12,120

6,818

Total current assets

592,021

360,483

PROPERTY AND EQUIPMENT:

Property and equipment, net of depreciation and amortization

89,208

71,384

OTHER ASSETS:

Other assets

9,177

6,487

Goodwill

589,862

589,862

Acquired intangible assets, net of amortization

494,484

515,553

Total other assets

1,093,523

1,111,902

TOTAL ASSETS

$

1,774,752

$

1,543,769

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES:

Restaurant food liability

$

110,011

$

119,922

Accounts payable

8,829

7,607

Accrued payroll

11,223

13,186

Taxes payable

1,203

3,109

Short-term debt

5,469

3,906

Other accruals

35,782

26,818

Total current liabilities

172,517

174,548

LONG-TERM LIABILITIES:

Deferred taxes, non-current

70,983

74,292

Other accruals

18,246

7,468

Long-term debt

116,598

169,645

Total long-term liabilities

205,827

251,405

STOCKHOLDERS’ EQUITY:

Common stock, $0.0001 par value

9

9

Accumulated other comprehensive loss

(1,528)

(1,228)

Additional paid-in capital

1,066,167

849,043

Retained earnings

331,760

269,992

Total Stockholders’ Equity

$

1,396,408

$

1,117,816

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

$

1,774,752

$

1,543,769

 

GRUBHUB INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Six Months Ended June 30,

2018

2017

CASH FLOWS FROM OPERATING ACTIVITIES

Net income

$

60,886

$

32,469

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

Depreciation

10,526

5,092

Provision for doubtful accounts

301

148

Deferred taxes

(3,308)

(6,780)

Amortization of intangible assets

30,274

15,362

Stock-based compensation

22,170

15,438

Deferred rent

2,877

43

Amortization of deferred loan costs

460

240

Other

(596)

(554)

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

Accounts receivable

5,770

784

Prepaid expenses and other assets

(8,446)

3,323

Restaurant food liability

(9,870)

(1,690)

Accounts payable

(107)

(978)

Accrued payroll

(1,961)

396

Other accruals

7,041

4,365

Net cash provided by operating activities

116,017

67,658

CASH FLOWS FROM INVESTING ACTIVITIES

Purchases of investments

(44,271)

(110,108)

Proceeds from maturity of investments

29,116

114,303

Capitalized website and development costs

(13,145)

(9,576)

Purchases of property and equipment

(19,266)

(7,291)

Acquisitions of businesses, net of cash acquired

737

Acquisition of other intangible assets

(5,000)

Other cash flows from investing activities

24

492

Net cash used in investing activities

(46,805)

(17,180)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from the issuance of common stock

200,000

Repayments of borrowings under the credit facility

(51,562)

Proceeds from exercise of stock options

9,958

8,308

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

(18,717)

(5,523)

Net cash provided by financing activities

139,679

2,785

Net change in cash, cash equivalents, and restricted cash

208,891

53,263

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

(318)

413

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

$

446,812

$

295,890

SUPPLEMENTAL DISCLOSURE OF NON-CASH ITEMS

Cash paid for income taxes

$

7,426

$

13,805

 

GRUBHUB INC.

NON-GAAP FINANCIAL MEASURES RECONCILIATION

(in thousands, except per share data)

Three Months Ended
June 30,

Six Months Ended
June 30,

2018

2017

2018

2017

Net income

$

30,120

$

14,754

$

60,886

$

32,469

Income taxes

4,191

7,341

3,955

14,611

Interest (income) expense – net

8

(314)

1,030

(535)

Depreciation and amortization

19,849

10,414

40,800

20,454

EBITDA

54,168

32,195

106,671

66,999

Acquisition, restructuring and legal costs

1,312

1,495

2,641

1,904

Stock-based compensation

11,939

8,195

22,170

15,438

Adjusted EBITDA

$

67,419

$

41,885

$

131,482

$

84,341

Three Months Ended
June 30,

Six Months Ended
June 30,

2018

2017

2018

2017

Net income

$

30,120

$

14,754

$

60,886

$

32,469

Stock-based compensation

11,939

8,195

22,170

15,438

Amortization of acquired intangible assets

9,527

5,100

21,070

10,373

Acquisition, restructuring and legal costs

1,312

1,495

2,641

1,904

Income tax adjustments

(6,628)

(6,315)

(13,305)

(11,834)

Non-GAAP net income

$

46,270

$

23,229

$

93,462

$

48,350

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

92,503

87,700

91,297

87,410

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

$

0.50

$

0.26

$

1.02

$

0.55

Guidance

Three Months Ended
September 30, 2018

Year Ended
December 31, 2018

Low

High

Low

High

(in millions)

Net income

$

18.5

$

22.8

$

103.3

$

113.4

Income taxes

7.3

9.0

20.6

24.5

Interest expense ̶ net

(0.3)

(0.3)

0.5

0.5

Depreciation and amortization

20.0

20.0

81.0

81.0

EBITDA

45.5

51.5

205.4

219.4

Acquisition and restructuring costs

2.6

2.6

Stock-based compensation

12.5

12.5

48.0

48.0

Adjusted EBITDA

$

58.0

$

64.0

$

256.0

$

270.0