Grubhub (GRUB) Beats on Q1 Earnings, Revenues Surge Y/Y

Grubhub Inc. GRUB delivered first-quarter 2018 earnings of 52 cents per share, which beat the Zacks Consensus Estimate by 16 cents. The figure soared 79.3% on a year-over-year basis driven by robust top-line growth.

Revenues climbed 49% year over year to $232.6 million, which comfortably surpassed the Zacks Consensus Estimate of $228 million. Excluding Eat24, which was acquired from Yelp YELP in October 2017, revenues increased 36%.

During the quarter, the company launched delivery in dozens of new markets like Charleston, Honolulu, Memphis, Shreveport and Portland, ME.

Gross food sales surged 38.6% year over year to $1.25 billion. Excluding the acquisition of Eat24, gross food sales increased almost 22% with average order size up 4% during the quarter.

Net revenues as a percentage of gross food sales were 18.7%, up 130 basis points (bps) on a year-over-year basis and 65 bps sequentially. The increase was primarily due to favorable mix shift towards GrubHub Delivery, including Eat24 and Yelp diners, and restaurants continuing to opt to pay for more impressions on the platform.

As of Mar 31, 2018, active diners were 15.1 million, compared with 8.8 million in the year-ago quarter. Daily Average Grubs (DAGs) were 436,900 compared with 324,600 reported in the year-ago quarter. Organic DAGs grew sequentially driven by strong momentum across the company’s Tier 2 and smaller markets.
 

GrubHub Inc. Price, Consensus and EPS Surprise

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

 

Recently, Yum! Brand YUM closed its previously-announced investment in GrubHub. Grubhub is now the only national U.S. ordering partner for Yum! Brands. Under the partnership, Grubhub will provide a comprehensive online ordering solution for KFC and Taco Bell franchises, sub-divisions of Yum! Brands.

Operating Details

In first-quarter 2018, total costs & expenses as percentage of revenues increased 230 bps on a year-over-year basis to 86.4% in the reported quarter.

Sales & marketing, technology, and general & administrative expenses decreased 170 bps, 100 bps and 80 bps, respectively. These were offset by 330 bps and 260 bps increase in operations & support and depreciation & amortization expenses, respectively.

Strong growth in operations & support expenses are expected to be driven by increased delivery orders and the inclusion of Eat24 orders. New delivery market launches negatively impacted driver pay per order in the reported quarter.

Adjusted EBITDA margin increased 40 bps to 27.5%. Adjusted EBITDA per order was $1.63, up 12% from the year-ago quarter.

Guidance

For second-quarter 2018, GrubHub forecasts revenues between $228 million and $236 million. DAGs are expected to decline sequentially, which will hurt top-line growth. Adjusted EBITDA is anticipated to be within $59-$65 million.

For 2018, GrubHub forecasts revenues between $930 million and $965 million. Adjusted EBITDA is expected to be within $242-$262 million.

Grubhub plans to expand into 100 new delivery markets throughout 2018. The company has already expanded into 50 markets across the country. The investments are now expected to negatively impact EBITDA by slightly less than $10 million.

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 the 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 scale these newer markets.

Management expects advertising spending to decline sequentially in the second quarter. Advertising spending in the third quarter is also expected to remain flat sequentially.

Zacks Rank & Stocks to Consider

Currently, GrubHub carries a Zacks Rank #3 (Hold).

Autohome ATHM is a stock worth considering 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.

Autohome is set to report first-quarter 2018 results on May 8.

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