Grubhub (GRUB) Potential?

Investment Analysis Clubs Saul’s Investing Discussions
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Not sure if this has crossed anyone’s radar here, but it looks interesting.
Haven’t had a chance to do a deep dive, but here are the key statistics, pulled from their most recent quarterly report:

“Grubhub is the nation’s leading online and mobile food ordering company dedicated to connecting hungry diners with local takeout restaurants. The company’s online and mobile ordering platforms allow diners to order from more than 85,000 takeout restaurants in over 1,600 U.S. cities and London. Every order is supported by the company’s 24/7 customer service teams, and Grubhub has offices in Chicago, New York and London. The Grubhub portfolio of brands includes Grubhub, Seamless, Eat24, AllMenus and MenuPages.”

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.

Key Business Metrics:

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.

They have also very recently acquired the mobile tech firm Levelup. “It shows grubhub wants to better integrate its point-of-sale tech at partner restaurants. LevelUp’s digital ordering/payments know-how makes that easier.”
The acquisition has caused their shares to jump 23%. 52 week change is u p 186%

77% approve of CEO
0.27% shares held by insiders
IPO 2014
Forward P/E 59.96
P/S(ttm) 16.26 (a lil pricey)

I am new to this, so please feel free to critique me to your hearts content.
I do not have a position in GRUB

All the best gentlemen,

WM33

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Grubhub is the nation’s leading online and mobile food ordering company dedicated to connecting hungry diners with local takeout restaurants.

Hi WM33

Thanks for a useful and interesting write-up. What first struck my eye was that insiders only own a quarter of 1% of the outstanding shares, which is tiny, a real outlier, for a small new (4-years post-IPO) fast-growing company like that. Almost impossible. Are you sure of that figure? Is there an explanation? It just can’t be right. Very odd. Maybe a misprint?

We should also note that Square competes directly with them, and Square is no slouch.

Saul

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Saul,

You’re right, that is definitely a glaring red flag. Doesn’t seem to be a misprint either according to Yahoo finance:
https://finance.yahoo.com/quote/GRUB/holders?p=GRUB

Stiff competition is most certainly a concern as well, thanks for pointing that out.

WM33

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Saul,

Information taken from this year’s Proxy Statement (as of April 2018)states officers and directors hold 1.59% of shares:

Named Executive Officers, Directors and Director Nominees:
Matthew Maloney 885,944 1.01%
Brian McAndrews 136,942
Lloyd Frink 123,195
Adam DeWitt 101,841
David Fisher 56,794
Girish Lakshman 25,388
Keith Richman 18,026
Stanley Chia 15,672
Katrina Lake 14,510
Maria Belousova 11,948
David Habiger 6,819
Linda Johnson Rice1,436
Barbara Martin Coppola 0

All current executive officers, directors and director nominees, as a group
(13 persons) 1,409,818 1.59%

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According to finviz, insider ownership is at 0.01%.
https://finviz.com/quote.ashx?t=GRUB

Is that called having “flesh in the game”?

🆁🅶🅱

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Hi j124, Thanks, that does sound slightly better, but what are director nominees, and why are they counted?
Saul

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So, 63% of the insider holding by one person…

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I live in Los Angeles and have never used GrubHub. They have the worst reviews on Yelp of any business I have ever seen. Most of the reviews are one star for poor service by drivers and poor response by customer service when the ordered meal is delivered very late and is cold or missing items. I have to admit that I cannot reconcile the poor reviews with the GrubHub’s apparent financial success. Something is off. However, due to the poor reviews, I have chosen to use Caviar instead, which is a Square company. Have never had a problem with them.

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Interesting Rundog - Seamless in NYC has the opposite reputation. Top notch and very high utilisation rates. Caviar is minute compared with Grub Hub. Someone did a review - maybe Bear about 4-6 months ago and reckoned the then 100-110 offered an amazing exit price as it was overvalued. I held the faith and held the stock. It certainly has leverage.

Forget about London though, this is an America only story. It has very high growth and a very high valuation vs other worldwide food delivery operators and is very geo niched into the US, however it is also by far the most profitable.

Ant

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Didnt a lot of Grub’s growth came in via acquisitions in last few years?

i researched a while back so going off of my faulty memory… but i thought organic growth is in 20% range consistently.

It certainly has probably the best business model and management team in the industry

However, i worry that their organic growth is not clear and certainly not in the range of 40%…

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Didnt a lot of Grub’s growth came in via acquisitions in last few years?

Yes. Well, have not looked at 2Q yet, but that was the case with Q1. Here’s what I wrote in an article recently.

In the company’s first quarter, daily average grubs (DAGs), the number of daily orders across GrubHub’s entire platform, grew to almost 436,900, a 34.4% increase year over year. The platform’s active diners, the number of unique diner accounts from which an order has been placed over the preceding year, grew to 15.1 million, an incredible 71.6% increase year over year. While some of that growth can be attributed to GrubHub’s acquisition of Eat24, which was finalized in the fourth quarter of 2017, management stated that with the acquisition excluded DAGs still organically increased about 18% to 19% over last year’s results.

Grubhub offers restaurants a low-risk, high-reward proposition for using its food-ordering platform. The restaurants do not have to pay anything up-front or any subscription fees, just a commission fee for every order the platform generates. Individual restaurants can choose to pay higher commission rates in exchange for more prominence on the platform, thus exposing themselves to more potential diners. GrubHub saves diners’ preferences, including previous orders and payment methods, to make the ordering experience as seamless as possible in an effort to drive frequent usage.

From https://www.fool.com/investing/2018/06/17/how-to-invest-in-t…

But I came away very impressed with the company, much more than I thought I would before reviewing it. GrubHub is accumulating a lot of customer data through its platform, which it then analyzes to give restaurants actionable data to help them optimize their online marketing, menu pricing, and delivery footprints. This makes the partnering restaurants more dependent on GrubHub, creating a stickiness to the relationship that makes it unlikely that a restaurant will leave for a competing platform. After I looked over its Q1 results and business model I put it on my watchlist. Only so many companies I can follow, so I didn’t buy a position, but I like this one.

Matt
No position
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See all my holdings at http://my.fool.com/profile/TMFCochrane/info.aspx

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