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GrubHub Delivers Strong First Quarter as a Public Company

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By on Consumer Staples

GrubHub shares are currently up in the after-market by $1.50, or 5%, on strong results. First quarter 2014 revenue of $58.6 million registered ahead of the consensus expectation of $53.4 million, and adjusted EBITDA of $16.4 million beat the consensus estimate of $10.7 million. Management set second quarter 2014 revenue and adjusted EBITDA guidance above consensus expectations. Our 2014 and 2015 estimates are increasing.

Revenue of $58.6 million finished ahead of the consensus estimate of $53.4 million. Adjusted EBITDA of $16.4 million were also well above the consensus estimate of $10.7 million. Management attributed some of the outperformance to the inclement weather experienced in many of the regions of the country this winter, with colder temperatures and increased snowfall driving consumers to order delivery more frequently. Management forecasts second quarter revenue of $53.0 million to $55.0 million, ahead of the consensus expectation of $52.6 million. Adjusted EBITDA are expected to be $13.0 million to $15.0 million, with the midpoint ($14.0 million) ahead of the consensus estimate of $13.4 million.

GrubHub ended the first quarter with 3.85 million active diners (diners that have placed an order within the last 12 months) on its platform, ahead of our estimate of 3.60 million and representing 49% year-over-year growth. The company added 430,000 net active diners in the quarter, well ahead of our estimate of 175,000 and the 256,000 added in the same period last year. Management also attributed some of this outsized increase to the aforementioned weather factors. Mobile orders increased to 44% of total orders in the first quarter, up from 35% in the same period last year and 43% last quarter as mobile continues to be a positive mix shift for GrubHub. Management noted that more growth has come from mobile platforms than from desktop.

GrubHub’s reported commission rate of 13.5% was about 50 basis points higher than our model. Management noted it has recently rolled out the GrubHub auction sort product on its Seamless platform. With auction sort, the default restaurant search results are based on restaurants willing to pay the highest commission rates, rather than alphabetically. We believe this change could potentially provide upside to the 13% long-term commission rate in our model.

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