(GRUB) shares rallied at the close of trading on Monday after the food delivery company reported lower-than-expected Q3 earnings – and more worryingly – Q4 guidance, which was drastically below Wall Street expectations.
The report comes at a time of intense competition in the food delivery business as companies like it
(UBER) Uber Eats, DoorDash and Postmates spend a lot on expanding their business positions. Postal officers earlier this month postponed a planned IPO, citing market conditions.
For the quarter, Grubhub had revenue of $ 322 million, up over 30% from a year ago, but below the analyst consensus estimate of $ 330.5 million. Non-GAAP earnings were 27 cents per share, according to estimates. Gross food sales were $ 1.4 billion, up 15%. Active nights are 21.2 million, up 29% year-on-year, while active daily frauds are 457,000, up 10%.
For Q4, Grubhub projects revenues of $ 315 million to $ 335 million, under the old Street consensus of $ 387.3 million. The company sees adjusted Ebitda (earnings before interest, taxes, depreciation and amortization, cash flow measure) of $ 15 million to $ 25 million, well below the $ 53.8 million reported for the third quarter.
In a brutally candid letter to 16-page shareholders, Grubhub addressed how his business is affected by changing dynamics in the food supply sector. In the beginning, the company noted that the 10% rise in daily active customers "is at the lower end of our expectations," adding "we suspect it may be at the lower end of your expectations."
In the letter, Grub Hub wrote that the trend is accelerating, starting in August.
"While we were digging through the data, we saw that our newer diners, especially those in our newer markets, were not performing as many orders as we expected at this point in their lifecycle," the company wrote in a letter. "While keeping those newer dinners was good, their ordering frequency didn't" mature "at the same level as the earlier cohorts … At the same time, we also noticed that the retention rate, not just the frequency of our newest evenings (those acquired at the end of the second quarter) were slightly lower than previous cohorts. "
Grubhub writes that he is examining the situation and concludes that" innovations in online retrieval offerings have been played out and annual growth slows and returns to a more normal longer-term, which we believe will be found with the lower double numbers, except that there are multiple players competing for the same new evenings and order growth. "
In short, the company is being crushed by a competitively saturated market.
"We believe that dinner on the Internet is becoming increasingly blurred," the company says. "For years, we have seen in our records that Grubhub dinner is extremely loyal to our platform. But our newer dinners are coming more and more to us, having already booked on a competitive online platform, and our existing dinners are increasingly being ordered from multiple platforms. "
And Grubhub added," This is a significant change in our industry that will require us, like everyone else, to compete, creating the greatest benefit for diners and restaurants, rather than relying on the industry's queues. "
The company issued a stern warning about the short-term impact of all this on its business.
" While our competitors continue to spend aggressively, absorbing steep losses in the process, we must give new evenings more reasons to try Grubhub, to stop existing ve dignitaries look elsewhere and continue to expand our food base to ensure that we are best positioned when the industry matures and reaches a stable long-term cost level. "Grubhub says that" we will move faster, spend more and we will be trying a lot of different strategies over the next 12-18 months to increase the supply of restaurants aggressively while making our dinner easier — Effective action to eliminate any reason for snackers to look elsewhere adenoma. "
While the company did not provide detailed guidance for 2020, it has designed an adjusted Ebitda of at least $ 100 million.
Grubhub stock in after hours trading fell 32% to $ 39.95.
Write to Eric J. Savitz at email@example.com