GrubHub (GRUB) is trading modestly lower today after reporting Q1 results last night. Non-GAAP EPS fell 42% yr/yr to $0.30, but that was much better than expected. Revenue rose 39.2% yr/yr to $323.8 mln, toward the higher end of prior guidance of $310-330 mln. Adjusted EBITDA is a key metric for GRUB since the company does not guide for EPS but does guide for adjusted EBITDA. On the front, adjusted EBITDA in Q1 rose 21% yr/yr to $50.9 mln vs prior guidance of $40-50 mln.
The guidance was a bit mixed, but generally pretty good. GRUB guided to Q2 revenue of just $305-325 mln, which was below market expectations. However, its Q2 adjusted EBITDA guidance of $49-59 mln was generally in-line, perhaps a bit on the lighter side. However, after a huge guide-down last quarter, investors appear to be happy with this result. Full year guidance was reaffirmed: revenue of $1.315-1.415 bln and adjusted EBITDA of $235-265 mln.
If you look at GRUB's stock price, you will notice a huge sell-off in 4Q18, going from $149 in September 2018 to $80 by early December. The stock has pretty much stayed in that area since then but has drifted to below $70. What accounts for the drop? The company reported some poor financial results/guidance.
A big reason for the drop, especially in the adjusted EBITDA was GRUB's decision to ramp up marketing/investment spending concurrent with its entrance into a number of new markets in 2018 (see press release from company). On the other hand, the online delivery market is very competitive. In addition to GrubHub, the space is populated by DoorDash, UberEATS, Amazon Restaurants, Postmates, and others. Based on the high number of competition-related questions GRUB gets on its earnings calls, it's clearly an area that concerns analysts. Briefing.com is also concerned about these competitive pressures.
The bottom line here with GRUB's Q1 report is that it did what it needed to do. Investors are breathing a sigh of relief that there was not another EBITDA guide-down, which many assumed would happen again. We probably will not know until later in the year whether it was the marketing spend or competitive pressures that led to a pullback in GRUB's financial results, but we will put this report in GRUB's column as a win.