What happened
Shares of Grubhub (GRUB +0.00%) were getting tossed today after the online restaurant takeout marketplace posted disappointing results in its fourth-quarter earnings report and offered underwhelming guidance for 2019. The numbers seemed to be the clearest sign yet that Grubhub is feeling the effects of competition from Uber Eats and other delivery services, adding to concerns following its previous earnings report.
As a result, the stock was down 8.2% as of 1:09 p.m. EST, after falling as much as 20.6% earlier in the morning.
Image source: Grubhub.
So what
Grubhub said revenue in the quarter grew at a brisk 40%, reaching $287.7 million as the company saw organic growth, expanded to new markets, and integrated recent acquisitions like LevelUp and Tapingo. However, that figure was short of analyst estimates at $290.7 million.
Other user metrics showed solid growth, as Daily Average Grubs, or orders, were up 19% to 467,500, and active diners rose 22% to 17.7 million. Gross figures for food sales increased 21% to $1.4 billion.
However, the company, which also owns brands like Seamless and Eat24, paid dearly for that growth, as expenses for operations and support, sales and marketing, and technology all surged, outpacing revenue growth. Consequently, operating income reversed from a profit of $26.2 million a year ago to a loss of $2.8 million.
On the bottom line, the company reported adjusted earnings per share of $0.19 down from $0.37, which also missed Wall Street expectations at $0.28.
CFO Adam DeWitt explained that the company made significant investments in marketing and in the launch of new delivery markets, saying those investments contributed to "exceptionally strong growth in our newer markets." DeWitt also said those moves would "help us generate meaningful operating leverage throughout 2019, with per order economics likely similar to the third quarter of 2018."
Check out the latest Grubhub earnings call transcript.
Now what
Looking ahead, the company saw strong top-line growth continuing into 2019, forecasting full-year revenue of $1.315 to $1.415 billion, representing 36% growth at the midpoint. That compares to analyst estimates of $1.35 billion.
Showing that rising costs would continue to present a headwind, Grubhub guided full-year EBITDA at $235 million to $265 million, up modestly from $233.7 million in 2018 but below the consensus at $284.2 million.
The rebound from this morning's lows seems to indicate that investors thought the stock was oversold, but it's clear why shares are down on today's report.
