Shares of Grubhub Inc (NYSE: GRUB) went on a wild ride after the company released its fourth-quarter report Thursday. The stock initially plunged about 20% after it missed estimates on the top and bottom lines, but pared nearly all those losses with a 2% dip by the end of the day.
Grubhub's revenue rose 40% annually to $287.7 million during the quarter, but missed estimates by $2.3 million. Its adjusted EBITDA fell 26% to $42.1 million, missing expectations by $5.1 million.
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Grubhub's non-GAAP net income declined 47% to $17.6 million, or $0.19 per share, which also missed expectations by nine cents. On a GAAP basis it posted a net loss of $5.2 million, compared to a profit of $53.5 million a year earlier.
Grubhub expects its revenue to rise 31% to 42% in 2019, which matches Wall Street's expectations. However, it expects its adjusted EBITDA to rise just 1% to 13%, compared to a consensus forecast for 29% growth. These bleak numbers indicate that the online food delivery company is experiencing serious growing pains.
The key numbers
Grubhub, which owns the largest network of food delivery services in America, has been considered a great growth stock. However, its growth in Daily Average Grubs, Gross Food Sales, Active Diners, and revenue all decelerated during the fourth quarter.
| Metric | Q4 2017 | Q1 2018 | Q2 2018 | Q3 2018 | Q4 2018 |
|---|---|---|---|---|---|
| Daily Average Grubs | 34% | 35% | 35% | 37% | 19%* |
| Gross Food Sales | 39% | 39% | 39% | 40% | 21% |
| Active Diners | 77% | 72% | 70% | 67% | 22% |
| Revenue | 49% | 49% | 51% | 52% | 40% |
YOY growth. Source: GrubHub quarterly reports. *22% excluding Eat24 from both periods.
That slowdown was caused by two things. First, Grubhub lapped its acquisitions of Yelp's (NYSE: YELP) Eat24, Foodler, and OrderUp, which closed in the second half of 2017 and boosted its growth throughout the year.
Second, it faced tougher competition from rivals like Uber Eats, DoorDash, Postmates, and Square's (NYSE: SQ) Caviar. Last year Edison Trends claimed that Grubhub controlled 34% of the US food delivery market, followed by Uber Eats' 28% share, DoorDash's 18% share, Postmates' 12% share, and Caviar's 4% share.
Grubhub's top-line growth still looks impressive, but its total costs and expenses surged 62% annually to $290.5 million (101% of its revenue) during the quarter and caused its bottom-line growth to crumble.
| Q4 2017 | Q1 2018 | Q2 2018 | Q3 2018 | Q4 2018 | |
|---|---|---|---|---|---|
| GAAP net income | 293% | 74% | 104% | 75% | (110%) |
| Non-GAAP net income | 68% | 88% | 99% | 72% | (47%) |
| Adjusted EBITDA | 45% | 51% | 61% | 41% | (26%) |
YOY growth. Source: GrubHub quarterly reports.