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GrubHub Inc (GRUB)

Q4 2018 Earnings Conference Call

February 7, 2019 10:00 AM ET

Company Participants

Adam Patnaude – Head-Investor Relation

Matt Maloney – Founder and Chief Executive Officer

Adam DeWitt – President and Chief Financial Officer

Conference Call Participants

Ron Josey – JMP Securities

Matthew DiFrisco – Guggenheim Securities

Jason Helfstein – Oppenheimer

Heath Terry – Goldman Sachs

Nat Schindler – Bank of America Merrill Lynch

Brian Nowak – Morgan Stanley

Andy Hargreaves – KBCM

Presentation

Operator

Good morning, ladies and gentlemen. My name is Julie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Grubhub Q4 2018 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] Thank you.

And now I'd like to turn the call over to Adam Patnaude, Head of Investor Relation. Please go ahead.

Adam Patnaude

Good morning, everyone. Welcome to Grubhub's fourth quarter 2018 earnings call. I'm Dave Patnaude, Head of Investor Relations. Joining me today to discuss Grubhub's results are our Founder and CEO, Matt Maloney; and our President and CFO, Adam DeWitt. This conference call is available via webcast on the Investor Relations section of our website at investors.grubhub.com. In addition, we'll be referencing our press release, which has been attached as an exhibit to our current report on Form 8-K, filed with the SEC today.

I'd like to take this opportunity to remind you that during this call, we will make forward-looking statements, including guidance as to our future performance. These forward-looking statements are made in reliance on the safe harbor provisions of the Securities and Exchange Act of 1934 as amended and are subject to substantial risks and uncertainties that may cause actual results to differ materially from those in these forward-looking statements.

For additional information concerning factors that could affect our financial results or cause actual results to differ materially, please refer to the cautionary statements included in our filings with the SEC, including the Risk Factors section of our annual report on Form 10-K for the fiscal year ended December 31, 2017, filed with the SEC on February 28, 2018, and our quarterly reports on Form 10-Q and our Annual Report on Form 10-K for the fiscal year ended December 31, 2018, that will be filed with the SEC. Our SEC filings are available electronically on our Investors website at investors.grubhub.com, or the EDGAR portion of the SEC's website at www.sec.gov.

Also, I'd like to remind you that during the course of this call, we will discuss non-GAAP financial measures in talking about our performance. Reconciliations to the most directly comparable GAAP financial measures are provided in the tables of the press release. All references to active diners, daily average grubs and gross food sales only include transactions placed on the Grubhub marketplace or related platform or Grubhub provides marketing services to generate orders. Specifically, these metrics exclude transactions like LevelUp and Tapingo or Grubhub only provides technology or fulfillment services. Adam will discuss this disclosure change in more detail later on the call, but we think this clarification is the best way for investors to understand how our business is performing.

And now, I will turn the call over to Matt Maloney, Grubhub's Founder and CEO.

Matt Maloney

Thanks, Adam. Good morning everyone and thanks for joining the call. This morning we are celebrating Seamless’ 20 year anniversary. So for breakfast we're enjoying corn, beef and eggs from the famous Katz's Deli on the lower east side, delivered all the way from New York City. We had to temporarily increase their delivery boundary to include Chicago, which will definitely skew our average click to delivery time, but we left a great tip for the driver.

Now before I get nostalgic, we had an outstanding fourth quarter to finish a transformational 2018. We had over $5 billion in sales for our local restaurant partners. Our organic order growth, excluding all acquisition noise, accelerated in every quarter in 2018. This past quarter was actually the fifth in a row. And we ended the year with almost $18 million active diners on our platform. We added 1.3 million diners in the fourth quarter alone. Now to put this in perspective, last quarter we set a record for net new diners and the number of diners we added this quarter is more than 60% higher than that past record. We now have over 105,000 restaurant partners in more than 2,000 cities in all of the 50 states. With our aggressive expansion in the fourth quarter, we tripled the number of markets with Grubhub Delivery in 2018 to over 300.

Now for the Nostalgia, Seamless is an iconic New York City brand that defines how New Yorkers eat. It was founded to help Manhattan workers eat seamlessly at the office and has evolved over time to be the most ubiquitous and most beloved way to order delivery and one of the greatest cities in the world. We're proud to steward this brand for the next 20 years and continue to evolve the platform to make ordering at home and at work even more seamless. Reflecting on the successful history of our company much has changed over the past two decades.

Recall smartphones and apps did not exist when Seamless launched in 1999, and Grubhub initially solved the last mile problem by sending faxed orders to restaurants. What has not changed is our singular focus on connecting hungry diners with all of their favorite local restaurants. I remember the first restaurant pitch I went on 15 years ago. It was a Thai Sushi fusion mom-and-pop restaurant in Chicago's loop. I walked in with my laminated flip book, ready to explain online demand and how it could grow their business.

Little did I know that many independent restaurants, including this one, had been burned in the initial Internet bubble by paying thousands of dollars to contractors to build a website. Explaining how our platform would aggregate demand better than individual websites was an uphill battle, but I sat there for over an hour and a half explaining the concept to the son of the owner. I'm not sure if I was persuasive or if he felt bad for me, but eventually he signed up and that was the first dollar we earned.

Read the rest of this transcript on seekingalpha.com