Q3 2020 Waitr Holdings Inc Earnings Call

Good afternoon, and welcome to the Wheater Holdings third quarter 2020 conference call with US today, our winters, Chief Executive Officer, Carl Graham said and Chief Financial Officer, we own about jobs by now you should have access to our earnings press release, if not it may be found at <unk>.

C Dot Gov, where investor relations website, <unk> investors got weight.

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Before I turn the call over to management I would like to remind you that certain statements and projections and this call about our future business and financial results constitute forward looking statements. These statements are based on management's current business and market expectations and our actual results could differ.

Pure real leave from those projected in the forward looking statements. Please see the risk factors contained in our annual report on form 10-K, and in our form 10-Q for a discussion of risks that may cause our actual results to vary from these forward looking statements.

Finally, please note that on todays call management will refer to a non G.A.P. financial not start measure. Please refer to waiters third quarter 2020, <unk> earnings release for a full reconciliation of non G.A.P. financial measure to the most comparable G.A.P. financial measure I would.

Ill now like to turn the call over to waiter CEO, Carl Grimstad, who will give an overview of the companys business activities and developments for the third quarter of 2020. He will then turn the call over to Leo Bob who will provide an overview of the Companys operating and financial results. We will then open the call for Johnny Carl.

Please go ahead.

Thank you.

Everyone. Thank you for joining our call today we.

We are pleased with our results we generated this quarter, marking its second consecutive quarter of continued profitability and positive operating cash flow or profitable results continue to prove the sustainability of our business model and usually that you've.

Even during these difficult times.

The restaurant and hospitality sector faces and filled that as a result of the drain.

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Despite impact from recent Hurricanes treorchy markets and ongoing.

Our results continue to reflect the implementation of many fundamental strategic Michigan around service and profitability.

We've expanded our service offerings and increased efficiencies all while maintaining a cost structure within our turn.

Turn on deployed capital.

Our focus is continuing to grow and to operate a sustainable business model and bring value to shareholders over the long term.

Our recent launch of Tableside surface technology is a prime example of our efforts to diversify our product offerings beyond restaurant <unk> strengthening our market presence like.

<unk> combining this table side service technology with our delivery takeout ordering services leader now offers restaurants integrated payment solution that can help them improve their safety protocols sales and efficiency, both inside and outside the four walls.

As of today, we already have many restaurants weve signed agreements to utilize the cable side service technology.

Additionally, we have continued to our expansion into new delivery verticals, such as same day groceries and alcohol, all while offering no contact delivery.

During the third quarter of 2020, we also announced the appointment three key leaders market grows young our chief sales officer.

David Cronin, our chief engagement Officer, and Tom its Pritchard, our general Counsel, Mark David and Tom have made immediate impacts in their respective areas of expertise and I look forward to growing the business with these leaders.

Now I'll turn it over to Lee, our Chief Financial Officer for a recap of third quarter results.

Thank you Carl.

We can now turn our brokerage <unk> third quarter 2020 financial results.

Revenue for the third quarter, 2020, which could be 2.7 billion compared to 49 countries during the third quarter 29.

Net income for the third quarter was 4.6 billion four.

Four cents per diluted share.

Her to a loss of 220.1 building.

Your dog 89 cents per share in the third quarter last year.

Third quarter 2019 that wall include 192.1 million non cash goodwill intangible asset impairment charges, well consider the adjustments within our adjusted EBITDA.

Adjusted EBITDA for the third quarter 13, compared to a net loss of 15.4 million or 29.

Increased 20.4 million.

And the implementation of initiatives around service dropping below.

I forget the words were approximately 39880 her order active diners were approximately 2 billion as it stands at 30.1.

I've just got a 30 2020 of your cash on hand at 77.1 billion, an increase of 4 million at June 32012, driven primarily from the completion of our aftermarket offerings in July and positive operating cash flows partially offset by prepaying. The long term debt made toward lender.

Total outstanding long term debt, that's going back to back then.

Nearly a point I think by doing <unk> 49 point buyback ratable.

Thank you well with that we will go into a short question and answer session.

Thank you if you would like to ask a question. Please signal by pressing star one on your telephone keypad.

If you are using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment.

Again press Star one to ask a question and we'll take our first question from Jeff Van Sinderen with B. Riley. Please go ahead.

Oh Hello, everyone.

Did you could start with any quantification that you have around the impact of the Hurricanes on your P. you know for Q3, if you have that.

Well.

Jeff as you know and we've discussed.

<unk> has had any impact on Oh order volume during the quarter.

At last last count I think it's it's been six storms for named storms.

[noise] and most markets are backing up and running at this 0.1 of our larger markets like Charles is still struggling to get 100% back on its feet.

No, we're really not providing any specifics around the October impact just yet.

You know one caveat I would tell you is it's it's also hard to hurt.

Yeah distinguish the COVID-19 economics. It also played a part in any order get integration during those periods of time.

But it kinda than an unforeseen event that we could do.

Nothing about that.

The business.

It continues to bounce back in a very strong matters, though so hopefully we're at the tail end of.

Ah the storm season.

Okay, and then as a follow up to that if you look at the regions that were not impacted by the Hurricanes can you maybe speak more about what.

You experienced in transaction count there versus somebody that we know your overall transaction costs I guess, just trying to get a sense of maybe the difference. There. If that was you know I would imagine it was much stronger and then maybe if you could touch on kind of the new restaurant additions and the restaurants you got it.

Have similar trends as far as adding restaurants continued into Q4.

Right, So first consistent which how how I'd been explaining the business from observations of what's been going on.

We have good macro overhang of a lot of people out of work.

Yeah.

We are.

Experience order denigration, when the pandemic first hit.

And then we saw subsidies come in and a massive upswing, obviously in the second quarter and I I think how you have explained it over time is the water level went up.

To a certain level and then it leveled off at this higher.

Is.

At this higher base.

Our markets, which as you know are second and third tier markets.

Ah some of which opened up earlier than the bigger cities, a lot of which have oh employment issues and what have you have leveled off and you know as we've talked about the COVID-19 impact on our business and how I often think it's bad.

Double edged sword for us because in one respect.

It's been great in that you have a.

A validation if you will with third party delivery you have the diner universe has gotten bigger but as it relates to later in <unk> and that's somewhat of a turnaround story.

Yes, if you're a naysayer you say well this is an anomaly that cannot be replicated overtime.

And what I think the results of the third quarter show us that not only having the headwind of the macroeconomic conditions, but then also the.

Nature's headwinds no pun intended of these storms the business continued to perform at a very strong unit economic base level. So what what you can infer from that is I almost feel like there's potential upside when subsidies and we come out of.

This because we haven't completely benefited from you know the dynamic that has gone on in it a lot of the larger cities that have remained under a lot more restriction in our markets.

And then touch on yourselves.

Yup got it and then but.

Touch on your sales question, you know still early to call, but I'm starting to feel a.

Pretty proud of marketing brochure and his team.

You know the new sales or compensation package and reshuffling of our sales strategy is really in its infancy, but oh, we are seeing a big increase in restaurants activating on our platform.

And you know numerically it may not seem a lot to you, but the restaurants that were activating now actually create revenue added in the past that we had a.

Sales strategy that was more focused around stick count then it was revenue so you know.

Really two or a couple of months into the new fully.

Fully implemented strategy and I'm very proud of the direction that we're going it.

Okay. Good well I'll, just say congratulations on growing your business and still delivering what I would consider to be strong adjusted EBITDA. Despite a getting hit by somebody storms. So best of luck going forward.

Thank you like it.

And we'll take our next question from Alex Fuhrman with Craig Hallum Capital Group. Please go ahead.

Great. Thanks, very much for taking my question I wanted to ask about some of the component of your revenue and the economics of it your orders it looks like.

The first two quarters of this year or the number of orders was down and yet revenue was up nicely adopted driven more by take rate or basket size would be curious what you've been seeing there in the third quarter and then heading into the fourth.

Well I think the unit economics Q2 to Q3 are pretty similar if I think if you compare the first quarter to Q2 and Q3, it's slightly different because as we've talked about in the past.

The the service offering in general was behind the competition.

In in a number of our markets.

And you know Alex we discussed this in the past I mean the industry.

Prices.

Very similar fashion right. It's the restaurant pays a certain take rate it could be a teaser rate did a lot of people use of you know, 10% all the way up to 30%.

Drivers get paid a delivery charge they keep their tips the customer pay face a service charge and they did delivery charge. There's <unk>. There's no special sauce here I think if you you look across the industry.

The the pricing.

However, it's bundled whether it's you know initially and that kind of a teaser rate. It all moderates to be about the same level I think that on the basket size and what have we.

The actual.

Change from Q2 to Q3, we might have saw us a slight.

The decrease in basket size Q3 from Q2 and that might be a little bit more of a shift to people being more fiscally responsible with subsidies running out that would be a hypothesis, but I think in general.

I had one of the highest basket sizes.

In the industry because you know, we we focus on independent restaurants, they typically have a slightly higher price point than a QSR.

Okay. Thank called up that's helpful and.

I was asking about your sales and marketing efforts and it looks like sales and marketing dollars on track.

We'll be less than a quarter of what they were last year and that you've been able to generate.

On that as we hopefully towards the other side of coal that over the next year or so do you think you're going to have to reinvest a little bit in sales and marketing and all that continue to drive.

So the revenue levels.

Well, what I would tell you is if you look at our margins. Obviously, we've documented that we can run a profitable business.

We have a lot of their spend money.

But as we've also talked about.

We can't play the game of spending tens if not hundreds of millions of dollars on television ads and what have you. So we're very focused on being as efficient with our capital as we possibly can but don't miss interpret that to mean that we're not.

Wanting to spend.

Monies on a different marketing strategies or promotions or what have you. You know we have the companies and probably its strongest position it's ever been from a cash perspective, we have a lot of margin to play with and we're going to do it very responsibly.

That's terrific thank Ben style.

And we'll take our next question from Dan Kurnos with the Benchmark company. Please go ahead.

Yeah. Thanks, Carl just one question first you know maybe we can just go back to <unk>.

The general economic landscape in comments around.

You know mobility.

That impacts and obviously you know the <unk> the outcome of the election, if they get further stimulus at this point you know relative to vaccine sort of your thoughts on how that and that's probably a sort of get broad brush and how you think about that and also as it relates to drivers as well you know it.

There's obviously getting kind of a huge source of driver does that start to people go back to last year and one thing that started seeing sort of the complexity of the landscape it that sort of thing.

Yes, so a couple of things there I think.

There's a general consensus that people need some help and now that the election is past us.

Whether that that comes in the form of a big subsidy package before the end of the year or we have to wait for the New administration again, it's anyone's guess I think that's.

Upside in our our model for sure you know.

Like I said earlier and I guess was reflected in the market today a lot of a lot of equity set were quota quote unquote stay at home businesses got knocked around a little bit today.

And I think that we're.

We're not at an inflated rate from what I see in the business. This is kind of the base business, where we are today, where we've got several things within our business that I think are unique and very positive but in the short term it creates a little bit of a headwind right that these smaller markets second and third tier.

You have a lot of working class folks they are been economically challenged by this pandemic.

These <unk> and you can't say that these markets have been closed like some of the major cities a lot of our southern states have been generally generally open.

So I I think as the economy rebounds, and we get subsidies and then the last part.

As a lot of ours independent restaurant partners get back online and get back on their feet. I think there's there's quite a bit of promising tailwind to our particular business versus you know the the three big national guys.

Well refresh me that was one part that you were asking about two hours and Oh, yes, I'm talking driver Adam.

Yeah, well look I think the the.

Probably 22 outcome was more important than any outcome in the presidential election for waiter right I think that's even though we're not in California, I think that sets the tone gnashing <unk> nationwide I think it's a big win for workers that have.

They'd love to work as independent contractors, where we have driver left levels right. Now that are I mean, I think last time I look we have close to 27000 drivers I mean, we have we have and I don't think that's going away right. You know we've talked about it we have.

We have people that just love what they do and in its great as crazy It might sound to you we have people, making quite a bit of money I'm working in our network.

Delivering our services.

Well I don't think that's going away.

And then.

Okay got it that's that's really helpful. And then just one one quick one if I could just squeeze it in just because you you know look what we're getting is an ancillary categories. If you know market expansion is probably not as much on the table penetration has always been an area of opportunity for you and we will see what your new sales Ah you know activation and even then it goes to find yield but just how do we think.

About sort of unique economics, you know between the two what you get more into grocery or some of the other ancillary opportunities. You have is there any material investment required there I know it will be profitable, but will that change margin. Thanks.

No I you know I I candidly said long term EBITDA EBITDA margins that I think that our business can maintain or at least 20% I.

I think the unit economics and some of these other verticals are actually stronger.

Then the pure few food delivery.

Margins, So you know.

There's there's there's great opportunity there and the one thing I'll say its dining product.

Why it's important for us and is it allows us to further pivot the business be on just delivery.

We.

This may or may not mean, something to you, but this is really an integrated payments business.

And this now allows us to expand beyond the delivery markets that we currently operate in any market across the United States, we could utilize our sales network to sell the dining product in any city.

That they're all restaurants, its a viable product.

And it also allows us in these different markets. If you work to get some level of critical mass with with restaurant customers. Because we now have in either a independent driver network and we have the technology platform.

Overnight you can be in a market with some level of a critical mass without in the past having to deploy a bunch of capital try to develop a market be well in advance of ever seeing any revenue from it.

So you got the dining product helps us to leverage our sales organization and helps to leverage obviously other revenue opportunity. It also allows us to expand the business beyond our current footprint.

It's really interesting that's all the color I appreciate it.

Absolutely.

And we'll take our next question from Camilo matters are flattish thing. Please go ahead.

Hi, Thanks for taking my questions have been a good congratulations on doing this call. It's been it's been a long time, but that you.

You've spoken.

I have to public cloud or so how how that number or a number of questions. One is with regard to the competitive intensity. What are you seeing it builds a competitor, but then to be in your markets.

Well as you know.

All of our markets.

Have competition.

Top four competitors in all of our markets have been door dash.

Mover Groben postmates personally probably the least of which.

They continue to have a presence in our markets. We think we have a local advantage and brand loyalty in our core markets, but.

You know there there in our markets there is here to stay.

I think if if you watch national television you see that Oh, they do quite a bit of advertising.

So you know we're we're a local were on the ground and and you know we have to compete in different ways and then these folks compete.

That being said, they're not going to go away and Norway.

I also think that.

It further.

Points to further consolidation in the space.

But you know in the meantime.

We have to continue to grow a profitable business.

Uh huh.

Not that that's absolutely makes sense don't we don't sort of like marketers how has the market church trended over the past you know one quarter of the two quarters, especially the past one quarter in the third quarter. What did you see the marketshare is trending.

Hi, Hey, it it's generally.

Ah level. It we have a couple of markets that I think door dashes pick.

Some market share up on that's really driven by.

By heavy QSR focus, but you know we continue to have a strong position in our top 20 markets.

Okay, that's correct that.

Got it appeared that out there no one on the month I work it could have been a great. How how has that kind of benefit there been a williams is that the border. The GFS is.

Is there any political.

Sorry, I Didnt hear you I I would assume you're talking you asked about grocery.

Asking about grocery yes.

Yeah. So we're committed to grocery its not meaning it's not material just yet, but I think you'll you'll continue not only with grocery with alcohol and potentially some other verticals that we're going to continue to build out.

Okay got it one of the things that you mentioned was that you had 275000, probably worse at the last count.

I'm sure it's.

No no no no.

No not 275000, we have 27000, [laughter], Oh 27000, Okay, sorry, sorry.

27000, [laughter] 47000, and I and I divide that by the total number of orders that basically means about one third of our borders board dry, but where did.

Oh, that's right if they if they if they.

Yeah.

However, they are independent contractors. They are independent contractors. So not every one of those drivers is doing is even working every day.

I'm, just telling you that the amount of drivers that we have in our ranks currently is a big number which gives us a lot of flexibility and those drivers a lot of flexibility.

Of course.

Of course.

One last one on the M&A front and you pointed to further consolidation in the space.

You'll definitely you know you've tried in the past had it did not it did not quite work out the way you would apart, but now but like you know grabbed the take away and you know I adore dashed IDE study or.

But it's kind of going with Postmates.

How do you see consolidation in the space is there like an increased urgency or been Oh.

But where do you see you know that the fit.

Well, what I would say to be clear I hadn't tried in the past that was passed regime.

I think course, you know the business last year was in a different place than it is today as well as the industry was in a different place.

Ah I think that you're right. We have three main players in the U S. One that.

Probably will be.

Be a public perks.

Participates in the England, not too distant future. The other two are competing to transactions.

Candidly, where a a perfect fit for any of them.

I also think as we continue to expand our integrated payment solution the universe of.

Companies that we would fit very nicely with expands rapidly.

Got it.

I have two more if you don't mind, one is with regard to the ATM program that you had you are basically selling shares at two bucks a share or is that they need time to kind of have a similar kind of an ATM program in the near term.

Well that was completed some time ago and Ah there.

I don't want to make any comments on the future, but right now we're in a pretty strong cash position and as we as we are as we sit here today, it's not something that we're contemplating.

Got it and card one last one actually looks to me like you know for Q. Ah you you will have feet on the ground you understand the space ready route how do you think we should think about like you know then but you haven't given guidance. So how should one think about like you know food Q projections.

As as we bring in all the puts and takes from you know the how to get it back to where it says you know what the continuing Cologuard words, there's been a prevention or you know maybe lockdowns Bart the prospect of a vaccine how should we kind of think about for Q Ah you know within the context of a weird.

<unk>.

Well, you're right I don't want to make any forward looking statements here, but what I would tell you very consistent which.

With what I've been saying for months now is the business is very stable.

Even in the face of things like Hurricanes and what have you. The unit economics are not going to change.

That being said Oh, we have.

We've had a and you saw the results of it in the third quarter, we had the headwind of people out of work.

We've had the headwind of independent restaurants being under pressure.

We've had the balancing act.

I have a lot of our market not being closed actually be open.

So I think with the advent of subsidies and door, a recovering economy bodes well from the baseline that we're at today.

So.

And I think hurricane season is over so that's a good thing too.

So from those comments I I think you can.

Read into how I feel.

[noise] cool. Thank you so much thanks, Curt guidance for doing the call welcome.

Thank you.

And that concludes today's question and answer session. Carl at this time I will turn the conference back to you for any additional or closing remarks.

Well all I can say is thank you very much for every once a patient with the waiter story.

We've been hard at work for.

Most of the year now I think that the team is doing a great job with.

We've added a number of curveballs thrown at us and the team has.

Responded.

Very well and we hope to continue to do a good job for all of our supporters and shareholders and we'll talk again after the next quarter. Thanks.

Thanks very much.

And this concludes today's call. Thank you for your participation you may now disconnect.

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