Q2 2021 Waitr Holdings Inc Earnings Call
Good afternoon, everyone I would like to welcome all of you to the waiter Holdings incorporated second quarter 2021conference call today's call is being recorded.
With us today are waiters, Chief Executive Officer, Carl Graham said, and Chief Financial Officer, Leo talked enough.
By now you should have access to our earnings press release, if not it may be found at SEC Gov G O V or our Investor Relations website at investors day W. H I T or a P. P dot com.
Before I turn the call over to management I would like to remind you that certain statements and projections on this call about our future business and financial results constitute forward looking statements.
Statements are based on management's current business and market expectations and our actual results could differ materially from those projected in the forward looking statements. Please see the risk factors contained in our annual report on form 10-K, and they'll go on form 10, Qs 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 may refer to non-GAAP financial measures. Please refer to waiters second quarter 2021earnings release for a full reconciliation of its non-GAAP financial measures to the most comparable GAAP financial measures.
I'd like to now turn the call over to waiters CEO, Karl Grinstead, who will give an overview of the company's business activities and developments for the second quarter of 'twenty 'twenty..1. He will then turn the call over to Leo but enough who will provide an overview of the company's operating and financial results. We will then open the call for Q&A call.
Thank you.
Hello, everyone and thank you for joining our call today this quarter, we strengthened our market presence.
And the on demand delivery sector by partnering with a number of national brands, including Potbelly long, John Silver's Smoothie King Applebee's Red Robin.
KFC.
With the on boarding of these popular chains and our continued addition of independent restaurants, we now have over 25000 partnered restaurants on our platform.
We continue to support our restaurant partners and communities, we serve and are hopeful that the recent signs of recovery from Covid related impacts continue.
Isn't that the emergence of Covid variance does not result in more hardships for the restaurant restaurant industry as a whole.
As I've mentioned many times before our strategy is to increase our eco system of restaurants, diners and independent contract drivers as the size of this group increases we plan to introduce additional products and services that are anticipated to create larger revenue and earnings.
Both opportunities.
To that extent during the quarter, we methodically invested our capital and various initiatives, which are positioning the company for future growth.
These include additional investments in our technology platforms with new product offerings, bolstering, our customer and partner support teams.
As well as continued opportunistic expansion into new markets all of which we believe are necessary for the core delivery business.
Additionally, we continued to strategically invest in our independent contract driver base.
In the second quarter of 2021, ensuring adequate driver supply.
As resulted in the highest level of active independent contractor drivers since the company's inception at approximately 34000 drivers.
We have.
Very recently executed 3 definitive purchase agreements to purchase payment processing companies Pro merchant Cape Cod merchant services and flow payments. The combination of these businesses will continue to broaden the company's capabilities be on third party food delivery we're excited.
To close these transactions in the near term.
During the quarter. We also made an investment in figure technology in their series D financing round figure is on the cutting edge of payment solution and utilizes blockchain technology for loan origination equity management private funds services banking and payments we are also.
So working on an agreement with their affiliate figure payments with the goal of leveraging that their underlying technology within our constituent base of diners restaurant partners and independent contract drivers to facilitate alternative payment and disbursement options. This is anticipated.
To further intertwine, our business with transformative Fintech solutions.
As previously announced we are also have recently launched a strategic initiative to change our name and visual identity.
In a comprehensive company rebrand, we look to identify a corporate name and brand that unifies, our current service offerings and better reflects our long term business strategy. The rebranding strategy reflects our ongoing commitment to innovation continued expansion into new delivery verticals and.
Other business ventures.
We're looking forward to the second half of the year as we continue to make long term investments in the company and focus on fundamental operational and strategic initiatives necessary to grow the business.
With that I'm going to turn it over to Leo our Chief Financial Officer for a recap of second quarter results.
Thank you Carl.
Now I'll review, our second quarter 2021 financial results.
Revenue from the second quarter of 2021 was $49.2 million.
Compared to $59 million on the first quarter of 2021.
$65 million on our second quarter of 2020.
For the 6 months ended June 32021 revenue was $100.1 million compared to $104.7 million from 6 months ended June 32020.
Adjusted EBITDA for the second quarter of 2021 was $2.5 million.
It's $8.3 million in the first quarter of 2021 and.
From $16.7 million second.
Second quarter of 2020.
Loss per share from the second quarter of 2021 was 5 cents compared to a loss per share of <unk> in the first quarter of 2021 and earnings per diluted share of 10, the second quarter of 2020.
Adjusted loss per diluted share for the second quarter 2021, 4 cents compared to adjusted earnings per diluted share of once that the first quarter of 2021.11 in the second quarter of 2020.
Cash on hand totaled $60.5 million as of June 32021.
Total outstanding long term debt as of June 32021 was $84.5 million.
Primarily by a $35 million term loans $49.5 million of convertible notes.
That concludes the recap of our second quarter 2020 on financial results.
Now going to short Q&A session.
Okay.
Thank you.
If you would like to ask a question. Please press star 1 on your telephone keypad and if you're on speaker phone. Please make sure. If it's from your assumption is turned off to have all your signal to reach our equipment.
Yeah.
We will pause just a moment to allow everyone an opportunity to signal for questions.
And at this time, we will go first to Dan Kraus of the benchmark company.
Okay.
And please go ahead, Sir your line is open.
Hi can you guys hear me.
Yes perfectly Dan.
Alright, great sorry about that I think it must have been on mute.
Karl can we just start off by level setting sort of expectations around around the pieces here.
We kind of look at the core business and the trajectory.
Just help us think.
As you kind of go through this rebrand true.
What the organic trends are right now and as you make these investments I guess, maybe if you could sort of break out short term versus long term.
What's the margin flow through is this quarter, obviously investing at historically you'd said you know kind of north of 20, how do we think about it in the near term and the long term.
Yes.
Yeah, So let's start with that first I still think.
Long term those margins that we've talked about are attainable, but as I said in the past, it's going to be more than just last mile delivery right, it's going to be.
Supplemental businesses like payments and other things that are going to combine from.
For more of an offering to our customer base than just free delivery here free delivery there.
<unk>.
Dan ultimately we're in this.
Business now where we can't be.
A mini me of <unk>.
<unk> cash right, we have to be more than that we can't play the game that day play.
And that's why I've always talked about our 3 main constituents.
And thinking beyond just the the last mile delivery. The the addition of these payment businesses is really the first big step and giving ourselves the capability to offer a full suite of payment services not only to our installed base, but.
Beyond that into other verticals and what have you. So I still think long term those EBITDA margins are attainable, but not purely just from from last mile delivery in the short term I think that this quarter.
Is about as soft as the aggregate EBITDA will hit I think that day, the rest of the year rebounds, a little bit will be the timing of some of the impact of our P. O S integrators are integrations with.
2 big third parties.
Historically the quarter on the floor is a little softer at least it was last year than the second quarter.
But I do see a rebound in the fourth quarter.
It it has been tricky.
To predict the top line of the business and that's why it didn't.
Reticent to get out over our skis with it because the impact of Covid, where as we've talked about in the past it's been great and validating you know last mile delivery, but it's also Cree.
Creates a nightmare of projecting you know, let's just say if stimulus for example, getting hit in mid March Q2's revenue number would have been bigger than Q1.
And if I think if we scrape out the effects of.
The pandemic since last year, the business is essentially where it would've been but only profitable today, where it wasn't prior to the pandemic.
From from our base business, that's where we start from and then we build from there with our strategy.
Got it that's helpful and can you just I mean, you brought it up.
Times on that response, but maybe just talk a little bit more about the strategic rationale of the acquisition. How quickly you can move that into adjacencies and sort of how that filters through from top to bottom over the course of the year.
Yeah I think in.
Potentially in in.
Uh huh.
2022 that could represent 10% growth to the business just on its own.
And.
It's a multi pronged strategy. So so these businesses are like many.
I payments, which was my old company right. They they they offer a broad suite of payment solutions across all types of S. ICD codes of merchants.
So sure.
Sure we had the low hanging fruit of our 25000 restaurants that are captive for us to go after.
But then we have a every merchant category that you can imagine.
Several of you know what's in Vogue marketing strategies that you know payments companies use.
Today, So I mean that business on its own I expect even without the you know the.
On the synergistic.
The aspect of having an embedded merchant base, that's already doing business with us is going to be is going to is going to drive some really nice revenue growth and earnings over time, and and give us that 1 other stickiness that additional product to our merchant partners that we can you know delivered to him.
In a in a packaged offering that will make financial sense.
Got it thanks, and then if I could just sneak 1 more in just in terms of the Adjacencies.
Still no update on Canada, I know, that's kind of a longer tailed opportunity grocery seems to be growing alright.
Maybe just talk through kind of how the ancillary or developing at this point and is that included in that 10% upside from payments or is that payments alone and then the ancillary plus the core last mile delivery is the remainder.
Yeah, I think that's payments are the number I was throwing out was with them on their own. These other verticals you know cannabis is tricky right.
As everyone knows.
As we sit here today, you traditional payment methods are not available to.
Retailers and candidates nor our.
The ability to deliver their product like what we can deliver a cheeseburger right. So there there are on.
All types of regulatory dynamics around both of those things all of which we are working on and you could be assured that.
That our solution is going to comply with all regulatory.
Entity and it's state by state and you know, it's not quite I E.
Alcohol isn't as quite as.
Onerous, but it's the same thing with as we've expanded state by state in alcohol delivery. There are a number of dynamics. There that you have to comply with all that being said the more gray. It is the more difficult it is for someone.
To step into that business is what's attractive to us right because we're going to do the work we're going to come up with a solution that marries both payments and delivery and you know everyone seems to be afraid of the last mile delivery because they think it's such a money drain and it cannot be done.
Profitably and if we've done anything else last year I think.
We've shown that we can do that component of it.
And at a profitable level and I think that that's going to be a super important.
Skill for this business in Super valuable to many different players that are serving that are selling goods and services in the future because if all they're going to be left with is a duopoly, it's not going to bode well for pricing or flexibility or competitiveness and.
It seems like that's the direction the ubers and the door dashes are going and you know so I think we will be you know a refreshing alternative to whether it's the restaurant industry or the convenience store industry, obviously candidates, but across the board.
Got it thanks for all the color Karl I really appreciate it.
And we'll go to our next question from Jeff and Brian B Riley.
Yeah.
I guess I just wanted to follow up a little bit more on the driver cost picture, maybe you can speak to that and give us kind of the outlook there.
Yeah.
You know as we got a lot of color from Uber are in and around.
They are quote unquote investor the investment and drivers.
And I think it was pretty well documented that we've had a tight labor market for a period of time, usually coincides with subsidies.
So I think that the if if if we consider it an investment in Q1 and Q2 are at.
It probably impacted us.
Notably the EBITDA line.
That being said whatever we did resulted in a lot of success right. We have a high highest driver count that we ever had we have our lowest delivery times that we've ever had at least since I've been here.
I do think that those elevated costs are trending lower and we're starting to see that.
In July so I don't think that that continues.
To get any worse I think that has peaked.
Okay, and then if we can kind of just look at the <unk>.
I guess, you're thinking around the <unk>.
Sales and marketing and G&A lines.
For Q3 or for a second half those were a little bit higher than we expected in Q2, So just wondering directionally, where those might head.
Yeah. So.
Couple of things about that.
The push into Q S. R, which is you know on a nascent necessary.
Strategy long term for the business right you need that level of restaurant selection because you don't want your customer that you know once a month once a big Mac to remember in his mind, Oh, well that's not on the waiter platform in my market. So I have to go to a competitor Super.
Important that impacted our top line revenue.
At least in the short term.
As we've seen.
Revenue per order come down slightly because.
Even though it's still healthy margin, it's not as is higher.
Higher margin as your independent restaurant week.
We did we did some additional couponing to try to reactivate some.
Additionally, our dormant diners in the quarter I think that that will bode well and then you know we we opened this year. We've opened maybe some 100 new markets smaller markets and when we go into these markets, we do start with some lower rates.
The rates that.
Over time do increase contractually so.
You know I think those were well thought out I think there were smart Ah I think that will continue on the strategy of these opening these smaller markets.
But I don't I don't think you see things get more heavy handed than you saw them in this quarter.
Okay and then.
Just kind of looking at the operating profitability profile. When do you when would you expect to return to operating profitability.
I'm not sure I understand the question, Yeah, I get the on.
Operating definite operating margin operating margin line.
Yeah.
Leo what line is he actually pointing to why don't you explain because I don't I don't seem to understand yeah, sorry, I'm I'm just looking at the the income from operations that line, which was a little bit lower than we expected I'm just wondering if that 1 you would.
See that line getting back to positive.
So what number are we looking at Jeff.
3.092 million I believe.
Negative way okay.
Where can you help me out here.
Sure, Jeff Yeah, I think we probably expect to be.
Rebound there in <unk>.
In 2022.
I think the expectation at this stage.
Okay. So 2022.
Got it helpful. Okay, and then I just had 1 more just was curious on the investment and the blockchain application any anything you can help us with there.
Yeah. So are you familiar with figure technologies.
Being either nationally.
Alright, so figure is founded by a guy named Mike Cagny. He was also the founder so far.
And.
They are.
They're a blockchain enabled.
A company that has been focused on the mortgage industry.
They also have a product that is called figure pay that they aim to essentially dissing franchise.
Franchise member banks and reduce the cost of interchange so.
As you know there are a number of these defy or challenger banks that have popped up that are attacking.
All different revenue streams from established banks.
In the visa Mastercard World.
The member banks earn something called the interchange right to.
Essentially they they say that that is for credit risk marketing maintaining of their networks and what have you well figure pay aims to sit in between the merchant and the consumer.
And.
Offer the ability to transact and in some cases.
Having non collateralized short term loan.
Mike I'd after pay if you will.
To pay for their goods.
Uh huh.
So you know if you think about our constituents again merchants consumers do you think about we pay drivers every day.
This is a super interesting innovative payment related product and offering to offer too I mean.
Just remember there's 2 million active diners on our network, but 6 million people have downloaded that App you got 25000.
Merchants right and then you have another 34000 drivers, it's a super valuable ecosystem that you know a company.
Like figure or other payments company.
You know find Super valuable.
So with with the addition of these payment businesses that we purchased and our ability to market their figure pay solution.
You know, it's you know what.
1 additional.
Product offering that you know is is.
Innovative.
Besides traditional credit card processing.
Okay fair enough. Thanks for taking my questions and best of luck.
And that does concludes today's.
Question and answer session I will now turn the call back to Karl Grinstead for any additional or closing comments.
No no closing comments other than thanks for your interest.
We continue to be excited about the future of our our business and the rest of this year.
And.
Have a nice night. Thank you.
Yeah.
And that does conclude today's call. Thank you for your participation you may now disconnect.
Okay.
[music].