GrubHub IPO Signals Hunger for Expansion

grubhub

GrubHub Inc. is an Internet platform allowing users to order pick-up and get delivery. The platform can be accessed as an app or through their website. Grubhub recently delivered a $100 million IPO, initial public offering, filing signaling their hunger for expansion.

GrubHub is the industry leader in online food orders. Their closest competitor up until August was Seamless. The industry leader decided to seamlessly acquire the competitor instead of competing for business. Before the IPO filing the company was GrubHub Seamless, after the filing the company shortened the brand to GrubHub. The ticker symbol for GrubHub’s stock on the New York Stock Exchange will be listed as “GRUB.”

A rapidly growing business has helped GrubHub add 28,000 restaurants to its network, average 135,000 food orders daily, and convert $1.3 billion in food sales during 2013. Achieved success is a result of restaurants preferring the online food orders vs. the traditional phone orders. Mobile orders composed 43 percent of total orders in the fourth-quarter of 2013. According to GrubHub, this figure represents a 20 percent jump from two years ago. Customers are hungry for mobile ordering and Grubhub has signaled their expansion with an IPO.

Total dollar value of the independent restaurant takeout order market is $67 billion, according to GrubHub. In 2012, Americans forked over $204 billion to restaurants in this market and $67 billion of that pie was spent on takeout.

GrubHub filed a S-1, preliminary financial statements required by the U.S. Securities and Exchange Commission for companies planning on going public, on Friday. The S-1 highlighted the 67 percent year over year revenue growth realized by GrubHub from 2012 to 2013. The 67 percent revenue growth is misleading to prospective investors because of the Seamless acquisition. The 2012 full-year sales of $82.1 million only includes Seamless numbers. The 2013 sales of $137.1 million include 12 months of Seamless and five months of GrubHub. The yearly revenue growth is not apples to apples, but more like Cloudy With a Chance of Meatballs.

According to Brian Solomon at Forbes, the totaling revenue for both companies is $170.1 and $118.9 million in 2013 and 2012. Solomon added $32.9 million of GrubHub revenue earned prior to the August acquisition to the original 2013 revenue number and included $36.8 million of GrubHub sales to the original 2012 number. All financial information can be found on GrubHub’s S-1, according to Solomon. The calculated growth rate is 43 percent after merging the revenues to accurately compare business years. 43 percent is a strong growth rate, but 23 percent less than what the tech company was advertising.

GrubHub plans on using the $100 million of IPO proceeds for working capital and potentially acquiring or investing in “complementary” businesses, services, products, or technologies. No commitments or agreements involving investments or acquisitions have been finalized at this time.

The chief underwriters to GrubHub’s IPO are Citigroup Global Markets Inc. and Morgan Stanley & Co. LLC. Additional underwriters involved are BMO Capital Markets Corp., Allen & Company LLC, Canaccord Genuity Inc., William & Blair Company LLC, and Raymond James & Associates Inc.

GrubHub has capitalized on a growing online food ordering market. The IPO signals capital to expand as long as customers stay hungry.

Opinion by Niles Olson

Sources:
Bloomberg
Chicago Tribune
Forbes

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