UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2020
OR
☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number 1-36389
GRUBHUB INC.
(Exact name of registrant as specified in its charter)
Delaware |
|
46-2908664 |
(State or other jurisdiction of incorporation or organization) |
|
(I.R.S. Employer Identification No.) |
|
|
|
111 W. Washington Street, Suite 2100 Chicago, Illinois |
|
60602 |
(Address of principal executive offices) |
|
(Zip code) |
(877) 585-7878
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
Common Stock, $0.0001 par value per share |
GRUB |
New York Stock Exchange |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated filer |
☒ |
|
|
Accelerated filer |
|
☐ |
|
|
|
|
|
|
|
Non-Accelerated filer |
☐ |
|
|
Smaller reporting company |
|
☐ |
|
|
|
|
|
|
|
Emerging growth company |
☐ |
|
|
|
|
|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of August 1, 2020, 92,277,727 shares of common stock were outstanding.
GRUBHUB INC.
TABLE OF CONTENTS
PART I |
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Page |
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Item 1: |
3 |
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Condensed Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019 |
3 |
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4 |
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|
4 |
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Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2020 and 2019 |
5 |
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6 |
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|
7 |
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Item 2: |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
17 |
Item 3: |
29 |
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Item 4: |
29 |
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PART II |
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Item 1: |
29 |
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Item 1A: |
29 |
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Item 2: |
33 |
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Item 3: |
33 |
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Item 4: |
33 |
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Item 5: |
33 |
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Item 6: |
34 |
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35 |
2
Part I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
GRUBHUB INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(UNAUDITED)
|
|
June 30, 2020 |
|
|
December 31, 2019 |
|
|||
ASSETS |
|
|
|
|
|
|
|
|
|
CURRENT ASSETS: |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
484,760 |
|
|
$ |
375,909 |
|
|
Short-term investments |
|
|
48,616 |
|
|
|
49,275 |
|
|
Accounts receivable, less allowances for doubtful accounts |
|
|
75,726 |
|
|
|
119,658 |
|
|
Income tax receivable |
|
|
19,390 |
|
|
|
3,960 |
|
|
Prepaid expenses and other current assets |
|
|
18,721 |
|
|
|
17,515 |
|
|
Total current assets |
|
|
647,213 |
|
|
|
566,317 |
|
|
PROPERTY AND EQUIPMENT: |
|
|
|
|
|
|
|
|
|
Property and equipment, net of depreciation and amortization |
|
|
212,772 |
|
|
|
172,744 |
|
|
OTHER ASSETS: |
|
|
|
|
|
|
|
|
|
Other assets |
|
|
36,836 |
|
|
|
26,836 |
|
|
Operating lease right-of-use asset |
|
|
99,058 |
|
|
|
100,632 |
|
|
Goodwill |
|
|
1,007,968 |
|
|
|
1,007,968 |
|
|
Acquired intangible assets, net of amortization |
|
|
476,309 |
|
|
|
500,481 |
|
|
Total other assets |
|
|
1,620,171 |
|
|
|
1,635,917 |
|
|
TOTAL ASSETS |
|
$ |
2,480,156 |
|
|
$ |
2,374,978 |
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES: |
|
|
|
|
|
|
|
|
|
Restaurant food liability |
|
$ |
206,306 |
|
|
$ |
131,753 |
|
|
Accounts payable |
|
|
24,508 |
|
|
|
26,748 |
|
|
Accrued payroll |
|
|
34,166 |
|
|
|
19,982 |
|
|
Current operating lease liability |
|
|
16,642 |
|
|
|
9,376 |
|
|
Other accruals |
|
|
124,555 |
|
|
|
61,504 |
|
|
Total current liabilities |
|
|
406,177 |
|
|
|
249,363 |
|
|
LONG-TERM LIABILITIES: |
|
|
|
|
|
|
|
|
|
Deferred taxes, non-current |
|
|
11,607 |
|
|
|
27,163 |
|
|
Noncurrent operating lease liability |
|
|
110,193 |
|
|
|
111,056 |
|
|
Long-term debt |
|
|
493,475 |
|
|
|
493,009 |
|
|
Other accruals |
|
|
4,152 |
|
|
|
817 |
|
|
Total long-term liabilities |
|
|
619,427 |
|
|
|
632,045 |
|
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’ EQUITY: |
|
|
|
|
|
|
|
|
|
Preferred Stock, $0.0001 par value. Authorized: 25,000,000 shares as of June 30, 2020 and December 31, 2019; issued and outstanding: no shares as of June 30, 2020 and December 31, 2019. |
|
|
— |
|
|
|
— |
|
|
Common stock, $0.0001 par value. Authorized: 500,000,000 shares at June 30, 2020 and December 31, 2019; issued and outstanding: 92,235,195 and 91,576,060 shares as of June 30, 2020 and December 31, 2019, respectively |
|
|
9 |
|
|
|
9 |
|
|
Accumulated other comprehensive loss |
|
|
(2,330 |
) |
|
|
(1,628 |
) |
|
Additional paid-in capital |
|
|
1,204,922 |
|
|
|
1,164,400 |
|
|
Retained earnings |
|
|
251,951 |
|
|
|
330,789 |
|
|
Total stockholders’ equity |
|
$ |
1,454,552 |
|
|
$ |
1,493,570 |
|
|
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
$ |
2,480,156 |
|
|
$ |
2,374,978 |
|
(See Notes to Condensed Consolidated Financial Statements (unaudited))
3
GRUBHUB INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(UNAUDITED)
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
||||
Revenues |
$ |
459,282 |
|
|
$ |
325,058 |
|
|
$ |
822,262 |
|
|
$ |
648,828 |
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operations and support |
|
318,867 |
|
|
|
162,406 |
|
|
|
533,428 |
|
|
|
323,756 |
|
Sales and marketing |
|
94,004 |
|
|
|
74,128 |
|
|
|
184,746 |
|
|
|
152,582 |
|
Technology (exclusive of amortization) |
|
30,228 |
|
|
|
29,400 |
|
|
|
61,501 |
|
|
|
56,650 |
|
General and administrative |
|
32,237 |
|
|
|
25,784 |
|
|
|
71,186 |
|
|
|
48,571 |
|
Depreciation and amortization |
|
34,557 |
|
|
|
27,223 |
|
|
|
67,920 |
|
|
|
52,312 |
|
Total costs and expenses |
|
509,893 |
|
|
|
318,941 |
|
|
|
918,781 |
|
|
|
633,871 |
|
Income (loss) from operations |
|
(50,611 |
) |
|
|
6,117 |
|
|
|
(96,519 |
) |
|
|
14,957 |
|
Interest expense - net |
|
6,816 |
|
|
|
5,467 |
|
|
|
13,196 |
|
|
|
8,279 |
|
Income (loss) before provision for income taxes |
|
(57,427 |
) |
|
|
650 |
|
|
|
(109,715 |
) |
|
|
6,678 |
|
Income tax benefit |
|
(12,016 |
) |
|
|
(602 |
) |
|
|
(30,877 |
) |
|
|
(1,464 |
) |
Net income (loss) attributable to common stockholders |
$ |
(45,411 |
) |
|
$ |
1,252 |
|
|
$ |
(78,838 |
) |
|
$ |
8,142 |
|
Net income (loss) per share attributable to common stockholders: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
$ |
(0.49 |
) |
|
$ |
0.01 |
|
|
$ |
(0.86 |
) |
|
$ |
0.09 |
|
Diluted |
$ |
(0.49 |
) |
|
$ |
0.01 |
|
|
$ |
(0.86 |
) |
|
$ |
0.09 |
|
Weighted-average shares used to compute net income (loss) per share attributable to common stockholders: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
92,116 |
|
|
|
91,177 |
|
|
|
91,954 |
|
|
|
91,064 |
|
Diluted |
|
92,116 |
|
|
|
92,786 |
|
|
|
91,954 |
|
|
|
92,852 |
|
GRUBHUB INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(UNAUDITED)
|
Three Months Ended June 30, |
|
|
|
Six Months Ended June 30, |
|
||||||||||
|
2020 |
|
|
2019 |
|
|
|
2020 |
|
|
2019 |
|
||||
Net income (loss) |
$ |
(45,411 |
) |
|
$ |
1,252 |
|
|
|
$ |
(78,838 |
) |
|
$ |
8,142 |
|
OTHER COMPREHENSIVE LOSS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments |
|
(59 |
) |
|
|
(316 |
) |
|
|
|
(702 |
) |
|
|
(89 |
) |
COMPREHENSIVE INCOME (LOSS) |
$ |
(45,470 |
) |
|
$ |
936 |
|
|
|
$ |
(79,540 |
) |
|
$ |
8,053 |
|
(See Notes to Condensed Consolidated Financial Statements (unaudited))
4
GRUBHUB INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(UNAUDITED)
|
|
Six Months Ended June 30, |
|
|||||
|
|
2020 |
|
|
2019 |
|
||
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(78,838 |
) |
|
$ |
8,142 |
|
Adjustments to reconcile net income (loss) to net cash from operating activities: |
|
|
|
|
|
|
|
|
Depreciation |
|
|
18,820 |
|
|
|
13,626 |
|
Amortization of intangible assets and developed software |
|
|
49,100 |
|
|
|
38,686 |
|
Stock-based compensation |
|
|
41,221 |
|
|
|
36,527 |
|
Deferred taxes |
|
|
(15,556 |
) |
|
|
298 |
|
Other |
|
|
2,548 |
|
|
|
3,240 |
|
Change in assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
43,390 |
|
|
|
(13,349 |
) |
Income taxes receivable |
|
|
(15,429 |
) |
|
|
429 |
|
Prepaid expenses and other assets |
|
|
(5,476 |
) |
|
|
(14,857 |
) |
Restaurant food liability |
|
|
74,612 |
|
|
|
(3,078 |
) |
Accounts payable |
|
|
547 |
|
|
|
(10,216 |
) |
Accrued payroll |
|
|
14,190 |
|
|
|
3,122 |
|
Other accruals |
|
|
61,732 |
|
|
|
7,219 |
|
Net cash provided by operating activities |
|
|
190,861 |
|
|
|
69,789 |
|
CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
Purchases of investments |
|
|
(56,554 |
) |
|
|
(25,526 |
) |
Proceeds from maturity of investments |
|
|
57,500 |
|
|
|
21,636 |
|
Capitalized website and development costs |
|
|
(29,269 |
) |
|
|
(22,188 |
) |
Purchases of property and equipment |
|
|
(41,800 |
) |
|
|
(23,140 |
) |
Acquisition of other intangible assets |
|
|
(510 |
) |
|
|
(8,889 |
) |
Acquisitions of businesses, net of cash acquired |
|
|
— |
|
|
|
127 |
|
Other cash flows from investing activities |
|
|
(525 |
) |
|
|
— |
|
Net cash used in investing activities |
|
|
(71,158 |
) |
|
|
(57,980 |
) |
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
Proceeds from the issuance of long-term debt |
|
|
175,000 |
|
|
|
500,000 |
|
Repayments of borrowings under the credit facility |
|
|
(175,000 |
) |
|
|
(342,313 |
) |
Taxes paid related to net settlement of stock-based compensation awards |
|
|
(14,240 |
) |
|
|
(15,360 |
) |
Proceeds from exercise of stock options |
|
|
3,667 |
|
|
|
2,930 |
|
Payments for debt issuance costs |
|
|
(259 |
) |
|
|
(8,954 |
) |
Other cash flows from financing activities |
|
|
(454 |
) |
|
|
— |
|
Net cash provided by (used in) financing activities |
|
|
(11,286 |
) |
|
|
136,303 |
|
Net change in cash, cash equivalents, and restricted cash |
|
|
108,417 |
|
|
|
148,112 |
|
Effect of exchange rates on cash, cash equivalents and restricted cash |
|
|
(651 |
) |
|
|
(2 |
) |
Cash, cash equivalents, and restricted cash at beginning of year |
|
|
379,595 |
|
|
|
215,802 |
|
Cash, cash equivalents, and restricted cash at end of the period |
|
$ |
487,361 |
|
|
$ |
363,912 |
|
SUPPLEMENTAL DISCLOSURE OF NON-CASH ITEMS |
|
|
|
|
|
|
|
|
Cash paid for income taxes |
|
$ |
— |
|
|
$ |
567 |
|
Capitalized property, equipment and website and development costs in accounts payable at period end |
|
|
2,846 |
|
|
|
5,310 |
|
RECONCILIATION OF CASH, CASH EQUIVALENTS, AND RESTRICTED CASH |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
484,760 |
|
|
$ |
358,847 |
|
Restricted cash included in prepaid expenses and other current assets |
|
|
— |
|
|
|
1,904 |
|
Restricted cash included in other assets |
|
|
2,601 |
|
|
|
3,161 |
|
Total cash, cash equivalents, and restricted cash |
|
$ |
487,361 |
|
|
$ |
363,912 |
|
(See Notes to Condensed Consolidated Financial Statements (unaudited)
5
GRUBHUB INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(in thousands, except share data)
(UNAUDITED)
|
|
Common stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
Shares |
|
|
Amount |
|
|
Additional paid-in capital |
|
|
Accumulated other comprehensive loss |
|
|
Retained earnings |
|
|
Total stockholders' equity |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2020 |
|
|||||||||||||||||||||
Balance at March 31, 2020 |
|
|
91,916,978 |
|
|
$ |
9 |
|
|
$ |
1,182,757 |
|
|
$ |
(2,271 |
) |
|
$ |
297,362 |
|
|
$ |
1,477,857 |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(45,411 |
) |
|
|
(45,411 |
) |
Currency translation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(59 |
) |
|
|
— |
|
|
|
(59 |
) |
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
26,101 |
|
|
|
— |
|
|
|
— |
|
|
|
26,101 |
|
Stock option exercises and vesting of restricted stock units, net of withholdings and other |
|
|
448,698 |
|
|
|
— |
|
|
|
2,253 |
|
|
|
— |
|
|
|
— |
|
|
|
2,253 |
|
Shares repurchased and retired to satisfy tax withholding upon vesting |
|
|
(130,481 |
) |
|
|
— |
|
|
|
(6,189 |
) |
|
|
— |
|
|
|
— |
|
|
|
(6,189 |
) |
Balance at June 30, 2020 |
|
|
92,235,195 |
|
|
$ |
9 |
|
|
$ |
1,204,922 |
|
|
$ |
(2,330 |
) |
|
$ |
251,951 |
|
|
$ |
1,454,552 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2019 |
|
|||||||||||||||||||||
Balance at March 31, 2019 |
|
|
91,074,285 |
|
|
$ |
9 |
|
|
$ |
1,107,047 |
|
|
$ |
(1,664 |
) |
|
$ |
356,245 |
|
|
$ |
1,461,637 |
|
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,252 |
|
|
|
1,252 |
|
Currency translation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(316 |
) |
|
|
— |
|
|
|
(316 |
) |
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
24,015 |
|
|
|
— |
|
|
|
— |
|
|
|
24,015 |
|
Stock option exercises and vesting of restricted stock units, net of withholdings and other |
|
|
234,356 |
|
|
|
— |
|
|
|
506 |
|
|
|
— |
|
|
|
— |
|
|
|
506 |
|
Shares repurchased and retired to satisfy tax withholding upon vesting |
|
|
(77,725 |
) |
|
|
— |
|
|
|
(5,394 |
) |
|
|
— |
|
|
|
— |
|
|
|
(5,394 |
) |
Balance at June 30, 2019 |
|
|
91,230,916 |
|
|
$ |
9 |
|
|
$ |
1,126,174 |
|
|
$ |
(1,980 |
) |
|
$ |
357,497 |
|
|
$ |
1,481,700 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2020 |
|
|||||||||||||||||||||
Balance at December 31, 2019 |
|
|
91,576,060 |
|
|
$ |
9 |
|
|
$ |
1,164,400 |
|
|
$ |
(1,628 |
) |
|
$ |
330,789 |
|
|
$ |
1,493,570 |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(78,838 |
) |
|
|
(78,838 |
) |
Currency translation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(702 |
) |
|
|
— |
|
|
|
(702 |
) |
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
51,095 |
|
|
|
— |
|
|
|
— |
|
|
|
51,095 |
|
Stock option exercises and vesting of restricted stock units, net of withholdings and other |
|
|
943,223 |
|
|
|
— |
|
|
|
3,667 |
|
|
|
— |
|
|
|
— |
|
|
|
3,667 |
|
Shares repurchased and retired to satisfy tax withholding upon vesting |
|
|
(284,088 |
) |
|
|
— |
|
|
|
(14,240 |
) |
|
|
— |
|
|
|
— |
|
|
|
(14,240 |
) |
Balance at June 30, 2020 |
|
|
92,235,195 |
|
|
$ |
9 |
|
|
$ |
1,204,922 |
|
|
$ |
(2,330 |
) |
|
$ |
251,951 |
|
|
$ |
1,454,552 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2019 |
|
|||||||||||||||||||||
Balance at December 31, 2018 |
|
|
90,756,548 |
|
|
$ |
9 |
|
|
$ |
1,094,866 |
|
|
$ |
(1,891 |
) |
|
$ |
349,355 |
|
|
$ |
1,442,339 |
|
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
8,142 |
|
|
|
8,142 |
|
Currency translation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(89 |
) |
|
|
— |
|
|
|
(89 |
) |
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
43,738 |
|
|
|
— |
|
|
|
— |
|
|
|
43,738 |
|
Stock option exercises and vesting of restricted stock units, net of withholdings and other |
|
|
676,527 |
|
|
|
— |
|
|
|
2,930 |
|
|
|
— |
|
|
|
— |
|
|
|
2,930 |
|
Shares repurchased and retired to satisfy tax withholding upon vesting |
|
|
(202,159 |
) |
|
|
— |
|
|
|
(15,360 |
) |
|
|
— |
|
|
|
— |
|
|
|
(15,360 |
) |
Balance at June 30, 2019 |
|
|
91,230,916 |
|
|
$ |
9 |
|
|
$ |
1,126,174 |
|
|
$ |
(1,980 |
) |
|
$ |
357,497 |
|
|
$ |
1,481,700 |
|
(See Notes to Condensed Consolidated Financial Statements (unaudited))
6
GRUBHUB INC.
Notes to Condensed Consolidated Financial Statements (unaudited)
1. Organization
Grubhub Inc., a Delaware corporation, and its wholly-owned subsidiaries (collectively referred to as the “Company”) provide an online and mobile takeout marketplace for restaurant pick-up and delivery orders. The Company connects diners and restaurants through restaurant technology and easy-to-use platforms. Diners enter their delivery address or use geo-location within the mobile applications and the Company displays the menus and other relevant information for restaurants in its network. Orders may be placed directly online, via mobile applications or over the phone. The Company primarily charges restaurant partners a per order commission that is percentage-based. In many markets, the Company also provides delivery services to restaurants on its platform that do not have their own delivery operations. The Company’s takeout marketplace, and related platforms where the Company provides marketing services to generate orders, are collectively referred to as the “Platform”.
2. Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
The accompanying unaudited condensed consolidated interim financial statements include the accounts of Grubhub Inc. and have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the rules and regulations of the United States Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. These unaudited condensed consolidated interim financial statements include all wholly-owned subsidiaries and reflect all normal and recurring adjustments, as well as any other than normal adjustments, that are, in the opinion of management, necessary for a fair presentation of the results for the interim periods and should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 filed with the SEC on February 28, 2020 (the “2019 Form 10-K”). All significant intercompany transactions have been eliminated in consolidation. Operating results for the three and six months ended June 30, 2020 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2020.
Use of Estimates
The preparation of condensed consolidated financial statements in accordance with GAAP requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and the related disclosures at the date of the financial statements, as well as the reported amounts of revenue and expenses during the periods presented. These estimates, judgments and assumptions take into account historical and forward-looking factors that the Company believes are reasonable including, but not limited to, the potential impacts arising from the COVID-19 pandemic and measures implemented to prevent its spread. As the extent and duration of the impacts from the COVID-19 pandemic remain unclear, the Company’s estimates and assumptions may evolve as conditions change. Significant items subject to such estimates, judgments and assumptions include revenue recognition, website and internal-use software development costs, goodwill, valuation and recoverability of intangible assets with finite lives and other long-lived assets, stock-based compensation, and income taxes. Actual results could differ significantly from these estimates.
Changes in Accounting Principle
See “Recently Issued Accounting Pronouncements” below for a description of accounting principle changes adopted during the six months ended June 30, 2020 related to credit losses. There have been no other material changes to the Company’s significant accounting policies described in the 2019 Form 10-K.
Recently Issued Accounting Pronouncements
In June 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update No. 2016-13, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”). ASU 2016-13 introduces a new forward-looking approach, based on expected losses, to estimate credit losses on certain types of financial instruments, including trade receivables and held-to-maturity debt securities, which requires entities to incorporate considerations of historical information, current information and reasonable and supportable forecasts. This ASU also expands disclosure requirements. ASU 2016-13 was effective for and adopted by the Company in the first quarter of 2020. The guidance was applied using the modified-retrospective approach. The adoption of ASU 2016-13 did not have a material impact on the Company’s consolidated financial position, results of operations or cash flows as credit losses were not expected to be significant. The Company will continue to monitor the impact of the COVID-19 pandemic on expected credit losses.
7
GRUBHUB INC.
Notes to Condensed Consolidated Financial Statements (unaudited) (continued)
3. Merger Agreement
On June 10, 2020, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Just Eat Takeaway.com N.V. (“JET”), Checkers Merger Sub I, Inc., a Delaware corporation and wholly owned subsidiary of JET (“Merger Sub I”), and Checkers Merger Sub II, Inc., a Delaware corporation and wholly owned subsidiary of JET (“Merger Sub II”). Pursuant to the Merger Agreement, Merger Sub I will be merged with and into the Company (the “Initial Merger”), with the Company continuing as the surviving company in the Initial Merger (the “Initial Surviving Company”). Immediately thereafter, the Initial Surviving Company will merge with and into Merger Sub II (the “Subsequent Merger” and, together with the Initial Merger, the “Transaction”), with Merger Sub II continuing as the surviving company.
On and subject to the terms and conditions set forth in the Merger Agreement, at the effective time of the Initial Merger, each issued and outstanding share of our common stock (other than any shares of our common stock owned by the Company, JET, Merger Sub I, Merger Sub II or any other direct or indirect wholly owned subsidiary of JET), will be converted into one share of common stock, par value $0.0001 per share, of the Initial Surviving Company (the “Initial Surviving Company Stock”). Each such share of Initial Surviving Company Stock will immediately thereafter be automatically exchanged for 0.6710 American depositary shares of JET (“JET ADS”), with each JET ADS representing one share in the share capital of JET with a nominal value of €0.04 per share (“JET Shares”) (the “Merger Consideration”). The Transaction is expected to close in the first half of 2021.
The Company incurred certain expenses directly and indirectly related to mergers and acquisitions which were recognized in general and administrative expenses within the condensed consolidated statements of operations of $8.3 million and $0.3 million for the three months ended June 30, 2020 and 2019, respectively, and of $9.0 million and $0.8 million for the six months ended June 30, 2020 and 2019, respectively.
4. Marketable Securities
The amortized cost, unrealized gains and losses and estimated fair value of the Company’s held-to-maturity marketable securities as of June 30, 2020 and December 31, 2019 were as follows:
|
|
June 30, 2020 |
|
|||||||||||||
|
|
Amortized Cost |
|
|
Unrealized Gains |
|
|
Unrealized Losses |
|
|
Estimated Fair Value |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Cash and cash equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial paper |
|
$ |
19,894 |
|
|
$ |
— |
|
|
$ |
(14 |
) |
|
$ |
19,880 |
|
Short-term investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial paper |
|
|
42,296 |
|
|
|
— |
|
|
|
(79 |
) |
|
|
42,217 |
|
Corporate bonds |
|
|
6,320 |
|
|
|
4 |
|
|
|
(1 |
) |
|
|
6,323 |
|
Total |
|
$ |
68,510 |
|
|
$ |
4 |
|
|
$ |
(94 |
) |
|
$ |
68,420 |
|
|
|
December 31, 2019 |
|
|||||||||||||
|
|
Amortized Cost |
|
|
Unrealized Gains |
|
|
Unrealized Losses |
|
|
Estimated Fair Value |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Cash and cash equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial paper |
|
$ |
17,548 |
|
|
$ |
— |
|
|
$ |
(34 |
) |
|
$ |
17,514 |
|
Corporate bonds |
|
|
1,300 |
|
|
|
— |
|
|
|
— |
|
|
|
1,300 |
|
Short-term investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial paper |
|
|
46,971 |
|
|
|
— |
|
|
|
(195 |
) |
|
|
46,776 |
|
Corporate bonds |
|
|
2,304 |
|
|
|
2 |
|
|
|
— |
|
|
|
2,306 |
|
Total |
|
$ |
68,123 |
|
|
$ |
2 |
|
|
$ |
(229 |
) |
|
$ |
67,896 |
|
All of the Company’s marketable securities were classified as held-to-maturity investments and have maturities within one year of June 30, 2020. The Company evaluated its marketable securities aggregated by credit rating agency rating, all of which are highly rated, investment grade securities, considering historical investment losses, current market conditions and historical recovery rates of similar securities and determined that no material credit losses were expected as of June 30, 2020.
8
GRUBHUB INC.
Notes to Condensed Consolidated Financial Statements (unaudited) (continued)
The gross unrealized losses, estimated fair value and length of time the individual marketable securities were in a continuous loss position for those marketable securities in an unrealized loss position as of June 30, 2020 and December 31, 2019 were as follows:
|
|
June 30, 2020 |
|
|||||||||||||||||||||
|
|