2019
ANNUAL REPORT
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 2019
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO
☐
Commission File Number 1-36389
GRUBHUB INC.
(Exact name of Registrant as specified in its Charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
111 W. Washington Street, Suite 2100
Chicago, Illinois
(Address of principal executive offices)
46-2908664
(I.R.S. Employer
Identification No.)
60602
(Zip Code)
Registrant’s telephone number, including area code: (877) 585-7878
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, $0.0001 par value per share
Trading Symbol(s)
GRUB
Name of each exchange on which registered
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES ☒ NO ☐
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. YES ☐ NO ☒
Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 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 definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging
growth company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer
☒
Non-accelerated filer
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 ☒
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant, based on the closing price of the
shares of common stock on The New York Stock Exchange on June 30, 2019, was $5,349,074,861.
The number of shares of Registrant’s Common Stock outstanding as of February 14, 2020 was 91,840,273.
Portions of the Registrant’s Definitive Proxy Statement relating to the Annual Meeting of Stockholders, scheduled to be held on May 19, 2020, are
incorporated by reference into Part III of this Annual Report on Form 10-K.
Accelerated filer
Smaller reporting company
Emerging growth company
☐
☐
☐
Form 10-K
Item No. Name of Item
Part I
TABLE OF CONTENTS
Business
Item 1.
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2.
Item 3.
Item 4.
Properties
Legal Proceedings
Mine Safety Disclosures
Part II
Part III
Part IV
Item 5.
Market for Grubhub Inc.’s Common Equity, Related Stockholder Matters and Issuer Repurchases of
Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 6.
Item 7.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Financial Statements and Supplementary Data
Item 8.
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
Item 10. Directors, Executive Officers and Corporate Governance
Item 11.
Item 12.
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14.
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Principal Accountant Fees and Services
Item 15.
Exhibits and Financial Statement Schedules
SIGNATURES
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The following should be read in conjunction with the audited consolidated financial statements and the notes thereto included
elsewhere in this Annual Report on Form 10-K. Unless otherwise stated, the discussion below primarily reflects the historical
condition and results of operations for Grubhub Inc. for the periods presented and the results of acquired businesses from the relevant
acquisition dates. In addition to historical consolidated financial information, the following discussion contains forward-looking
statements that reflect the plans, estimates, and beliefs of the Company (as defined below). Actual results could differ materially from
those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed
below and elsewhere in this Annual Report on Form 10-K, particularly in Part I, Item 1A, “Risk Factors.” The forward-looking
statements in this Annual Report on Form 10-K are made as of the date of this Annual Report on Form 10-K, and the Company
disclaims any intention or obligation to update or revise any forward-looking statements to reflect events or circumstances occurring
after the date of this Annual Report on Form 10-K. See “Cautionary Statement Regarding Forward-Looking Statements” below for
additional information.
PART I.
Item 1.
Business
Company Overview
Grubhub Inc. and its wholly-owned subsidiaries (collectively referred to as the “Company,” “Grubhub,” “we,” “us,” and “our”)
is a leading online and mobile platform for restaurant pick-up and delivery orders, which the Company refers to as takeout. The
Company connects more than 300,000 restaurants with hungry diners in thousands of cities across the United States and is focused on
transforming the takeout experience. For restaurants, Grubhub generates higher margin takeout orders at full menu prices. The
Grubhub platform empowers diners with a “direct line” into the kitchen, avoiding the inefficiencies, inaccuracies and frustrations
associated with paper menus and phone orders. The Company has a powerful takeout marketplace that creates additional value for
both restaurants and diners as it grows. The Company’s takeout marketplace, and related platforms where the Company provides
marketing services to generate orders, are collectively referred to as the “Platform”.
For restaurants, takeout enables them to grow their business without adding seating capacity or wait staff. Advertising for
takeout, typically done through the distribution of menus to local households or advertisements in local publications, is often
inefficient and requires upfront payment with no certainty of success. In contrast, Grubhub provides restaurants on its Platform with
an efficient way to generate more takeout orders. Grubhub enables restaurants to access local diners at the moment when those diners
are hungry and ready to purchase takeout. In addition, the Company does not charge the restaurants on its Platform any upfront or
subscription fees, does not require any discounts from their full price menus and only gets paid for the orders the Company generates
for them, providing restaurants with a low-risk, high-return solution. The Company charges restaurant partners on the Platform a per-
order commission that is primarily percentage-based. In many markets, the Company also provides delivery services to restaurants on
its Platform that do not have their own delivery operations. As of December 31, 2019, the Company was providing delivery services in
more than 440 of the largest core-based statistical areas across the country.
For diners, the traditional takeout ordering process is often a frustrating experience—from using paper menus to communicating
an order by phone to a busy restaurant employee. In contrast, ordering on Grubhub is enjoyable and a dramatic improvement over the
“menu drawer.” The Company provides diners on the platform with an easy-to-use, intuitive and personalized interface that helps
them search for and discover local restaurants and then accurately and efficiently place an order from any Internet-connected device.
Grubhub also provides diners with information and transparency about their orders and status and solves problems that may arise. In
addition, the Company makes re-ordering convenient by storing previous orders, preferences and payment information, helping to
promote diner frequency and drive strong repeat business.
The Company generates revenues primarily when diners place an order on its Platform. Restaurant partners pay a commission,
typically a percentage of the transaction, on orders that are processed through the Company’s Platform. Most of the restaurant partners
on the Company’s Platform can choose their level of commission rate, at or above the base rate. A restaurant partner can choose to
pay a higher rate, which affects its prominence and exposure to diners on the Platform. Additionally, restaurant partners that use the
Company’s delivery services pay an additional commission on the transaction for the use of those services. The Company also
recognizes as revenue any fees charged directly to the diner.
For most orders, diners use a credit card to pay the Company for their meal when the order is placed. For these transactions, the
Company collects the total amount of the diner’s order net of payment processing fees from the payment processor and remits the net
proceeds to the restaurant less commission and other fees. The Company generally accumulates funds and remits the net proceeds to
the restaurant partners on at least a monthly basis. The Company also deducts commissions for other transactions that go through its
platform, such as cash transactions for restaurants partners, from the aggregate proceeds received. Additionally, the Company provides
consolidated invoicing for its corporate and campus program customers generally on a monthly basis.
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Organization
Grubhub was founded in 2004 and Seamless was founded in 1999. Unless otherwise stated or the context requires otherwise,
references to “Seamless” mean the operations for Seamless Holdings Corporation and Seamless North America, LLC through August
8, 2013, when the merger of Grubhub Holdings Inc. and Seamless was completed (the “Merger”). The Merger enabled the Company
to expand its two-sided network, connecting customers in the geographies it serves with more restaurants. The Merger also enabled
the Company to eliminate duplicative expenses and take advantage of a complementary geographic footprint.
On April 4, 2014, the Company completed an initial public offering (the “IPO”) and its common stock is listed on The New
York Stock Exchange (the “NYSE”) under the ticker symbol “GRUB”.
Acquisitions of Business and Other Intangible Assets
On November 7, 2018, the Company acquired all of the issued and outstanding shares of Tapingo Ltd. (“Tapingo”), a leading
platform for campus food ordering with direct integration into college meal plans and point of sale systems.
On September 13, 2018, the Company acquired SCVNGR, Inc. d/b/a LevelUp (“LevelUp”), a leading provider of mobile diner
engagement and payment solutions for national and regional restaurant brands.
On October 10, 2017, the Company acquired all of the issued and outstanding equity interests of Eat24, LLC (“Eat24”), a
wholly-owned subsidiary of Yelp Inc. and provider of online and mobile food-ordering services for restaurants across the United
States.
On August 23, 2017, the Company acquired substantially all of the assets and certain expressly specified liabilities of A&D
Network Solutions, Inc. and Dashed, Inc. (collectively, “Foodler”), a food-ordering company headquartered in Boston.
For a description of the Company’s acquisitions, see Note 4, Acquisitions, to the accompanying notes to the consolidated
financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.
On October 30, 2018, the Company completed the acquisition of substantially all of the restaurant and diner network assets of
OrderUp, Inc. (“OrderUp”), an online and mobile food-ordering company. The Company previously acquired certain assets of
OrderUp on September 14, 2017 from Groupon, Inc.
Growth Strategy
The Company strives to make Grubhub an integral part of everyday life for restaurants and diners through the following growth
strategies:
•
•
•
•
Grow the Takeout Marketplace. The Company intends to continue to grow the number of independent and national and
regional chain (“Enterprise”) restaurants on its Platform, in existing and new geographic markets by providing them with
opportunities to generate more takeout orders and by offering delivery services. The Company intends to continue to grow
the number of diners and orders placed on the Platform primarily through word-of-mouth referrals and marketing that
encourages adoption of the Company’s ordering Platform and increased order frequency.
Enhance the Platform. The Company plans to continue to invest in its websites and mobile products and its independent
delivery network, develop new products and better leverage the significant amount of order data that the Company
collects.
Deliver Excellent Customer Care. By meeting and exceeding the expectations of both restaurants and diners through
customer service, the Company seeks to gain their loyalty and support for the Platform.
Pursue Strategic Acquisitions and Partnerships. The Company intends to continue to pursue expansion opportunities in
existing and new markets, as well as in core and adjacent categories through strategic acquisitions and partnerships that
help accelerate the growth of the takeout marketplace.
Key Metrics
For a description of the Company’s key metrics, including Active Diners, Daily Average Grubs and Gross Food Sales, see Part
II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Annual Report on Form
10-K.
The Grubhub Solution
The Company focuses on providing value to both restaurants and diners through its takeout marketplace. Grubhub provides
restaurants with more orders, helps them serve diners better, facilitates delivery logistics in many markets, and enables them to
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improve the efficiency of their takeout business. For diners, Grubhub makes takeout accessible, simple and enjoyable, enabling them
to discover new restaurants and accurately and easily place their orders anytime and from anywhere.
Restaurant Benefits
With more than 300,000 restaurants currently on the Company’s Platform, of which the Company partners with more than
155,000, management believes that Grubhub provides restaurants with the following key benefits:
•
•
•
•
•
•
More Orders. Through Grubhub, restaurants in the network receive more orders at full menu prices.
Targeted Reach. Restaurants in the network gain an online and mobile presence with the ability to reach their most
valuable target audience—hungry diners in their area.
Low Risk, High Return. Grubhub generates higher margin takeout orders for its restaurant partners by enabling them to
leverage their existing fixed costs.
Efficiency. Restaurant partners in the network can receive and handle a larger volume of takeout orders more accurately,
increasing their operational efficiency while providing their takeout diners with a high-quality experience. Grubhub also
offers customizable integrated technologies that support digital orders with point of sale system integration and customer
relationship management programs, including loyalty.
Insights. Grubhub provides restaurant partners with actionable insights based on the significant amount of order data the
Company gathers, helping them to optimize their delivery footprints, menus, pricing and online profiles.
Delivery. In many markets, the Company offers delivery services to the restaurants on its Platform. By providing delivery
services, the Company allows restaurants to focus on making great food while Grubhub handles the complexity of
operating the delivery networks.
Diner Benefits
With 22.6 million Active Diners as of December 31, 2019 and more than 492,300 combined Daily Average Grubs during the
year ended December 31, 2019, management believes that Grubhub provides diners with the following key benefits:
•
•
•
•
Discovery. Grubhub aggregates menus and enables ordering from restaurants across more than 3,200 cities in the United
States as of December 31, 2019, in most cases providing diners with more choices than the “menu drawer” and allowing
them to discover hidden gems from local restaurants on the platform.
Convenience. Using Grubhub, diners do not need to place their orders over the phone. Grubhub provides diners with an
easy-to-use, intuitive and personalized platform that makes ordering simple from any connected device.
Control and Transparency. The Grubhub Platform empowers diners with a “direct line” into the kitchen, without having
to talk to a distracted order-taker in an already error-prone process.
Service. For diners, Grubhub’s role is similar to that of the waiter in a restaurant, providing a critical layer of customer
care that is typically missing in takeout.
Challenges
The Company faces several key challenges in continuing to grow its business and maintaining profitability. These challenges
include that:
•
•
•
•
long-term growth depends on the Company’s ability to continue to expand its takeout marketplace of restaurants and
diners in a cost-effective manner;
the ability to realize the benefits of the investment in the Company’s delivery network depends on the efficient utilization
and expansion of such network;
the ability to realize the benefits of acquired businesses depends on the successful integration of the operations of the
acquired businesses with those of the Company; and
while the Company’s primary competition remains the traditional offline takeout ordering method, new competitors could
emerge and existing competitors could continue to grow in the Company’s markets. These competitors may have greater
resources and other advantages than Grubhub and could impact the Company’s growth rates and ability to maintain
profitability.
Factors Affecting Performance
•
The Size of the Company’s Takeout Marketplace. Grubhub’s growth has come, and is expected to continue to come, from
the Company’s ability to successfully expand its takeout marketplace, which occurs through the growth of the number of
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restaurants and diners on the platform. The Company believes that increases in the number of restaurants will make the
platform more attractive to diners and increases in the number of diners will make the platform more attractive to
restaurants. Furthermore, the number of popular restaurants in each local market is an important factor in making the
platform more attractive to diners.
Seasonality. In metropolitan markets, the Company generally experiences a relative increase in diner activity from
September to April and a relative decrease in diner activity from May to August. In addition, the Company benefits from
increased order volumes in campus markets when school is in session and experiences a decrease in order volumes when
school is not in session (during summer breaks and other vacation periods).
Weather. Diner activity can also be impacted by colder or more inclement weather, which typically increases order
volumes, and warmer or sunny weather, which typically decreases order volumes.
•
•
Products and Services
The following is a list of the Company’s primary products and services. A significant portion of the Company’s revenues are the
commissions earned from restaurant partners for consumer orders generated on its Platform.
Grubhub and Seamless Mobile Apps and Mobile Website
The Company offers diners access to the Platform through its mobile applications designed for iPhone®, Android™, iPad®,
Amazon Alexa® and Apple TV® devices. To use the mobile applications, diners either enter their delivery address or use geo-
location and are presented with local restaurants that provide takeout. Diners can further refine their search results using the search
capability, enabling them to filter results across cuisine types, restaurant names, menu items, proximity, ratings and other criteria.
Once diners have found what they are looking for, they place their orders using easy-to-use and intuitive menus, enabling them to
discover food choices, select options and provide specific instructions on a dish-by-dish basis. Once an order is received, the Company
transmits it to the restaurant, while saving the diners’ preferences for future orders, thus providing diners with a convenient repeat
order experience. Diners can also access the Platform from their mobile devices through the mobile website using any mobile browser.
Grubhub, Seamless and MenuPages Websites
Diners can access the Platform through www.grubhub.com, www.seamless.com and menupages.com. The websites provide
diners with the same functionality as the Company’s mobile applications, including restaurant discovery, search and ordering. For
restaurants, all website-based orders are received in the same way as the mobile orders, and the Company charges restaurant partners
the same commission for both.
Corporate Program
The Company provides a corporate program that helps businesses address inefficiencies in food ordering and associated billing.
The corporate program offers employees a wide variety of food and ordering options, including options for individual meals, group
ordering and catering, as well as proprietary tools that consolidate all food ordering into a single online account that enables
companies to proactively manage food spend by automating the enforcement of budgets and rules. The corporate tools provide
consolidated ordering and invoicing, eliminating the need for employee expense reports and therefore significantly reducing
administrative overhead relating to office food ordering.
Delivery Services
The Company offers delivery services to restaurants in many of its markets. By providing delivery services, the Company is
able to significantly broaden the number of restaurants it can offer to diners while enhancing the transparency, consistency and
reliability of the diner experience. Delivery services benefit the restaurants by allowing them to focus on making great food while
Grubhub handles the complexity of operating the delivery networks.
Grubhub for Restaurants
Restaurants have historically received orders from Grubhub through a facsimile or email and confirmed orders by phone.
Though many restaurants on the Company’s Platform still use this traditional method, a large portion of Grubhub’s restaurants use
Grubhub for Restaurants, a responsive web application that can be accessed from computers and mobile devices, as well as Grubhub-
provided tablets. Grubhub for Restaurants allows restaurants to electronically receive and display orders and provides operators with
the capability to acknowledge receipt of the order, update the estimated completion time and status, specify driver pick-up times,
monitor delivery status for delivery drivers in Grubhub’s network, update menu items and perform other administrative functions.
Grubhub for Restaurants allows the Company to monitor orders throughout the takeout process (receipt, ready for pickup, on the way,
etc.). In turn, Grubhub can make that information available to hungry diners who are waiting for their orders, thus providing greater
transparency, reducing their frustration and making the takeout experience more enjoyable.
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Technology and Fulfillment Services
Technology and fulfillment services include order transmission, customer relationship management tools such as loyalty
programs, fully integrated online and in-store ordering and fulfillment solutions (the “Ultimate platform”), quick-response code
payment processing scanners, customer support, and functional analytics. The Company also offers mobile application development
professional services and integrated access to the Company’s related platforms and services.
Point of Sale Integration
The Company also offers point of sale (“POS”) integration which allows restaurants to manage Grubhub orders and update their
menus directly from their existing POS system, eliminating the need for additional devices. Grubhub has developed or is in the
process of developing POS integrations with most of the major platforms including, among others, NCR’s Aloha, Oracle’s MICROS
systems, Brink, Toast, POSitouch and Clover. These integrations help restaurants improve their in-store workflow, eliminate the time
required to enter orders, create more transparency and potentially shorten the window between consumer order and meal preparation.
Restaurant Websites and Mobile Applications
The Company offers the restaurants in its network a turnkey website and mobile application design and hosting service powered
by template-driven technology, which provides restaurant partners with a simple yet effective online and mobile presence. Grubhub
processes the orders placed on these websites and mobile applications through its platforms.
Allmenus
Allmenus.com provides an aggregated database of approximately 595,000 menus from restaurants across all 50 U.S. states. The
website is searchable by cuisine type, restaurant name, menu items and other criteria. For those restaurants whose menus are posted on
allmenus.com and which are also part of the Company’s restaurant network, the site provides a link from its menus to grubhub.com
and seamless.com, as applicable, through which diners can then place their orders, providing the Company with an efficient customer
acquisition channel.
Customer Care
Restaurants
Customer care is an important component of Grubhub’s value proposition for restaurants, enabling them to focus on food
preparation. The Company provides restaurants with 24/7 service, where representatives are able to assist with problems that may
arise. The Company tracks and manages restaurant performance on the platform, helping restaurants manage capacity issues while
ensuring that diners receive the service they expect.
In addition to operations-related services, the Company offers restaurant partners actionable insights based on the significant
amount of order data the Company gathers, helping restaurants optimize their delivery footprint, menus, pricing and online profiles.
Diners
The customer care the Company offers to diners is also an important component of Grubhub’s value proposition, helping to
generate diner satisfaction and positive word-of-mouth referrals. The Company believes that it is its responsibility to make diners
happy. When diners contact the 24/7 customer care center, the Company typically helps them add items to orders that have already
been placed and informs them of the status of their orders. The Company believes that its excellent customer care drives diner
referrals, more frequent ordering and overall loyalty to the Platform.
Geographic Markets
The Company’s geographic reach included more than 3,200 cities across the United States as of December 31, 2019. The
Company generally has greater market penetration in densely populated metropolitan cities in the United States. During the years
ended December 31, 2019, 2018 and 2017, the Company also generated a nominal amount of foreign revenues through its U.K.
subsidiary.
Sales and Marketing
The Company’s sales team adds new restaurant partners to the network by emphasizing the Grubhub Platform’s low risk, high
return proposition: providing more orders, without charging any upfront payments or subscription fees or requiring any discounts from
a restaurant’s full price menus, and Grubhub only gets paid for orders it generates for them. The Company’s delivery network has also
expanded the Company’s offerings and ability to attract restaurants that do not have their own delivery operations. Leads for new
restaurants are generated either directly by the restaurant through the Company’s websites, including allmenus.com, or are self-
prospected by the sales team. Once restaurants have joined the Company’s takeout marketplace, Grubhub representatives continue to
work with them to maintain quality control and to increase their order volume. The sales team separately focuses on adding new
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corporate and campus program clients by emphasizing Grubhub’s value proposition. For corporate customers, Grubhub provides a
wide variety of ordering options for employees and proprietary tools that provide rule-based ordering and consolidated reporting and
invoicing for employers. For campus customers, the Company provides integrated order ahead and meal plan payment processing
technology and a mobile ordering application for student diners.
The Company believes that its online ordering platform, innovative products and excellent customer care are its best and most
effective marketing tools, helping to generate strong word-of-mouth referrals, which have been the primary driver of the Company’s
diner growth. The Company’s integrated marketing efforts are aimed at encouraging new diners to try the Platform and driving
existing diners to engage more frequently with the platform. The Company uses both online as well as offline advertising.
Technology
The Company generally develops additional features for its platform in-house, focusing on quick release cycles and constant
improvement. Grubhub’s web and mobile properties are either stored on secure remote servers and software networks through a public
cloud provider or are hosted by a third-party provider of hosting services. The Company’s primary third-party hosting service
providers are located in Illinois and Utah. The platform includes a variety of encryption, antivirus, firewall and patch-management
technology to protect and maintain systems and computer hardware across the business. The Company relies on third-party off-the-
shelf technology as well as internally developed and proprietary products and systems to ensure rapid, high-quality customer care,
software development, website integration, updates and maintenance. The Company leverages off-the-shelf hardware and software
platforms in order to build and customize its hardware-based products, such as tablets installed with the Grubhub for Restaurants
application and the Ultimate platform.
Customers
As of December 31, 2019, the Company served approximately 22.6 million Active Diners and currently serves over 155,000
partnered restaurants. For the years ended December 31, 2019, 2018 and 2017, none of these Active Diners or restaurants accounted
for 10% or more of the Company’s net revenues.
Competition
The Company is a leading online provider of takeout orders in the United States for independent and Enterprise restaurants. The
Company primarily competes with the traditional offline ordering process used by the vast majority of restaurants and diners involving
paper menus that restaurants distribute to diners, as well as advertising that restaurants place in local publications to attract diners. For
diners, Grubhub competes with the traditional ordering process by aggregating restaurant and menu information in one place online so
that it is easier and more convenient to find a desirable restaurant option and place a customized order without having to interact
directly with the restaurants. For restaurants, the Company offers a more targeted marketing opportunity than the yellow pages,
billboards or other local advertising mediums since diners typically access the Company’s Platform when they are looking to place a
takeout order, and Grubhub captures the transaction right when a diner has made a decision.
The Company’s online competition consists primarily of national and local service providers, point-of-sale module vendors that
serve some independent restaurants who have their own standalone websites and the online interfaces of Enterprise restaurants that
also offer takeout. Compared to other online platforms, Grubhub offers diners a wide range of choices, with over 300,000 restaurants
on the Company’s platform, including low cost or no cost delivery, menu price parity with any other online ordering option and, the
Company believes, the lowest overall pricing and most compelling rewards for diners in the industry. The Company also competes for
diners with online competitors on the basis of convenience, control and customer care. For restaurants, Grubhub competes with other
online platforms based on its ability to generate additional orders, manage challenges such as customization, change orders, menu
updates and specials and the ability to help them improve their operational efficiency, with product innovations like Grubhub for
Restaurants, POS integration, mobile application development, customer relationship management programs including loyalty tools,
and the Ultimate platform, as well as providing a seamless diner experience.
Management believes the Company competes favorably based on these factors and its singular focus on connecting restaurants
and diners for takeout ordering.
Seasonality
The Company’s business is dependent on diner behavior patterns. In metropolitan markets, the Company generally experiences
a relative increase in diner activity from September to April and a relative decrease in diner activity from May to August. In addition,
the Company benefits from increased order volume in its campus markets when school is in session and experiences a decrease in
order volume when school is not in session, during summer breaks and other vacation periods. Diner activity can also be impacted by
colder or more inclement weather, which typically increases order volume, and warmer or sunny weather, which typically decreases
order volume. Seasonality may cause fluctuations in the Company’s financial results on a quarterly basis.
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Intellectual Property
The Company protects its intellectual property through a combination of trademarks, trade dress, domain name registrations,
copyrights, trade secrets and patents applications, as well as contractual provisions and restrictions on access to and use of proprietary
information.
As of December 31, 2019, the Company owned nearly 60 trademarks registered in the United States and eight registered abroad,
including: “Grubhub,” “Seamless,” “MenuPages,” “Tapingo,” and “LevelUp”. The Company has also filed five other trademark
applications including two trademark applications pending in the United States and three applications pending abroad and may pursue
additional trademark registrations to the extent management believes it will be beneficial and cost-effective.
As of December 31, 2019, the Company had 30 patents issued in the United States, three of which are scheduled to expire in
2020, one of which is scheduled to expire in 2025, one of which is scheduled to expired in 2027, one of which is scheduled to expire
in 2030, three of which are scheduled to expire in 2031, six of which are scheduled to expire in 2032, six of which are scheduled to
expire in 2033, six of which are scheduled to expire in 2034, two of which are scheduled to expire in 2035, and one of which is
scheduled to expire in 2036. The Company also had 20 patent applications pending in the United States as of December 31, 2019,
which seek to cover proprietary inventions relevant to the Company’s products and services. The Company may pursue additional
patent protection to the extent management believes it will be beneficial and cost effective.
The Company is the registered holder of a variety of domestic and international domain names that include the terms
“Grubhub,” “Seamless,” “Allmenus,” “MenuPages,” “DiningIn,” “LevelUp,” “Tapingo,” “ROTR,” “Delivered Dish” and certain other
trademarks and similar variations of such terms.
In addition to the protection provided by the Company’s intellectual property rights, the Company enters into confidentiality
agreements with its employees, consultants, contractors and business partners who are given access to confidential information.
Further, employees and contractors who contribute to the development of material intellectual property on the Company’s behalf are
also subject to invention assignment and/or license agreements, as appropriate. The Company further controls the use of its proprietary
technology and intellectual property by engaging trademark watch services, as well as through its general websites and product-
specific terms of use and policies.
Employees
As of February 14, 2020, the Company had approximately 2,714 full-time equivalent employees. None of the Company’s
employees is represented by a labor union with respect to his or her employment with Grubhub.
Available Information
The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”) and files or furnishes reports, proxy statements and other information with the Securities and Exchange Commission (the
“SEC”). The Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and
amendments to reports filed pursuant to Sections 13(a) and 15(d) of the Exchange Act, are filed with the SEC and are available free of
charge on the Company’s website at investors.grubhub.com/investors/sec-filings at the same time as when the reports are available on
the SEC’s website. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information
regarding issuers that file electronically with the SEC at http://www.sec.gov. The Company also maintains websites at
www.grubhub.com and www.seamless.com. The contents of the websites referenced herein are not incorporated into this filing.
Further, the Company’s references to the URLs for these websites are intended to be inactive textual references only.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
In this section and elsewhere in this Annual Report on Form 10-K, we discuss and analyze the results of operations and financial
condition of the Company. In addition to historical information about the Company, we also make statements relating to the future
called “forward-looking statements,” which are provided under the “safe harbor” of the U.S. Private Securities Litigation Act of 1995.
Forward-looking statements involve substantial risks, known or unknown, and uncertainties that may cause actual results to differ
materially from future results or outcomes expressed or implied by such forward-looking statements. Forward-looking statements
generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking
statements because they contain words such as “anticipates,” “believes,” “contemplates,” “continue,” “could,” “estimates,” “expects,”
“intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “target” or “will” or the negative of these words or other
similar terms or expressions that concern the Company’s expectations, strategy, plans or intentions.
We cannot guarantee that any forward-looking statement will be realized. These forward-looking statements are subject to a
number of risks, uncertainties and assumptions, including those discussed elsewhere in this Annual Report on Form 10-K and in Part
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I. Item 1A, “Risk Factors”, that could affect the future results of the Company and could cause those results or other outcomes to
differ materially from those expressed or implied in the Company’s forward-looking statements.
While forward-looking statements are our best prediction at the time they are made, you should not place undue reliance on
them. Forward-looking statements speak only as of the date of this document or the date of any document that may be incorporated by
reference into this document.
Consequently, you should consider forward-looking statements only as the Company’s current plans, estimates and beliefs. The
Company does not undertake and specifically declines any obligation to publicly update or revise forward-looking statements,
including those set forth in this Annual Report on Form 10-K, to reflect any new events, information, events or any change in
conditions or circumstances unless required by law. You are advised, however, to consult any further disclosures we make on related
subjects in our Quarterly Reports on Form 10-Q, Current Reports on 8-K and future Annual Reports on 10-K and our other filings
with the SEC.
Item 1A.
Risk Factors
Our business is subject to numerous risks. You should carefully consider the following risk factors and all other information
contained in this Annual Report on Form 10-K. Any of these risks could harm our business, results of operations, and financial
condition and our prospects. In addition, risks and uncertainties not currently known to us or that we currently deem to be immaterial
also may materially adversely affect our business, financial condition and operating results.
Risks Related to Our Business
If we fail to retain our existing restaurants and diners or to acquire new restaurants and diners in a cost-effective manner, our
revenue may decrease and our business may be harmed.
We believe that growth of our business and revenue is dependent upon our ability to continue to grow our takeout marketplace
in existing geographic markets by retaining our existing restaurants and diners and adding new restaurants and diners. The increase in
restaurants attracts more diners to our platform and the increase in diners attracts more restaurants. This takeout marketplace takes
time to build and may grow more slowly than we expect or than it has grown in the past. In addition, as we have become larger
through organic growth, the growth rates for Active Diners, Daily Average Grubs and Gross Food Sales have at times slowed, and
may similarly slow in the future, even if we continue to add restaurants and diners on an absolute basis. Although we expect that our
growth rates will continue to slow during certain periods as our business increases in size, if we fail to retain either our existing
restaurants (especially our most popular restaurants) or diners, the value of our takeout marketplace will be diminished. In addition,
although we believe that many of our new restaurants and diners originate from word-of-mouth and other non-paid referrals from
existing restaurants and diners, we also expect to continue to spend to acquire additional restaurants and diners. We cannot assure you
that the revenue from the restaurants and diners we acquire will ultimately exceed the cost of acquisition.
While a key part of our business strategy is to add restaurants and diners in our existing geographic markets, we will also
continue to expand our operations into new geographic markets. In doing so, we may incur losses or otherwise fail to enter new
markets successfully. Our expansion into new markets may place us in unfamiliar competitive environments and involve various risks,
including the need to invest significant resources and the possibility that returns on such investments will not be achieved for several
years or at all.
We compete primarily with the traditional offline ordering process. Adherence to this traditional ordering method, together with
increasing pressure from existing and new companies that offer online ordering could harm our business and results of
operations.
We primarily compete with the traditional offline ordering process used by the vast majority of restaurants and diners involving
the telephone and paper menus that restaurants distribute to diners, as well as advertising that restaurants place in local publications to
attract diners. Changing traditional ordering habits is difficult and if restaurants and diners do not embrace the transition to online food
ordering as we expect, our business and results of operations could be harmed.
In addition to the traditional takeout ordering process, we increasingly compete with other online food ordering businesses,
Enterprise restaurants that have their own online ordering platforms, point of sale companies and restaurant delivery services. Our
current and future competitors may enjoy competitive advantages, such as greater name recognition, longer operating histories, greater
market share in certain markets and larger existing user bases in certain markets and substantially greater financial, technical and other
resources than we have. Greater financial resources and product development capabilities may allow these competitors to respond
more quickly to new or emerging technologies and changes in restaurant and diner requirements that may render our products less
attractive or obsolete. These competitors have and may continue to introduce new products with competitive price and performance
characteristics and they may undertake more aggressive marketing campaigns than ours. Large Internet companies with substantial
resources, users and brand power have also entered our market and compete with us. Furthermore, independent restaurants could
determine that it is more cost effective to develop their own platforms to permit online takeout orders rather than use our service.
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If we lose existing restaurants or diners in our network, fail to attract new restaurants or diners or are forced to reduce our
commission percentage or make pricing concessions as a result of increased competition, our business and results of operations could
be harmed.
Growth of our business will depend on a strong brand and any failure to maintain, protect and enhance our brand would hurt
our ability to retain or expand our base of restaurants and diners and our ability to increase their level of engagement.
We believe that a strong brand is necessary to continue to attract and retain diners and, in turn, the restaurants in our network.
We need to maintain, protect and enhance our brand in order to expand our base of diners and increase their engagement with our
websites and mobile applications. This will depend largely on our ability to continue to provide differentiated products, and we may
not be able to do so effectively. While we may choose to engage in a broader marketing campaign to further promote our brand, this
effort may not be successful or cost effective. If we are unable to maintain or enhance restaurant and diner awareness in a cost-
effective manner, our brand, business, results of operations and financial condition could be harmed. Furthermore, negative publicity
about our Company, including delivery problems, issues with our technology and complaints about our personnel or customer service,
could diminish confidence in, and the use of, our products, which could harm our results of operations and business.
We rely on restaurants in our network for many aspects of our business, and any failure by them to maintain their service levels
could harm our business.
We rely upon restaurants in our network, principally small and local independent businesses, and, to a lesser degree, our
independent contractor driver network, to provide quality food to our diners on a timely basis. If these restaurants or our independent
contractor driver network experience difficulty servicing diner demand, producing quality food, providing timely delivery and good
service or meeting our other requirements or standards, our reputation and brand could be damaged. In addition, if restaurants in our
network were to cease operations, temporarily or permanently, face financial distress or other business disruption, or if our
relationships with restaurants in our network deteriorate, we may not be able to provide diners with restaurant choices. This risk is
more pronounced in markets where we have fewer restaurants. In addition, if we are unsuccessful in choosing or finding popular
restaurants, if we fail to negotiate satisfactory pricing terms with them or if we ineffectively manage these relationships, it could harm
our business and results of operations.
We may not continue to grow at historical rates or maintain profitability in the future.
While our revenue has grown in recent periods, this growth rate may not be sustainable and we may not realize sufficient
revenue to maintain profitability. We may incur significant losses in the future for a number of reasons, including insufficient growth
in the number of restaurants and diners on our platform, increasing competition, as well as other risks described in this Annual Report
on Form 10-K, and we may encounter unforeseen expenses, difficulties, complications and delays and other unknown factors. We
expect to continue to make investments in the development and expansion of our business, which may not result in increased revenue
or growth. In addition, as a public company, we incur and will continue to incur significant legal, accounting and other expenses that
we did not incur as a private company. As a result of these increased expenditures, we will have to generate and sustain increased
revenue to maintain profitability. Accordingly, we may not be able to maintain profitability and we may incur significant losses in the
future, and this could cause the price of our common stock to decline.
Failure to realize anticipated benefits from our growth initiatives could have an adverse impact on our business, financial
condition or results of operations.
In October 2019, the Company announced a series of growth initiatives to drive diner acquisition and retention. These initiatives
include a significant expansion of non-partnered restaurants on the Platform, as well as increased investments in diner loyalty tools
and offerings. Although we believe these investments will position our business for long-term, sustainable growth, such endeavors
involve significant risks and uncertainties, including that such initiatives and investments may result in reduced short-term
profitability, may not be commercially viable for an indefinite amount of time, and may not result in adequate return of capital. If we
are unable to successfully implement our growth initiatives as planned, or do not achieve expected diner growth and retention as a
result of these initiatives, we may not realize all or any of the anticipated benefits, which could adversely affect our business, financial
condition or results of operations.
If we fail to manage our growth effectively, our brand, results of operations and business could be harmed.
We have experienced rapid growth in our headcount and operations, both through organic growth and recent acquisitions. This
growth places substantial demands on management and our operational infrastructure. Many of our employees have been with us for
fewer than 18 months. We have and intend to continue to make substantial investments in our technology, customer care, sales and
marketing infrastructure. As we continue to grow, we must effectively integrate, develop and motivate a large number of new
employees, while maintaining the beneficial aspects of our Company culture. We may not be able to manage growth effectively. If we
do not manage the growth of our business and operations effectively, the quality of our platform and efficiency of our operations could
suffer, which could harm our brand, business and results of operations.
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The impact of economic conditions, including the resulting effect on consumer spending, may harm our business and results of
operations.
Our performance is subject to economic conditions and their impact on levels of consumer spending. Some of the factors having
an impact on discretionary consumer spending include general economic conditions, unemployment, consumer debt, reductions in net
worth, residential real estate and mortgage markets, taxation, energy prices, interest rates, consumer confidence and other
macroeconomic factors. Consumer purchases of discretionary items generally decline during recessionary periods and other periods in
which disposable income is adversely affected. Small businesses that do not have substantial resources, like a substantial number of
the restaurants in our network, tend to be more adversely affected by poor economic conditions than large businesses. Also, because
spending for food purchases from restaurants is generally considered to be discretionary, any decline in consumer spending may have
a disproportionate effect on our business relative to those businesses that sell products or services considered to be necessities. If
spending at many of the restaurants in our network declines, or if a significant number of these restaurants go out of business, diners
may be less likely to use our service, which could harm our business and results of operations. In addition, significant adverse
economic conditions could harm the businesses of our corporate customers, resulting in decreased use of our platform. Restaurants in
our network are located in diverse geographic areas across the U.S. and include major metropolitan areas like New York City,
Chicago and the San Francisco Bay Area. To the extent any one of these major metropolitan areas experience any of the above-
described conditions to a greater extent than other geographic areas, the harm to our business and results of operations could be
exacerbated.
We make the restaurant and diner experience our highest priority. Our dedication to making decisions based primarily on the
best interests of restaurants and diners may cause us to forego short-term opportunities, which could impact our profitability.
We base many of our decisions upon the best interests of the restaurants and diners who use our platform. We believe that this
approach has been essential to our success in increasing our growth rate and the frequency with which restaurants and diners use our
platform and has served our long-term interests and those of our stockholders. We believe that it is our responsibility to make our
diners happy. In the past, we have foregone, and we may in the future forego, certain expansion or revenue opportunities that we do
not believe are in the best interests of our restaurants and diners, even if such decisions negatively impact our business or results of
operations in the short term. Our focus on making decisions based primarily on the interests of the restaurants and diners who use our
platform may not result in the long-term benefits that we expect, and our business and results of operations may be harmed.
If use of the Internet via websites, mobile devices and other platforms, particularly with respect to online food ordering, does not
continue to increase as rapidly as we anticipate, our business and growth prospects will be harmed.
Our business and growth prospects are substantially dependent upon the continued and increasing use of the Internet as an
effective medium of transactions by diners. Internet use may not continue to develop at historical rates, and diners may not continue to
use the Internet and other online services to order their food at current or increased growth rates or at all. In addition, the Internet and
mobile applications may not continue to be accepted as a viable platform or resource for a number of reasons, including:
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actual or perceived lack of security of information or privacy protection;
possible disruptions, computer viruses or other damage to Internet servers, users’ computers or mobile applications;
excessive governmental regulation; and
unacceptable delays due to actual or perceived limitations of wireless networks.
Grubhub is expanding its independent contractor driver network. The status of the drivers as independent contractors, rather
than employees, has been and will likely continue to be challenged. A reclassification of the drivers as employees could harm
our business or results of operations.
We are involved or may become involved in legal proceedings and investigations that claim that members of the delivery
network who we treat as independent contractors for all purposes, including employment tax and employee benefits, should instead be
treated as employees. In addition, there can be no assurance that legislative, judicial or regulatory (including tax) authorities will not
introduce proposals or assert interpretations of existing rules and regulations that would mandate that we change our classification of
the drivers. In the event of a reclassification of members of our independent contractor driver network as employees, we could be
exposed to various liabilities and additional costs. These liabilities and costs could have an adverse effect on our business and results
of operations and/or make it cost prohibitive for us to deliver orders using our driver network, particularly in geographic areas where
we do not have significant volume. These liabilities and additional costs could include exposure (for prior and future periods) under
federal, state and local tax laws, and workers’ compensation, unemployment benefits, labor, and employment laws, as well as potential
liability for penalties and interest.
If our security measures are compromised, or if our platform is subject to attacks that degrade or deny the ability of restaurants
and diners to access our content, restaurants and diners may curtail or stop use of our platform.
Like all online services, our platform is vulnerable to computer viruses, break-ins, phishing attacks, attempts to overload our
servers with denial-of-service, misappropriation of data through website scraping or other attacks and similar disruptions from
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unauthorized use of our computer systems, any of which could lead to interruptions, delays or website shutdowns, causing loss of
critical data or the unauthorized disclosure or use of personally identifiable or other confidential information. Like most Internet
companies, we have experienced interruptions in our service in the past due to software and hardware issues as well as denial-of-
service and other cyber-attacks and, in the future, may experience compromises to our security that result in performance or
availability problems, the complete shutdown of our websites or the loss or unauthorized disclosure of confidential information. In the
event of a prolonged service interruption or significant breach of our security measures, our restaurants and diners may lose trust and
confidence in us and decrease their use of our platform or stop using our platform entirely. We may be unable to implement adequate
preventative measures against or proactively address techniques used to obtain unauthorized access, disable or degrade service or
sabotage systems because such techniques change frequently, often remain undetected until launched against a target and may
originate from remote areas around the world that are less regulated. The impact of cyber security events experienced by third-parties
with whom we do business (or upon whom we otherwise rely in connection with our day-to-day operations) could have a similar
effect on us. Moreover, even cyber or similar attacks that do not directly affect us or third-parties with whom we do business may
result in a loss of consumer confidence generally, which could make users less likely to use or continue to use our platform. Any or all
of these issues could harm our ability to attract new restaurants and diners or deter current restaurants and diners from returning,
reduce the frequency with which restaurants and diners use our platform, or subject us to third-party lawsuits, regulatory fines or other
action or liability, thereby harming our business and results of operations.
Our failure to protect personal information provided by our diners against inappropriate disclosure, including security
breaches, could violate applicable law and contracts with our service providers and could result in liability to us, damage to our
reputation and brand and harm to our business.
We rely on third-party payment processors and encryption and authentication technology licensed from third parties that is
designed to effect secure transmission of personal information provided by our diners. In some cases, we retain third-party vendors to
store data, including personal information. We may need to expend significant resources to protect against impermissible disclosure,
including security breaches, or to address problems caused by such disclosure. If we, or our third-party providers, are unable to
maintain the security of our diners’ personal information, our reputation and brand could be harmed and we may lose current and
potential diners, be exposed to litigation and possible liability.
Because we process and transmit payment card information, we are subject to the Payment Card Industry (“PCI”) and Data
Security Standard (the “Standard”). The Standard is a comprehensive set of requirements for enhancing payment account data security
that was developed by the PCI Security Standards Council to help facilitate the broad adoption of consistent data security measures.
We are required by payment card network rules to comply with the Standard, and our failure to do so may result in fines or restrictions
on our ability to accept payment cards. Under certain circumstances specified in the payment card network rules, we may be required
to submit to periodic audits, self-assessments or other assessments of our compliance with the Standard. Such activities may reveal
that we have failed to comply with the Standard. If an audit, self-assessment or other test determines that we need to take steps to
remediate any deficiencies, such remediation efforts may distract our management team and require us to undertake costly and time
consuming remediation efforts. In addition, even if we comply with the Standard, there is no assurance that we will be protected from
a security breach.
We face potential liability, expenses for legal claims and harm to our business based on the nature of our business and the
content on our platform.
We face potential liability, expenses for legal claims and harm to our business relating to the nature of the takeout food business,
including potential claims related to food offerings, delivery and quality. For example, third parties could assert legal claims against us
in connection with personal injuries related to food poisoning or tampering or accidents caused by the delivery drivers of restaurants in
our network or drivers in our delivery network. Alternatively, we could be subject to legal claims relating to the delivery of alcoholic
beverages sold by restaurants on our network to underage diners.
Reports, whether true or not, of food-borne illnesses (such as E. Coli, avian flu, bovine spongiform encephalopathy, hepatitis A,
trichinosis or salmonella) and injuries caused by food tampering have severely injured the reputations of participants in the food
business and could do so in the future as well. The potential for acts of terrorism on our nation’s food supply also exists and, if such an
event occurs, it could harm our business and results of operations. In addition, reports of food-borne illnesses or food tampering, even
those occurring solely at restaurants that are not in our network, could, as a result of negative publicity about the restaurant industry,
harm our business and results of operations.
In addition, we face potential liability and expense for claims relating to the information that we publish on our websites and
mobile applications, including claims for trademark and copyright infringement, defamation, libel and negligence, among others.
We have incurred and expect to continue to incur legal claims. Potentially, the frequency of such claims could increase in
proportion to the number of restaurants and diners that use our platform and as we grow. These claims could divert management time
and attention away from our business and result in significant costs to investigate and defend, regardless of the merits of the claims. In
some instances, we may elect or be compelled to remove content or may be forced to pay substantial damages if we are unsuccessful
in our efforts to defend against these claims. If we elect or are compelled to remove valuable content from our websites or mobile
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applications, our platform may become less useful to restaurants and diners and our traffic may decline, which could harm our
business and results of operations.
We may not timely and effectively scale and adapt our existing technology and network infrastructure to ensure that our
platform is accessible, which would harm our reputation, business and results of operations.
It is critical to our success that restaurants and diners within our geographic markets be able to access our platform at all times.
We have previously experienced service disruptions and, in the future, we may experience service disruptions, outages or other
performance problems due to a variety of factors, including infrastructure changes, human or software errors, capacity constraints due
to an overwhelming number of diners accessing our platform simultaneously, and denial of service or fraud or security attacks. In
some instances, we may not be able to identify the cause or causes of these performance problems within an acceptable period of time.
It may become increasingly difficult to maintain and improve the availability of our platform, especially during peak usage times and
as our products become more complex and our diner traffic increases. If our platform is unavailable when diners attempt to access it or
it does not load as quickly as they expect, diners may seek other services, and may not return to our platform as often in the future, or
at all. This would harm our ability to attract restaurants and diners and decrease the frequency with which they use our platform. We
expect to continue to make significant investments to maintain and improve the availability of our platform and to enable rapid
releases of new features and products. To the extent that we do not effectively address capacity constraints, respond adequately to
service disruptions, upgrade our systems as needed or continually develop our technology and network architecture to accommodate
actual and anticipated changes in technology, our business and results of operations would be harmed.
We are subject to payment-related risks, and if payment processors are unwilling or unable to provide us with payment
processing service or impose onerous requirements on us in order to access their services, or if they increase the fees they
charge us for these services, our business and results of operations could be harmed.
We accept payments using a variety of methods, including credit and debit cards, Apple Pay®, Android Pay™, PayPal, Amex
Express Checkout, Venmo, certain campus meal plans and gift cards. For certain payment methods, including credit and debit cards,
we pay bank interchange and other fees. These fees may increase over time and raise our operating costs and lower our profitability.
We rely on third parties to provide payment processing services, including the processing of credit and debit cards. Our business may
be disrupted for an extended period of time if any of these companies becomes unwilling or unable to provide these services to us. We
are also subject to payment card association operating rules, certification requirements and rules governing electronic funds transfers,
which could change or be reinterpreted to make it difficult or impossible for us to comply. If we fail to comply with these rules or
requirements, we may be subject to fines and higher transaction fees and/or lose our ability to accept credit and debit card payments
from diners or facilitate other types of online payments, and our business and results of operations could be harmed.
We rely on third parties, including our payment processor and data center hosts, and if these or other third parties do not
perform adequately or terminate their relationships with us, our costs may increase and our business and results of operations
could be harmed.
Our success will depend upon our relationships with third parties, including our payment processor and data center hosts. We
rely on a third-party payment processor and encryption and authentication technology licensed from third parties that is designed to
effect secure transmission of personal information provided by our diners. We also rely on third-party data center hosts to provide a
reliable network backbone with the speed, data capacity, security and hardware necessary for reliable Internet access and services. If
our payment processor, or a data center host, or another third party, does not perform adequately, terminates its relationship with us or
refuses to renew its agreement with us on commercially reasonable terms, we may have difficulty finding an alternate provider on
similar terms and in an acceptable timeframe, our costs may increase and our business and results of operations could be harmed.
In addition, we rely on off-the-shelf hardware and software platforms developed by third parties to build and customize our
Grubhub for Restaurants tablet and mobile application, quick-response code scanners and in-store ordering kiosks. If third parties fail
to continue to produce or maintain these hardware and software platforms, our Grubhub for Restaurants tablet and mobile application,
quick-response code scanners and in-store ordering kiosks may become less accessible to restaurants and diners, and our business and
results of operations could be harmed.
If we do not continue to innovate and provide useful products or if our introduced products do not perform or are not adopted
by restaurants in accordance with our expectations, we may not remain competitive and our business and results of operations
could suffer.
Our success depends in part on our ability to continue to innovate. To remain competitive, we must continuously enhance and
improve the functionality and features of our platform, including our websites and mobile applications. The Internet and the online
commerce industry are rapidly changing and becoming more competitive. If competitors introduce new products embodying new
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technologies, or if new industry standards and practices emerge, our existing websites, technology and mobile applications may
become obsolete. Our future success could depend on our ability to:
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enhance our existing products and develop new products;
persuade restaurants to adopt our new technologies and products in a timely manner; and
respond to technological advances and emerging industry standards and practices on a cost-effective and timely basis.
Developing our platform, which includes our mobile applications, websites and other technologies entails significant technical
and business risks. We may use new technologies ineffectively, or we may fail to adapt to emerging industry standards. If we face
material delays in introducing new or enhanced products or if our recently introduced products do not perform in accordance with our
expectations, the restaurants and diners in our network may forego the use of our products in favor of those of our competitors.
Internet search engines drive traffic to our platform and our new diner growth could decline and our business and results of
operations would be harmed if we fail to appear prominently in search results.
Our success depends in part on our ability to attract diners through unpaid Internet search results on search engines like Google,
Yahoo! and Bing. The number of diners we attract to our platform from search engines is due in large part to how and where our
websites rank in unpaid search results. These rankings can be affected by a number of factors, many of which are not under our direct
control and may change frequently. For example, a search engine may change its ranking algorithms, methodologies or design layouts.
As a result, links to our websites may not be prominent enough to drive traffic to our websites, and we may not know how or
otherwise be in a position to influence the results. In some instances, search engine companies may change these rankings in a way
that promotes their own competing products or services or the products or services of one or more of our competitors. Search engines
may also adopt a more aggressive auction-pricing system for keywords that would cause us to incur higher advertising costs or reduce
our market visibility to prospective diners. Our websites have experienced fluctuations in search result rankings in the past, and we
anticipate similar fluctuations in the future. Any reduction in the number of diners directed to our platform could harm our business
and results of operations.
We experience significant seasonal fluctuations in our financial results, which could cause our stock price to fluctuate.
Our business is highly dependent on diner behavior patterns that we have observed over time. In our metropolitan markets, we
generally experience a relative increase in diner activity from September to April and a relative decrease in diner activity from May to
August. In addition, we benefit from increased order volume in our campus markets when school is in session and experience a
decrease in order volume when school is not in session, during summer breaks and other vacation periods. Diner activity can also be
impacted by colder or more inclement weather, which typically increases order volume, and warmer or sunny weather, which typically
decreases order volume. Seasonality will likely cause fluctuations in our financial results on a quarterly basis. In addition, other
seasonality trends may develop and the existing seasonality and diner behavior that we experience may change or become more
significant.
We expect a number of factors to cause our results of operations to fluctuate on a quarterly and annual basis, which may make
it difficult to predict our future performance.
Our results of operations could vary significantly from quarter to quarter and year to year because of a variety of factors, many
of which are outside of our control. As a result, comparing our results of operations on a period-to-period basis may not be
meaningful. In addition to other risk factors discussed in this section, factors that may contribute to the variability of our quarterly and
annual results include:
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our ability to attract new restaurants and diners and retain existing restaurants and diners in our network in a cost effective
manner;
our ability to accurately forecast revenue and appropriately plan our expenses;
the effects of changes in search engine placement and prominence;
the effects of increased competition on our business;
our ability to successfully expand in existing markets and successfully enter new markets;
the impact of worldwide economic conditions, including the resulting effect on diner spending on takeout;
the seasonality of our business, including the effect of academic calendars on college campuses and seasonal patterns in
restaurant dining;
the impact of weather on our business;
our ability to protect our intellectual property;
our ability to maintain an adequate rate of growth and effectively manage that growth;
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our ability to maintain and increase traffic to our platform;
our ability to keep pace with technology changes in the takeout industry;
the success of our sales and marketing efforts;
costs associated with defending claims, including intellectual property infringement claims and related judgments or
settlements;
changes in governmental or other regulation affecting our business;
interruptions in service and any related impact on our business, reputation or brand;
the attraction and retention of qualified employees and key personnel;
our ability to choose and effectively manage third-party service providers;
changes in diner behavior with respect to takeout;
the effects of natural or man-made catastrophic events;
the effectiveness of our internal controls;
the impact of payment processor costs and procedures;
changes in the online payment transfer rate; and
changes in our tax rates or exposure to additional tax liabilities.
The loss of key senior management personnel could harm our business and future prospects.
We depend on our senior management and other key personnel. We may not be able to retain the services of any of our senior
management or other key personnel. Although we have employment agreements with our key senior management personnel, their
employment is at-will and they could leave at any time. The loss of any of our executive officers or other key employees could harm
our business and future prospects.
We depend on talented personnel to grow and operate our business, and if we are unable to hire, retain, manage and motivate
our personnel, or if our new personnel do not perform as we anticipate, we may not be able to grow effectively.
Our future success will depend upon our ability to continue to identify, hire, develop, motivate and retain talented personnel. We
may not be able to retain the services of any of our employees or other members of senior management in the future. In addition, from
time to time, there may be changes in our senior management team that may be disruptive to our business. If our senior management
team fails to work together effectively and to execute our plans and strategies, our business and results of operations could be harmed.
Our growth strategy also depends on our ability to expand our organization by attracting and hiring high-quality personnel.
Identifying, attracting, recruiting, training, integrating, managing and motivating talented individuals will require significant time,
expense and attention. Competition for talent is intense, particularly in technology driven industries such as ours. If we are not able to
effectively recruit and retain our talent, our business and our ability to achieve our strategic objectives would be harmed.
Unfavorable media coverage could harm our business and results of operations.
We are the subject of media coverage from time to time. Unfavorable publicity regarding our business model, content,
personnel, customer care, technology, product changes, product quality or privacy practices could harm our reputation. Such negative
publicity could also harm the size of our network and engagement and loyalty of our restaurants and diners, which could adversely
impact our business and results of operations.
Our business, and that of our third-party providers and third-party data center, is subject to the risks of severe weather,
earthquakes, fires, floods, hurricanes and other natural catastrophic events and to interruption by man-made problems such as
computer viruses or terrorism.
Our business, particularly in areas of significant concentration like New York, Chicago and San Francisco, is subject to damage
or interruption from severe weather, earthquakes, fires, floods, tornadoes, hurricanes, power losses, telecommunications failures,
terrorist attacks, acts of war and similar events. For example, severe weather in Chicago, the location of our corporate headquarters
and most of our customer care staff, could inhibit the ability of our customer care staff to get to work, which could result in service
problems and complaints from restaurants or diners. As we rely heavily on our servers, computer and communications systems, as
well as those of our third-party providers and third-party data centers, and the Internet to conduct our business and provide high
quality customer service, disruptions could harm our ability to run our business, which could harm our results of operations and
financial condition. These events could also negatively impact diner activity or the ability of restaurants to continue to operate.
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Increases in food, labor, energy and other costs could adversely affect results of operations.
An increase in restaurant operating costs could cause restaurants in our network to raise prices or cease operations. Factors such
as inflation, increased food costs, increased labor and employee benefit costs, increased rent costs and increased energy costs may
increase restaurant operating costs. Many of the factors affecting restaurant costs are beyond the control of the restaurants in our
network. In many cases, these restaurants may not be able to pass along these increased costs to diners and, as a result, may cease
operations, which could harm our profitability and results of operations. Additionally, if these restaurants raise prices, order volume
may decline, which could harm our profitability and results of operations.
Acquisitions could disrupt our business and harm our business and results of operations.
As part of our business strategy, we have and we will continue to selectively explore acquisition opportunities of companies and
technologies to strengthen our platform. For example, in 2018 we completed acquisitions of Tapingo and LevelUp and in 2017 we
completed the acquisitions of Eat24 and Foodler. The identification of suitable acquisition candidates can be difficult, time consuming
and costly, and we may not be able to successfully complete identified acquisitions. The risks we face in connection with acquisitions
include:
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regulatory hurdles;
anticipated benefits may not materialize;
diversion of management time and focus from operating our business to addressing acquisition integration challenges;
transition of the acquired company’s users to our websites and mobile applications;
retention of employees from the acquired company;
assimilation, integration and maintenance of the acquired company’s business;
cultural challenges associated with integrating employees from the acquired company into our organization;
integration of the acquired company’s accounting, management information, human resources and other administrative
systems;
the need to implement or improve controls, procedures and policies at a business that prior to the acquisition may have
lacked effective controls, procedures and policies;
coordination of product development and sales and marketing functions;
liability for activities of the acquired company before the acquisition, including patent and trademark infringement claims,
violations of laws, commercial disputes, tax liabilities and other known and unknown liabilities; and
litigation or other claims in connection with the acquired company, including claims from terminated employees, users,
former stockholders or other third parties.
Our failure to address these risks or other problems encountered in connection with our past or future acquisitions and
investments could cause us to fail to realize the anticipated benefits of these acquisitions or investments, cause us to incur
unanticipated liabilities, and harm our business generally. Future acquisitions could also result in dilutive issuances of our equity
securities, the incurrence of debt, contingent liabilities, amortization expenses or the impairment of goodwill, any of which could harm
our business and results of operations.
Government regulation of the Internet and e-commerce is evolving, and unfavorable changes could substantially harm our
business and results of operations.
We are subject to general business regulations and laws as well as federal and state regulations and laws specifically governing
the Internet and e-commerce. Existing and future laws and regulations may impede the growth of the Internet, e-commerce or other
online services, and increase the cost of providing online services. These regulations and laws may cover sweepstakes, taxation,
tariffs, user privacy, data protection, pricing, content, copyrights, distribution, electronic contracts and other communications,
consumer protection, broadband residential Internet access and the characteristics and quality of services. It is not clear how existing
laws governing issues such as property ownership, sales, use and other taxes, libel and personal privacy apply to the Internet and e-
commerce. Unfavorable resolution of these issues may harm our business and results of operations.
Our business is subject to a variety of U.S. laws, many of which are unsettled and still developing and which could subject us to
claims or otherwise harm our business or results of operations.
We are subject to a variety of laws in the United States, including laws regarding data retention, online credit card payments,
privacy, data security, distribution of user-generated content, consumer protection, tax and securities laws, which are frequently
evolving and developing. The scope and interpretation of the laws that are or may be applicable to us are often uncertain and may be
conflicting.
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In addition, we may be subject to foreign data protection, privacy, and other laws and regulations, including without limitation
the E.U. General Data Protection Regulation, which can be more restrictive than those in the United States and could impact our
ability to transfer, process and/or receive transnational data. The regulatory framework for privacy and security issues is evolving and
may remain in flux for some period of time. It is difficult to ascertain whether this will impact our business in the United Kingdom. It
is also likely that if our business grows and evolves and our products are used in a greater number of geographies, we will become
subject to laws and regulations in additional jurisdictions. It is difficult to predict how existing laws will be applied to our business and
the new laws to which we may become subject.
If we are not able to comply with these laws or regulations or if we become liable under these laws or regulations, we could be
harmed, and we may be forced to implement new measures to reduce our exposure to this liability. This may require us to expend
substantial resources or to discontinue certain products or features, which would negatively affect our business. In addition, the
increased attention focused upon liability issues as a result of lawsuits and legislative proposals could harm our reputation or
otherwise impact the growth of our business. Any costs incurred to prevent or mitigate this potential liability could also harm our
business and results of operations.
Failure to adequately protect our intellectual property could harm our business and results of operations.
Our business depends on our intellectual property, the protection of which is crucial to the success of our business. We rely on a
combination of patent, trademark, trade secret and copyright law and contractual restrictions to protect our intellectual property. In
addition, we attempt to protect our intellectual property, technology and confidential information by requiring our employees and
consultants who develop intellectual property on our behalf to enter into confidentiality and assignment of inventions agreements and
non-competition agreements, and third parties to enter into nondisclosure agreements. These agreements may not effectively prevent
unauthorized use or disclosure of our confidential information, intellectual property or technology and may not provide an adequate
remedy in the event of unauthorized use or disclosure of our confidential information, intellectual property or technology. Despite our
efforts to protect our proprietary rights, unauthorized parties may copy aspects of our website features, software and functionality or
obtain and use information that we consider proprietary.
We have registered, among numerous other trademarks, “Grubhub,” “Seamless,” “Tapingo,” “LevelUp,” and “MenuPages” as
trademarks in the United States and abroad. Competitors have and may continue to adopt service names similar to ours, thereby
harming our ability to build brand identity and possibly leading to user confusion. In addition, there could be potential trade name or
trademark infringement claims brought by owners of other trademarks that are similar to our trademarks. Litigation or proceedings
before the U.S. Patent and Trademark Office or other governmental authorities and administrative bodies in the United States and
abroad may be necessary in the future to enforce our intellectual property rights and to determine the validity and scope of the
proprietary rights of others. Our efforts to enforce or protect our proprietary rights may be ineffective and could result in substantial
costs and diversion of resources, which could harm our business and results of operations.
We may be unable to continue to use the domain names that we use in our business, or prevent third parties from acquiring and
using domain names that infringe on, are similar to, or otherwise decrease the value of our brand or our trademarks or service
marks.
We have registered domain names for our websites that we use in our business, most importantly seamless.com, grubhub.com,
thelevelup.com, tapingo.com, MenuPages.com and allmenus.com. If we lose the ability to use a domain name, whether due to
trademark claims, failure to renew the applicable registration, or any other cause, we may be forced to market our products under a
new domain name, which could cause us substantial harm, or to incur significant expense in order to purchase rights to the domain
name in question. In addition, our competitors and others could attempt to capitalize on our brand recognition by using domain names
similar to ours. Domain names similar to ours have been registered in the United States and elsewhere. We may be unable to prevent
third parties from acquiring and using domain names that infringe on, are similar to, or otherwise decrease the value of our brand or
our trademarks or service marks. Protecting and enforcing our rights in our domain names may require litigation, which could result in
substantial costs and diversion of resources, which could in turn harm our business and results of operations.
Intellectual property infringement assertions by third parties could result in significant costs and harm our business, results of
operations and reputation.
We operate in an industry with extensive intellectual property litigation. Other parties have asserted, and in the future may
assert, that we have infringed their intellectual property rights. Such litigation may involve patent holding companies or other adverse
patent owners who have no relevant product revenue, and therefore our own issued and pending patents may provide little or no
deterrence. We could be required to pay substantial damages or cease using intellectual property or technology that is deemed
infringing.
Furthermore, we cannot predict whether assertions of third-party intellectual property rights or claims arising from such
assertions will substantially harm our business and results of operations. The defense of any such claims, whether they are with or
without merit or are determined in our favor, may result in costly litigation and diversion of technical and management personnel.
Furthermore, an adverse outcome of a dispute may require us to pay damages, potentially including treble damages and attorneys’ fees
if we are found to have willfully infringed a party’s patent or copyright rights; cease making, licensing or using products that are
alleged to incorporate the intellectual property of others; expend additional development resources to redesign our products; and enter
into potentially unfavorable royalty or license agreements in order to obtain the right to use necessary technologies. Royalty or
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licensing agreements, if required, may be unavailable on terms acceptable to us, or at all. In any event, we may need to license
intellectual property which would require us to pay royalties or make one-time payments. Even if these matters do not result in
litigation or are resolved in our favor or without significant cash settlements, the time and resources necessary to resolve them could
harm our business, results of operations and reputation.
Some of our products contain open source software, which may pose particular risks to our proprietary software and products.
We use open source software in our products and will use open source software in the future. From time to time, we may face
claims from third parties claiming ownership of, or demanding release of, the open source software and/or derivative works that we
developed using such software (which could include our proprietary source code), or otherwise seeking to enforce the terms of the
applicable open source license. These claims could result in litigation and could require us to purchase a costly license or cease
offering the implicated products unless and until we can re-engineer them to avoid infringement. This re-engineering process could
require significant additional research and development resources. In addition to risks related to license requirements, use of certain
open source software can lead to greater risks than use of third-party commercial software, as open source licensors generally do not
provide warranties or controls on the origin of software. Any of these risks could be difficult to eliminate or manage, and, if not
addressed, could harm our business and results of operations.
The agreements governing our senior debt contain operating and financial covenants that may restrict our business and
financing activities.
We are party to a credit agreement in connection with our secured, revolving credit facility, and an indenture in connection with
our senior notes. The credit facility and the senior notes are guaranteed by the Company and its domestic subsidiaries. In addition, the
credit facility is secured by a lien on substantially all of the tangible and intangible property of the Company, and by a pledge of all of
the equity interests of the Company’s domestic subsidiaries.
The credit agreement and indenture contain customary covenants that, among other things, restrict the Company’s and its
subsidiaries’ ability to incur additional debt, create liens, make certain investments and acquisitions, pay dividends and make
distributions, transfer and sell material assets and merge or consolidate. In addition, the credit agreement requires the Company to
satisfy certain financial covenants. As a result, we are limited in the manner in which we conduct our business, and we may be unable
to engage in favorable business activities. These restrictions could place us at a competitive disadvantage to competitors.
Our ability to comply with these covenants may be affected by events beyond our control, and we may not be able to meet these
covenants. From time to time, we may be required to seek waivers or amendments to the agreements governing our senior debt to
maintain compliance with these covenants, and there can be no certainty that any such waiver or amendment will be available, or what
the cost of such waiver or amendment, if obtained, would be. Non-compliance with one or more of these covenants could result in our
senior debt becoming immediately due and payable, and the termination of the lenders’ commitments under our credit facility.
If we are unable to generate sufficient cash available to repay our debt obligations, if any, when they become due and payable,
either when they mature or in the event of a default, we may not be able to obtain additional debt or equity financing on favorable
terms, if at all.
In addition to the capital available under the credit facility, we may require additional capital to support business growth, and
this capital might not be available on acceptable terms, if at all.
We intend to continue to make investments to support our business growth and may require additional funds to respond to
business challenges, including the need to develop new features and products or enhance our existing products, improve our operating
infrastructure or acquire complementary businesses and technologies. Accordingly, we may need to engage in equity or debt
financings to secure additional funds. If we raise additional funds through future issuances of equity or convertible debt securities, our
existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and
privileges superior to those of holders of our common stock. Any additional debt financing that we secure in the future could involve
restrictive covenants relating to our capital raising activities and other financial and operational matters. As a result, it may be more
difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. We may not be able
to obtain additional financing on terms favorable to us, if at all. If we are unable to obtain adequate financing or financing on terms
satisfactory to us when we require it, our ability to continue to support our business growth and to respond to business challenges
could be impaired, and our business may be harmed.
Our business and results of operations may be harmed if we are deemed responsible for the collection and remittance of state
sales taxes for our restaurants.
If we are deemed an agent for the restaurants in our network under state tax law, we may be deemed responsible for collecting
and remitting sales taxes directly to certain states. It is possible that one or more states could seek to impose sales, use or other tax
collection obligations on us with regard to such food sales. These taxes may be applicable to past sales. A successful assertion that we
should be collecting additional sales, use or other taxes or remitting such taxes directly to states could result in substantial tax
liabilities for past sales and additional administrative expenses, which would harm our business and results of operations.
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As a public company, we incur significant costs to comply with the laws and regulations affecting public companies which
could harm our business and results of operations.
As a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act of 2002 (the
“Sarbanes-Oxley Act”), the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) and the listing
requirements of the NYSE, and other applicable securities rules and regulations. These rules and regulations have increased and will
continue to increase our legal, accounting and financial compliance costs and have made and will continue to make some activities
more time consuming and costly. For example, these rules and regulations could make it more difficult and more costly for us to
obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or to incur
substantial costs to maintain the same or similar coverage. These rules and regulations could also make it more difficult for us to
attract and retain qualified persons to serve on our board of directors or our board committees or as executive officers. Our
management and other personnel devote a substantial amount of time to these compliance initiatives. As a result, management’s
attention may be diverted from other business concerns, which could harm our business and operating results. Although we have hired
additional employees to comply with these requirements, we may need to hire more employees in the future, which will increase our
costs and expenses.
Risks Related to Ownership of Our Common Stock
A significant portion of our common stock is held by our existing executive officers, directors and holders of 5% or more of our
outstanding common stock, whose interests may differ from yours.
As of February 14, 2020, our current executive officers, directors and holders of 5% or more of our outstanding common stock
beneficially owned, in the aggregate, approximately 53% of our outstanding shares of common stock. Some of these persons or
entities may have interests that are different from yours. For example, these stockholders may support proposals and actions with
which you may disagree or which are not in your interests or which adversely impact the value of your investment. These stockholders
will be able to exercise a significant level of control over all matters requiring stockholder approval, including the election of
directors, amendment of our certificate of incorporation and approval of significant corporate transactions. This control could have the
effect of delaying or preventing a change of control in us or changes in management and could also make the approval of certain
transactions difficult or impossible without the support of these stockholders, which in turn could reduce the price of our common
stock.
The trading price of our common stock has been and may continue to be volatile, and you could lose all or part of your
investment.
Since shares of our common stock were sold in our IPO in April 2014 at a price of $26.00 per share, the reported high and low
sales prices of our common stock have ranged from $17.77 to $149.35 through February 14, 2020. An active, liquid and orderly
market for our common stock may not be sustained, which could depress the trading price of our common stock. The trading price of
our common stock has been and may continue to be subject to wide fluctuations in response to various factors, some of which are
beyond our control. These fluctuations could cause you to lose all or part of your investment in our common stock since you might be
unable to sell your shares at or above the price you paid. In addition to the factors discussed in this “Risk Factors” section and
elsewhere in this Annual Report on Form 10-K, factors that could cause fluctuations in the trading price of our common stock include
the following:
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price and volume fluctuations in the overall stock market from time to time;
volatility in the market prices and trading volumes of technology stocks, particularly Internet stocks;
changes in operating performance and stock market valuations of other technology companies generally, or those in our
industry in particular;
sales of shares of our common stock by us or our stockholders;
failure of securities analysts to maintain coverage of us, changes in financial estimates by any securities analysts who
follow our Company or our failure to meet these estimates or the expectations of investors;
the financial projections we may provide to the public, any changes in those projections or our failure to meet those
projections;
announcements by us or our competitors of new products;
the public’s reaction to our press releases, other public announcements and filings with the SEC;
rumors and market speculation involving us or other companies in our industry;
actual or anticipated changes in our results of operations or fluctuations in our results of operations;
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actual or anticipated developments in our business, our competitors’ businesses or the competitive landscape generally;
litigation involving us, our industry or both, or investigations by regulators into our operations or those of our
competitors;
developments or disputes concerning our intellectual property or other proprietary rights;
announced or completed acquisitions of businesses or technologies by us or our competitors;
new laws or regulations or new interpretations of existing laws or regulations applicable to our business;
changes in accounting standards, policies, guidelines, interpretations or principles;
any significant change in our management; and
general economic conditions and slow or negative growth of our markets.
In addition, in the past, securities class action litigation has often been instituted against companies following periods of
volatility in the overall market and in the market price of a company’s securities. Such litigation, including the putative class action
instituted against us in November 2019, could result in substantial costs, divert our management’s attention and resources and harm
our business and results of operations.
We cannot guarantee that we will repurchase additional shares of our common stock pursuant to our ongoing share repurchase
program or that our share repurchase program will enhance stockholder value. Share repurchases could also increase the
volatility of the price of our common stock and could diminish our cash reserves.
On January 22, 2016, our Board of Directors approved a program that authorizes the repurchase of up to $100 million of our
common stock exclusive of any fees, commissions or other expenses relating to such repurchases through open market purchases or
privately negotiated transactions at the prevailing market price at the time of purchase.
Although our Board of Directors has approved the share repurchase program, we are not obligated to repurchase any specific
dollar amount or to acquire any specific number of shares. The timing and amount of repurchases, if any, will depend upon several
factors, including market and business conditions, the trading price of our common stock and the nature of other investment
opportunities. The repurchase program may be limited, suspended or discontinued at any time without prior notice, which could result
in a decrease in the trading price of our common stock. In addition, repurchases of our common stock pursuant to our share repurchase
program could affect the trading price of our common stock or increase its volatility. For example, the existence of a share repurchase
program could cause our stock price to be higher than it would be in the absence of such a program and could potentially reduce the
market liquidity for our common stock. Additionally, our share repurchase program may cause us to incur debt or reduce our cash
reserves, and those reserves may be reduced further in the future, which may impact our ability to finance future growth and to pursue
possible future strategic opportunities and acquisitions. There is no assurance that our share repurchase program will enhance
stockholder value and short-term stock price fluctuations could reduce the program’s effectiveness.
If we are unable to implement and maintain effective internal control over financial reporting, the accuracy and timeliness of
our financial reporting may be adversely affected.
We are responsible for implementing and maintaining adequate internal control over financial reporting and are required,
pursuant to Section 404, to furnish a report by management on, among other things, the effectiveness of our internal control over
financial reporting. This assessment requires disclosure of any material weaknesses identified by our management in our internal
control over financial reporting. While we have determined that our internal control over financial reporting was effective as of
December 31, 2019, as indicated in our Management’s Report and Attestation Report on Internal Control over Financial Reporting
included in this Annual Report on Form 10-K for the fiscal year ended December 31, 2019, we must continue to monitor and assess
our internal control over financial reporting. If during the evaluation and testing process we identify one or more material weaknesses
in our internal control over financial reporting, we will be unable to assert that our internal controls are effective. If we are unable to
assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to
express an opinion on the effectiveness of our internal controls or concludes that we have a material weakness in our internal controls,
investors may lose confidence in the accuracy and completeness of our financial reports, which could adversely affect the market price
of our common stock. In addition, if we are not able to comply with the requirements of Section 404 in a timely manner each year, we
could be subject to sanctions or investigations by the SEC, the NYSE or other regulatory authorities which would require additional
financial and management resources and could adversely affect the market price of our stock.
In addition, implementing any appropriate changes to our internal controls may distract our officers and employees, entail
substantial costs to implement new processes and modify our existing processes and take significant time to complete. Moreover, any
such changes do not guarantee that we will be effective in maintaining the adequacy of our internal controls, and any failure to
maintain that adequacy, or consequent inability to produce accurate financial statements on a timely basis, could increase our
operating costs and harm our business. Furthermore, investors’ perceptions that our internal controls are inadequate or that we are
unable to produce accurate financial statements on a timely basis may harm our stock price.
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Anti-takeover provisions contained in our certificate of incorporation and bylaws, as well as provisions of Delaware law, could
impair a takeover attempt.
Our certificate of incorporation and bylaws contain and Delaware law contains provisions, which could have the effect of
rendering more difficult, delaying or preventing an acquisition deemed undesirable by our board of directors. Our corporate
governance documents include provisions:
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creating a classified board of directors whose members serve staggered three-year terms;
authorizing “blank check” preferred stock, which could be issued by our board of directors without stockholder approval
and may contain voting, liquidation, dividend and other rights superior to our common stock;
limiting the liability of, and providing indemnification to, our directors and officers;
limiting the ability of our stockholders to call and bring business before special meetings;
requiring advance notice of stockholder proposals for business to be conducted at meetings of our stockholders and for
nominations of candidates for election to our board of directors;
controlling the procedures for the conduct and scheduling of board of directors and stockholder meetings; and
providing our board of directors with the express power to postpone previously scheduled annual meetings and to cancel
previously scheduled special meetings.
These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in our
management.
As a Delaware corporation, we are also subject to provisions of Delaware law, including Section 203 of the Delaware General
Corporation law, which prevents some stockholders holding more than 15% of our outstanding common stock from engaging in
certain business combinations without approval of the holders of substantially all of our outstanding common stock.
Any provision of our certificate of incorporation, bylaws or Delaware law that has the effect of delaying or deterring a change in
control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock, and could also
affect the price that some investors are willing to pay for our common stock.
If securities or industry analysts issue an adverse or misleading opinion regarding our common stock or do not publish or cease
publishing research or reports about us, our business or our market, or if they change their recommendations regarding our
common stock adversely, our stock price and trading volume could decline.
The trading market for our common stock is influenced, to some extent, by the research and reports that industry or securities
analysts may publish about us, our business, our market or our competitors. We do not control these analysts or the content and
opinions included in their reports. If any of the analysts who cover us change their recommendation regarding our common stock
adversely, or provide more favorable relative recommendations about our competitors, our stock price would likely decline. If any
analyst who covers us were to cease coverage of our Company or fail to publish reports on us regularly or if analysts elect not to
provide research coverage of our common stock, we could lose visibility in the financial markets, which in turn could cause our stock
price or trading volume to decline.
We do not expect to declare any dividends in the foreseeable future.
We do not anticipate declaring any cash dividends to holders of our common stock in the foreseeable future. Consequently,
investors may need to rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize
any future gains on their investment. Investors seeking cash dividends should not purchase our common stock.
Item 1B.
Unresolved Staff Comments
None.
Item 2.
Properties
The Company’s principal executive offices are located at 111 W. Washington, Suite 2100, Chicago, Illinois 60602. As of
December 31, 2019, the Company leased approximately 164,072 square feet of office space that houses the principal operations in
Chicago, Illinois, as well as approximately 81,219 and 74,888 square feet of space at its primary offices in New York, New York, and
Boston, Massachusetts, respectively. The Company leases additional office space in various locations throughout the U.S. as well as in
the U.K. and Israel as a result of acquisitions and organic growth. The Company believes these facilities are in good condition and
sufficient for its current needs but may need to seek additional or expanded facilities if the business continues to grow.
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Item 3.
Legal Proceedings
For a description of the Company’s material pending legal proceedings, please see Note 9, Commitments and Contingencies -
Legal, to the accompanying notes to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form
10-K, which is incorporated herein by reference.
Item 4:
Mine Safety Disclosures
Not applicable.
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PART II.
Item 5.
Market for Grubhub Inc.’s Common Equity, Related Stockholder Matter and Issuer Purchases of Equity
Securities
The Company’s common stock began trading on the NYSE under the symbol “GRUB” on April 4, 2014. Before then, there was
no public market for the Company’s common stock.
Holders
As of the close of business on February 14, 2020, there were approximately 26 stockholders of record of the Company’s
common stock. The number of holders of record is based upon the actual number of holders registered at such date and does not
include holders of shares in “street name” or persons, partnerships, associates, corporations or other entities in security position
listings maintained by depositories.
Dividends
There were no distributions to common and preferred stockholders during the years ended December 31, 2019, 2018 and 2017
and the Company currently intends to retain any future earnings and does not expect to pay any dividends in the foreseeable future.
Any future determination to declare dividends will be made at the discretion of the Company’s board of directors, subject to
applicable laws, and will depend on a number of factors, including the Company’s financial condition, results of operations, capital
requirements, contractual restrictions, general business conditions and other factors that the board of directors may deem relevant.
Issuer Purchases of Equity Securities
Unregistered Sales of Equity Securities
There were no sales of unregistered equity securities during the three months and year ended December 31, 2019.
Issuer Purchases of Equity Securities
On January 22, 2016, the Board of Directors of the Company approved a program (the “Repurchase Program”) that authorizes
the repurchase of up to $100 million of the Company’s common stock exclusive of any fees, commissions or other expenses relating
to such repurchases through open market purchases or privately negotiated transactions at the prevailing market price at the time of
purchase. The Repurchase Program was announced on January 25, 2016. Repurchased stock may be retired or held as treasury shares.
The repurchase authorizations do not obligate the Company to acquire any particular amount of common stock or adopt any particular
method of repurchase and may be modified, suspended or terminated at any time at the Company’s discretion. Repurchased and
retired shares will result in an immediate reduction of the outstanding shares used to calculate the weighted-average common shares
outstanding for basic and diluted net income per share at the time of the transaction.
During the year ended December 31, 2019, the Company did not repurchase any of its common stock. See Part II, Item 8, Note
13, Stockholders' Equity, for additional details of common stock repurchased since inception of the program.
24
Company Stock Performance Graph
The following graph shows a comparison of cumulative total return for the Company’s common stock, the NYSE Composite
Index and the RDG Internet Composite Index over the period from January 1, 2015 to January 31, 2020. The graph assumes that $100
was invested at market close on December 31, 2014 in each of the Company’s common stock, the NYSE Composite Index and the
RDG Internet Composite Index. Such returns are based on historical results and are not intended to suggest future performance. The
cumulative total returns for the NYSE Composite Index and the RDG Internet Composite Index assume reinvestment of dividends.
$450
$400
$350
$300
$250
$200
$150
$100
$50
$0
GRUB
NYSE Composite
RDG Internet Composite
This performance graph shall not be deemed “soliciting material” or to be “filed” with the SEC for purposes of Section 18 of
the Exchange Act, or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference
into any filing of Grubhub Inc. under the Securities Act, or the Exchange Act.
Item 6.
Selected Financial Data
The selected financial data presented below reflects the results of operations and financial condition of Grubhub Inc. for the
periods presented and the results of acquired businesses from the relevant acquisition dates. The audited consolidated financial
statements, in the opinion of management, reflect all adjustments of a normal, recurring nature that are necessary for the fair
presentation of the financial statements. The following selected consolidated financial data is not necessarily indicative of the results
of future operations and should be read in conjunction with Part II, Item 7, “Management’s Discussion and Analysis of Financial
Condition and Results of Operations,” and the consolidated financial statements and the related notes thereto included in Part II,
25
Item 8, “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K to fully understand factors that may
affect the comparability of the information presented below.
2019
Year Ended December 31,
2018
2016
2017
(in thousands, except per share data)
2015
Consolidated Statements of Operations Data:
Revenues(a)
Total costs and expenses(a)
Income (loss) before provision for income taxes
Net income (loss) attributable to common
stockholders
Net income (loss) per share attributable to common
stockholders:
Basic
Diluted
Consolidated Balance Sheet Data:
Cash, cash equivalents and short-term investments
Working capital(b)
Total assets
Total stockholders’ equity
Other Financial Information:
Adjusted EBITDA(c)
Cash Flow Data:
$ 1,312,151 $ 1,007,257 $ 683,067 $ 493,331 $ 361,825
1,318,434 922,294 593,317 410,208 300,403
61,929
(26,776 )
81,433
89,648
83,852
(18,566 )
78,481
98,983
49,557
38,077
$
$
(0.20 ) $
(0.20 ) $
0.88 $
0.85 $
1.15 $
1.12 $
0.58 $
0.58 $
0.45
0.44
$ 425,184 $ 225,329 $ 257,695 $ 323,619 $ 310,741
316,954 140,607 185,935 285,847 266,662
2,374,978 2,065,708 1,543,769 1,197,507 1,060,248
1,493,570 1,442,339 1,117,816 972,119 877,596
$ 186,150 $ 233,742 $ 183,988 $ 144,646 $ 104,967
Net cash provided by operating activities
Net cash used in investing activities
Net cash provided by financing activities
$ 182,622 $ 225,527 $ 154,144 $
(148,417 ) (594,004 ) (336,962 )
129,267 346,685 178,059
43,988
97,780 $
(45,519 ) (116,397 )
39,404
19,344
Reflects results of acquired businesses from the relevant acquisition dates.
(a) On January 1, 2018, the Company adopted Financial Accounting Standards Board (the “FASB”) Accounting Standards
Codification Topic 606, Revenue from Contracts with Customers (“ASC Topic 606”) using the modified retrospective
method applied to those contracts which were not completed as of January 1, 2018. Results for reporting periods
beginning on or after January 1, 2018 are presented under ASC Topic 606, while prior period amounts are not adjusted
and continue to be reported in accordance with historical accounting guidance under ASC Topic 605. The adoption of
ASC Topic 606 did not have a material impact on the Company’s results of operations, financial position or cash flows.
(b) Working capital is calculated as current assets less current liabilities.
(c) See the section titled “Non-GAAP Financial Measures” in Part II, Item 7, “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” for more information and for a reconciliation of Adjusted EBITDA to net
income, the most directly comparable financial measure calculated and presented in accordance with accounting
principles generally accepted in the United States of America (“GAAP”).
Includes the following items:
For 2019: Proceeds from the issuance of senior notes of $500.0 million, the repayment of borrowings under the Company’s
credit facility of $342.3 million, payments to acquire restaurant and diner network assets of $10.0 million including certain
assets of OrderUp, debt issuance costs of $9.1 million and acquisition and restructuring costs of $4.1 million.
For 2018: Acquisitions of businesses, including LevelUp and Tapingo, for an aggregate of $517.9 million in net cash paid,
$200.0 million of proceeds from the issuance of common stock to Yum Restaurant Services Group, LLC (see Note 13,
Stockholders' Equity), $168.1 million of borrowings under the Company’s credit facility (net of repayments of $53.9 million),
payments to acquire certain assets of OrderUp of $11.9 million and acquisition and restructuring costs of $7.6 million.
For 2017: Acquisition of Eat24 and Foodler for an aggregate of $333.3 million in net cash paid, $174.2 million of borrowings
under the Company’s credit facility (net of repayments of $25.8 million), $61.2 million of proceeds from maturities of
investments net of purchases, income tax benefit of $34.1 million related to the Tax Cuts and Jobs Act (the “Tax Act”),
acquisitions of other intangible assets including certain assets of OrderUp of $25.1 million and acquisition-related and non-
recurring legal costs of $9.6 million.
For 2016: Acquisition of LABite for $65.8 million in cash, $58.0 million of proceeds from maturities of investments net of
purchases and repurchases of common stock of $14.8 million.
26
For 2015: Acquisition of three restaurant delivery services for an aggregate of $73.9 million in cash and net purchases of
investments of $30.8 million.
Key Business Metrics
To analyze the Company’s business performance, determine financial forecasts and help develop long-term strategic plans,
management reviews the following key business metrics:
2019
2018
2017
2016
2015
Year Ended December 31,
Key Business Metrics:
Active Diners(a)
Daily Average Grubs(b)
Gross Food Sales (in millions)(c)
22,621,000 17,688,000 14,462,000 8,174,000 6,746,000
334,000 274,800 227,100
3,783.7 $ 2,998.1 $ 2,353.6
435,900
5,056.8 $
492,300
5,913.6 $
$
Key business metrics include transactions placed on the Platform where the Company provides marketing services to generate
orders. The Platform excludes transactions where the Company exclusively provides technology or fulfillment services. Reflects
results of acquired businesses from the relevant acquisition dates.
(a) Active Diners are the number of unique diner accounts from which an order has been placed in the past twelve months
through the Company’s Platform.
(b) Daily Average Grubs are the number of orders placed on the Platform divided by the number of days for a given period.
(c) Gross Food Sales are the total value of food, beverages, taxes, prepaid gratuities, and any delivery fees processed through
the Company’s Platform. The Company includes all revenue generating orders placed on the Platform in this metric;
however, revenues are recognized on a net basis for the Company’s commissions from the transaction, which are a
percentage of the total Gross Food Sales for such transaction.
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be
read in conjunction with the consolidated financial statements and the notes thereto included elsewhere in this Annual Report on Form
10-K. Unless otherwise stated, the discussion below primarily reflects the historical condition and results of operations for Grubhub
Inc. for the periods presented and the results of acquired businesses from the relevant acquisition dates. In addition to historical
consolidated financial information, the following discussion contains forward-looking statements that reflect the Company’s plans,
estimates, and beliefs. Actual results could differ materially from those discussed in the forward-looking statements. Factors that could
cause or contribute to these differences include those discussed below and elsewhere in this Annual Report on Form 10-K, particularly
in Part I, Item 1A, “Risk Factors”. This overview summarizes the MD&A, which includes the following sections:
•
•
•
•
Our Business –for a general description of our business, strategy, challenges and products and services see Part I, Item 1,
“Business” of this Annual Report on Form 10-K.
Significant Accounting Policies and Critical Estimates – for further discussion of accounting policies that require critical
judgments and estimates see Part II, Item 8, Note 2, Summary of Significant Accounting Policies, of the accompanying
notes to our consolidated financial statements in this Annual Report on Form 10-K.
Operations Review – an analysis of our consolidated results of operations for the year ended December 31, 2019 as
compared to the prior year, pro-forma results of operations and non-GAAP financial measures.
Liquidity and Capital Resources – an analysis of cash flows, contractual obligations and commitments, the impact of
inflation, changes in interest rates and fluctuations in foreign currency and an overview of financial position.
Significant Accounting Policies and Critical Estimates
Our financial statements are prepared in accordance with GAAP. The preparation of these financial statements requires us to
make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures. We
evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other
27
assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates. We believe
our most critical accounting policies and estimates relate to the following:
•
Revenue recognition
• Website and software development costs
•
•
•
•
Valuation and recoverability of intangible assets with finite lives and other long-lived assets
Stock-based compensation
Goodwill
Income Taxes
For a description of our significant accounting policies including critical judgments and estimates, see Part II, Item 8, Note 2,
Summary of Significant Accounting Policies, of the accompanying notes to our consolidated financial statements in this Annual Report
on Form 10-K.
Operations Review
Executive Overview
In 2019, we continued our strong growth trajectory, generating 30% revenue growth and continued growth across all key
business metrics as compared to 2018. Additionally, we have made meaningful progress on our restaurant network and diner loyalty
initiatives in 2019. We have expanded our network to more than 300,000 restaurants and launched a number of new loyalty programs
for our restaurant partners.
Compared to 2018, our revenues increased by $304.9 million, or 30%, to $1.3 billion for the year ended December 31, 2019.
The increase was primarily related to the significant growth in Active Diners, which increased from 17.7 million as of December 31,
2018 to 22.6 million at the end of December 31, 2019, driving an increase in Daily Average Grubs to 492,300 during the year ended
December 31, 2019 from 435,900 Daily Average Grubs during 2018. We processed $5.9 billion in Gross Food Sales in 2019, a 17%
increase from the $5.1 billion in 2018. The growth in Active Diners and Daily Average Grubs was due to increased product and brand
awareness largely as a result of marketing efforts and word-of-mouth referrals, better restaurant choices for diners in our markets,
technology and product improvements to drive more orders. In addition, revenue increased during the year ended December 31, 2019
compared to 2018 due to an increase in our average commission rates, the full year impact of the LevelUp and Tapingo acquisitions
and a higher average order size.
Net income (loss) decreased by $97.0 million to a loss of $18.6 million or $0.20 per diluted share during the year ended
December 31, 2019 compared to 2018. The decrease was primarily driven by investments to grow our marketplace, including the
expansion of the delivery network and increased marketing to generate organic growth. Additionally, compensation expense, payment
processing costs and certain other expenses increased as a result of organic growth in the business and order volume.
During the year ended December 31, 2019, we issued $500.0 million in aggregate principal amount of 5.500% senior notes due
July 1, 2027 (“Senior Notes”). We used $323.0 million of the net proceeds from the Senior Notes to prepay and extinguish the term
loan facility portion of our existing credit facility and $17.3 million to pay down the outstanding balance of the revolving loan under
our existing credit facility. We entered into an amended and restated credit agreement on February 6, 2019 which provides for
aggregate revolving loans up to $225 million, of which there were no outstanding borrowings as of December 31, 2019. See Part II,
Item 8, Note 10, Debt, for additional details.
Key Business Metrics
To analyze our business performance, determine financial forecasts and help develop long-term strategic plans, we review key
business metrics which include transactions placed on the Platform where the Company provides marketing services to generate
orders. The Platform excludes transactions where the Company exclusively provides technology or fulfillment services. The following
key business metrics are reviewed:
Active Diners.
We count Active Diners as the number of unique diner accounts from which an order has been placed in the past twelve months
through our Platform. Diner accounts from which an order has been placed on one of our websites or one of our mobile
applications are included in our Active Diner metrics. Active Diners is an important metric for us because the number of diners
using our Platform is a key revenue driver and a valuable measure of the size of our engaged diner community. Some of our
diners could have more than one account if they were to set up multiple accounts using a different e-mail address for each
account. As a result, it is possible that our Active Diners metric may count certain diners more than once during any given
period.
28
Daily Average Grubs.
We count Daily Average Grubs as the number of orders placed on our Platform divided by the number of days for a given
period. Daily Average Grubs is an important metric for us because the number of orders processed on our Platform is a key
revenue driver and, in conjunction with the number of Active Diners, a valuable measure of diner activity on our Platform for a
given period.
Gross Food Sales.
We calculate Gross Food Sales as the total value of food, beverages, taxes, prepaid gratuities, and any diner-paid fees processed
through our Platform. We include all revenue generating orders placed on our Platform in this metric. Gross Food Sales is an
important metric for us because the total volume of food sales transacted through our Platform is a key revenue driver. Because
we act as an agent of the merchant in the transaction, revenues are recognized on a net basis for our commissions from the
transaction, which are a percentage of the total Gross Food Sales for such transaction.
Our key business metrics are as follows for the periods presented:
Active Diners
Daily Average Grubs
Gross Food Sales (in millions)
2019
Year Ended December 31,
2018
22,621,000 17,688,000 14,462,000
334,000
3,783.7
435,900
5,056.8 $
492,300
5,913.6 $
2017
$
% Change
2018 to 2019
2017 to 2018
28 %
13 %
17 %
22 %
31 %
34 %
We experienced growth across all of our key business metrics, Active Diners, Daily Average Grubs and Gross Food Sales,
during the periods presented.
2019 compared to 2018
The Company experienced growth across all of its key business metrics during the year ended December 31, 2019 as compared
to the prior year. Growth in all metrics was primarily attributable to increased product and brand awareness by diners largely as a
result of marketing efforts and word-of-mouth referrals, better restaurant choices for diners in our markets and technology and product
improvements.
For discussion related to 2018 key business metrics compared to 2017, refer to the section titled “Operations Review” in Part II,
Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form
10-K for the year ended December 31, 2018 (“2018 Form 10-K”).
Basis of Presentation
Revenues
On January 1, 2018, the Company adopted ASC Topic 606 using the modified retrospective method applied to those contracts
which were not completed as of January 1, 2018. Results for reporting periods beginning on or after January 1, 2018 are presented
under ASC Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with historical
accounting guidance under ASC Topic 605. The adoption of ASC Topic 606 did not have a material impact on the Company’s results
of operations, financial position or cash flows.
We generate revenues primarily when diners place an order on our Platform through our mobile applications, our websites, or
through third-party websites that incorporate our API or one of our listed phone numbers. Restaurant partners pay us a commission,
typically a percentage of the transaction on orders that are processed through our Platform. Most of the restaurant partners on our
Platform can choose their level of commission rate, at or above the base rate. A restaurant can choose to pay a higher rate which
affects its prominence and exposure to diners on the Platform. Additionally, restaurant partners that use our delivery services pay an
additional commission for the use of those services. We may also charge fees directly to the diner.
For most orders, diners use a credit card to pay us for their meal when the order is placed. For these transactions, we collect the
total amount of the diner’s order net of payment processing fees from the payment processor and remit the net proceeds to the
restaurant less commissions and other fees. We generally accumulate funds and remit the net proceeds to the restaurant partners on at
least a monthly basis. Non-partnered restaurants are paid at the time of the order. We also deduct commissions for other transactions
that go through our platform, such as cash transactions for restaurants in our network, from the aggregate proceeds received.
We periodically provide incentive offers to restaurants and diners to use our Platform. These promotions are generally cash
credits to be applied against purchases. These incentive offers are recorded as reductions in revenues, generally on the date the
corresponding revenue is recorded.
We also derive some revenues from mobile application development professional services and access to the respective order
ahead platforms and related tools and services.
29
We generate a small amount of revenues directly from companies that participate in our corporate ordering program and by
selling advertising on our allmenus.com website.
We do not anticipate that corporate fees, advertising, professional services or fees to access order ahead platforms and tools will
generate a significant portion of our revenues in the foreseeable future.
Costs and Expenses
Operations and Support
Operations and support expenses consist of salaries and benefits, stock-based compensation expense and bonuses for salaried
employees and payments to independent contractors engaged in customer care, operations and restaurant delivery services. Operations
and support expenses also include payment processing costs for diner orders, costs of uploading and maintaining restaurant menu
content, communications costs related to orders, facilities costs allocated on a headcount basis and other expenses related to operating
and maintaining an independent delivery network.
Sales and Marketing
Sales and marketing expenses contain advertising expenses including search engine marketing, television, online display, media
and other programs. Sales and marketing expenses also consist of salaries, commissions, benefits, stock-based compensation expense
and bonuses for restaurant sales, restaurant sales support, corporate and campus program customer sales and marketing employees,
payments to contractors and facilities costs allocated on a headcount basis.
Technology (exclusive of amortization)
Technology (exclusive of amortization) expenses consist of salaries and benefits, stock-based compensation expense and
bonuses for salaried employees and payments to contractors engaged in the design, development, maintenance and testing of our
platform, including our websites, mobile applications and other products. Technology expenses also include facilities costs allocated
on a headcount basis but do not include amortization of capitalized website and software development costs.
General and Administrative
General and administrative expenses consist of salaries, benefits, stock-based compensation expense and bonuses for executive,
finance, accounting, legal, human resources and administrative support. General and administrative expenses also include legal,
accounting, other third-party professional services, other miscellaneous expenses and facilities costs allocated on a headcount basis.
Depreciation and Amortization
Depreciation and amortization expenses primarily consist of amortization of acquired intangibles and depreciation of computer
equipment, furniture and fixtures, leasehold improvements and capitalized website and software development costs.
Income Tax (Benefit) Expense
Income tax (benefit) expense consists of federal and state income taxes in the United States and income taxes in certain foreign
jurisdictions, deferred income taxes reflecting the net tax effects of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income tax purposes, excess tax benefits or deficiencies from
stock-based compensation and net operating loss carryforwards.
30
Results of Operations
The following tables set forth our results of operations for the periods presented in dollars and as a percentage of our revenues:
2019
Year Ended December 31,
2018
2017
Amount
% of
revenue
Amount
% of
revenue
Amount
% of
revenue
(in thousands, except percentages)
$ 1,312,151
100 % $ 1,007,257
100 % $ 683,067
100 %
675,471
310,299
115,297
101,918
115,449
1,318,434
(6,283 )
20,493
(26,776 )
(8,210 )
51 % 454,321
24 % 214,290
82,278
9 %
85,465
8 %
85,940
9 %
100 % 922,294
84,963
3,530
81,433
2,952
0 %
2 %
0 %
(1 %)
45 % 269,453
21 % 150,730
56,263
8 %
65,023
8 %
9 %
51,848
92 % 593,317
89,750
8 %
102
0 %
89,648
8 %
(9,335 )
0 %
39 %
22 %
8 %
10 %
8 %
87 %
13 %
0 %
13 %
(1 %)
$
(18,566 )
0 % $
78,481
8 % $ 98,983
14 %
Revenues
Costs and expenses:
Operations and support
Sales and marketing
Technology (exclusive of amortization)
General and administrative
Depreciation and amortization
Total costs and expenses(a)
Income (loss) from operations
Interest expense – net
Income (loss) before provision for income taxes
Income tax (benefit) expense
Net income (loss) attributable to common
stockholders
NON-GAAP FINANCIAL MEASURES:
Adjusted EBITDA(b)
$ 186,150
14 % $ 233,742
23 % $ 183,886
27 %
(a) Totals of percentage of revenues may not foot due to rounding
(b) For an explanation of Adjusted EBITDA as a measure of the Company’s operating performance and a reconciliation to net
earnings, see “Non-GAAP Financial Measure—Adjusted EBITDA” below.
The following is a discussion of our results of operations for the year ended December 31, 2019 compared to 2018. For a
discussion related to results of operations for the year ended December 31, 2018 compared to 2017, refer to the section titled “Results
of Operations” in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our
2018 Form 10-K.
Revenues
Revenues
$ 1,312,151 $ 1,007,257 $
683,067
30 %
47 %
Year Ended December 31,
% Change
2019
2018
2017
2018 to 2019
2017 to 2018
(in thousands)
2019 compared to 2018
Revenues increased by $304.9 million, or 30%, for the year ended December 31, 2019 compared to 2018. The increase was
primarily related to significant growth in Active Diners, which increased from 17.7 million to 22.6 million at the end of each year,
driving an increase in Daily Average Grubs to 492,300 during the year ended December 31, 2019 from 435,900 Daily Average Grubs
during 2018. The growth in Active Diners and Daily Average Grubs was due primarily to increased product and brand awareness
largely as a result of marketing efforts and word-of-mouth referrals, better restaurant choices for diners in our markets, and technology
and product improvements to drive more orders. In addition, revenue increased during the year ended December 31, 2019 compared to
2018 due to an increase in our average commission rates as a result of a higher proportion of orders fulfilled through our delivery
services as well as restaurant partners electing increased prominence on the Platform, the inclusion of results from acquisitions (see
Part II, Item 8, Note 4, Acquisitions to our consolidated financial statements in this Annual Report on Form 10-K), and higher average
order size.
Operations and Support
Operations and support
Percentage of revenues
Year Ended December 31,
% Change
2019
2018
2017
2018 to 2019
2017 to 2018
(in thousands, except percentages)
$
675,471 $
51 %
454,321
$
45 %
269,453
49 %
69 %
39 %
31
2019 compared to 2018
Operations and support expense increased by $221.2 million, or 49%, for the year ended December 31, 2019 compared to 2018.
This increase was primarily attributable to expenses incurred to support the 17% growth in Gross Food Sales and the related increase
in order volume including expenses related to delivering orders, the inclusion of results from recent acquisitions, payment processing
costs and customer care and operations personnel costs. Delivery expenses increased disproportionally with revenue growth during the
year ended December 31, 2019 compared to the prior year due to organic growth of our delivery orders and the expansion of the
delivery network in general.
Sales and Marketing
Sales and marketing
Percentage of revenues
2019 compared to 2018
Year Ended December 31,
% Change
2019
2018
2017
2018 to 2019
2017 to 2018
$
(in thousands, except percentages)
214,290 $
21 %
310,299 $
24 %
150,730
22 %
45 %
42 %
Sales and marketing expense increased by $96.0 million, or 45%, for the year ended December 31, 2019 compared to 2018. The
increase was primarily attributable to an increase of $66.8 million in our advertising campaigns across various media channels, as well
as an increase in salaries, commissions and stock-based compensation expense due to the 38% growth in our sales and marketing
teams.
Technology (exclusive of amortization)
Technology (exclusive of amortization)
Percentage of revenues
$
115,297 $
9 %
82,278 $
8 %
56,263
8 %
40 %
46 %
Year Ended December 31,
% Change
2019
2018
2017
2018 to 2019
2017 to 2018
(in thousands, except percentages)
2019 compared to 2018
Technology expense increased by $33.0 million, or 40%, for the year ended December 31, 2019 compared to 2018. The increase
was primarily attributable to the 40% growth in our technology team to support the growth and development of our platform.
Technology team expenses, including related salaries and stock-based compensation expense, increased as a result of organic growth
and the impact of acquisitions.
General and Administrative
General and administrative
Percentage of revenues
2019 compared to 2018
Year Ended December 31,
% Change
2019
2018
2017
2018 to 2019
2017 to 2018
(in thousands, except percentages)
$
101,918 $
8 %
85,465
$
8 %
65,023
10 %
19 %
31 %
General and administrative expense increased by $16.5 million, or 19%, for the year ended December 31, 2019 compared to
2018. The increase was primarily attributable to the inclusion of results of operations from recent acquisitions as well an increase in a
number of miscellaneous expenses required to support growth in the business. The increase was partially offset by a decrease in
transaction expenses related to acquisitions incurred during the year ended December 31, 2018.
Depreciation and Amortization
Depreciation and amortization
Percentage of revenues
Year Ended December 31,
% Change
2019
2018
2017
2018 to 2019
2017 to 2018
(in thousands, except percentages)
$
115,449 $
9 %
85,940
$
9 %
51,848
34 %
66 %
8 %
32
2019 compared to 2018
Depreciation and amortization expense increased by $29.5 million, or 34%, for the year ended December 31, 2019 compared to
2018. The increase was primarily attributable to the increase in capital spending on internally developed software, restaurant facing
technology, office equipment and leasehold improvements to support the growth of our business, as well as amortization of intangible
assets acquired in recent acquisitions. The increase was partially offset by certain intangible assets that became fully amortized in
2019.
Interest Expense - net
Interest expense - net
Percentage of revenues
2019 compared to 2018
Year Ended December 31,
2019
2018
2017
% Change
2018 to 2019
2017 to 2018
$
(in thousands, except percentages)
3,530 $
0 %
20,493 $
2 %
102
0 %
nm
nm
Net interest expense increased by $17.0 million for the year ended December 31, 2019 compared to 2018. The increase was
attributable to the increase in outstanding borrowings of long-term debt in the current period primarily as a result of the issuance of
$500.0 million of the Company’s 5.500% Senior Notes. Interest expense for the year ended December 31, 2019 also included the
aggregate write-off of $1.9 million of unamortized debt issuance costs as a result of the extinguishment of the Company’s term loan
portion of the credit facility in June of 2019 and amendment of its existing credit agreement in February of 2019.
Income Tax (Benefit) Expense
Income tax (benefit) expense
Effective income tax rate
2019 compared to 2018
Year Ended December 31,
2019
2018
2017
(in thousands, except percentages)
$
(8,210 )
$
31 %
2,952
$
(9,335 )
4 %
(10 %)
Income tax expense decreased by $11.2 million to a benefit of $8.2 million for the year ended December 31, 2019 compared to
2018. The decrease was primarily due to the loss before provision for income taxes generated in the year ended December 31, 2019
due to the factors described above, partially offset by a $16.0 million decrease in discrete excess tax benefits from stock-based
compensation during the year ended December 31, 2019 as compared to 2018. See Part II, Item 8, Note 12, Income Taxes, to the
Company’s consolidated financial statements in the Annual Report on Form 10-K for further details.
Non-GAAP Financial Measure - Adjusted EBITDA
Adjusted EBITDA is a financial measure that is not calculated in accordance with GAAP. We define Adjusted EBITDA as net
income (loss) adjusted to exclude acquisition and restructuring costs, non-recurring legal costs, income taxes, net interest expense,
depreciation and amortization and stock-based compensation expense. A reconciliation of Adjusted EBITDA to net income, the most
directly comparable financial measure calculated and presented in accordance with GAAP, is provided below. Adjusted EBITDA
should not be considered as an alternative to net income or any other measure of financial performance calculated and presented in
accordance with GAAP. The Company’s Adjusted EBITDA may not be comparable to similarly titled measures of other organizations
because other organizations may not calculate Adjusted EBITDA in the same manner.
We have included Adjusted EBITDA in this Annual Report on Form 10-K because it is an important measure upon which
management assesses the Company’s operating performance. We use Adjusted EBITDA as a key performance measure because we
believe it facilitates operating performance comparisons from period to period by excluding potential differences primarily caused by
variations in capital structures, tax positions, the impact of acquisitions and restructuring, the impact of depreciation and amortization
expense on the Company’s fixed assets and the impact of stock-based compensation expense. Because Adjusted EBITDA facilitates
internal comparisons of our historical operating performance on a more consistent basis, we also use Adjusted EBITDA for business
planning purposes, in evaluating business opportunities and determining incentive compensation for certain employees. In addition,
management believes Adjusted EBITDA and similar measures are widely used by investors, securities analysts, ratings agencies and
other parties in evaluating companies in the industry as a measure of financial performance and debt-service capabilities.
Our use of Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute
for analysis of our results as reported under GAAP. Some of these limitations are:
•
•
Adjusted EBITDA does not reflect our cash expenditures for capital equipment or other contractual commitments;
although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be
replaced in the future, and Adjusted EBITDA does not reflect capital expenditure requirements for such replacements;
33
•
•
Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; and
other companies, including companies in the same industry, may calculate Adjusted EBITDA differently, which reduces
its usefulness as a comparative measure.
In evaluating Adjusted EBITDA, you should be aware that in the future the Company will incur expenses similar to some of the
adjustments in this presentation. The presentation of Adjusted EBITDA should not be construed as indicating that our future results
will be unaffected by these expenses or by any unusual or non-recurring items. When evaluating our performance, you should
consider Adjusted EBITDA alongside other financial performance measures, including net income and other GAAP results.
The following table sets forth Adjusted EBITDA and a reconciliation to net income (loss) for each of the periods presented
below:
Year Ended December 31,
2018
2019
2017
(in thousands)
Net income (loss)
Income taxes
Interest expense - net
Depreciation and amortization
EBITDA
Acquisition, restructuring and legal costs(a)
Stock-based compensation(b)
Adjusted EBITDA
$
(18,566 ) $
(8,210 )
20,493
115,449
109,166
4,105
72,879
78,481 $ 98,983
(9,335 )
2,952
3,530
102
51,848
85,940
170,903 141,598
9,642
32,748
$ 186,150 $ 233,742 $ 183,988
7,578
55,261
(a) Acquisition and restructuring costs include transaction and integration-related costs, such as legal and
accounting costs, associated with acquisition and restructuring initiatives. Legal costs included above
are not expected to be recurring (see Part II, Item 8, Note 9, Commitments and Contingencies, to the
Company’s consolidated financial statements in this Annual Report on Form 10-K for additional
details).
(b) Stock-based compensation for the years ended December 31, 2019 and 2018 included $1.6 million
and $4.8 million, respectively, of expense related to the accelerated vesting of equity awards to
certain terminated acquired employees.
Liquidity and Capital Resources
As of December 31, 2019, we had cash and cash equivalents of $375.9 million consisting of cash, money market funds,
commercial paper and U.S. and non-U.S.-issued corporate debt securities with original maturities of three months or less and short-
term investments of $49.3 million consisting of commercial paper and other short-term corporate debt securities with original
maturities greater than three months, but less than one year. We generate a significant amount of cash flows from operations and have
additional availability under the credit facility.
As of December 31, 2019, cash and cash equivalents of $375.9 million included $9.7 million held in the accounts of our U.K.
subsidiary, Seamless Europe, Ltd. We plan to repatriate the cash from our U.K. subsidiary to the U.S. in the future and we estimate no
additional tax liability as there are no applicable withholding taxes for the repatriation of unremitted earnings of our U.K. subsidiary
(see Part II, Item 8, Note 12, Income Taxes, for additional details).
Amounts deposited with third-party financial institutions exceed Federal Deposit Insurance Corporation and Securities Investor
Protection insurance limits, as applicable. These cash, cash equivalents and short-term investments balances could be affected if the
underlying financial institutions fail or if there are other adverse conditions in the financial markets. We have not experienced any loss
or lack of access to our invested cash, cash equivalents or short-term investments; however, such access could be adversely impacted
by conditions in the financial markets in the future.
We believe that our existing cash, cash equivalents, short term investments and borrowings available under the credit facility
will be sufficient to meet our working capital requirements for at least the next twelve months. However, our liquidity assumptions
may prove to be incorrect, and we could utilize our available financial resources sooner than currently expected. Our future capital
requirements and the adequacy of available funds will depend on many factors, including those set forth in Part I, Item 1A, “Risk
Factors” of this Annual Report on Form 10-K. If we are unable to obtain needed additional funds, we will have to reduce operating
costs, which could impair our growth prospects and could otherwise negatively impact our business.
34
For most orders, diners use a credit card to pay for their meal when the order is placed. For these transactions, we collect the
total amount of the diner’s order net of payment processing fees from the payment processor and remit the net proceeds to the
restaurant less commission and other fees. Outstanding credit card receivables are generally settled with the payment processors
within two to four business days. We generally accumulate funds and remit the net proceeds to the restaurant partners on at least a
monthly basis. Restaurant partners have different contractual arrangements with us regarding payment frequency. They may be paid
bi-weekly, weekly, monthly or, in some cases, more frequently when requested by the restaurant. We generally hold accumulated
funds prior to remittance to the restaurants in a non-interest bearing operating bank account that is used to fund daily operations,
including the liability to the restaurants. However, the Company is not restricted from earning investment income on these funds under
its restaurant contract terms and has made short term investments of proceeds in excess of our restaurant liability as described above.
Non-partnered restaurants are paid at the time of the order.
Seasonal fluctuations in our business may also affect the timing of cash flows. In metropolitan markets, we generally experience
a relative increase in diner activity from September to April and a relative decrease in diner activity from May to August. In addition,
we benefit from increased order volume in our campus markets when school is in session and experience a decrease in order volume
when school is not in session, during summer breaks and other vacation periods. Diner activity can also be impacted by colder or more
inclement weather, which typically increases order volume, and warmer or sunny weather, which typically decreases order volume.
These changes in diner activity and order volume have a direct impact on operating cash flows. While we expect this seasonal cash
flow pattern to continue, changes in our business model could affect the timing or seasonal nature of our cash flows.
On June 10, 2019, our wholly-owned subsidiary, Grubhub Holdings Inc., issued $500.0 million in aggregate principal amount of
5.500% senior notes due July 1, 2027 (“Senior Notes”). Interest is payable on the Senior Notes semi-annually on January and July of
each year, beginning on January 1, 2020. The first interest payment of $15.4 million was made in December 2019. The net proceeds
from the sale of the Senior Notes were $494.4 million after deducting the initial purchasers’ discount and offering expenses. We used
$323.0 million of the proceeds from the Senior Notes offering to prepay and extinguish the term loan facility portion of our existing
credit facility and $17.3 million to pay down the outstanding balance of the revolving loan under the existing credit facility. The
remaining proceeds will be used for general corporate purposes. The Senior Notes are guaranteed on a senior unsecured basis by the
Company and each of our existing and future wholly owned domestic restricted subsidiaries that guarantees the credit facility or that
guarantees certain of our other indebtedness or indebtedness of a guarantor. We have the option to redeem all or a portion of the
Senior Notes at various redemption or make-whole prices per the terms of indenture pursuant to which the Senior Notes were issued.
In addition, we will be obligated to make an offer to repurchase the Senior Notes upon the occurrence of a Change of Control
Triggering Event (as defined in the indenture). See Note 10, Debt, for additional details.
On February 6, 2019, we entered into an amended and restated agreement which provides, among other things, for aggregate
revolving loans up to $225 million and provided for term loans in an aggregate principal amount of $325 million (the “Credit
Agreement”). The $325 million term loan portion of the Credit Agreement was extinguished on June 10, 2019. In addition to the $225
million aggregate undrawn revolving loans under the Credit Agreement as of December 31, 2019, we may incur up to $250 million of
incremental revolving or term loans pursuant to the terms and conditions of the Credit Agreement. The credit facility under the Credit
Agreement will be available until February 5, 2024. The Credit Agreement amended and restated our prior $350 million credit facility,
which was due to expire on October 9, 2022 (the “Previous Credit Agreement”). See Part II, Item 8, Note 10, Debt, for additional
details.
During the year ended December 31, 2019, proceeds from the sale of the Senior Notes and cash on hand were used to pay down
the principal balance outstanding under the Credit Agreement of $342.3 million. As of December 31, 2019, outstanding debt consisted
of $500.0 million in Senior Notes and there were no outstanding borrowings under the Credit Agreement. The undrawn portion of the
revolving loan under the Credit Agreement of $225.0 million less $5.5 million of outstanding letters of credit issued under the Credit
Agreement provided for additional capacity of $219.5 million available to us under the Credit Agreement as of December 31, 2019
that may be used for general corporate purposes, including funding working capital and future acquisitions.
The agreements governing our senior debt contain customary covenants that, among other things, may restrict our ability and the
ability of certain of our subsidiaries to incur additional debt, pay dividends and make distributions, make certain investments and
acquisitions, create liens, transfer and sell material assets and merge or consolidate. In addition, our Credit Agreement requires us to
satisfy certain financial covenants. These covenants are subject to a number of important exceptions and qualifications and also
include customary events of default. Non-compliance with one or more of the covenants and restrictions could result in any amounts
outstanding under our debt facilities becoming immediately due and payable. We were in compliance with the financial covenants of
our debt facilities as of December 31, 2019. We expect to remain in compliance for the foreseeable future.
On January 22, 2016, our Board of Directors approved a program (the “Repurchase Program”) that authorizes the repurchase of
up to $100 million of our common stock exclusive of any fees, commissions or other expenses relating to such repurchases through
open market purchases or privately negotiated transactions at the prevailing market price at the time of purchase. The Repurchase
Program was announced on January 25, 2016. Repurchased stock may be retired or held as treasury shares. The repurchase
authorizations do not obligate us to acquire any particular amount of common stock or adopt any particular method of repurchase and
may be modified, suspended or terminated at any time at management’s discretion. Repurchased and retired shares will result in an
immediate reduction of the outstanding shares used to calculate the weighted-average common shares outstanding for basic and
35
diluted net income per share at the time of the transaction. We did not repurchase any of our common stock during the years ended
December 31, 2019, 2018 and 2017. Since inception of the program, we repurchased and retired 724,473 shares of our common stock
at a weighted-average share price of $20.37, or an aggregate of $14.8 million.
The following table sets forth certain cash flow information for the periods presented:
Net cash provided by operating activities
Net cash used in investing activities
Net cash provided by financing activities
2019
Year Ended December 31,
2018
(in thousands)
2017
$
182,622 $
(148,417 )
129,267
225,527 $
(594,004 )
346,685
154,144
(336,962 )
178,059
The following information discusses our cash flows for the years ended December 31, 2019 and 2018. For discussion related to
the year ended December 31, 2017, refer to the section titled “Liquidity and Capital Resources” in Part II, Item 7, “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” in our 2018 Form 10-K.
Cash Flows Provided by Operating Activities
For the year ended December 31, 2019, net cash provided by operating activities was $182.6 million compared to $225.5
million in 2018. The decrease in cash flows from operations was driven primarily by a decrease in net income of $97.0 million,
partially offset by a $40.7 million increase in non-cash expenses and changes in operating assets and liabilities. The increase in non-
cash expenses primarily related to increases in depreciation and amortization of $29.5 million and stock-based compensation of $17.6
million, partially offset by a decrease in deferred taxes of $9.5 million. Additionally, during the years ended December 31, 2019 and
2018, significant changes in our operating assets and liabilities, net of effects of business acquisitions, resulted from the following:
•
•
•
•
an increase in accrued expenses of $25.2 million during the year ended December 31, 2019, primarily related to increases
in diner gift card liabilities and accrued sales tax, advertising and other operating costs, compared to an increase of $8.2
million during the year ended December 31, 2018;
a decrease in income tax receivable of $6.0 million due to refunds received during the year ended December 31, 2019
compared to an increase of $1.4 million during the year ended December 31, 2018;
an increase in accounts receivable of $11.6 million during the year ended December 31, 2019 compared to an increase of
$6.1 million for the year ended December 31, 2018 primarily due to the timing of the receipt of processor payments at
year-end; and
an increase in accounts payable of $2.0 million during the year ended December 31, 2019 compared to an increase of
$11.2 million during the year ended December 31, 2018 due to the timing of payments.
For the year ended December 31, 2018, net cash provided by operating activities was $225.5 million, driven primarily by net
income adjusted for non-cash expenses of $227.0 million. Decreases in operating cash flows from changes in operating assets and
liabilities primarily resulted from an increase in prepaid expenses and other assets of $16.3 million primarily related to the deferral of
contract acquisition costs and an increase in prepaid advertising and software services, and an increase in accounts receivable of $6.1
million due to the timing of the receipt of processor payments at year-end. These were largely offset by increases in operating cash
flows from changes in operating assets and liabilities primarily resulting from an increase in accounts payable of $11.2 million due to
the timing of payments and an increase in bills payable to support growth of the business and an increase in accrued expenses of $8.2
million primarily related to an increase in accrued credit card processing fees and payroll costs.
Cash Flows Used in Investing Activities
Our primary investing activities during the periods presented consisted primarily of acquisitions of businesses and other
intangible assets, the purchase of property and equipment and the development of the Grubhub platform to support the growth of the
business, and purchases of and proceeds from maturities of short-term investments.
For the year ended December 31, 2019, net cash used in investing activities was $148.4 million compared to $594.0 million in
2018. The decrease in net cash used in investing activities was primarily due to the acquisitions of LevelUp and Tapingo of $518.0
million during the year ended December 31, 2018. The decrease was partially offset by an increase in purchases of investments of
$28.8 million, an increase in the development of the Grubhub platform of $17.3 million, a decrease in proceeds from the maturity of
investments of $15.8 million, and an increase in the purchases of property and equipment of $12.1 million in the current year.
For the year ended December 31, 2018, net cash used in investing activities was $594.0 million compared to $337.0 million in
2017. The increase in net cash used in investing activities was primarily due to an increase in acquisitions of businesses of $184.6
million, a decrease in proceeds from maturity of investments of $148.8 million and an increase in purchases of property and
36
equipment of $24.1 million, partially offset by a $97.6 million decrease in the purchases of short-term investments and a $13.3 million
decrease in the acquisition of intangible assets.
Cash Flows Provided by Financing Activities
Our financing activities during the periods presented consisted primarily of proceeds from the issuance of long-term debt,
proceeds from the issuance of common stock, repayments of borrowings under the Credit Agreement, and taxes paid related to the net
settlement of stock-based compensation awards.
For the year ended December 31, 2019, net cash provided by financing activities was $129.3 million compared to $346.7
million for the year ended December 31, 2018. The decrease in net cash provided by financing activities was primarily related to the
issuance of common stock of $200.0 million in the prior year, an increase in repayments of long-term debt, net of proceeds, of $10.4
million, a decrease in proceeds from exercises of stock options of $9.7 million and debt issuance costs of $9.1 million in 2019,
partially offset by a decrease in taxes paid related to the net settlement of stock-based compensation awards of $11.8 million as
compared to the prior year.
For the year ended December 31, 2018, net cash provided by financing activities was $346.7 million compared to $178.1
million for the year ended December 31, 2017. The increase in net cash provided by financing activities was primarily related to
$200.0 million in proceeds received from the issuance of our common stock to Yum Restaurant Services Group, LLC (see Part II,
Item 8, Note 13, Stockholders’ Equity) and $22.0 million in additional proceeds received from borrowings under the credit facility in
2018. These increases were partially offset by the increase in repayments of borrowings under the credit facility of $28.1 million
during the year ended December 31, 2018 and an increase of $25.0 million in taxes paid related to the net share settlement of stock-
based compensation awards compared to 2017.
Contractual Obligations and Other Commitments
We have offices located in Chicago, Illinois, New York, New York and Boston, Massachusetts, as well as smaller offices
throughout the U.S. and in the U.K. and Israel as a result of both recent acquisitions and organic growth, with various lease terms
through May 2030. The office lease for our headquarters in Chicago, Illinois expires in March 2028. The terms of the lease
agreements provide for rental payments that increase on an annual basis. We recognize rent expense on a straight-line basis over the
lease period. We do not have any finance lease obligations as of December 31, 2019 and all of our material property, equipment and
software have been purchased with cash. We have no material long-term purchase obligations outstanding with any vendors or third
parties.
Our debt and interest payments and future operating lease obligations for office facilities were as follows as of December 31,
2019:
As of December 31, 2019
Less than 1
year
1 to 2 years
2 to 3
years
3 to 4
years
4 to 5
years
More than
5 Years
Total
(in thousands)
Debt(a)
Interest due on debt(a)
Operating lease obligations(b)
Total
$
— $
13,750
10,185
— $ — $ — $ — $ 500,000 $ 500,000
27,500 27,500 27,500 27,500 82,500 206,250
19,184 17,205 17,295 16,355 72,304 152,528
$ 23,935 $ 46,684 $ 44,705 $ 44,795 $ 43,855 $ 654,804 $ 858,778
(a) Debt payments include the maturity of the Senior Notes in July 2027. Interest due on debt includes scheduled semi-annual interest
payments for the Senior Notes at a 5.500% interest rate. The initial interest payment due in January 2020 of $15.4 million was
paid in December 2019. See Part II, Item 8, Note 10, Debt, for details of the Senior Notes issued on June 10, 2019. There were no
outstanding borrowings under the Company’s Credit Agreement as of December 31, 2019.
(b) The contractual commitment amounts under operating leases in the table above are associated with agreements that are
enforceable and legally binding. Obligations under contracts that we can cancel without a significant penalty are not included in
the table above. The table above does not reflect our option to exercise early termination rights or the payment of related early
termination fees.
_________________________________________________________
We also have accrued management bonuses as of December 31, 2019, included in accrued payroll on the consolidated balance
sheets, which are expected to be paid in the first quarter of 2020.
37
Acquisitions of Businesses and Other Intangible Assets
The Company paid $10.0 million in cash for the acquisition of certain restaurant and diner network assets during the year ended
December 31, 2019. In October of 2018, we completed the acquisition of substantially all of the restaurant and diner network assets of
OrderUp for $18.5 million, of which $11.8 million was paid in cash at closing, $6.4 million was paid in 2019 and the remaining $0.3
million was paid in the first quarter of 2020.
On November 7, 2018, we acquired Tapingo and on September 13, 2018, we acquired LevelUp. We paid an aggregate of $518.5
million in cash to acquire LevelUp and Tapingo, net of cash acquired of $7.5 million and non-cash consideration of $3.0 million. See
Part II, Item 8, Note 4, Acquisitions, for additional details.
On October 10, 2017, we acquired all of the issued and outstanding equity interests of Eat24. On August 23, 2017, we acquired
substantially all of the assets and certain expressly specified liabilities of Foodler. We paid an aggregate of $332.6 million in cash to
acquire Eat24 and Foodler, net of cash acquired of $0.1 million and non-cash consideration of $0.3 million.
Quantitative and Qualitative Disclosures about Market Risk
We are exposed to certain market risks in the ordinary course of business. These risks primarily consist of interest rate
fluctuations and inflation rate risk as follows:
Interest Rate Risk
We had outstanding borrowings under our 5.500% Senior Notes of $500.0 million and did not have any outstanding borrowings
under the Credit Agreement as of December 31, 2019. We are exposed to interest rate risk on variable-rate debt drawn under the
Credit Agreement and price risk on our fixed-rate Senior Notes described above. For fixed-rate debt, changes in interest rates
generally affect the fair value of the debt instrument, but not our earnings or cash flows. We generally have no obligation to prepay the
Senior Notes before maturity, and, as a result, interest rate risk and changes in fair market value should not have a significant impact
on our fixed-rate debt unless the Company becomes required or elects to refinance or repurchase such debt. Under the Credit
Agreement, the loans bear interest, at the Company’s option, based on LIBOR or an alternate base rate, plus a margin, which in the
case of LIBOR loans is between 1.125% and 1.750% and in the case of alternate base rate loans is between 0.125% and 0.750%, and
in each case, is based upon our consolidated total net leverage ratio (as defined in the Credit Agreement). We do not use interest rate
derivative instruments to manage exposure to interest rate changes.
We invest our excess cash primarily in money market accounts, commercial paper and U.S. and non-U.S.-issued corporate debt
securities. We intend to hold our investments to maturity. Our current investment strategy seeks first to preserve principal, second to
provide liquidity for our operating and capital needs and third to maximize yield without putting principal at risk. We do not enter into
investments for trading or speculative purposes.
Our investments are exposed to market risk due to the fluctuation of prevailing interest rates that may reduce the yield on our
investments or their fair value. We assess market risk utilizing a sensitivity analysis that measures the potential change in fair values,
interest income and cash flows. As our investment portfolio is short-term in nature, management does not believe an immediate 100
basis point increase in interest rates would have a material effect on the fair value of our portfolio, and therefore management does not
expect our results of operations or cash flows to be materially affected to any degree by a sudden change in market interest rates. In
the unlikely event that we would need to sell our investments prior to their maturity, any unrealized gains and losses arising from the
difference between the amortized cost and the fair value of the investments at that time would be recognized in the consolidated
statements of operations. See Part II, Item 8, Note 5, Marketable Securities, in this Annual Report on Form 10-K, for additional
details.
Inflation Risk
We do not believe that inflation has had a material effect on our business, results of operations or financial condition.
Risks Related to Market Conditions
We perform our annual goodwill impairment tests as of September 30, or more frequently if an event occurs or circumstances
change that would more likely than not reduce the fair value of our Company below its carrying value. Such indicators may include
the following, among others: a significant decline in expected future cash flows, a sustained, significant decline in our stock price
and market capitalization, a significant adverse change in legal factors or in the business climate, unanticipated competition, the
testing for recoverability of a significant asset group and slower growth rates. Any adverse change in these factors could have a
significant impact on the recoverability of our goodwill and could have a material impact on the consolidated financial statements.
Goodwill represents the excess of the purchase price of an acquired business over the fair value of the net assets acquired. As of
December 31, 2019, we had $1,008.0 million in goodwill on the consolidated balance sheets.
Based on our annual and interim assessments, management concluded that as of December 31, 2019, there were no events or
changes in circumstances that indicated it was more likely than not that our fair value was below our carrying value. For further details
of our interim and annual assessments, see the discussion above in Part II, Item 8, Note 2, Summary of Significant Accounting
38
Policies, to the accompanying consolidated financial statements in this Annual Report on Form 10-K concerning goodwill.
Nevertheless, significant changes in global economic and market conditions could result in changes to expectations of future financial
results and key valuation assumptions. Such changes could result in revisions of management’s estimates of our fair value and could
result in a material impairment of goodwill.
OTHER INFORMATION
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of December 31, 2019.
Contingencies
For a discussion of certain litigation involving our Company, see Part II, Item 8, Note 9, Commitments and Contingencies, to the
accompanying consolidated financial statements in this Annual Report on Form 10-K.
New Accounting Pronouncements and Pending Accounting Standards
See Part II, Item 8, Note 2, Summary of Significant Accounting Policies, to the accompanying consolidated financial statements
in this Annual Report on Form 10-K for a description of the accounting standard adopted during the year ended December 31, 2019.
Pending standards and their estimated effect on the Company’s consolidated financial statements are described in Part II, Item 8, Note
2, Summary of Significant Accounting Policies, to the accompanying consolidated financial statements in this Annual Report on Form
10-K.
Item 7A.
Quantitative and Qualitative Disclosures about Market Risk
We are exposed to certain market risks in the ordinary course of business. These risks primarily consist of interest rate
fluctuations and inflation rate risk. We discuss risk management in various places throughout this document, including discussions in
Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in this Annual Report on
Form 10-K concerning Quantitative and Qualitative Disclosures about Market Risk.
39
Item 8:
Financial Statements and Supplementary Data
TABLE OF CONTENTS
Consolidated Statements of Operations ........................................................................................................................................
Consolidated Statements of Comprehensive Income ....................................................................................................................
Consolidated Balance Sheets ........................................................................................................................................................
Consolidated Statements of Cash Flows .......................................................................................................................................
Consolidated Statements of Changes in Stockholders’ Equity .....................................................................................................
Notes to Consolidated Financial Statements .................................................................................................................................
Report of Independent Registered Public Accounting Firm .........................................................................................................
Unaudited Selected Quarterly Financial Data ...............................................................................................................................
Report of Independent Registered Public Accounting Firm .........................................................................................................
Page
41
41
42
43
44
45
70
72
74
40
GRUBHUB INC.
Consolidated Statements of Operations
(in thousands, except per share data)
Revenues
Costs and expenses:
Operations and support
Sales and marketing
Technology (exclusive of amortization)
General and administrative
Depreciation and amortization
Total costs and expenses
Income (loss) from operations
Interest expense - net
Income (loss) before provision for income taxes
Income tax (benefit) expense
Net income (loss) attributable to common stockholders
Net income (loss) per share attributable to common stockholders:
Basic
Diluted
Weighted-average shares used to compute net income (loss) per share
attributable to common stockholders:
$
$
$
$
2019
1,312,151 $
Year Ended December 31,
2018
1,007,257
$
675,471
310,299
115,297
101,918
115,449
1,318,434
(6,283 )
20,493
(26,776 )
(8,210 )
(18,566 ) $
454,321
214,290
82,278
85,465
85,940
922,294
84,963
3,530
81,433
2,952
78,481
(0.20 ) $
(0.20 ) $
0.88
0.85
$
$
$
2017
683,067
269,453
150,730
56,263
65,023
51,848
593,317
89,750
102
89,648
(9,335 )
98,983
1.15
1.12
Basic
Diluted
91,247
91,247
89,447
92,354
86,297
88,182
GRUBHUB INC.
Consolidated Statements of Comprehensive Income (Loss)
(in thousands)
Net income (loss)
OTHER COMPREHENSIVE INCOME (LOSS)
Foreign currency translation adjustments
COMPREHENSIVE INCOME (LOSS)
Year Ended December 31,
2019
2018
2017
$
(18,566 ) $
78,481
$
98,983
263
(18,303 ) $
(663 )
77,818
$
850
99,833
$
(See Notes to Consolidated Financial Statements)
41
GRUBHUB INC.
Consolidated Balance Sheets
(in thousands, except share data)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
Short-term investments
Accounts receivable, less allowances for doubtful accounts
Income tax receivable
Prepaid expenses and other current assets
Total current assets
PROPERTY AND EQUIPMENT:
December 31, 2019 December 31, 2018
$
375,909 $
49,275
119,658
3,960
17,515
566,317
211,245
14,084
110,855
9,949
17,642
363,775
Property and equipment, net of depreciation and amortization
172,744
119,495
26,836
100,632
1,007,968
500,481
1,635,917
2,374,978 $
14,186
—
1,019,239
549,013
1,582,438
2,065,708
131,753 $
26,748
19,982
—
9,376
61,504
249,363
27,163
111,056
493,009
817
632,045
—
9
(1,628 )
1,164,400
330,789
1,493,570 $
2,374,978 $
127,344
26,656
18,173
6,250
—
44,745
223,168
46,383
—
335,548
18,270
400,201
—
9
(1,891 )
1,094,866
349,355
1,442,339
2,065,708
OTHER ASSETS:
Other assets
Operating lease right-of-use asset
Goodwill
Acquired intangible assets, net of amortization
Total other assets
TOTAL ASSETS
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Restaurant food liability
Accounts payable
Accrued payroll
Current portion of long-term debt
Current operating lease liability
Other accruals
Total current liabilities
LONG-TERM LIABILITIES:
Deferred taxes, non-current
Noncurrent operating lease liability
Long-term debt
Other accruals
Total long-term liabilities
Commitments and contingencies
STOCKHOLDERS’ EQUITY:
$
$
Preferred Stock, $0.0001 par value. Authorized: 25,000,000 shares as of December 31, 2019
and December 31, 2018; issued and outstanding: no shares as of December 31, 2019 and
December 31, 2018.
Common stock, $0.0001 par value. Authorized: 500,000,000 shares at December 31, 2019 and
December 31, 2018; issued and outstanding: 91,576,060 and 90,756,548 shares as of December
31, 2019 and December 31, 2018, respectively
Accumulated other comprehensive loss
Additional paid-in capital
Retained earnings
Total stockholders’ equity
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
$
$
(See Notes to Consolidated Financial Statements)
42
GRUBHUB INC.
Statements of Cash Flows
(in thousands)
2019
Year Ended December 31,
2018
2017
$
(18,566 ) $
78,481 $
98,983
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)
Adjustments to reconcile net income (loss) to net cash from operating activities:
Depreciation
Amortization of intangible assets and developed software
Stock-based compensation
Deferred taxes
Other
Change in assets and liabilities, net of the effects of business acquisitions:
Accounts receivable
Income taxes receivable
Prepaid expenses and other assets
Restaurant food liability
Accounts payable
Accrued payroll
Other accruals
Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of investments
Proceeds from maturity of investments
Capitalized website and development costs
Purchases of property and equipment
Acquisition of other intangible assets
Acquisitions of businesses, net of cash acquired
Other cash flows from investing activities
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt
Repayments of borrowings under the credit facility
Proceeds from the issuance of common stock
Taxes paid related to net settlement of stock-based compensation awards
Proceeds from exercise of stock options
Payments for debt issuance costs
Net cash provided by financing activities
Net change in cash, cash equivalents, and restricted cash
Effect of exchange rates on cash, cash equivalents and restricted cash
Cash, cash equivalents, and restricted cash at beginning of year
Cash, cash equivalents, and restricted cash at end of the period
SUPPLEMENTAL DISCLOSURE OF NON-CASH ITEMS
Cash paid for income taxes
Capitalized property, equipment and website and development costs in
accounts payable at period end
Net working capital adjustment receivable
Fair value of equity awards assumed on acquisition
RECONCILIATION OF CASH, CASH EQUIVALENTS, AND RESTRICTED
CASH
Cash and cash equivalents
Restricted cash included in prepaid expenses and other current assets
Restricted cash included in other assets
Total cash, cash equivalents, and restricted cash
$
$
$
$
30,237
85,212
72,879
(7,726 )
8,531
(11,591 )
5,989
(13,854 )
4,380
1,978
1,804
23,349
182,622
(85,989 )
51,366
(48,524 )
(55,167 )
(9,980 )
127
(250 )
(148,417 )
500,000
(342,313 )
—
(23,753 )
4,469
(9,136 )
129,267
163,472
320
215,802
$
379,594
21,647
64,293
55,261
1,724
5,552
(6,092 )
(1,356 )
(16,270 )
2,921
11,160
3,621
4,585
225,527
(57,197 )
67,166
(31,180 )
(43,033 )
(11,851 )
(517,909 )
—
(594,004 )
222,000
(53,906 )
200,000
(35,599 )
14,190
—
346,685
(21,792 )
(645 )
238,239
215,802
$
11,775
40,073
32,748
(31,179 )
2,457
(26,236 )
(1,597 )
5,516
8,576
(4,244 )
5,537
11,735
154,144
(154,758 )
215,983
(21,325 )
(18,971 )
(25,147 )
(333,301 )
557
(336,962 )
200,000
(25,781 )
—
(10,556 )
16,375
(1,979 )
178,059
(4,759 )
784
242,214
238,239
1,163
$
7,895
$
19,148
5,627
—
—
7,463
127
2,966
375,909
501
3,184
379,594
$
$
211,245 $
1,398
3,159
215,802 $
2,960
737
274
234,090
—
4,149
238,239
(See Notes to Consolidated Financial Statements)
43
GRUBHUB INC.
Consolidated Statements of Changes in Stockholders’ Equity
(in thousands, except share data)
Common stock
Shares
Amount
APIC
Accumulated
Other
Comprehensive
Income (Loss)
Retained
Earnings
Total
Stockholders'
Equity
Balance at December 31, 2016
Net income
Cumulative effect adjustment upon adoption of ASU 2016-09
Currency translation
Stock-based compensation
Stock option exercises and vesting of restricted stock units, net of
withholdings and other
Issuance of common stock, acquisitions
Shares repurchased and retired to satisfy tax withholding upon vesting
Balance at December 31, 2017
Net income
Cumulative effect adjustment upon adoption of ASU 2014-09
Currency translation
Stock-based compensation
Stock option exercises and vesting of restricted stock units, net of
withholdings and other
Issuance of common stock, investments
Issuance of common stock, acquisitions
Shares repurchased and retired to satisfy tax withholding upon vesting
Balance at December 31, 2018
Net loss
Currency translation
Stock-based compensation
Stock option exercises and vesting of restricted stock units, net of
withholdings and other
Shares repurchased and retired to satisfy tax withholding upon vesting
Balance at December 31, 2019
85,692,333 $
—
—
—
—
1,331,083
—
(232,792 )
86,790,624
—
—
—
—
1,512,426
2,820,464
—
(366,966 )
90,756,548
—
—
—
1,174,002
(354,490 )
91,576,060
$
9
—
—
—
—
—
—
—
9
—
—
—
—
—
—
—
—
9
—
—
—
—
—
9
$
$
805,731
—
—
—
37,219
16,375
274
(10,556 )
849,043
—
—
—
64,266
14,190
200,000
2,966
(35,599 )
1,094,866
—
—
88,818
4,469
(23,753 )
$
1,164,400
$
(2,078 ) $
—
—
850
—
—
—
—
(1,228 )
—
—
(663 )
—
—
—
—
(1,891 )
—
263
—
—
—
(1,628 ) $
$
168,457
98,983
2,552
—
—
—
—
—
269,992
78,481
882
—
—
—
—
—
349,355
(18,566 )
—
—
—
—
330,789
$
972,119
98,983
2,552
850
37,219
16,375
274
(10,556 )
1,117,816
78,481
882
(663 )
64,266
14,190
200,000
2,966
(35,599 )
1,442,339
(18,566 )
263
88,818
4,469
(23,753 )
1,493,570
(See Notes to Consolidated Financial Statements)
44
GRUBHUB INC.
Notes to Consolidated Financial Statements
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 primarily 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. Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
The Company’s consolidated financial statements were prepared in conformity with accounting principles generally accepted
in the United States of America (“GAAP”). The accompanying consolidated financial statements include all wholly-owned
subsidiaries. All significant intercompany accounts and transactions have been eliminated. The consolidated statements of operations
include the results of entities acquired from the dates of the acquisitions for accounting purposes.
Changes in Accounting Principle
See “Recently Issued Accounting Pronouncements” below for a description of accounting principle changes adopted during the
year ended December 31, 2019 related to leases.
Use of Estimates
The preparation of consolidated financial statements in conformity 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. 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. To the extent there are material differences between these estimates, judgments or assumptions and
actual results, the Company’s consolidated financial statements will be affected. In many cases, the accounting treatment of a
particular transaction is specifically dictated by GAAP and does not require management’s judgment in its application.
Cash and Cash Equivalents
Cash includes demand deposits with banks or financial institutions. Cash equivalents include short-term, highly liquid
investments that are both readily convertible to known amounts of cash, and that are so near their maturity that they present minimal
risk of changes in value because of changes in interest rates. The Company’s cash equivalents include only investments with original
maturities of three months or less. The Company regularly maintains cash in excess of federally insured limits at financial
institutions. Cash and cash equivalents exclude the Company’s restricted cash balances of $3.7 million and $4.6 million as of
December 31, 2019 and 2018, respectively, which are included within prepaid expenses and other current assets and other long-term
assets on the consolidated balance sheets.
Marketable Securities
Marketable securities consist primarily of commercial paper and investment grade U.S. and non-U.S.-issued corporate debt
securities. The Company invests in a diversified portfolio of marketable securities and limits the concentration of its investment in
any particular security. Marketable securities with original maturities of three months or less are included in cash and cash
equivalents and marketable securities with original maturities greater than three months, but less than one year, are included in short
term investments on the consolidated balance sheets. The Company determines the classification of its marketable securities as
available-for-sale or held-to-maturity at the time of purchase and reassesses these determinations at each balance sheet date. Debt
securities are classified as held-to-maturity when the Company has the intent to hold the securities to maturity. Held-to-maturity
securities are stated at amortized cost and are periodically assessed for other-than-temporary impairment. The amortized cost of debt
securities is adjusted for the amortization of premiums and accretion of discounts to maturity, which is recognized as interest income
within net interest expense in the consolidated statements of operations. Interest income is recognized when earned.
Accumulated Other Comprehensive Loss
Accumulated other comprehensive loss consists of foreign currency translation adjustments. The financial statements of the
Company’s foreign subsidiaries are translated from their functional currency into U.S. dollars. Assets and liabilities are translated at
45
GRUBHUB INC.
Notes to Consolidated Financial Statements (Continued)
period end rates of exchange, and revenue and expenses are translated using average rates of exchange. The resulting gain or loss is
included in accumulated other comprehensive loss on the consolidated balance sheets.
Property and Equipment, Net
Property and equipment is recorded at cost and depreciated using the straight-line method over the estimated useful lives of the
related assets. The useful lives are as follows:
Estimated Useful Life
Computer equipment
2-3 years
Furniture and fixtures
5 years
1-3 years
Developed software
Purchased software and digital assets 3-5 years
Leasehold improvements
Shorter of expected useful life or lease term
Maintenance and repair costs are charged to expense as incurred. Major improvements, which extend the useful life of the
related asset, are capitalized. Upon disposal of a fixed asset, the Company records a gain or loss based on the difference between the
proceeds received and the net book value of the disposed asset.
Accounts Receivable, Net
See Note 3, Revenue, below for a description of the Company’s accounts receivable accounting policy.
Advertising Costs
Advertising costs are generally expensed as incurred in connection with the requisite service period. Certain advertising
production costs are capitalized and expensed when the advertisement first takes place. For the years ended December 31, 2019, 2018
and 2017, expenses attributable to advertising totaled approximately $237.1 million, $170.3 million and $107.2 million, respectively.
Advertising costs are recorded in sales and marketing expense on the Company’s consolidated statements of operations.
Stock-Based Compensation
The Company measures compensation expense for all stock-based awards, including stock options and restricted stock units, at
fair value on the date of grant and recognizes compensation expense over the service period on a straight-line basis for awards
expected to vest.
The Company uses the Black-Scholes option-pricing model to determine the fair value for stock options. Management has
determined the Black-Scholes fair value of stock option awards and related stock-based compensation expense with the assistance of
third-party valuations. Determining the fair value of stock-based awards at the grant date requires judgment. The determination of the
grant date fair value of options using an option-pricing model is affected by the Company’s common stock fair value as well as
assumptions regarding a number of other complex and subjective variables. If any of the assumptions used in the Black-Scholes
model changes significantly, stock-based compensation for future awards may differ materially compared with the awards granted
previously.
The Black-Scholes option-pricing model requires the use of highly subjective and complex assumptions, including the
expected term and the price volatility of the underlying stock, which determine the fair value of stock-based awards. These
assumptions include:
•
•
•
•
•
Risk-free rate. Risk-free interest rates are derived from U.S. Treasury securities as of the option grant date.
Expected dividend yields. Expected dividend yields are based on our historical dividend payments, which have been zero
to date (excluding the preferred stock tax distributions made by Seamless Holdings prior to 2015).
Volatility. Since the first quarter of 2018, expected volatility has been based on the historical and implied volatilities of
the Company’s own common stock. Prior to 2018, the expected stock price volatility was based on a combination of the
historical and implied volatilities of comparable publicly-traded companies and the historical volatility of our common
stock due to our limited trading history as there was no active external or internal market for our common stock prior to
the Company’s initial public offering in April 2014.
Expected term. The expected term calculation for option awards considers a combination of the Company’s historical
and estimated future exercise behavior.
Forfeiture rate. Forfeiture rates are estimated using historical actual forfeiture trends as well as our judgment of future
forfeitures. These rates are evaluated at least annually and any change in compensation expense is recognized in the
period of the change. The estimation of stock awards that will ultimately vest requires judgment and, to the extent actual
46
GRUBHUB INC.
Notes to Consolidated Financial Statements (Continued)
results or updated estimates differ from our current estimates, such amounts will be recorded as a cumulative adjustment
in the period in which the estimates are revised. The Company considers many factors when estimating expected
forfeitures, including the types of awards and employee class. Actual results, and future changes in estimates, may differ
substantially from management’s current estimates.
See Note 11, Stock-Based Compensation, for the weighted-average assumptions used to estimate the fair value of options
granted during the years ended December 31, 2019, 2018 and 2017.
Income Tax (Benefit) Expense
Income tax (benefit) expense is determined using the asset and liability method. Under this method, deferred tax assets and
liabilities are calculated based upon the temporary differences between the financial statement and income tax bases of assets and
liabilities using the enacted tax rates that are applicable in a given year. The utilization of deferred tax assets is limited by the amount
of taxable income expected to be generated within the allowable carryforward period and other factors. The Company records a
valuation allowance to reduce deferred tax assets to the amount management believes is more likely than not to be realized. As of
December 31, 2019 and 2018, a valuation allowance of $15.7 million and $23.8 million, respectively, was recorded on the
Company’s consolidated balance sheets. See Note 12, Income Taxes, for additional information.
The Company utilizes a two-step approach to recognizing and measuring uncertain tax positions (“tax contingencies”). The
first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely
than not that the position will be sustained on audit, including resolution of related appeals or litigation processes. The second step is
to measure the tax benefit as the largest amount which is more than 50% likely to be realized upon ultimate settlement. The Company
considers many factors when evaluating and estimating its tax positions and tax benefits, which may require periodic adjustments,
and which may not accurately forecast actual outcomes.
Management believes that it is more likely than not that forecasted income, including future reversals of existing taxable
temporary differences, will be sufficient to fully recover the net deferred tax assets. In the event the Company determines that all or
part of the net deferred tax assets are not realizable in the future, we will adjust the valuation allowance with the adjustment
recognized as expense in the period in which such determination is made. The calculation of income tax liabilities involves
significant judgment in estimating the impact of uncertainties and complex tax laws. In addition, the Company’s tax returns are
subject to audit by various U.S. and foreign tax authorities. Resolution of these uncertainties in a manner inconsistent with our
expectations could have a material impact on the Company’s financial position and results of operations.
Due to the reduced cost of repatriating unremitted earnings as a result of U.S. tax legislation signed into law in December of
2017, the Tax Cuts and Jobs Act (the “Tax Act”), the Company plans to repatriate cash from the U.K. to the U.S. The Company
estimated no additional tax liability as of December 31, 2019 and 2018 as there are no applicable withholding taxes for the
transaction. Management regularly evaluates whether foreign earnings are expected to be permanently reinvested. This evaluation
requires judgment about the future operating and liquidity needs of the Company’s foreign subsidiary. Changes in economic and
business conditions, foreign or U.S. tax laws, or the Company’s financial situation could result in changes in these judgments and the
need to record additional tax liabilities.
The Company includes interest and penalties related to tax contingencies in the provision for income taxes in the consolidated
statements of operations. Management does not expect the total amount of unrecognized tax benefits to significantly change in the
next twelve months.
47
GRUBHUB INC.
Notes to Consolidated Financial Statements (Continued)
Intangible Assets
The estimated fair values of acquired intangible assets are determined as of the acquisition date based on significant
management estimates included in established valuation techniques with the assistance of third-party valuations. See Note 4,
Acquisitions, for the estimated acquisition date fair values and valuation methodologies of assets acquired in the periods presented.
Intangible assets with finite useful lives are amortized using the straight-line method over their estimated useful lives and are
reviewed for impairment. The Company evaluates intangible assets with finite and indefinite useful lives and other long-lived assets
for impairment whenever events or circumstances indicate that they may not be recoverable, or at least annually. If management
determines in its qualitative assessment that it is more likely than not that the assets may not be recoverable, the recoverability of
finite and other long-lived assets is measured by comparing the carrying amount of an asset group to the future undiscounted net cash
flows expected to be generated by that asset group. The Company groups assets for purposes of such review at the lowest level for
which identifiable cash flows of the asset group are largely independent of the cash flows of the other groups of assets and liabilities.
The amount of impairment to be recognized for finite and indefinite-lived intangible assets and other long-lived assets is calculated
as the difference between the carrying value and the fair value of the asset group, generally measured by discounting estimated future
cash flows. There were no impairment indicators present during the years ended December 31, 2019, 2018 or 2017.
Website and Software Development Costs
The costs incurred in the preliminary stages of website and software development are expensed as incurred. Once an
application has reached the development stage, internal and external costs, if direct and incremental and deemed by management to
be significant, are capitalized and amortized on a straight-line basis over the estimated useful life of the application. Maintenance and
enhancement costs, including those costs in the post-implementation stages, are typically expensed as incurred, unless such costs
relate to substantial upgrades and enhancements to the website or software that result in added functionality, in which case the costs
are capitalized and amortized on a straight-line basis over the estimated useful lives. Amortization expense related to capitalized
website and software development costs is included in depreciation and amortization in the consolidated statements of operations.
The Company capitalized $64.5 million, $41.1 million and $26.0 million of website development costs during the years ended
December 31, 2019, 2018 and 2017, respectively.
Goodwill
Goodwill represents the excess of the cost of an acquired business over the fair value of the assets acquired at the date of
acquisition. The Company’s methodology for allocating the purchase price of acquisitions is based on established valuation
techniques that consider a number of factors, including valuations performed by third-party appraisers. As of December 31, 2019, the
Company had $1,008.0 million in goodwill on its consolidated balance sheets. The Company assesses the impairment of goodwill at
least annually and whenever events or changes in circumstances indicate that goodwill may be impaired. Absent any special
circumstances that could require an interim test, the Company has elected to test for goodwill impairment at September 30 of each
year. The Company has one reporting unit in testing goodwill for impairment.
In testing goodwill for impairment, the Company may elect to utilize a qualitative assessment to evaluate whether it is more
likely than not that the fair value of a reporting unit is less than its carrying amount. If the qualitative assessment indicates that
goodwill impairment is more likely than not, the Company performs a quantitative impairment test. The Company would recognize
an impairment charge for the amount by which the reporting unit’s carrying amount exceeds its fair value, if any, not to exceed the
carrying amount of goodwill.
Management determined the fair value of the Company as of September 30, 2019 by using a market-based approach that
utilized our market capitalization, as adjusted for factors such as a control premium. After consideration of the Company’s market
capitalization, business growth and other factors, management determined that it was more likely than not that the fair value of the
Company exceeded its carrying amount at September 30, 2019 and that further analysis was not required.
Additionally, as part of the interim review for indicators of impairment, management analyzed potential changes in value based
on operating results for the three months ended December 31, 2019 compared to expected results. Management also considered how
the Company’s market capitalization, business growth and other factors used in the September 30, 2019 impairment analysis, could
be impacted by changes in market conditions and economic events. For example, the fair market value of the Company’s stock has
decreased since September 30, 2019. Management considered these trends in performing its assessment of whether an interim
impairment review was required. Based on this interim assessment, management concluded that as of December 31, 2019, there were
no events or changes in circumstances that indicated it was more likely than not that the Company’s fair value was below its carrying
value.
The Company determined there was no goodwill impairment during the years ended December 31, 2019, 2018 and 2017.
Nevertheless, significant changes in global economic and market conditions could result in changes to expectations of future
48
GRUBHUB INC.
Notes to Consolidated Financial Statements (Continued)
financial results and key valuation assumptions. Such changes could result in revisions of management’s estimates of the Company’s
fair value and could result in a material impairment of goodwill.
Debt Issuance Costs
The Company has incurred debt issuance costs in connection with its debt facilities and related amendments. Amounts paid
directly to lenders are classified as issuance costs. Commitment fees and other costs directly associated with obtaining credit facilities
are deferred financing costs which are recorded in the consolidated balance sheets and amortized over the term of the facility. The
Company allocated deferred debt issuance costs incurred for its credit facility between the revolver and term loan based on their relative
borrowing capacity. Deferred debt issuance costs associated with the revolving credit facility are recorded within other assets and those
associated with the term loan and senior notes are recorded as a reduction of the carrying value of the debt on the consolidated balance
sheets. All deferred debt issuance costs are amortized using the effective interest rate method to interest expense within net interest
expense on the Company’s consolidated statements of operations. The Company records the write-off of unamortized debt issuance
costs upon the extinguishment or modification of the related debt facility within interest expense in the consolidated statements of
operations. See Note 10, Debt, for additional details.
Fair Value
Accounting standards define fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit
price) in the principal or most advantageous market in an orderly transaction between market participants on the measurement date.
The standards also establish a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize
the use of unobservable inputs when measuring fair value. See Note 16, Fair Value Measurement, for details of the fair value
hierarchy and the related inputs used by the Company.
Concentration of Credit Risk
Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of accounts
receivable. For the years ended December 31, 2019, 2018 and 2017, the Company had no customers which accounted for more than
10% of revenue or accounts receivable.
Revenue Recognition
See Note 3, Revenue, below for a description of the Company’s revenue recognition policy.
Lease Obligations
On January 1, 2019, the Company adopted Accounting Standards Codification Topic 842, Leases (“ASC Topic 842”) using the
modified retrospective transition approach by applying the new standard to all leases existing at the date of initial application. The
Company elected the optional practical expedient package which, among other things, includes retaining the historical classification
of leases.
Under ASC Topic 842, the Company determines if an arrangement is a lease at inception of a contract. Leases with an initial
term of 12 months or less are not recorded on the balance sheet. Non-lease components associated with lease components in the
Company’s lease contracts are treated as a single lease component. Operating lease right-of-use assets and liabilities commencing
after January 1, 2019 are recognized at commencement date based on the present value of lease payments over the lease term. The
right-of-use asset also includes any lease payments made prior to commencement and is recorded net of any lease incentives
received. Because the rate implicit in each lease is not readily determinable, the Company uses its incremental borrowing rate to
determine the present value of the lease payments. To determine the incremental borrowing rate, the Company uses information
including the risk-free interest rate for the remaining lease term, the Company’s implied credit rating and interest rates of similar debt
instruments of entities with comparable credit ratings. The Company recognizes rent expense on a straight-line basis over the lease
term, which is allocated on a headcount basis to operations and support, sales and marketing, technology and general and
administrative costs and expenses in the consolidated statements of operations.
Prior period amounts have not been adjusted and continue to be reported under ASC Topic 840 with the difference between
cash rent payments and straight-lined rent expenses recorded as a deferred rent liability presented within other accruals in the
consolidated balance sheets. The Company also has landlord-funded leasehold improvements that were recorded as tenant
allowances, which were amortized as a reduction of rent expense over the noncancelable terms of the operating leases. See Recently
Issued Accounting Pronouncements below for additional details of the impact of the adoption of ASC Topic 842.
Segments
The Company has one reportable segment, which has been identified based on how the chief operating decision maker
manages the business, makes operating decisions and evaluates operating performance.
Recently Issued Accounting Pronouncements
49
GRUBHUB INC.
Notes to Consolidated Financial Statements (Continued)
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 will require entities to incorporate the
consideration of historical information, current information and reasonable and supportable forecasts. This ASU also expands
disclosure requirements. ASU 2016-13 is effective for the Company beginning in the first quarter of 2020 and early adoption is
permitted. The guidance will be 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.
In February 2016, and in subsequent updates, the FASB issued ASC Topic 842. Under ASC Topic 842, a lessee recognizes a
liability to make lease payments and a right-of-use asset for all leases (with the exception of short-term leases) in the statement of
financial position at the commencement date. ASC Topic 842 was effective for and adopted by the Company in the first quarter of
2019. The Company adopted ASC Topic 842 using the modified retrospective transition method applied to all existing leases
beginning January 1, 2019. Periods prior to adoption were not adjusted and continue to be reported in accordance with historic
accounting guidance under ASC Topic 840. The adoption of ASC Topic 842 resulted in the recognition on the consolidated balance
sheets as of January 1, 2019 of right-of-use assets of $81.2 million and lease liabilities for operating leases of $97.7 million. but did
not result in a cumulative-effect adjustment on retained earnings. The operating lease right-of-use asset includes the impact upon
adoption of ASC Topic 842 of the derecognition of lease incentives, deferred rent, below-market lease intangibles, cease-use
liabilities and prepaid rent balances recognized in prepaid expenses and other current assets and current and noncurrent other accruals
on the consolidated balance sheets as of December 31, 2018. The adoption of ASC Topic 842 did not have a material impact to the
Company's consolidated results of operations or cash flows. See Note 9, Commitments and Contingencies, for additional details.
3. Revenue
Revenues are recognized when control of the promised goods or services is transferred to the customer, in the amount that
reflects the consideration the Company expects to receive in exchange for those good or services.
The Company generates revenues primarily when diners place an order on the Platform through its mobile applications, its
websites, or through third-party websites that incorporate the Company’s API or one of the Company’s listed phone numbers.
Restaurant partners generally pay a commission, typically a percentage of the transaction, on orders that are processed through the
Platform. Most of the restaurant partners on the Company’s Platform can choose their level of commission rate, at or above a base
rate. A restaurant partner can choose to pay a higher rate that affects its prominence and exposure to diners on the Platform.
Additionally, restaurant partners on the Platform that use the Company’s delivery services pay an additional commission for the use
of those services. The Company may also charge fees directly to the diner.
Revenues from online and phone pick-up and delivery orders are recognized when the orders are transmitted to the
restaurants, including revenues for managed delivery services due to the simultaneous nature of the Company’s delivery operations.
The amount of revenue recognized by the Company is based on the arrangement with the related restaurant and is adjusted for any
expected refunds or adjustments, which are estimated using an expected value approach based on historical experience and any cash
credits related to the transaction, including incentive offers provided to restaurants and diners. The Company also recognizes as
revenue any fees charged directly to the diner. Although the Company processes and collects the entire amount of the transaction
with the diner, it records revenue for transmitting orders to restaurants on a net basis because the Company is acting as an agent for
takeout orders, which are prepared by the restaurants. The Company is the principal in the transaction with respect to credit card
processing and managed delivery services because it controls the respective services. As a result, costs incurred for processing the
credit card transactions and providing delivery services are included in operations and support expense in the consolidated statements
of operations.
The Company periodically provides incentive offers to restaurants and diners to use our platform. These promotions are
generally cash credits to be applied against purchases. These incentive offers are recorded as a reduction in revenues, generally on the
date the corresponding order revenue is recognized. For those incentives that create an obligation to discount current or future orders,
management applies judgment in allocating the incentives that are expected to be redeemed proportionally to current and future
orders based on their relative expected transaction prices.
The Company derives some revenues from mobile application development professional services and access to the respective
order ahead platforms and related services. Revenues for professional services and related platform access fees are generally
recognized ratably over the subscription period beginning on the date the platform access becomes available to the customer.
Revenues for certain professional services may be recognized in full once the services are performed if they are distinct. The
Company also generates a small amount of revenues directly from companies that participate in our corporate ordering program and
by selling advertising to third parties on our allmenus.com website. The Company does not anticipate that the foregoing will generate
a material portion of our revenues in the foreseeable future.
50
GRUBHUB INC.
Notes to Consolidated Financial Statements (Continued)
For most orders, diners use a credit card to pay for their meal when the order is placed. For these transactions, the Company
collects the total amount of the diner’s order net of payment processing fees from the payment processor and remits the net proceeds
to the restaurant less commission and other fees. The Company generally accumulates funds and remits the net proceeds to the
restaurant partners on at least a monthly basis, depending on the payment terms with the restaurant. Non-partnered restaurants are
paid at the time of the order. The Company also accepts payment for orders via gift cards offered on its platform. For gift cards that
are not subject to unclaimed property laws, the Company recognizes revenue from estimated unredeemed gift cards, based on its
historical breakage experience, over the expected customer redemption period.
Certain governmental taxes are imposed on the products and services provided through the Company’s platform and are
included in the order fees charged to the diner and collected by the Company. Sales taxes are either remitted to the restaurant for
payment or are paid directly to certain states. These fees are recorded on a net basis, and, as a result, are excluded from revenues.
Accounts Receivable, Net
Accounts receivable primarily represent the net cash due from the Company’s payment processors for cleared transactions and
amounts owed from corporate and other institutional customers and Enterprise restaurants, which are generally invoiced on a
monthly basis. The carrying amount of the Company’s receivables is reduced by an allowance for doubtful accounts that reflects
management’s best estimate of amounts that will not be collected. These uncollected amounts are generally not recovered from the
restaurants. The allowance is recorded through a charge to bad debt expense which is recognized within general and administrative
expense in the consolidated statements of operations. The allowance is based on historical loss experience and any specific risks,
current or forecasted, identified in collection matters.
Management provides for probable uncollectible amounts through a charge against bad debt expense and a credit to an
allowance based on its assessment of the current status of individual accounts. Balances still outstanding after management has used
reasonable collection efforts are written off against the allowance. The Company does not charge interest on trade receivables.
The Company incurs expenses for uncollected credit card receivables (or “chargebacks”), including fraudulent orders, when a
diner’s card is authorized but fails to process, and for other unpaid credit card receivables. The majority of the Company’s
chargeback expense is recorded directly to general and administrative expense in the consolidated statements of operations as the
charges are incurred; however, a portion of the allowance for doubtful accounts includes a reserve for estimated chargebacks on the
net cash due from the Company’s payment processors as of the end of the period.
Changes in the Company’s allowance for doubtful accounts for the periods presented were as follows:
Balance at beginning of period
Additions (reductions) to expense
Write-offs, net of recoveries and other adjustments
Balance at end of period
Year Ended December 31,
2019
2018
$
$
1,460 $
1,497
(145 )
2,812 $
1,513
(23 )
(30 )
1,460
Deferred Revenues
The Company’s deferred revenues consist primarily of gift card liabilities, certain incentive liabilities as well as customer
billings for professional services recognized ratably over the subscription period. These amounts are included within other accruals
on the consolidated balance sheets. See Note 8, Other Accruals, for the Company’s gift card liabilities as of December 31, 2019 and
2018. Other deferred revenues are not material to the Company’s consolidated financial position. The majority of gift cards and
incentives issued by the Company are redeemed within a year.
Contract Acquisition Costs
The Company defers the incremental costs of obtaining and renewing restaurant and corporate and campus program customer
contracts, primarily consisting of commissions and bonuses and related payroll taxes, as contract acquisition assets within other
assets on the consolidated balance sheets. Contract acquisition assets are amortized on a straight-line basis to sales and marketing
expense in the consolidated statements of operations over the useful life of the contract, which is estimated to be approximately 4
years based on anticipated customer renewals. During the years ended December 31, 2019 and 2018, the Company deferred $16.5
million and $10.3 million of contract acquisitions costs, respectively, and amortized $4.5 million and $1.3 million of related expense,
respectively.
51
GRUBHUB INC.
Notes to Consolidated Financial Statements (Continued)
4. Acquisitions
There were no acquisitions during the year ended December 31, 2019
2018 Acquisitions
On November 7, 2018, the Company acquired all of the issued and outstanding shares of Tapingo Ltd. (“Tapingo”) for
approximately $152.1 million, including $151.7 million of cash paid (net of cash acquired of $1.5 million) and $0.4 million of other
non-cash consideration. Tapingo is a leading platform for campus food ordering with direct integration into college meal plans and
point of sale systems. The acquisition of Tapingo has enhanced the Company’s diner network on college campuses.
On September 13, 2018, the Company acquired SCVNGR, Inc. d/b/a LevelUp (“LevelUp”) for approximately $369.4
million, including $366.8 million of cash paid (net of cash acquired of $6.0 million) and $2.6 million of other non-cash
consideration. LevelUp is a leading provider of mobile diner engagement and payment solutions for national and regional restaurant
brands. The acquisition of LevelUp has simplified the Company’s integrations with restaurants’ systems, increased diner engagement
and accelerated product development.
The Company assumed Tapingo and LevelUp employees’ unvested incentive stock option (“ISO”) awards as of the
respective closing dates. Approximately $0.4 million and $2.6 million of the fair value of the assumed ISO awards granted to
acquired Tapingo and LevelUp employees, respectively, was attributable to the pre-combination services of the awardees and was
included in the respective purchase prices. These amounts are reflected within goodwill in the respective purchase price allocations.
As of the respective acquisition dates, aggregate post-combination expense of approximately $21.4 million was expected to be
recognized related to the combined assumed ISO awards over the remaining post-combination service periods.
The results of operations of Tapingo and LevelUp have been included in the Company’s financial statements since November
7, 2018 and September 13, 2018, respectively.
The excess of the consideration transferred in the acquisitions over the amounts assigned to the fair value of the net assets
acquired was recorded as goodwill, which represents the value of LevelUp’s technology team, the ability to simplify integrations
with restaurants on the Company’s platform and the expanded breadth and depth of the Company’s network of diners and campus
relationships. The total goodwill related to the acquisitions of Tapingo and LevelUp of $418.1 million is not deductible for income
tax purposes.
The assets acquired and liabilities assumed of Tapingo and LevelUp were recorded at their estimated fair values as of the
closing dates of November 7, 2018 and September 13, 2018, respectively. See Note 6, Goodwill and Acquired Intangible Assets, for a
description of changes to the purchase price allocations for Tapingo and LevelUp during the year ended December 31, 2019.
The following table summarizes the final purchase price allocation acquisition-date fair values of the assets and liabilities
acquired in connection with the Tapingo and LevelUp acquisitions:
Accounts receivable
Prepaid expenses and other current assets
Property and equipment
Other assets
Restaurant relationships
Diner acquisition
Below-market lease intangible
Developed technology
Goodwill
Net deferred tax asset
Accounts payable and accrued expenses
Total purchase price net of cash acquired
Fair value of assumed ISOs attributable to pre-
combination service
Net cash paid
$
$
$
Tapingo
LevelUp
(in thousands)
$
3,101
843
—
163
11,279
—
—
9,755
121,908
9,582
(4,573 )
$
152,058
$
6,201
1,396
895
—
10,217
3,912
2,205
20,107
296,198
31,545
(3,249 )
$
369,427
Total
9,302
2,239
895
163
21,496
3,912
2,205
29,862
418,106
41,127
(7,822 )
521,485
(372 )
151,686 $
(2,594 )
366,833 $
(2,966 )
518,519
2017 Acquisitions
On October 10, 2017, the Company acquired all of the issued and outstanding equity interests of Eat24, LLC (“Eat24”), a
wholly owned subsidiary of Yelp Inc., for approximately $281.7 million, including $281.4 million in net cash paid and $0.3 million
52
GRUBHUB INC.
Notes to Consolidated Financial Statements (Continued)
of other non-cash consideration. Eat24 provides online and mobile food ordering for restaurants and diners across the United States.
The acquisition expanded the breadth and depth of the Company’s national network of restaurant partners and active diners.
The Company granted restricted stock unit (“RSU”) awards to acquired Eat24 employees in replacement of their unvested
equity awards as of the closing date. Approximately $0.3 million of the fair value of the replacement RSU awards granted to acquired
Eat24 employees was attributable to the pre-combination services of the Eat24 awardees and was included in the $281.7 million
purchase price. This amount is reflected within goodwill in the purchase price allocation. As of the acquisition date, post-
combination expense of approximately $4.1 million was expected to be recognized related to the replacement awards over the
remaining post-combination service period.
On August 23, 2017, the Company acquired substantially all of the assets and certain expressly specified liabilities of A&D
Network Solutions, Inc. and Dashed, Inc. (collectively, “Foodler”). The purchase price for Foodler was $51.1 million in cash, net of
cash acquired of $0.1 million. Foodler is an independent online food-ordering company with an established diner base in the
Northeast United States. The acquisition expanded the breadth and depth of the Company’s restaurant network, active diners and
delivery network.
The results of operations of Eat24 and Foodler have been included in the Company’s financial statements since October 10,
2017 and August 23, 2017, respectively.
The excess of the consideration transferred in the acquisitions over the net amounts assigned to the fair value of the assets was
recorded as goodwill, which represents the value of increasing the breadth and depth of the Company’s network of restaurants and
diners. The total goodwill related to the acquisitions of Eat24 and Foodler of $153.4 million is expected to be deductible for income
tax purposes.
The assets acquired and liabilities assumed of Eat24 and Foodler were recorded at their estimated fair values as of the
respective closing dates of October 10, 2017 and August 23, 2017. The following table summarizes the final purchase price
allocation acquisition-date fair values of the assets and liabilities acquired in connection with the Eat24 and Foodler acquisitions:
Eat24
Foodler
(in thousands)
Total
Accounts receivable
Prepaid expenses and other current assets
Property and equipment
Restaurant relationships
Diner acquisition
Trademarks
Developed technology
Goodwill
Accounts payable and accrued expenses
Total purchase price net of cash acquired
Fair value of replacement RSUs attributable to pre-combination service
Net cash paid
$
8,574
307 $
8,267 $
221
—
221
1,113
— 1,113
126,232 35,217 161,449
35,226 1,354 36,580
2,225
74 2,299
2,559 1,955 4,514
135,955 17,452 153,407
(30,082 ) (5,237 ) (35,319 )
$ 281,716 $ 51,122 $ 332,838
(274 )
$ 281,442 $ 51,122 $ 332,564
(274 )
—
Additional Information
The estimated fair values of the intangible assets acquired were determined based on a combination of the income, cost, and
market approaches to measure the fair value of the restaurant relationships, diner acquisition, developed technology and trademarks
as follows:
53
GRUBHUB INC.
Notes to Consolidated Financial Statements (Continued)
Restaurant relationships
Tapingo
Multi-period excess
earnings
Diner acquisition
Developed technology
n/a
Cost to recreate
Trademark
n/a
Valuation Method
LevelUp
With or without
comparative
business valuation
Cost to recreate
Multi-period
excess earnings
n/a
Eat24
Multi-period
excess earnings
Foodler
Multi-period excess
earnings
Cost to recreate
Cost to recreate
Cost to recreate
Cost to recreate
Relief from royalty Relief from royalty
The fair value of the LevelUp below-market lease was measured based on the present value of the difference between the
contractual amounts to be paid pursuant to the lease and an estimate of current fair market lease rates measured over the non-
cancelable remaining term of the lease. As of January 1, 2019, the below-market lease intangible asset was derecognized from
acquired intangible assets resulting in a corresponding adjustment to the opening balance of operating lease right-of-use assets on the
consolidated balance sheets upon adoption of ASC Topic 842.
These fair value measurements were based on significant inputs not observable in the market and thus represent Level 3
measurements within the fair value hierarchy. Unobservable inputs were reflective of the types of assumptions that market
participants would use in measuring the fair values of similar assets and liabilities such as, among others, discount rates, estimated
future cash flows, initial developer costs, expected profits, royalty rates, rates of attrition and expected rates of return.
The Company incurred certain expenses directly and indirectly related to acquisitions of $2.7 million, $6.9 million, and $5.6
million which were recognized in general and administrative expenses within the consolidated statements of operations for the years
ended December 31, 2019, 2018 and 2017, respectively.
Pro Forma (unaudited)
The following unaudited pro forma information presents a summary of the operating results of the Company for the year ended
December 31, 2018 as if the acquisitions of Tapingo and LevelUp had occurred as of January 1 of the year prior to acquisition:
Revenues
Net income
Net income per share attributable to common shareholders:
Basic
Diluted
Year Ended
December 31, 2018
(in thousands, except per
share data)
$
$
$
1,041,811
55,975
0.63
0.61
The pro forma adjustments that reflect the amortization that would have been recognized for intangible assets, elimination of
transaction costs incurred, stock-based compensation expense for assumed equity awards and interest expense for transaction
financings, as well as the pro forma tax impact of such adjustments for the year ended December 31, 2018 were as follows:
Depreciation and amortization
Transaction costs
Stock-based compensation
Interest expense
Income tax benefit
Year Ended
December 31, 2018
(in thousands)
$
4,893
(6,923 )
3,748
1,601
(1,548 )
The unaudited pro forma revenues and net income are not intended to represent or be indicative of the Company’s consolidated
results of operations or financial condition that would have been reported had the acquisitions been completed as of the beginning of
the period presented and should not be taken as indicative of the Company’s future consolidated results of operations or financial
condition.
54
GRUBHUB INC.
Notes to Consolidated Financial Statements (Continued)
5. Marketable Securities
The amortized cost, unrealized gains and losses and estimated fair value of the Company’s held-to-maturity marketable
securities as of December 31, 2019 and 2018 were as follows:
Cash and cash equivalents
Commercial paper
Corporate bonds
Short-term investments
Commercial paper
Corporate bonds
Total
Cash and cash equivalents
Commercial paper
Corporate bonds
Short-term investments
Commercial paper
Corporate bonds
Total
Amortized Cost
Unrealized Gains
Unrealized Losses
(in thousands)
Estimated
Fair Value
December 31, 2019
17,548 $
1,300
46,971
2,304
68,123 $
$
—
—
—
2
2 $
(34 ) $
—
(195 )
—
(229 ) $
17,514
1,300
46,776
2,306
67,896
Amortized Cost
Unrealized Gains
Unrealized Losses
(in thousands)
Estimated
Fair Value
December 31, 2018
12,097 $
870
13,334
750
27,051 $
$
—
—
—
—
— $
(21 ) $
—
(88 )
—
(109 ) $
12,076
870
13,246
750
26,942
$
$
$
$
All of the Company’s marketable securities were classified as held-to-maturity investments and have maturities within one year
of December 31, 2019.
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 December 31, 2019 and 2018 were as follows:
Less Than 12 Months
December 31, 2019
12 Months or Greater
Total
Estimated
Fair Value
Unrealized
Loss
Estimated
Fair Value
Unrealized
Loss
Estimated
Fair Value
Unrealized
Loss
Commercial paper
Total
$
$
64,290 $
64,290 $
(229 ) $
(229 ) $
(in thousands)
— $
— $
December 31, 2018
— $
— $
64,290 $
64,290 $
(229 )
(229 )
Less Than 12 Months
12 Months or Greater
Total
Estimated
Fair Value
Unrealized
Loss
Estimated
Fair Value
Unrealized
Loss
Estimated
Fair Value
Unrealized
Loss
Commercial paper
Corporate bonds
Total
$
$
25,322 $
750
26,072 $
(109 ) $
—
(109 ) $
(in thousands)
— $
—
— $
— $
—
— $
25,322 $
750
26,072 $
(109 )
—
(109 )
The Company recognized interest income during the years ended December 31, 2019, 2018 and 2017 of $3.9 million, $4.0
million and $2.0 million, respectively, within net interest expense in the consolidated statements of operations. During the years
ended December 31, 2019, 2018 and 2017, the Company did not recognize any other-than-temporary impairment losses related to its
marketable securities.
55
GRUBHUB INC.
Notes to Consolidated Financial Statements (Continued)
The Company’s marketable securities are classified within Level 2 of the fair value hierarchy (see Note 16, Fair Value
Measurement, for further details).
6. Goodwill and Acquired Intangible Assets
The components of acquired intangible assets as of December 31, 2019 and 2018 were as follows:
December 31, 2019
Gross Carrying
Amount
Accumulated
Amortization
Net Carrying
Value
Gross Carrying
Amount
December 31, 2018
Accumulated
Amortization
Net Carrying
Value
$
Restaurant relationships
Diner acquisition
Developed technology
Other
Trademarks
Below-market lease intangible
Total amortizable intangible assets
Indefinite-lived trademarks
Total acquired intangible assets
$
497,788 $
48,293
35,826
2,918
—
—
584,825
89,676
674,501 $
(135,482 ) $
(19,909 )
(15,916 )
(2,713 )
—
—
(174,020 )
—
(174,020 ) $
(in thousands)
362,306 $
28,384
19,910
205
—
—
410,805
89,676
500,481 $
494,278 $
47,541
38,385
3,676
2,225
2,206
588,311
89,676
677,987 $
(103,457 ) $
(10,306 )
(10,247 )
(2,615 )
(2,225 )
(124 )
(128,974 )
—
(128,974 ) $
390,821
37,235
28,138
1,061
—
2,082
459,337
89,676
549,013
The gross carrying amount and accumulated amortization of the Company’s trademarks, developed technology and other
intangible assets as of December 31, 2019 were adjusted in aggregate by $5.5 million and $5.4 million, respectively, for certain fully
amortized assets that were no longer in use. Additionally, upon adoption of ASC Topic 842, the acquired below-market lease
intangible was derecognized resulting in a corresponding adjustment to the operating lease right-of-use asset within the consolidated
balance sheets as of January 1, 2019. Amortization of the acquired below-market lease intangible was recognized as rent expense
within the consolidated statements of operations. See Note 9, Commitments and Contingencies, for further details.
Amortization expense for acquired intangible assets was $50.7 million, $42.5 million and $28.1 million for the years ended
December 31, 2019, 2018 and 2017, respectively.
The changes in the carrying amount of goodwill during the years ended December 31, 2019 and 2018 were as follows.
Goodwill
Accumulated
Impairment
Losses
(in thousands)
Net Book Value
$
$
589,862 $
429,377
1,019,239 $
— $
—
— $
589,862
429,377
1,019,239
Balance as of December 31, 2017
Acquisitions
Balance as of December 31, 2018
Acquisitions - measurement period
adjustments (a)
Balance as of December 31, 2019
(a) The change in the carrying amount of goodwill during the year ended December 31, 2019 was
primarily related to changes in the fair value of net deferred tax assets for the purchase price
allocations of the Tapingo and LevelUp acquisitions during the measurement period.
$
(11,271 )
1,007,968 $
—
— $
(11,271 )
1,007,968
The Company acquired intangible assets of $4.3 million and $76.1 during the years ended December 31, 2019 and 2018,
respectively, as a result of the acquisitions of LevelUp and Tapingo and the acquisitions of certain restaurant and diner network
assets. The components of the acquired intangible assets added during the years ended December 31, 2019 and 2018 were as
follows:
56
GRUBHUB INC.
Notes to Consolidated Financial Statements (Continued)
Year Ended December 31, 2019 Year Ended December 31, 2018
Amount
(in thousands)
Restaurant relationships
Developed technology
Diner acquisition
Below-market lease intangible
Total
$
$
3,510
—
752
—
4,262
Weighted-
Average
Amortization
Period
(years)
19.5
Amount
(in thousands)
$
36,697
29,862
7,294
2,205
76,058
5.0
$
Weighted-
Average
Amortization
Period
(years)
17.5
4.7
5.0
5.8
Estimated future amortization expense of acquired intangible assets as of December 31, 2019 was as follows:
2020
2021
2022
2023
2024
Thereafter
Total
(in thousands)
45,645
$
38,812
36,843
30,348
28,141
231,016
410,805
$
As of December 31, 2019, the estimated remaining weighted-average useful life of the Company’s acquired intangibles was
13.4 years. The Company recognizes amortization expense for acquired intangibles on a straight-line basis.
7. Property and Equipment
The components of the Company’s property and equipment as of December 31, 2019 and 2018 were as follows:
December 31, 2019 December 31, 2018
(in thousands)
Developed software
Computer equipment
Leasehold improvements
Furniture and fixtures
Purchased software and digital assets
Construction in progress
$
Property and equipment
Accumulated depreciation and amortization
Property and equipment, net
$
154,656 $
74,052
52,962
14,463
13,395
6,018
315,546
(142,802 )
172,744 $
90,302
50,767
39,550
10,801
4,696
1,976
198,092
(78,597 )
119,495
The Company recorded depreciation and amortization expense for property and equipment other than developed software for
the years ended December 31, 2019, 2018 and 2017 of $30.2 million, $21.6 million and $11.7 million, respectively.
The Company capitalized developed software costs of $64.5 million, $41.1 million and $26.0 million for the years ended
December 31, 2019, 2018 and 2017, respectively. Amortization expense for developed software costs, recognized in depreciation and
amortization in the consolidated statements of operations, for the years ended December 31, 2019, 2018 and 2017 was $34.5 million,
$21.8 million and $12.0 million, respectively.
8. Other Accruals
The Company’s other accruals recorded in current liabilities on the consolidated balance sheets as of December 31, 2019 and
2018 were as follows:
57
GRUBHUB INC.
Notes to Consolidated Financial Statements (Continued)
Gift card liability
Other accrued expenses (a)
Total Other Accruals
December 31, 2019
December 31, 2018
(in thousands)
12,212 $
49,292
61,504 $
6,155
38,590
44,745
$
$
(a) Other accrued expenses consist of various accrued expenses with no individual item accounting for more than
5% of the total current liabilities as of December 31, 2019 and 2018.
9. Commitments and Contingencies
Leases
As of December 31, 2019, the Company had operating lease agreements for its office facilities in various locations
throughout the U.S, as well as in the U.K. and Israel, which expire at various dates through May 2030. The terms of the lease
agreements provide for fixed rental payments on a graduated basis. For its primary operating leases, the Company can, after the
initial lease term, renew its leases under right of first offer terms at fair value at the time of renewal for a period of five years. The
Company's lease terms include options to extend or terminate the lease when it is reasonably certain that it will exercise that option.
As of December 31, 2019, the Company recognized on its consolidated balance sheets operating lease right-of-use assets of
$100.6 million that represent the Company's right to use an underlying asset during the lease term and current and noncurrent
operating lease liabilities of $9.4 million and $111.1 million, respectively, that represent the Company's obligation to make lease
payments.
The components of lease costs, which consist of rent expense for leased office space, during the year ended December 31,
2019 were as follows:
Fixed operating lease cost
Short-term lease cost
Sublease income
Total lease cost
Year Ended
December 31, 2019
(in thousands)
$
$
16,900
2,025
(887 )
18,038
Supplemental cash flow information related to the Company’s operating leases as well as the weighted-average lease term and
discount rate as of December 31, 2019 were as follows:
Cash paid for operating lease liabilities (in thousands)
Operating lease assets obtained in exchange for new operating lease obligations
(in thousands)
Weighted-average remaining lease term (years)
Weighted-average discount rate
$
$
13,694
29,714
8.8
5.0 %
Future lease payments under the Company’s operating lease agreements as of December 31, 2019 were as follows:
Year Ended
December 31, 2019
2020
2021
2022
2023
2024
Thereafter
Total future lease payments
Less interest
Present value of lease liabilities
(in thousands)
10,185
19,184
17,205
17,295
16,355
72,304
152,528
(32,096 )
120,432
$
$
$
The table above does not reflect the Company’s option to exercise early termination rights or the payment of related early
termination fees. Lease incentives reduce lease payments in the table above in the period in which they are expected to be received.
58
GRUBHUB INC.
Notes to Consolidated Financial Statements (Continued)
Rental expense under ASC Topic 840, primarily for leased office space under the operating lease commitments, was $13.1
million and $7.5 million for the years ended December 31, 2018 and 2017, respectively.
As previously reported in the 2018 Form 10-K under ASC Topic 840, future minimum lease payments under the Company’s
operating lease agreements that had initial or remaining non-cancelable lease terms in excess of one year as of December 31, 2018
were as follows:
2019
2020
2021
2022
2023
Thereafter
Total
Legal
(in thousands)
13,009
14,874
14,243
12,219
12,220
57,503
124,068
$
$
In August 2011, Ameranth, Inc. (“Ameranth”) filed a patent infringement action against a number of defendants, including
Grubhub Holdings Inc., in the U.S. District Court for the Southern District of California, Case No. 3:11-cv-1810. Ameranth
subsequently initiated additional actions for infringement of a related patent, including separate actions against Grubhub Holdings
Inc., Case No. 3:12-cv-739, and Seamless North America, LLC, Case No. 3:12-cv-737, which were consolidated along with
approximately 40 other cases Ameranth filed in the same district.
In September 2018, the district court granted summary judgment (on another defendant’s motion) of unpatentability on the
sole remaining patent and vacated the December 3, 2018 jury trial date for the claims against Grubhub Holdings Inc. and Seamless
North America, LLC. In October 2018, the district court entered final judgment on all claims in the case in which summary judgment
was granted, and then stayed the remaining cases (including the cases against Grubhub and Seamless). Ameranth then appealed this
decision to the U.S. Court of Appeals for the Federal Circuit. In November 2019, the Federal Circuit affirmed the district court’s
findings of unpatentability in all material respects, and remanded certain dependent claims to the district court. The Company
believes this case lacks merit and that it has strong defenses to all of the infringement claims. The Company intends to defend the suit
vigorously. The Company has not recorded an accrual related to this lawsuit as of December 31, 2019, as it does not believe a
material loss is probable.
On November 20, 2019, a purported stockholder of the Company filed a putative class action complaint against the
Company, Chief Executive Officer Matthew Maloney, and Chief Financial Officer Adam DeWitt in the United States District Court
for the Northern District of Illinois, Case No. 19 Civ. 7665. The complaint asserts violations of Sections 10(b) and 20(a) of the
Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, based on its allegation that the defendants made false and
misleading statements about the Company’s growth, competitive landscape, and strategy. The complaint seeks unspecified
compensatory damages and attorneys’ fees, among other relief. The defendants believe that the complaint is without merit. A
reasonable estimate of the amount of any possible loss or range of loss cannot be made at this time.
In addition to the matters described above, from time to time, the Company is involved in various other legal proceedings
arising from the normal course of business activities, including labor and employment claims, some of which relate to the alleged
misclassification of independent contractors. In September 2015, a claim was brought in the United States District Court for the
Northern District of California under the Private Attorneys General Act by an individual plaintiff on behalf of himself and seeking to
represent other drivers and the State of California. The claim sought monetary penalties and injunctive relief for alleged violations of
the California Labor Code based on the alleged misclassification of drivers as independent contractors. A decision was issued on
February 8, 2018, and the court ruled in favor of the Company, finding that plaintiff was properly classified as an independent
contractor. In March 2018, the plaintiff appealed this decision to the U.S. Court of Appeals for the Ninth Circuit. Several other
putative class actions and arbitrations have been brought against the Company alleging misclassification of independent contractors.
The Company does not believe any of the foregoing claims will have a material impact on its consolidated financial statements.
However, there is no assurance that any claim will not be combined into a collective or class action.
Indemnification
In connection with the merger of Seamless North America, LLC, Seamless Holdings Corporation and Grubhub Holdings Inc.
in August 2013, the Company agreed to indemnify Aramark Holdings Corporation for negative income tax consequences associated
with the October 2012 spin-off of Seamless Holdings Corporation that were the result of certain actions taken by the Company
through October 29, 2014, in certain instances subject to a $15.0 million limitation. Management is not aware of any actions that
would impact the indemnification obligation.
59
GRUBHUB INC.
Notes to Consolidated Financial Statements (Continued)
10. Debt
The following table summarizes the carrying value of the Company’s debt as of December 31, 2019:
Senior Notes
Term loan
Revolving loan
Total debt
Less current portion
Less unamortized deferred debt issuance
costs
Long-term debt
December 31, 2019 December 31, 2018
(in thousands)
$
$
$
500,000 $
—
—
500,000 $
—
(6,991 )
493,009 $
—
120,312
222,000
342,312
(6,250 )
(514 )
335,548
Senior Notes
On June 10, 2019, the Company’s wholly-owned subsidiary, Grubhub Holdings Inc., issued $500.0 million in aggregate
principal amount of 5.500% senior notes due July 1, 2027 (“Senior Notes”) in a private placement exempt from the registration
requirements of the Securities Act of 1933, as amended. Interest is payable on the Senior Notes semi-annually on January and July of
each year, beginning on January 1, 2020. The first interest payment of $15.4 million was made in December 2019. The net proceeds
from the sale of the Senior Notes were $494.4 million after deducting the initial purchasers’ discount and offering expenses. The
Company used $323.0 million of the proceeds from the Senior Notes offering to prepay and extinguish the term loan facility portion
of the Company’s existing credit facility and $17.3 million to pay down the outstanding balance of the revolving loan under the
existing credit facility. The remaining proceeds will be used for general corporate purposes.
The Senior Notes were issued pursuant to an indenture, dated June 10, 2019 (the “Indenture”), among Grubhub Holdings Inc.,
the guarantors party thereto and Wilmington Trust, National Association, as trustee. The Company has the option to redeem all or a
portion of the Senior Notes at any time on or after July 1, 2022 by paying 100.0% of the principal amount of the Senior Notes plus a
declining premium, plus accrued and unpaid interest to (but excluding) the redemption date. The premium declines from 2.750%
during the twelve months on and after July 1, 2022, to 1.833% during the twelve months on and after July 1, 2023, to 0.917% during
the twelve months on and after July 1, 2024, to zero on and after July 1, 2025. The Company may also redeem all or any portion of
the Senior Notes at any time prior to July 1, 2022, at a price equal to 100.0% of the aggregate principal amount thereof plus a make-
whole premium set forth in the Indenture and accrued and unpaid interest, if any. In addition, before July 1, 2022, the Company may
redeem up to 40% of the aggregate principal amount of the Senior Notes with the net proceeds of certain equity offerings at a
redemption price of 105.5% of the principal amount plus accrued and unpaid interest, if any, provided that certain conditions are met.
In the event of a Change of Control Triggering Event (as defined in the Indenture), the Company will be required to make an offer to
purchase the Senior Notes at a price equal to 101.0% of their principal amount, plus accrued and unpaid interest.
The Senior Notes are guaranteed on a senior unsecured basis by the Company and each of its existing and future wholly
owned domestic restricted subsidiaries that guarantees the credit facility or that guarantees certain of our other indebtedness or
indebtedness of a guarantor.
The Indenture contains customary covenants that, among other things, restrict the ability of the Company and the ability of
certain of its subsidiaries to incur additional debt or issue preferred shares; create liens on certain assets to secure debt; and
consolidate, merge, sell or otherwise dispose of all or substantially all of the Company’s assets. These covenants are subject to a
number of important exceptions and qualifications and also include customary events of default.
Credit Agreement
On February 6, 2019, the Company entered into an amended and restated credit agreement (the “Credit Agreement”) which
provides, among other things, for aggregate revolving loans up to $225 million and provided for term loans in an aggregate principal
amount of $325 million. The $325 million term loan portion of the Credit Agreement was extinguished on June 10, 2019. In addition
to the $225 million aggregate undrawn revolving loans under the Credit Agreement, of which $219.5 million was available as of
December 31, 2019, the Company may incur up to $250 million of incremental revolving or term loans pursuant to the terms and
conditions of the Credit Agreement. The credit facility under the Credit Agreement will be available to the Company until February
60
GRUBHUB INC.
Notes to Consolidated Financial Statements (Continued)
5, 2024. The Credit Agreement amended and restated the Company’s prior $350 million credit facility, which was due to expire on
October 9, 2022.
Under the Credit Agreement, borrowings bear interest, at the Company’s option, based on LIBOR or an alternate base rate
plus a margin. In the case of LIBOR loans the margin ranges between 1.125% and 1.750% and, in the case of alternate base rate
loans, between 0.125% and 0.75%, in each case, based upon the Company’s consolidated senior secured net leverage ratio (as
defined in the Credit Agreement). The Company is also required to pay a commitment fee on the undrawn portion available under the
revolving loan facility of between 0.150% and 0.275% per annum, based upon the Company’s consolidated senior secured net
leverage ratio.
The obligations under the Credit Agreement and the guarantees are secured by a lien on substantially all of the tangible and
intangible property of the Company and the domestic subsidiaries that are guarantors, and by a pledge of all of the equity interests of
the Company’s domestic subsidiaries, subject to certain exceptions set forth in the Credit Agreement.
The Credit Agreement contains customary covenants that, among other things, require the Company to satisfy certain financial
covenants and may restrict the Company’s ability to incur additional debt, pay dividends and make distributions, make certain
investments and acquisitions, create liens, transfer and sell material assets and merge or consolidate.
Other Information
During the year ended December 31, 2019, proceeds from the sale of the Senior Notes and cash on hand were used to pay
down the principal balance outstanding under the Credit Agreement of $342.3 million. As of December 31, 2019, the Company’s
outstanding debt consisted of $500.0 million in Senior Notes. There were no outstanding borrowings under the Credit Agreement as
of December 31, 2019. See Note 16, Fair Value Measurement, for the fair value of the Company’s Senior Notes as of December 31,
2019.
The Company was in compliance with the financial covenants of its debt facilities as of December 31, 2019. Additional
capacity under the Credit Agreement may be used for general corporate purposes, including funding working capital and future
acquisitions.
The Company capitalized $9.1 million of debt issuance costs during the year ended December 31, 2019 in connection with the
issuance of the Senior Notes and the amendment of the Credit Agreement. As of December 31, 2019, unamortized debt issuance
costs of $1.1 million related to the revolving loan facility and $7.0 million related to the Senior Notes were recorded as other assets
and as a reduction of long-term debt, respectively, on the consolidated balance sheets. As of December 31, 2018, total unamortized
debt issuance costs of $1.9 million were recorded as other assets and as a reduction of long-term debt on the consolidated balance
sheets in proportion to the borrowing capacities of the revolving and term loans.
Interest expense includes interest on outstanding borrowings, amortization of debt issuance costs and commitment fees on the
undrawn portion available under the credit facility. During the years ended December 31, 2019, 2018 and 2017, the Company
recognized interest expense of $24.3 million, $7.5 million, and $2.1 million, respectively. Interest expense for the year ended
December 31, 2019 included $1.9 million for the write-off of unamortized debt issuance costs upon extinguishment of the term loan
facility and the amendment of the Credit Agreement. The effective interest rate, including amortization of debt issuance costs and
commitment fees, for borrowings under the Company’s senior debt facilities for the years ended December 31, 2019, 2018 and 2017
was 5.18%, 3.82%, and 3.00%, respectively.
Future maturities of principal payments for amounts outstanding under the Company’s debt facilities as of December 31, 2019,
excluding potential early payments, were as follows:
2020
2021
2022
2023
2024
Thereafter
Total
$
$
(in thousands)
—
—
—
—
—
500,000
500,000
61
GRUBHUB INC.
Notes to Consolidated Financial Statements (Continued)
11. Stock-Based Compensation
In May 2015, the Company’s stockholders approved the Grubhub Inc. 2015 Long-Term Incentive Plan (as amended, the “2015
Plan”), pursuant to which the Compensation Committee of the Board of Directors may grant stock options, stock appreciation rights,
restricted stock awards, restricted stock units, performance awards and other stock-based and cash-based awards. Effective upon the
adoption of the 2015 Plan, no further grants were or will be made under the Company’s 2013 Omnibus Incentive Plan (the “2013
Plan”). In May 2019, the Company’s stockholders approved an amendment to the 2015 Plan which increased the aggregate number
of shares that may be issued under the 2015 Plan by 5,000,000 shares. As of December 31, 2019, there were 5,702,780 shares of
common stock authorized and available for issuance pursuant to awards granted under the 2015 Plan. No further grants will be made
under the assumed Tapingo and LevelUp incentive plans. The Board of Directors of the Company and committee or subcommittee of
the Board of Directors has discretion to establish the terms and conditions for grants, including, but not limited to, the number of
shares and vesting and forfeiture provisions.
The Company has granted non-qualified and incentive stock options, restricted stock units and restricted stock awards under its
incentive plans. The Company recognizes compensation expense based on estimated grant date fair values for all stock-based awards
issued to employees and directors, including stock options, restricted stock units and restricted stock awards. For all stock options
outstanding as of December 31, 2019, the exercise price of the stock options equals the fair value of the stock option on the grant
date. The stock options and restricted stock units vest over different lengths of time, but generally over 4 years, and are subject to
forfeiture upon termination of employment prior to vesting. The maximum term for stock options issued to employees under the 2015
Plan, the 2013 Plan and the assumed Tapingo and LevelUp incentive plans is 10 years, and they expire 10 years from the date of
grant. Compensation expense for stock options, restricted stock units and restricted stock awards is recognized ratably over the
vesting period.
The rights granted to the recipient of a restricted stock unit generally accrue over the vesting period. Participants holding
restricted stock units are not entitled to any ordinary cash dividends paid by the Company with respect to such shares. The Company
does not expect to pay any dividends in the foreseeable future.
Stock-based Compensation Expense
The total stock-based compensation expense related to all stock-based awards was $72.9 million, $55.3 million and $32.7
million during the years ended December 31, 2019, 2018 and 2017, respectively. As of December 31, 2019, $211.5 million of total
unrecognized stock-based compensation expense is expected to be recognized over a weighted-average period of 2.8 years.
Excess tax benefits reflect the total realized value of the Company’s tax deductions from individual stock option exercise
transactions and the vesting of restricted stock awards and restricted stock units in excess of the deferred tax assets that were
previously recorded. During the years ended December 31, 2019, 2018, and 2017, the Company recognized excess tax benefits from
stock-based compensation of $2.0 million, $18.0 million, and $7.1 million, respectively, within income tax (benefit) expense in the
consolidated statements of operations and within cash flows from operating activities on the consolidated statements of cash flows.
The Company capitalized stock-based compensation expense as website and software development costs of $15.9 million, $9.0
million and $4.5 million for the years ended December 31, 2019, 2018 and 2017, respectively.
Stock Options
The Company granted 333,929, 347,891 and 618,899 stock options under the 2015 Plan during the years ended December 31,
2019, 2018 and 2017, respectively. In 2018, the Company also assumed 327,752 unvested ISOs with the acquisitions of LevelUp and
Tapingo. The fair value of each stock option award was estimated based on the assumptions below as of the grant date using the
Black-Scholes-Merton option pricing model. Since the first quarter of 2018, expected volatility has been based on the historical and
implied volatilities of the Company’s own common stock. The Company uses historical data to estimate option exercises and
employee terminations within the valuation model. Separate groups of employees that have similar historical exercise behavior are
considered separately for valuation purposes. The expected term calculation for option awards considers a combination of the
Company’s historical and estimated future exercise behavior. The risk-free rate for the period within the contractual life of the option
is based on the U.S. Treasury yield curve in effect at the time of grant.
62
GRUBHUB INC.
Notes to Consolidated Financial Statements (Continued)
The assumptions used to determine the fair value of the stock options granted during the years ended December 31, 2019, 2018
and 2017 were as follows:
Weighted-average fair value options granted
Average risk-free interest rate
Expected stock price volatility (a)
Dividend yield
Expected stock option life (years)
Year Ended December 31,
2018
2019
2017
$
30.91 $
2.42 %
48.3 %
None
4.00
66.19 $
2.61 %
46.4 %
None
3.51 (b)
15.19
1.65 %
48.7 %
None
4.00
(a) Prior to the first quarter of 2018, the expected stock price volatility was based on a combination of the
historical and implied volatilities of comparable publicly-traded companies and the historical
volatility of the Company’s own common stock due to its limited trading history as there was no
active external or internal market for the Company’s common stock prior to the Company’s initial
public offering in April 2014.
(b) The expected term for Tapingo and LevelUp assumed ISO awards was calculated based on their
________ ______ ______ ______ ______ ______ ______ ______ ______ ______ ______ ______ ______ ______ ______ ______ ______ ______ ______
respective remaining vesting periods as of the acquisition date.
Stock option awards as of December 31, 2019 and 2018, and changes during the year ended December 31, 2019, were as
follows:
Options
Weighted-Average
Exercise Price
Outstanding at December 31, 2018
Granted
Forfeited
Exercised
Outstanding at December 31, 2019
Vested and expected to vest at December 31, 2019
Exercisable at December 31, 2019
2,650,839 $
333,929
(30,086 )
(204,407 )
2,750,275
2,749,867
1,993,867 $
Aggregate
Intrinsic
Value
(thousands)
33.13 $ 120,977
76.98
83.05
21.87
38.74
38.73
28.75 $
50,737
50,737
46,412
Weighted-
Average
Exercise
Term
(years)
6.87
6.28
6.28
5.54
The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between the fair value
of the common stock and the exercise price, multiplied by the number of in-the-money options) that would have been received by the
option holders had all option holders exercised their in-the-money options on each date. This amount will change in future periods
based on the fair value of the Company’s stock and the number of options outstanding. The aggregate intrinsic value of awards
exercised during the years ended December 31, 2019, 2018 and 2017 was $10.4 million, $38.7 million and $19.5 million,
respectively.
The Company recorded compensation expense for stock options of $16.1 million, $17.7 million and $11.8 million for the years
ended December 31, 2019, 2018 and 2017, respectively. As of December 31, 2019, total unrecognized compensation cost, adjusted
for estimated forfeitures, related to non-vested stock options was $24.5 million and is expected to be recognized over a weighted-
average period of 2.2 years.
63
GRUBHUB INC.
Notes to Consolidated Financial Statements (Continued)
Restricted Stock Units
Non-vested restricted stock units as of December 31, 2019 and 2018, and changes during the year ended December 31, 2019
were as follows:
Restricted Stock Units
Outstanding at December 31, 2018
Granted
Forfeited
Vested
Cancelled
Outstanding at December 31, 2019
Shares
2,328,857 $
2,368,732
(579,612 )
(969,595 )
(52,357 )
3,096,025 $
Weighted-Average
Grant Date Fair
Value
67.33
69.82
70.30
60.96
85.39
70.62
Compensation expense related to restricted stock units was $56.8 million, $37.6 million and $20.9 million during the years
ended December 31, 2019, 2018 and 2017, respectively. The aggregate fair value as of the vest date of restricted stock units that
vested during years ended December 31, 2019, 2018, and 2017 was $64.6 million, $96.3 million and $27.3 million, respectively. As
of December 31, 2019, $187.0 million of total unrecognized compensation cost, adjusted for estimated forfeitures, related to
3,074,923 non-vested restricted stock units expected to vest with weighted-average grant date fair values of $70.71 is expected to be
recognized over a weighted-average period of 2.9 years. The fair value of these awards was determined based on the Company’s
stock price at the grant date and assumes no expected dividend payments through the vesting period.
12. Income Taxes
The Company files income tax returns in the U.S. federal, the United Kingdom (“U.K.”), Israel and various state jurisdictions.
For the years ended December 31, 2019, 2018 and 2017, the income tax provision was comprised of the following:
$
Current:
Federal
State
Foreign
Total current
Deferred:
Federal
State
Foreign
Total deferred
Total income tax (benefit) expense
$
2019
Year Ended December 31,
2018
(in thousands)
2017
328 $
(1,139 )
327
(484 )
(5,851 )
(1,791 )
(84 )
(7,726 )
(8,210 ) $
(2,934 ) $
3,827
335
1,228
16,852
4,721
271
21,844
2,608
(884 )
—
1,724
2,952 $
(30,794 )
(385 )
—
(31,179 )
(9,335 )
Income (loss) before provision for income taxes for the years ended December 31, 2019, 2018 and 2017, was as follows:
Domestic source
Foreign source
Income (loss) before provision for income taxes
2019
Year Ended December 31,
2018
(in thousands)
2017
$
$
(29,227 ) $
2,451
(26,776 ) $
80,878 $
555
81,433 $
88,357
1,291
89,648
64
GRUBHUB INC.
Notes to Consolidated Financial Statements (Continued)
The following is a reconciliation of income taxes computed at the U.S. federal statutory rate to the income taxes reported in the
consolidated statements of operations for the years ended December 31, 2019, 2018 and 2017:
Income tax expense (benefit) at statutory rate
Excess compensation
State income taxes
Effect of federal rate change
Stock-based compensation
Research and development tax credit
Uncertain tax position
Foreign rate differential
Meals and entertainment
Unremitted earnings tax
All other
Total income tax (benefit) expense
2019
Year Ended December 31,
2018
(in thousands)
2017
(5,623 ) $
1,786
(2,189 )
—
145
(2,995 )
67
(18 )
659
—
(42)
(8,210 ) $
17,101 $
1,753
1,248
—
(15,924 )
(1,470 )
(545 )
(57 )
292
—
554
2,952 $
31,377
—
5,011
(36,768 )
(7,072 )
(800 )
(55 )
(203 )
286
363
(1,474 )
(9,335 )
$
$
On December 22, 2017, the U.S. legislature enacted the Tax Act resulting in significant modifications to the tax law. The
Company completed its determination of the accounting effects of the Tax Act in the period it was enacted. The Tax Act reduced the
corporate income tax rate from 35% to 21%, subjected certain foreign earnings on which U.S. income tax was previously deferred to
a one-time transition tax, as well as other changes. As a result of the Tax Act, the Company incurred an incremental income tax
benefit of $34.1 million during the year ended December 31, 2017, which consisted primarily of the remeasurement of deferred tax
assets and liabilities at the 21% corporate income tax rate and the one-time transition tax on accumulated foreign earnings of $0.4
million.
The tax effects of temporary differences giving rise to deferred income tax assets and liabilities as of December 31, 2019 and
2018 were as follows:
Deferred tax assets:
Loss and credit carryforwards
Accrued expenses
Stock-based compensation
Lease accounting
Fixed assets - state
Total deferred tax assets
Valuation allowance
Net deferred tax assets
Deferred tax liabilities:
Fixed assets
Intangible assets
Prepaid expenses
Accrued expenses
Total deferred tax liabilities
Net deferred tax liability
As of December 31,
2019
2018
(in thousands)
$
84,153 $
—
8,302
5,817
2,514
100,786
(15,655 )
85,131
72,466
4,128
8,832
—
2,295
87,721
(23,840 )
63,881
(8,802 )
(99,870 )
(882 )
(2,740 )
(112,294 )
(27,163 ) $
(8,607 )
(101,451 )
(206 )
—
(110,264 )
(46,383 )
$
The Company classified its net deferred tax liabilities as long-term liabilities on the consolidated balance sheets as of
December 31, 2019 and 2018.
A partial valuation reserve of $13.2 million and $8.4 million was recorded as of December 31, 2019 and 2018, respectively,
against certain state-only credits that have a short carryover period for which the Company believes that a portion of the credit
carryovers will more likely than not expire before they are utilized. The Company also maintains a partial valuation allowance of
65
GRUBHUB INC.
Notes to Consolidated Financial Statements (Continued)
$2.5 million on Federal and state net operating losses (“NOLs”) as of December 31, 2019 as it is more likely than not that these will
not be utilized. The Company had previously recorded a full valuation allowance as of December 31, 2018 of $15.4 million on Israeli
NOLs that were not expected to be utilized prior to a tax restructuring during the year ended December 31, 2019.
The Tax Act generally allows companies to repatriate future foreign source earnings without incurring additional U.S. taxes by
providing a 100% exemption for the foreign source portion of dividends from certain foreign subsidiaries. As a result, the Company
plans to repatriate cash from its foreign subsidiaries to the U.S. in the future. The Company estimated no additional tax liability as
there are no applicable withholding taxes for the repatriation of unremitted earnings of its foreign subsidiaries.
The Company had the following tax loss and credit carryforwards as of December 31, 2019 and 2018:
$
U.S. federal loss carryforwards
U.S. state and local loss carryforwards
Israeli loss carryforward
Illinois Edge Credits(a)
Federal research and development credit
State research and development credit
(a) Amounts are before the federal benefit of state tax.
________ ______ ______ ______ ______ ______ ______ ______ ______ ______ ______ ______ ______ ______ ______ ______
2019
2018
(in thousands)
34,268 $
21,258
15,204
15,523
5,359
1,401
29,853
18,147
15,382
11,992
1,986
1,710
Beginning
Year of
Expiration
2027
2027
Indefinite
2018
2028
2018
The Company’s tax returns are subject to the normal statute of limitations, three years from the filing date for federal income
tax purposes. The federal and state statute of limitations generally remain open for years in which tax losses are generated until three
years from the year those losses are utilized. Under these rules, the 2006 and later year NOLs of Slick City Media, Inc. are still
subject to audit by the IRS and state and local jurisdictions. Also, the 2007 and later year NOLs of Grubhub Holdings Inc. and its
acquired businesses are still subject to audit by the IRS and state and local jurisdictions. The December 31, 2016 and later period
U.K. returns of Seamless Europe Ltd. are subject to examination by the U.K. tax authorities. The December 31, 2015 and later period
Israeli returns of Tapingo Ltd. are subject to exam by the Israeli tax authorities.
The Company is subject to taxation in the U.S. federal and various state jurisdictions. Significant judgment is required in
determining the provision for income taxes and recording the related income tax assets and liabilities. The Company’s practice for
accounting for uncertainty in income taxes is to recognize the financial statement benefit of a tax position only after determining that
the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-
likely-than-not criteria, the amount recognized in the financial statements is the largest benefit that has a greater than 50% likelihood
of being realized upon ultimate settlement with the relevant tax authority.
The following table summarizes the Company’s unrecognized tax benefit activity during the years ended December 31, 2019
and 2018, excluding the related accrual for interest:
Balance at beginning of period
Reductions for tax positions taken in prior years
Additions for tax positions taken in the current year
Balance at end of period
$
$
As of December 31,
2019
2018
(in thousands)
751 $
—
67
818 $
2,864
(2,260 )
147
751
Deferred tax assets that relate to the potential settlement of these unrecognized tax benefits were included in the net deferred
tax liabilities on the consolidated balance sheets as of December 31, 2019 and 2018. The reserve relates to research and development
credits.
The Company records interest and penalties, if any, as a component of its income tax (benefit) expense in the consolidated
statements of operations. No interest expense or penalties were recognized during the years ended December 31, 2019 and 2018.
Interest expense of less than $0.1 million and no penalties were recognized during the year ended December 31, 2017.
66
GRUBHUB INC.
Notes to Consolidated Financial Statements (Continued)
13. Stockholders’ Equity
As of December 31, 2019 and 2018, the Company was authorized to issue two classes of stock: common stock and preferred
stock.
Common Stock
Each holder of common stock has one vote per share of common stock held on all matters that are submitted for stockholder
vote. At December 31, 2019 and 2018, there were 500,000,000 shares of common stock authorized. At December 31, 2019 and 2018,
there were 91,576,060 and 90,756,548 shares of common stock issued and outstanding, respectively. The Company did not hold
any shares as treasury shares as of December 31, 2019 and 2018.
On April 25, 2018, the Company issued and sold 2,820,464 shares of the Company’s common stock to Yum Restaurant
Services Group, LLC (the “Investor”), a wholly owned subsidiary of Yum! Brands, Inc., for an aggregate purchase price of $200
million pursuant to an investment agreement dated February 7, 2018, by and between the Company and the Investor. The Company
has used and expects to use the proceeds for general corporate purposes.
On January 22, 2016, the Company’s Board of Directors approved a program (the “Repurchase Program”) that authorizes the
repurchase of up to $100 million of the Company’s common stock exclusive of any fees, commissions or other expenses relating to
such repurchases through open market purchases or privately negotiated transactions at the prevailing market price at the time of
purchase. The Repurchase Program was announced on January 25, 2016. Repurchased stock may be retired or held as treasury
shares. The repurchase authorizations do not obligate the Company to acquire any particular amount of common stock or adopt any
particular method of repurchase and may be modified, suspended or terminated at any time at management’s discretion. Repurchased
and retired shares will result in an immediate reduction of the outstanding shares used to calculate the weighted-average common
shares outstanding for basic and diluted net income per share at the time of the transaction. During the years ended December 31,
2019 and 2018, the Company did not repurchase any shares of its common stock. Since inception of the program, the Company has
repurchased and retired 724,473 shares of its common stock at a weighted-average share price of $20.37, or an aggregate of $14.8
million.
Preferred Stock
The Company was authorized to issue 25,000,000 shares of preferred stock as of December 31, 2019 and 2018. There were no
issued or outstanding shares of preferred stock as of December 31, 2019 and 2018.
14. Retirement Plan
Beginning February 1, 2012, the Company has maintained a defined contribution plan for employees. The plan is qualified
under section 401(k) of the Internal Revenue Code. The Company may also make discretionary profit-sharing contributions as
determined by the Company’s Board of Directors. The Company matched 100% of the first 3% of employees’ contributions of
eligible compensation and 50% of the next 2% of employees’ contributions of eligible compensation during the years ended
December 31, 2019, 2018 and 2017 and recognized matching contributions expense of $5.1 million, $3.5 million and $2.3 million,
respectively.
15. Earnings Per Share Attributable to Common Stockholders
Basic earnings per share is computed by dividing net income (loss) attributable to common stockholders by the weighted-
average number of common shares outstanding during the period without consideration for common stock equivalents. Diluted net
income per share attributable to common stockholders is computed by dividing net income by the weighted-average number of
common shares outstanding during the period and potentially dilutive common stock equivalents, including stock options and
restricted stock units, except in cases where the effect of the common stock equivalent would be antidilutive. Potential common stock
equivalents consist of common stock issuable upon exercise of stock options and vesting of restricted stock units using the treasury
stock method. For periods of net loss, basic and diluted earnings per share are the same as the effect of the assumed exercise of stock
options and vesting of restricted stock units is anti-dilutive.
The sale of 2,820,464 shares of the Company’s common stock to the Investor on April 25, 2018 resulted in an immediate
increase in the outstanding shares used to calculate the weighted-average common shares outstanding for the year ended December
31, 2018 (see Note 13, Stockholders' Equity).
67
GRUBHUB INC.
Notes to Consolidated Financial Statements (Continued)
The following table presents the calculation of basic and diluted net income (loss) per share attributable to common
stockholders for the years ended December 31, 2019, 2018 and 2017:
Year Ended December 31,
2019
2017
2018
(in thousands, except per share data)
Basic earnings (loss) per share:
Net income (loss) attributable to common stockholders (numerator) $
Shares used in computation (denominator)
(18,566 ) $
78,481 $
98,983
Weighted-average common shares outstanding
Basic earnings (loss) per share
Diluted earnings (loss) per share:
91,247
(0.20 ) $
89,447
0.88 $
86,297
1.15
$
Net income (loss) attributable to common stockholders (numerator) $
Shares used in computation (denominator)
(18,566 ) $
78,481 $
98,983
Weighted-average common shares outstanding
91,247
89,447
86,297
Effect of dilutive securities:
Stock options
Restricted stock units
Weighted-average diluted shares
Diluted earnings (loss) per share
—
—
91,247
(0.20 ) $
1,601
1,306
92,354
0.85 $
1,059
826
88,182
1.12
$
The number of shares of common stock underlying stock-based awards excluded from the calculation of diluted net income
(loss) per share attributable to common stockholders because their effect would have been antidilutive for the years ended December
31, 2019, 2018 and 2017 were as follows:
Anti-dilutive shares underlying stock-based awards:
Stock options
Restricted stock units
Year Ended December 31,
2019
2018
(in thousands)
2017
2,750
3,096
216
223
—
36
16. Fair Value Measurement
Certain assets and liabilities are required to be recorded at fair value on a recurring basis. Accounting standards define fair
value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most
advantageous market in an orderly transaction between market participants on the measurement date. The standards also establish a
fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs
when measuring fair value.
The accounting guidance for fair value measurements prioritizes valuation methodologies based on the reliability of the inputs
in the following three-tier value hierarchy:
Level 1
Quoted prices in active markets for identical assets or liabilities.
Level 2
Level 3
Assets and liabilities valued based on observable market data for similar instruments, such as quoted prices for
similar assets or liabilities.
Unobservable inputs that are supported by little or no market activity; instruments valued based on the best
available data, some of which is internally developed, and considers risk premiums that a market participant would
require.
The Company applied the following methods and assumptions in estimating its fair value measurements. The Company’s
commercial paper, investments in corporate bonds, certain money market funds and Senior Notes are classified as Level 2 within the
fair value hierarchy because they are valued using inputs other than quoted prices in active markets that are observable directly or
indirectly. The fair value of the Company’s outstanding borrowings under the Credit Agreement as of December 31, 2018 was
classified as Level 3 within the fair value hierarchy because it was valued using an income approach, which utilized a discounted
68
GRUBHUB INC.
Notes to Consolidated Financial Statements (Continued)
cash flow technique that considered the credit profile of the Company. Accounts receivable, restaurant food liability and accounts
payable approximate fair value due to their generally short-term maturities.
The following table presents the fair value, for disclosure purposes only, and carrying value of the Company’s assets and
liabilities that are recorded at other than fair value as of December 31, 2019 and 2018:
Assets
Money market funds
Commercial paper
Corporate bonds
Total assets
Liabilities
Long-term debt, including
current maturities
Total liabilities
$
$
$
$
December 31, 2019
December 31, 2018
Level 2
Carrying Value
Level 2
(in thousands)
Level 3
Carrying
Value
28 $
64,290
3,606
67,924 $
28 $
64,519
3,604
68,151 $
61 $
25,322
1,620
27,003 $
— $
—
—
— $
61
25,431
1,620
27,112
467,500 $
467,500 $
500,000 $
500,000 $
— $ 342,745 $ 342,312
— $ 342,745 $ 342,312
The Company is required to record certain assets and liabilities at fair value on a nonrecurring basis, generally as a result of
acquisitions. See Note 4, Acquisitions, for further discussion of the fair value of assets and liabilities associated with acquisitions.
69
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders of
Grubhub Inc.
Chicago, Illinois
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Grubhub Inc. (the “Company”) as of December 31, 2019 and
2018, the related consolidated statements of operations, comprehensive income (loss), changes in stockholders’ equity, and cash flows
for each of the three years in the period ended December 31, 2019, and the related notes (collectively referred to as the “financial
statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of
December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period ended December
31, 2019, in conformity with accounting principles generally accepted in the United States of America.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2019, based on criteria established in Internal
Control – Integrated Framework: (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”),
and our report dated February 28, 2020, expressed an unqualified opinion.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the
Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or
fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due
to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used
and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe
that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that
were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are
material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication
of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by
communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures
to which they relate.
Valuation of Acquired Intangible Assets
As disclosed in Note 4 to the financial statements, during the year ended December 31, 2019, the Company finalized the purchase
price allocation for two 2018 acquisitions with aggregate consideration of $521.5 million. In 2018, the Company acquired all of the
outstanding equity of SCVNGR, Inc. d/b/a LevelUp (“LevelUp”) for consideration of $369.4 million and Tapingo Ltd. (“Tapingo”) for
consideration of $152.1 million. These acquisitions resulted in the Company recognizing $57.5 million in acquired intangible assets,
comprised of $36.5 million of acquired intangible assets from the LevelUp acquisition and $21.0 million of intangible assets acquired
from the Tapingo acquisition.
As described in Note 2 Summary of Significant Accounting Policies, Intangible Assets and Note 4 Acquisitions, Additional
information; the valuation of acquired intangible assets is based on the estimated fair values at acquisition as measured by a combination
of income, cost, and market approaches. The valuation of the acquired intangible assets involved a significant level of judgment and
estimation by management including the selection of valuation models and the estimation of key inputs for the various valuation models
employed, such as discount rates, estimated future cash flows, initial developer costs, expected profits, royalty rates, rates of attrition,
and expected rates of return. Due to the complexity of these estimates, the Company engaged a specialist to assist in the valuation of
70
acquired intangible assets. We considered auditing the valuation of acquired intangible assets for these acquisitions to be a critical audit
matter, because it involved a high degree of subjectivity in evaluating management’s estimates and judgments as well as the use of
valuation specialists.
Our audit procedures related to the valuation of acquired intangible assets included the following:
• Tested the design and operating effectiveness of the Company’s internal controls over the accounting for acquired intangible
assets, including the appropriateness of valuation methods selected and key inputs used in the valuations.
• Evaluated the significant assumptions and methods used in developing the fair value estimates including assessing the
appropriateness of (1) the methods used to value the acquired intangible assets, and (2) the key inputs used in valuing the
acquired intangible assets, including discount rates, estimated future cash flows, initial developer costs, expected profits, royalty
rates, rates of attrition, and expected rates of return.
• Utilized a valuation specialist to assist in the evaluation of the appropriateness of the valuation models and certain assumptions
applied in the valuation of the acquired intangible assets.
Capitalization of Website and Software Development Costs
The Company’s business is predominantly based upon revenue derived from connecting diners and restaurants through
technology to create a takeout marketplace for restaurant pick-up and delivery orders and, as a result, the Company invests in website
and software development. As described in Note 2 Summary of Significant Accounting Policies, Website and Software Development
Costs and Note 7 Property and Equipment, significant internal and external costs incurred during the application development stage of
website and software development, as well as certain enhancement costs incurred in the post- implementation phase that are determined
to be substantial upgrades, are capitalized if determined by management to be direct and incremental thereto. During the year ended
December 31, 2019, the Company capitalized $64.5 million of website and software development costs.
The capitalization of website and software development costs involves a significant amount of judgment and estimation by
management. Evaluating website and software development costs for capitalization involves assessing a variety of subjective factors
and estimates, such as distinguishing between costs incurred during the preliminary project period and those incurred during the
development stages of an application. Further, management applies significant judgment to identify website and software development
costs that meet the capitalization criteria of being significant, and direct and incremental to the application development. In addition, the
determination of capitalizable website and software development costs involves complexity in the aggregation and evaluation of
significant amounts of data.
We considered auditing the amount of capitalized website and software development costs to be a critical audit matter, because
it involved a significant amount of judgment and estimation by management as well as complexity in the aggregation and evaluation of
significant amounts of data and thus required the application of significant auditor judgment.
Our audit procedures related to the capitalized website and software development costs included the following procedures:
• Tested the design and operating effectiveness of internal controls over the identification and calculation of website and software
development costs to be capitalized as well as the completeness and accuracy of reports used in management’s calculation.
• Tested the completeness and accuracy of reports used in management’s calculations of capitalized website and software
development costs, including testing mathematical accuracy.
• Evaluated individual costs incurred to assess whether website and software development costs were properly capitalized based
upon the nature and stage of the work performed and whether the requisite capitalization criteria were met.
• Tested capitalized costs in the post-implementation phase to determine if the costs related to substantial upgrades and
•
enhancements and met the criteria for capitalization.
Performed corroborative interviews with Company personnel involved in website and software development regarding the
nature and functionality of costs incurred.
We have served as the Company’s auditor since 2013.
Oak Brook, Illinois
February 28, 2020
/s/ Crowe LLP
71
SELECTED QUARTERLY FINANCIAL DATA
(UNAUDITED)
Unless otherwise stated, the discussion below reflects the results of acquired businesses from the relevant acquisition dates in
2018. In the opinion of management, the data has been prepared on the same basis as the audited financial statements included in this
Annual Report on Form 10-K, and reflects all necessary adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of this data. The results of historical periods are not necessarily indicative of the results of operations of any future
period. You should read this data together with the financial statements and the related notes included elsewhere in this Annual
Report on Form 10-K.
December 31,
2019
September 30,
2019
June 30,
2019
Three Months Ended
March 31,
2019
December 31,
2018
September 30,
2018
June 30,
2018
March 31,
2018
(in thousands, except per share data)(unaudited)
$ 341,270 $ 322,053 $ 325,058 $ 323,770 $ 287,721 $ 247,225 $ 239,741 $ 232,570
190,328
86,100
161,387 162,406 161,350 144,082
69,877
71,617 74,128 78,454
111,511 102,445 96,283
49,426 46,231 48,756
29,164
28,018
32,488
366,098
(24,828 )
6,189
29,483 29,400 27,250
25,329 25,784 22,787
30,649 27,223 25,089
24,972
27,393
24,153
318,465 318,941 314,930 290,477
(2,756 )
2,163
6,117
5,467
3,588
6,025
8,840
2,812
21,258 18,717 17,331
22,195 18,180 17,697
20,987 19,849 20,951
225,377 205,422 201,018
21,848 34,319 31,552
1,022
337
8
(31,017 )
(3,299 )
(2,437 )
(3,447 )
650
(602 )
6,028
(862 )
(4,919 )
231
21,511 34,311 30,530
(236 )
(1,234 )
4,191
$
(27,718 ) $
1,010 $
1,252 $ 6,890 $
(5,150 ) $
22,745 $ 30,120 $ 30,766
Revenues
Costs and expenses:
Operations and support
Sales and marketing
Technology (exclusive of
amortization)
General and administrative
Depreciation and amortization
Total costs and expenses
Income (loss) from operations
Interest expense - net
Income (loss) before provision
for
income taxes
Income tax (benefit) expense
Net income (loss) attributable to
common stockholders
Net income (loss) per share
attributable
to common stockholders(a):
Basic
Diluted
$
$
(0.30 ) $
(0.30 ) $
0.01 $
0.01 $
0.01 $
0.01 $
0.08 $
0.07 $
(0.06 ) $
(0.06 ) $
0.25 $
0.24 $
0.34 $
0.33 $
0.35
0.34
(a)
Full year amounts may not equal the sum of the quarters due to rounding
For a discussion of the significant changes in our operating results for the year ended December 31, 2019, please refer to the section
titled “Operations Review” in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of
Operations” in this Annual Report on Form 10-K.
•
•
During the three months ended March 31, 2019, June 30, 2019, September 30, 2019 and December 31, 2019, the Company
recognized acquisition-related and non-recurring restructuring costs of $0.5 million, $1.3 million, $1.3 million and $1.0 million,
respectively, within general and administrative expenses in the consolidated statements of operations
During the three months ended March 31, 2018, June 30, 2018, September 30, 2018 and December 31, 2018, the Company
recognized acquisition-related and non-recurring restructuring costs of $1.3 million, $1.3 million, $3.0 million and $2.0 million,
respectively, within general and administrative expenses in the consolidated statements of operations.
72
Key business metrics include transactions placed on the Platform where the Company provides marketing services to generate
orders. The Platform excludes transactions where the Company exclusively provides technology or fulfillment services. Our key
business metrics were as follows for the periods presented:
December 31,
2019
September 30,
2019
June 30,
2019
March 31,
2019
December 31,
2018
September 30,
2018
June 30,
2018
March 31,
2018
Three Months Ended
Active Diners
Daily Average Grubs
Gross Food Sales (in
millions)
(unaudited)
22,621,000 21,197,000 20,288,000 19,286,000 17,688,000 16,379,000 15,581,000 15,078,000
436,900
502,600
521,000
457,300
467,500
423,200
416,000
488,900
$
1,552.0 $
1,400.0 $
1,459.3 $
1,502.3 $
1,376.9 $
1,214.5 $
1,220.4 $
1,245.0
•
•
•
Active Diners are the number of unique diner accounts from which an order has been placed in the past twelve months through the Company’s
Platform.
Daily Average Grubs are calculated as the number of orders placed on the Platform divided by the number of days for a given period.
Gross Food Sales are the total value of food, beverages, taxes, prepaid gratuities, and any delivery fees processed through the Company’s
Platform. The Company includes all revenue generating orders placed on the Platform in this metric; however, revenues are recognized on a
net basis for the Company’s commissions from the transaction, which are a percentage of the total Gross Food Sales for such transaction.
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A.
Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As required by Rule 13a-15(b) and Rule 15d-15(b) of the Exchange Act, the Company’s management, including the Chief
Executive Officer and Chief Financial Officer, is responsible for establishing and maintaining effective disclosure controls and
procedures, as defined under Rules 13a-15(e) and 15d-15(e) of the Exchange Act. As of December 31, 2019, an evaluation was
performed under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on that
evaluation, the Chief Executive Officer and Chief Financial Officer concluded that disclosure controls and procedures as of
December 31, 2019 were effective in ensuring information required to be disclosed in the Company’s SEC reports was recorded,
processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information was
accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as
appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There have not been any changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and
15d-15(f) under the Exchange Act) that occurred during the quarter ended December 31, 2019 that has materially affected, or is
reasonably likely to materially affect, the Company’s internal control over financial reporting.
Management’s Report and Attestation Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in
Rules 13a-15(f) and 15d-15(f) under the Exchange Act).
Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2019. Our
management based this assessment on criteria for effective internal control over financial reporting described in the “Internal Control
– Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Based on this assessment, our management determined that, as of December 31, 2019, the Company maintained effective
internal control over financial reporting.
Crowe LLP, our independent registered public accounting firm, who has audited the consolidated financial statements of the
Company included in this Annual Report on Form 10-K, and as part of the audit, has issued an attestation report on the effectiveness
of our internal control over financial reporting as of December 31, 2019.
73
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders of
Grubhub Inc.
Chicago, Illinois
Opinion on Internal Control over Financial Reporting
We have audited Grubhub Inc.’s (the “Company”) internal control over financial reporting as of December 31, 2019, based on
criteria established in Internal Control – Integrated Framework: (2013) issued by the Committee of Sponsoring Organizations of the
Treadway Commission (“COSO”). In our opinion, the Company maintained, in all material respects, effective internal control over
financial reporting as of December 31, 2019, based on criteria established in Internal Control – Integrated Framework: (2013) issued
by COSO.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(“PCAOB”), the consolidated balance sheets of the Company as of December 31, 2019 and 2018, the related consolidated statements
of operations, comprehensive income (loss), changes in stockholders’ equity, and cash flows for each of the years in the three-year
period ended December 31, 2019, and the related notes (collectively referred to as the "financial statements") and our report dated
February 28, 2020 expressed an unqualified opinion.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report and
Attestation Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s
internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules
and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material
respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial
reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of
internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in
the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the
assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being
made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a
material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Crowe LLP
Oak Brook, Illinois
February 28, 2020
74
Item 9B.
Other Information
None.
75
PART III.
Item 10.
Directors, Executive Officers and Corporate Governance
The information required by this Item 10 will be contained in the Company’s definitive proxy statement to be filed with the SEC
in connection with its 2020 Annual Meeting of Stockholders (the “2020 Proxy Statement”), which is expected to be filed not later than
120 days after the end of the Company’s fiscal year ended December 31, 2019, and is incorporated herein by reference.
Code of Conduct. The Company has adopted a code of business conduct and ethics (the “Code of Conduct”) that applies to all
employees, officers and directors, including the principal executive officer, principal financial officer and principal accounting officer.
The Code of Conduct is available on the Company’s website at investors.grubhub.com under “Corporate Governance.” The Company
intends to post on its website all disclosures that are required by law or NYSE listing rules regarding any amendment to, or a waiver
of, any provision of the Code of Conduct for the principal executive officer, principal financial officer, principal accounting officer or
controller, or persons performing similar functions.
Item 11.
Executive Compensation
The information required by this Item 11 will be contained in the 2020 Proxy Statement, and is incorporated herein by reference.
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this Item 12 will be contained in the 2020 Proxy Statement, and is incorporated herein by reference.
Item 13.
Certain Relationships and Related Transactions and Director Independence
The information required by this Item 13 will be contained in the 2020 Proxy Statement, and is incorporated herein by reference.
Item 14.
Principal Accountant Fees and Services
The information required by this Item 14 will be contained in the 2020 Proxy Statement, and is incorporated herein by reference.
76
PART IV.
Item 15.
Exhibits, Financial Statement Schedules
(a)
The following documents are filed as part of this report:
1.
Financial Statements
Consolidated Statements of Operations for the years ended December 31, 2019, 2018 and 2017
Consolidated Statements of Comprehensive Income for the years ended December 31, 2019, 2018 and 2017
Consolidated Balance Sheets as of December 31, 2019 and 2018
Consolidated Statements of Cash Flows for the years ended December 31, 2019, 2018 and 2017
Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2019, 2018 and 2017
Notes to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
Quarterly Financial Data
2.
Financial Statement Schedules
The schedules for which provision is made in the applicable accounting regulations of the SEC are not required under the
related instructions or are inapplicable and, therefore, have been omitted.
(b)
Exhibits
See Item 15(b) below for a complete list of Exhibits to this report.
77
Description
Exhibit
No.
3.1 Amended and Restated Certificate of
Incorporation of Grubhub Inc.
3.2 Amended and Restated By-laws of Grubhub Inc.
4.1 Description of Securities of the Registrant
4.2 Form of common stock certificate of the
4.3
Registrant.
Indenture, dated June 10, 2019, among Grubhub
Holdings Inc., the guarantors party thereto and
Wilmington Trust, National Association, as
trustee.
4.4 Form of Senior Note
10.1 Registration Rights Agreement, dated August 8,
2013 by and among Grubhub Inc. (f/k/a Grubhub
Seamless Inc. f/k/a Seamless Grubhub Holdings
Inc.) and certain stockholders listed therein.
10.2* Employment Agreement between Grubhub
Holdings Inc. (f/k/a Grubhub, Inc.) and Matthew
Maloney, dated as of May 19, 2013.
10.3* Employment Agreement between Grubhub
Holdings Inc. (f/k/a Grubhub, Inc.) and Matthew
Maloney, dated as of March 9, 2009.
10.4* Employment Agreement between Grubhub
Holdings Inc. (f/k/a Grubhub, Inc.) and Adam
DeWitt, dated as of May 19, 2013.
10.5* Employment Offer Letter between Grubhub
Holdings Inc. (f/k/a Grubhub, Inc.) and Adam
DeWitt, dated October 17, 2011.
EXHIBITS
Incorporated by Reference
Form
10-Q 001-36389
File No.
Exhibit
3.1
Filing Date
August 7, 2014
10-Q 001-36389
3.2
August 7, 2014
S-1/A
8-K
333-
194219
001-36389
4.1
4.1
March 20, 2014
June 10, 2019
Filed
Herewith
X
8-K
S-1/A
001-36389
333-
194219
4.2
10.1
June 10, 2019
March 14, 2014
S-1/A
S-1/A
S-1/A
S-1/A
333-
194219
333-
194219
333-
194219
333-
194219
333-
194219
10.8
February 18, 2014
10.9
February 18, 2014
10.10
February 18, 2014
10.11
February 18, 2014
10.12
February 18, 2014
10.6* Protective Agreement and Agreement Not To
S-1/A
Compete between Grubhub Holdings Inc. (f/k/a
Grubhub, Inc.) and Adam DeWitt, dated as of
October 7, 2011.
10.7* Employment Offer Letter and Agreement
10-K 001-36389 10.39
February 26, 2016
Relating to Employment and Post-Employment
Competition between Seamless North America,
LLC and Margo Drucker, dated as of May 17,
2012.
10.8* Employment Offer Letter between Grubhub
10-K 001-36389 10.11
February 28, 2018
Holdings Inc. and Maria Belousova, dated as of
January 30, 2014.
10.9* Employment Offer Letter between Grubhub
Holdings Inc. and Sam Hall, dated as of January
26, 2018.
10.10* Stock Option Grant Notice and Stock Option
S-1/A
Agreement between Grubhub Inc. (f/k/a Grubhub
Seamless Inc.) and Matthew Maloney, granted in
replacement of options originally granted on
April 23, 2012.
10.11* Stock Option Grant Notice and Stock Option
S-1/A
Agreement between Grubhub Inc. (f/k/a Grubhub
Seamless Inc.) and Matthew Maloney, granted in
replacement of options originally granted on
July 26, 2012.
333-
194219
333-
194219
X
10.16
February 18, 2014
10.17
February 18, 2014
78
10.12* Stock Option Grant Notice and Stock Option
S-1/A
Agreement between Grubhub Inc. (f/k/a Grubhub
Seamless Inc.) and Matthew Maloney, granted in
replacement of options originally granted on
November 16, 2012.
10.13* Stock Option Grant Notice and Stock Option
S-1/A
Agreement between Grubhub Inc. (f/k/a Grubhub
Seamless Inc.) and Matthew Maloney, granted in
replacement of options originally granted on
January 28, 2013.
10.14* Stock Option Grant Notice and Stock Option
S-1/A
Agreement between Grubhub Inc. (f/k/a Grubhub
Seamless Inc.) and Matthew Maloney, granted in
replacement of options originally granted on
March 12, 2013.
10.15* Stock Option Grant Notice and Stock Option
S-1/A
Agreement between Grubhub Inc. (f/k/a Grubhub
Seamless Inc.) and Adam DeWitt, granted in
replacement of options originally granted on
December 7, 2011.
10.16* Stock Option Grant Notice and Stock Option
S-1/A
Agreement between Grubhub Inc. (f/k/a Grubhub
Seamless Inc.) and Adam DeWitt, granted in
replacement of options originally granted on
December 7, 2011.
10.17* Stock Option Grant Notice and Stock Option
S-1/A
Agreement between Grubhub Inc. (f/k/a Grubhub
Seamless Inc.) and Adam DeWitt, granted in
replacement of options originally granted on
April 23, 2012.
10.18* Stock Option Grant Notice and Stock Option
S-1/A
Agreement between Grubhub Inc. (f/k/a Grubhub
Seamless Inc.) and Adam DeWitt, granted in
replacement of options originally granted on
July 26, 2012.
10.19* Stock Option Grant Notice and Stock Option
S-1/A
Agreement between Grubhub Inc. (f/k/a Grubhub
Seamless Inc.) and Adam DeWitt, granted in
replacement of options originally granted on
November 16, 2012.
10.20* Stock Option Grant Notice and Stock Option
S-1/A
Agreement between Grubhub Inc. (f/k/a Grubhub
Seamless Inc.) and Adam DeWitt, granted in
replacement of options originally granted on
March 12, 2013.
10.21* Employee Restricted Stock Purchase Agreement,
dated November 3, 2010, by and between
Grubhub Holdings Inc. (f/k/a Grubhub, Inc.) and
Matthew Maloney.
333-
194219
333-
194219
333-
194219
333-
194219
333-
194219
333-
194219
333-
194219
333-
194219
333-
194219
10.18
February 18, 2014
10.19
February 18, 2014
10.20
February 18, 2014
10.21
February 18, 2014
10.22
February 18, 2014
10.23
February 18, 2014
10.24
February 18, 2014
10.25
February 18, 2014
10.26
February 18, 2014
S-1/A
333-
194219
10.38
February 18, 2014
10.22* Note Cancellation and Stock Repurchase
S-1/A
Agreement, dated December 21, 2012, by and
between Grubhub Holdings Inc. (f/k/a Grubhub,
Inc.), Matthew Maloney and Matt and Holly
Maloney Family Limited.
333-
194219
10.39
February 18, 2014
79
10.23* Stock Option Grant Notice and Stock Option
S-1/A
Agreement between Grubhub Inc. (f/k/a Grubhub
Seamless Inc.) and Matthew Maloney, granted
in substitution of options originally granted on
January 28, 2014.
10.24* Stock Option Grant Notice and Stock Option
S-1/A
Agreement between Grubhub Inc. (f/k/a Grubhub
Seamless Inc.) and Adam DeWitt, granted
in substitution of options originally granted on
January 28, 2014.
333-
194219
333-
194219
10.41
February 28, 2014
10.42
February 28, 2014
10.25* Stock Option Grant Notice and Stock Option
10-Q 001-36389
10.1
May 9, 2016
Agreement between Grubhub Inc. (f/k/a Grubhub
Seamless Inc.) and Margo Drucker, granted in
substitution of options originally granted on
July 9, 2012.
10.26* Stock Option Grant Notice and Stock Option
10-Q 001-36389
10.2
May 9, 2016
Agreement between Grubhub Inc. (f/k/a Grubhub
Seamless Inc.) and Margo Drucker relating to
options granted on January 28, 2014.
10.27* Form of Indemnification Agreement.
10.28* Grubhub Inc. (f/k/a Grubhub Seamless Inc.) 2013
Omnibus Incentive Plan.
10.29* Form of Option Grant Notice and Option
Agreement under the Grubhub Inc. 2013
Omnibus Incentive Plan.
10.44
S-1/A
S-1/A
333-
194219
333-
194219
10-K 001-36389 10.46
10.15
April 3, 2014
February 18, 2014
March 5, 2015
10.30* Form of RSU Grant Notice and Restricted Stock
10-K 001-36389 10.47
March 5, 2015
Unit Agreement under the Grubhub Inc. 2013
Omnibus Incentive Plan.
10.31* Grubhub Inc. 2015 Long-Term Incentive Plan. DEF 14A 001-36389 Appendix
April 10, 2015
A
10.32* Appendix A - Israel to the 2015 Long-Term
10-K 001-36389 10.32
February 28, 2019
Incentive Plan
10.33* First Amendment to Grubhub Inc. 2015 Long-
8-K
001-36389
10.1
May 21, 2019
Term Incentive Plan
10.34* Form of Non-Qualified Option Grant Notice and
10-K 001-36389 10.45
February 26, 2016
Option Agreement under the 2015 Long-Term
Incentive Plan.
10.35* Form of Restricted Stock Unit Grant Notice and
10-Q 001-36389 10.46
August 8, 2016
Option Agreement under the 2015 Long-Term
Incentive Plan.
10.36* Form of Non-Qualified Option Grant Notice and
10-K 001-36389 10.47
February 26, 2016
Option Agreement under the 2015 Long-Term
Incentive Plan (Officer Grant).
10.37* Form of Restricted Stock Unit Grant Notice and
10-K 001-36389 10.48
February 26, 2016
Option Agreement under the 2015 Long-Term
Incentive Plan (Officer Grant).
10.38* SCVNGR, Inc. 2013 Stock Incentive Plan.
10.39* Tapingo Ltd. - 2011 Option Plan.
10.40* Form of Non-Qualified Stock Option Grant
Notice and Award Agreement under New York
Stock Exchange Listed Company Manual
303A.08
10.41* Form of Restricted Stock Unit Grant Notice and
Award Agreement under New York Stock
Exchange Listed Company Manual 303A.08
80
S-8
S-8
333-
227330
333-
228261
99.1
99.1
September 14,
2018
November 7, 2018
X
X
10.42 Office Building Lease, dated March 23, 2012, by
8-K
001-36389
10.1
October 9, 2015
and between 111 West Washington, LLC and
Grubhub, Inc.
10.43 First Amendment to Lease, dated December 11,
8-K
001-36389
10.2
October 9, 2015
2013, by and between Burnham Center – 111
West Washington, LLC and Grubhub, Inc.
10.44 Second Amendment to Lease, dated October 5,
8-K
001-36389
10.3
October 9, 2015
2015, by and between Burnham Center – 111
West Washington, LLC and Grubhub Holdings
Inc.
10.45 Third Amendment to Lease, dated as of October
5, 2015, by and between Burnham Center – 111
West Washington, LLC and Grubhub Holdings
Inc.
10.46 Fourth Amendment to Lease, dated as of October
16, 2017, by and between Burnham Center – 111
West Washington, LLC and Grubhub Holdings
Inc.
10.47 Fifth Amendment to Lease, dated as of October
1, 2018, by and between Burnham Center – 111
West Washington, LLC and Grubhub Holdings
Inc.
10.48 Office Building Lease, dated as of May 19, 2011,
by and between TrizecHahn 1065 Avenue of the
Americas Property Owner LLC and Grubhub
Holdings Inc., as successor-in-interest to
Seamless North America, LLC (f/k/a
SeamlessWeb Professional Solutions, LLC)
10.49 First Amendment to Lease, dated as of July 26,
2013, by and between TrizecHahn 1065 Avenue
of the Americas Property Owner LLC and
Grubhub Holdings Inc., as successor-in-interest
to Seamless North America, LLC (f/k/a
SeamlessWeb Professional Solutions, LLC).
10-Q 001-36389
10.7
November 8, 2017
10-Q 001-36389
10.8
November 8, 2017
10-Q 001-36389
10.1
November 6, 2018
10-Q 001-36389
10.9
November 8, 2017
10-Q 001-36389
10.10 November 8, 2017
10.50 Second Amendment to Lease, dated as of July
10-Q 001-36389 10.11 November 8, 2017
26, 2013, by and between TrizecHahn 1065
Avenue of the Americas Property Owner LLC
and Grubhub Holdings Inc., as successor-in-
interest to and Seamless North America, LLC
(f/k/a SeamlessWeb Professional Solutions,
LLC).
10.51 Third Amendment to Lease, dated as of
10-Q 001-36389 10.12 November 8, 2017
September 27, 2017, by and between TrizecHahn
1065 Avenue of the Americas Property Owner
LLC and Grubhub Holdings Inc. as successor-in-
interest to Seamless North America, LLC.
10.52 Credit Agreement, dated as of February 6, 2019,
by and among Grubhub Inc., Grubhub Holdings
Inc., Citibank, N.A., as administrative agent,
Citibank, N.A,, BMO Capital Markets Group and
Merrill Lynch, Pierce Fenner & Smith
Incorporated, as joint lead arrangers and joint
bookrunners, and the other lenders party thereto.
10.53 Unit Purchase Agreement, dated as of August 3,
2017, by and among Grubhub Inc., Grubhub
Holdings, Inc., a wholly owned subsidiary of
Grubhub Inc., Yelp Inc. and Eat24, LLC, a
wholly-owned subsidiary of Yelp Inc.
8-K
001-36389
10.1
February 7, 2019
10-Q 001-36389
10.1
August 8, 2017
81
10.54 Amendment No. 1 to the Unit Purchase
10-Q 001-36389
10.2
November 8, 2017
Agreement, dated as of October 10, 2017, by and
among Grubhub Inc., Grubhub Holdings, Inc., a
wholly owned subsidiary of Grubhub Inc., Yelp
Inc. and Eat24, LLC, a wholly-owned subsidiary
of Yelp Inc.
10.55 Investment Agreement by and among the
8-K
001-36389
10.1
February 8, 2018
Grubhub Inc. and Yum Restaurant Services
Group, LLC, a wholly owned subsidiary of Yum!
Brands, Inc.
21.1 List of Subsidiaries.
23.1 Consent of Crowe LLP
24.1 Power of Attorney (incorporated by reference to
the signature page of this Annual Report on Form
10-K).
31.1 Certification of Matthew Maloney, Chief
Executive Officer, pursuant to Rule 13a-
14(a)/15d-14(a), as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of Adam DeWitt, Chief Financial
Officer, pursuant to Rule 13a-14(a)/15d-14(a), as
adopted pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002.
32.1 Certification of Matthew Maloney, Chief
Executive Officer, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
32.2 Certification of Adam DeWitt, Chief Financial
Officer, pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002.
101.INS Inline XBRL Instance Document - the instance
document does not appear in the Interactive Data
File because its XBRL tags are embedded within
the Inline XBRL document.
101.SCH Inline XBRL Taxonomy Extension Schema
Document.
101.CAL Inline XBRL Taxonomy Extension Calculation
Linkbase Document.
101.DEF Inline XBRL Taxonomy Extension Definition
Linkbase Document.
101.LAB Inline XBRL Taxonomy Extension Labels
Linkbase Document.
101.PRE Inline XBRL Taxonomy Extension Presentation
Linkbase Document.
104 Cover Page Interactive Data File (formatted as
inline XBRL and contained in Exhibit 101).
Indicates a management contract or compensatory plan
82
X
X
X
X
X
X
X
X
X
X
X
X
X
X
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
GRUBHUB INC.
By:
/s/ ADAM DEWITT
Adam DeWitt
President and Chief Financial Officer
(Principal Financial Officer)
February 28, 2020
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities indicated, on the twenty-eighth day of February 2020.
/s/ ADAM DEWITT
Adam DeWitt
President and Chief Financial Officer
(Principal Financial Officer)
/s/ DAVID FISHER
David Fisher
Director
/s/ LLOYD FRINK
Lloyd Frink
Director
/s/ DAVID HABIGER
David Habiger
Director
/s/ BRANDT KUCHARSKI
Brandt Kucharski
Principal Accounting Officer and Controller
(Principal Accounting Officer)
/s/ KATRINA LAKE
Katrina Lake
Director
/s/ GIRISH LAKSHMAN
Girish Lakshman
Director
/s/ MATTHEW MALONEY
Matthew Maloney
Chief Executive Officer and Director
(Principal Executive Officer)
/s/ BRIAN MCANDREWS
Brian McAndrews
Chairman of the Board of Directors
/s/ LINDA JOHNSON RICE
Linda Johnson Rice
Director
/s/ KEITH RICHMAN
Keith Richman
Director
/s/ ARTHUR F. STARRS, III
Arthur F. Starrs, III
Director
83
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO RULE 13-14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
EXHIBIT 31.1
I, Matthew Maloney, certify that:
1. I have reviewed this Annual Report on Form 10-K of GrubHub Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in
this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such
evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected,
or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the
equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information;
and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
By:
/S/ MATTHEW MALONEY
Matthew Maloney
Chief Executive Officer and Director
Date: February 28, 2020
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO RULES 13a-14(a) AND 15d-14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
EXHIBIT 31.2
I, Adam DeWitt, certify that:
1. I have reviewed this Annual Report on Form 10-K of GrubHub Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in
this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such
evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected,
or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the
equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information;
and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
By:
/S/ ADAM DEWITT
Adam DeWitt
President and Chief Financial Officer
Date: February 28, 2020
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. 1350,
AS ADOPTED PURSUANT TOSECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
EXHIBIT 32.1
In connection with the Annual Report of GrubHub Inc. (the “Company”) on Form 10-K for the period ending December 31,
2019 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Matthew Maloney, Chief Executive
Officer and Director of the Company, certify, as of the date hereof and solely for purposes of and pursuant to 18 U.S.C. § 1350, as
adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
1.
2.
The Report fully complies with the requirements of section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C.
78m); and
The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
By:
/S/ MATTHEW MALONEY
Matthew Maloney
Chief Executive Officer and Director
Date: February 28, 2020
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. 1350,
AS ADOPTED PURSUANT TOSECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
EXHIBIT 32.2
In connection with the Annual Report of GrubHub Inc. (the “Company”) on Form 10-K for the period ending December 31,
2019 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Adam DeWitt, Chief Financial
Officer and Treasurer of the Company, certify, as of the date hereof and solely for purposes of and pursuant to 18 U.S.C. § 1350, as
adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that , to my knowledge:
1.
2.
The Report fully complies with the requirements of section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C.
78m); and
The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
Date: February 28, 2020
By:
/S/ ADAM DEWITT
Adam DeWitt
President and Chief Financial Officer
BOARD OF DIRECTORS
EXECUTIVE OFFICERS
STOCK EXCHANGE
Matthew Maloney
Chief Executive Officer
Adam DeWitt
President and Chief
Financial Officer
Margo Drucker
Chief Legal Officer
and Secretary
Maria Belousova
Chief Technology Officer
Samuel Hall
Chief Product Officer
Brandt Kucharski
Chief Accounting Officer
Grubhub’s stock is listed on the
New York Stock Exchange under
the ticker symbol GRUB.
TRANSFER AGENT
American Stock Transfer & Trust
Company, LLC
6201 15th Avenue
Brooklyn, New York 11219
www.amstock.com
For inquiries: info@amstock.com
Shareholder inquiries:
(800) 937-5449
CORPORATE HEADQUARTERS
Grubhub Inc.
111 W. Washington, Suite 2100
Chicago, Illinois 60602
INVESTOR RELATIONS
Current information about
Grubhub, press releases and
investor information are
available on our website
at investors.grubhub.com
ir@grubhub.com
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Crowe LLP
225 W. Wacker Drive, Suite 2600
Chicago, Illinois 60606
David Fisher
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Lloyd Frink
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David Habiger
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Katrina Lake
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Stitch Fix
Girish Lakshman
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Matthew Maloney
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Linda Johnson Rice
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Keith Richman
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Arthur Francis Starrs, III
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