Earnings

Grubhub’s 2016 Growth Impacts Food Delivery Services

If Grubhub’s Q4 earnings call was any indication of the state of online food ordering’s future, the food service industry is set to see an upheaval.

The online food ordering service company reported $137.5 million in revenue during Q4 2016, which is a significant increase of 38 percent from its 2015 Q4 earnings of $100 million. Although shares of Grubhub fell by 6.8 percent on Wednesday (Feb. 8) to $38.52, the company set forth some bold predictions for Q1 earnings in its recent call with analysts. This is likely due to the fact that the company did see a 92 percent increase in its stock over the last 12 months.

Grubhub CEO Matt Maloney went into why he believes the company saw such success over the last year in this quote from the earnings call: “2016 was an incredibly successful year for Grubhub. We made dramatic strides in delivery, growing our organic delivery service from $50 million to almost $400 million in annual food sales. We also leveraged data-driven product improvements to significantly accelerate our order growth rate beginning in the second quarter.”

In combination with the company’s data-driven approach, Grubhub also grew organically from its new branding.

Maloney said: “Finally, a refreshed brand image and smarter approach to marketing spend has enabled us to acquire more higher-quality diners. We connected local restaurants and hungry diners more than 100 million times in 2016. We shattered our $500 million target for organic GFS growth for the year. We grew active diners by $1.4 million, and we’re now generating over 1,000 DAGs in 22 markets versus only seven markets at the time of our IPO. We added more net restaurants per month in the fourth quarter than we have in two years. And we managed to grow adjusted EBITDA per order by 14 percent for the year, while many companies in the on-demand economy shut their doors after losing millions of DC dollars. In short, we are firing on all cylinders.”

What does this mean for the world of online food ordering?

In short, more Americans are choosing to order takeout than cooking from scratch. Given the fact that Grubhub users have access to a larger variety of food options and the various competitors such as Foodler and DoorDash also breaking down food delivery barriers, this market is one to watch.

On the earnings call, Maloney also expanded on the company’s 2016 success and shared why it will see tremendous growth in 2017: “In total, we have over 10,000 Grubhub delivery restaurants live on the site, more than half of which are in Tier 2 and Tier 3 markets. This success has significantly increased the breadth and depth of our network in many markets and, given the nature of our two-sided marketplace, improved our ability to attract quality diners in more markets than ever before. Leveraging this improved restaurant density will be an important part of our 2017 growth plans.”

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