Growth from markets that do not include major cities fueled Grubhub’s revenue growth in the first quarter of 2018, an increase that beat analyst expectations. But the online food delivery service’s food sales and active daily orders came up short of estimates, causing its stock price to decline on Tuesday (May 1).
“Strong momentum in tier two and smaller markets” led to Grubhub’s 49 percent year-over-year revenue increase in the first quarter of 2018, said Grubhub CEO Matt Maloney in a post-earnings conference call. First-quarter revenue reached $232.6 million, higher than analyst predictions of about $229 million.
For the first quarter, Grubhub reported a 35 percent year-over-year increase in daily active orders, to 436,900. That was less than Wall Street estimates of about 442,500. Grubhub said it has 15.1 million active diners, a 71 percent increase year over year. Gross food sales increased 39 percent year over year, to $1.2 billion. Wall Street consensus expected higher food sales of $1.26 billion.
The food delivery service’s market growth continues. So far in 2018, Grubhub has added 50 markets for food deliveries — including 34 before the quarter ended on March 31 — and is on track to at least double that growth by the end of the year, Maloney said. Grubhub in the first quarter also benefited from the integration of its platform with Yelp and Eat24.
This spring the company announced it will add Venmo as a feature, enabling customers to split payments for orders, but executives during the post-earnings call gave no further details on that deal.
Advertising, including a new TV spot, led to a 38 percent increase in year-over-year sales and marketing costs during the first quarter, although spend on advertising will slow down as Grubhub enters the summer months, its traditional slow time.
Business will pick up again during the back-the-school season. The impact of Grubhub’s recent deal to enable Taco Bell and KFC deliveries should also be evident later in the year, Maloney said.
Grubhub net income increased 74 percent, to $30.8 million. First-quarter earnings stood at $0.52 per share, above analyst expectations of $0.39.