GRUBHUB INC., 10-Q filed on 11/6/2018
Quarterly Report
v3.10.0.1
Document and Entity Information - shares
9 Months Ended
Sep. 30, 2018
Nov. 02, 2018
Document And Entity Information [Abstract]    
Document Type 10-Q  
Amendment Flag false  
Document Period End Date Sep. 30, 2018  
Document Fiscal Year Focus 2018  
Document Fiscal Period Focus Q3  
Trading Symbol GRUB  
Entity Registrant Name GRUBHUB INC.  
Entity Central Index Key 0001594109  
Current Fiscal Year End Date --12-31  
Entity Filer Category Large Accelerated Filer  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity Common Stock, Shares Outstanding   90,701,489
v3.10.0.1
Condensed Consolidated Balance Sheets - USD ($)
$ in Thousands
Sep. 30, 2018
Dec. 31, 2017
CURRENT ASSETS:    
Cash and cash equivalents $ 294,550 $ 234,090
Short-term investments 16,687 23,605
Accounts receivable, less allowances for doubtful accounts 120,306 87,377
Income tax receivable 14,125 8,593
Prepaid expenses and other current assets 17,024 6,818
Total current assets 462,692 360,483
PROPERTY AND EQUIPMENT:    
Property and equipment, net of depreciation and amortization 105,434 71,384
OTHER ASSETS:    
Other assets 11,666 6,487
Goodwill 885,350 589,862
Acquired intangible assets, net of amortization 520,867 515,553
Total other assets 1,417,883 1,111,902
TOTAL ASSETS 1,986,009 1,543,769
CURRENT LIABILITIES:    
Restaurant food liability 122,900 119,922
Accounts payable 17,184 7,607
Accrued payroll 19,036 13,186
Taxes payable 1,566 3,109
Short-term debt 6,250 3,906
Other accruals 33,186 26,818
Total current liabilities 200,122 174,548
LONG-TERM LIABILITIES:    
Deferred taxes, non-current 44,073 74,292
Other accruals 19,683 7,468
Long-term debt 290,073 169,645
Total long-term liabilities 353,829 251,405
Commitments and contingencies
STOCKHOLDERS’ EQUITY:    
Preferred Stock, $0.0001 par value. Authorized: 25,000,000 shares as of September 30, 2018 and December 31, 2017; issued and outstanding: no shares as of September 30, 2018 and December 31, 2017.
Common stock, $0.0001 par value. Authorized: 500,000,000 shares at September 30, 2018 and December 31, 2017; issued and outstanding: 90,598,259 and 86,790,624 shares as of September 30, 2018 and December 31, 2017, respectively 9 9
Accumulated other comprehensive loss (1,620) (1,228)
Additional paid-in capital 1,079,165 849,043
Retained earnings 354,504 269,992
Total Stockholders’ Equity 1,432,058 1,117,816
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 1,986,009 $ 1,543,769
v3.10.0.1
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares
Sep. 30, 2018
Dec. 31, 2017
Statement Of Financial Position [Abstract]    
Preferred Stock, par value $ 0.0001 $ 0.0001
Preferred Stock, shares authorized 25,000,000 25,000,000
Preferred Stock, shares issued 0 0
Preferred Stock, shares outstanding 0 0
Common stock, par value $ 0.0001 $ 0.0001
Common stock, shares authorized 500,000,000 500,000,000
Common stock, shares issued 90,598,259 86,790,624
Common stock, shares outstanding 90,598,259 86,790,624
v3.10.0.1
Condensed Consolidated Statements of Operations (Unaudited) - USD ($)
shares in Thousands, $ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2018
Sep. 30, 2017
Sep. 30, 2018
Sep. 30, 2017
Income Statement [Abstract]        
Revenues $ 247,225 $ 163,059 $ 719,536 $ 477,987
Costs and expenses:        
Operations and support 111,511 65,352 310,239 187,795
Sales and marketing 49,426 35,138 144,413 105,346
Technology (exclusive of amortization) 21,258 14,292 57,306 41,560
General and administrative 22,195 18,617 58,072 46,627
Depreciation and amortization 20,987 12,613 61,787 33,067
Total costs and expenses 225,377 146,012 631,817 414,395
Income from operations 21,848 17,047 87,719 63,592
Interest (income) expense - net 337 (373) 1,367 (908)
Income before provision for income taxes 21,511 17,420 86,352 64,500
Income tax (benefit) expense (1,234) 4,432 2,721 19,043
Net income attributable to common stockholders $ 22,745 $ 12,988 $ 83,631 $ 45,457
Net income per share attributable to common stockholders:        
Basic $ 0.25 $ 0.15 $ 0.94 $ 0.53
Diluted $ 0.24 $ 0.15 $ 0.91 $ 0.52
Weighted-average shares used to compute net income per share attributable to common stockholders:        
Basic 90,494 86,449 89,027 86,162
Diluted 93,678 88,543 92,091 87,788
v3.10.0.1
Condensed Consolidated Statements of Comprehensive Income (Unaudited) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2018
Sep. 30, 2017
Sep. 30, 2018
Sep. 30, 2017
Statement Of Income And Comprehensive Income [Abstract]        
Net income $ 22,745 $ 12,988 $ 83,631 $ 45,457
OTHER COMPREHENSIVE INCOME (LOSS)        
Foreign currency translation adjustments (92) 299 (392) 749
COMPREHENSIVE INCOME $ 22,653 $ 13,287 $ 83,239 $ 46,206
v3.10.0.1
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)
$ in Thousands
9 Months Ended
Sep. 30, 2018
Sep. 30, 2017
CASH FLOWS FROM OPERATING ACTIVITIES    
Net income $ 83,631 $ 45,457
Adjustments to reconcile net income to net cash from operating activities:    
Depreciation 16,189 7,949
Provision for doubtful accounts 741 338
Deferred taxes 2,048 (2,162)
Amortization of intangible assets 45,598 25,118
Stock-based compensation 36,445 23,913
Deferred rent 3,975 130
Amortization of deferred loan costs 588 349
Other (732) (823)
Change in assets and liabilities, net of the effects of business acquisitions:    
Accounts receivable (17,969) (15,903)
Income taxes receivable (5,533) 3,795
Prepaid expenses and other assets (15,455) 4,193
Restaurant food liability 1,608 4,591
Accounts payable 5,265 2,965
Accrued payroll 5,311 1,575
Other accruals 3,752 6,351
Net cash provided by operating activities 165,462 107,836
CASH FLOWS FROM INVESTING ACTIVITIES    
Acquisitions of businesses, net of cash acquired (366,856) (51,859)
Purchases of investments (47,642) (145,667)
Proceeds from maturity of investments 54,916 164,733
Capitalized website and development costs (21,471) (15,281)
Purchases of property and equipment (31,984) (12,549)
Acquisition of other intangible assets   (25,147)
Other cash flows from investing activities 38 589
Net cash used in investing activities (412,999) (85,181)
CASH FLOWS FROM FINANCING ACTIVITIES    
Proceeds from the issuance of common stock 200,000  
Proceeds from borrowings under the Credit Agreement 175,000  
Repayments of borrowings under the Credit Agreement (52,344)  
Proceeds from exercise of stock options 13,010 12,505
Taxes paid related to net settlement of stock-based compensation awards (28,238) (7,696)
Payments for debt issuance costs   (285)
Net cash provided by financing activities 307,428 4,524
Net change in cash, cash equivalents, and restricted cash 59,891 27,179
Effect of exchange rates on cash, cash equivalents and restricted cash (406) 709
Cash, cash equivalents, and restricted cash at beginning of year 238,239 242,214
Cash, cash equivalents, and restricted cash at end of the period 297,724 270,102
SUPPLEMENTAL DISCLOSURE OF NON-CASH ITEMS    
Cash paid for income taxes 7,508 16,340
Capitalized property, equipment and website and development costs in accounts payable at period end 4,069 1,048
Net working capital adjustment receivable 530 887
Fair value of equity awards assumed on acquisition 2,594  
RECONCILIATION OF CASH, CASH EQUIVALENTS, AND RESTRICTED CASH    
Cash and cash equivalents $ 294,550 265,958
Restricted cash included in prepaid expenses and other current assets   $ 1,500
Restricted Cash, Current, Asset, Statement of Financial Position [Extensible List] us-gaap:PrepaidExpenseAndOtherAssetsCurrent us-gaap:PrepaidExpenseAndOtherAssetsCurrent
Restricted cash included in other assets $ 3,174 $ 2,644
Restricted Cash, Noncurrent, Asset, Statement of Financial Position [Extensible List] us-gaap:OtherAssetsNoncurrent us-gaap:OtherAssetsNoncurrent
Total cash, cash equivalents, and restricted cash $ 297,724 $ 270,102
v3.10.0.1
Organization
9 Months Ended
Sep. 30, 2018
Organization Consolidation And Presentation Of Financial Statements [Abstract]  
Organization

1. Organization

Grubhub Inc., a Delaware corporation, and its wholly-owned subsidiaries (collectively referred to as the “Company”) provide an online and mobile platform for restaurant pick-up and delivery orders. 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 at no cost to the diner. The Company charges the restaurant a per order commission that is largely fee based. In certain markets, the Company also provides delivery services to restaurants on its platform that do not have their own delivery operations.

v3.10.0.1
Significant Accounting Policies
9 Months Ended
Sep. 30, 2018
Accounting Policies [Abstract]  
Significant Accounting Policies

2. Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The accompanying unaudited condensed consolidated interim financial statements include the accounts of Grubhub Inc. and have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the rules and regulations of the United States Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. These unaudited condensed consolidated interim financial statements include all wholly-owned subsidiaries and reflect all normal and recurring adjustments, as well as any other than normal adjustments, that are, in the opinion of management, necessary for a fair presentation of the results for the interim periods and should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017 filed with the SEC on February 28, 2018 (the “2017 Form 10-K”). All significant intercompany transactions have been eliminated in consolidation. Operating results for the three and nine months ended September 30, 2018 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2018.

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 historic accounting guidance under ASC Topic 605. See Recently Issued Accounting Pronouncements and Note 3, Revenue, below for additional details.

Use of Estimates

The preparation of condensed consolidated financial statements in accordance with GAAP requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and the related disclosures at the date of the financial statements, as well as the reported amounts of revenue and expenses during the periods presented. Estimates include revenue recognition, the allowance for doubtful accounts, website and internal-use software development costs, goodwill, depreciable lives of property and equipment, recoverability of intangible assets with definite lives and other long-lived assets, stock-based compensation and income taxes. Actual results could differ from these estimates.  

Changes in Accounting Principle

See “Recently Issued Accounting Pronouncements” below for a description of accounting principle changes adopted during the nine months ended September 30, 2018 related to revenue and the statement of cash flows. There have been no other material changes to the Company’s significant accounting policies described in the 2017 Form 10-K.

Recently Issued Accounting Pronouncements

In August 2018, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update No. 2018-15, “Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract” (“ASU 2018-15”). ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in hosting arrangements that are service contracts and that include an internal-use software license with the requirement for capitalizing implementation costs incurred to develop or obtain internal-use software. The capitalized implementation costs are required to be expensed over the term of the hosting arrangement. The guidance also clarifies the presentation requirements for reporting such costs in the entity’s financial statements. The Company has elected to early adopt ASU 2018-15. The amendments will be applied prospectively to all implementation costs incurred after the date of adoption. The adoption of ASU 2018-15 is not expected to have a material impact on the Company’s consolidated financial position, results of operations or cash flows.

In May 2017, the FASB issued Accounting Standards Update No. 2017-09, “Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting” (“ASU 2017-09”). ASU 2017-09 provides clarification on when modification accounting should be used for changes to the terms or conditions of a share-based payment award. This ASU does not change the accounting for modifications but clarifies that modification accounting guidance should only be applied if there is a change to the value, vesting conditions, or award classification and would not be required if the changes are considered non-substantive. ASU 2017-09 is effective for the Company beginning in the first quarter of 2018 on a prospective basis. The adoption of ASU 2017-09 has not had and is not expected to have a material impact on the Company’s consolidated financial position, results of operations or cash flows.

In August 2016, the FASB issued Accounting Standards Update No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments” (“ASU 2016-15”). ASU 2016-15 adds or clarifies guidance on the classification of certain cash receipts and payments in the statement of cash flows with the intent of reducing diversity in practice related to eight types of cash flows including, among others, debt prepayment or debt extinguishment costs, contingent consideration payments made after a business combination, and separately identifiable cash flows and application of the predominance principle. In addition, in November 2016, the FASB issued Accounting Standards Update No. 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash” (“ASU 2016-18”). ASU 2016-18 requires companies to include amounts generally described as restricted cash and restricted cash equivalents in cash and cash equivalents when reconciling beginning-of-period and end-of-period total amounts shown on the statement of cash flow. ASU 2016-15 and ASU 2016-18 were effective for and adopted by the Company beginning in the first quarter of 2018. The amendments were applied using a retrospective transition method to each period presented and impacted the Company’s presentation of the consolidated statements of cash flows. The adoption of ASU 2016-15 and ASU 2016-18 had no material impact on the Company’s consolidated financial position, results of operations or cash flows as the Company’s restricted cash balances are immaterial.

In June 2016, 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 considerations 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 is not expected to have a material impact on the Company’s consolidated financial position, results of operations or cash flows.

In February 2016, the FASB issued Accounting Standards Update No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). Under ASU 2016-02, a lessee will recognize in the statement of financial position a liability to make lease payments and a right-of-use asset for all leases (with the exception of short-term leases) at the commencement date. The recognition, measurement, and presentation of expenses and cash flows arising from a lease under ASU 2016-02 will not significantly change from current GAAP. ASU 2016-02 is effective beginning in the first quarter of 2019 with early adoption permitted. In July 2018, the FASB issued Accounting Standards Update No. 2018-11 “Leases (Topic 842): Targeted Improvements” (“ASU 2018-11”), which provides for the election of transition methods between the modified retrospective method and the optional transition relief method. The modified retrospective method is applied to all prior reporting periods presented with a cumulative-effect adjustment recorded in the earliest comparative period while the optional transition relief method is applied beginning in the period of adoption with a cumulative-effect adjustment recorded in the first quarter of 2019. The Company will apply the optional transition relief method and has elected the optional practical expedient package, which includes retaining the current classification of leases. The Company is currently evaluating the impact of adoption of ASU 2016-02 on its consolidated financial statements under ASU 2018-11. Management anticipates that it will result in a significant increase in the Company’s long-term assets and liabilities but will have no material impact to its results of operations or cash flows.     

In May 2014, and in subsequent updates, the FASB issued ASC Topic 606, Revenue from Contracts with Customers, which supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, including most industry-specific requirements. ASC Topic 606 establishes a five-step revenue recognition process in which an entity will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. ASC Topic 606 also requires enhanced disclosures regarding the nature, amount, timing and uncertainty of revenues and cash flows from contracts with customers. ASC Topic 606 was effective for and adopted by the Company in the first quarter of 2018. The Company applied the modified retrospective approach to contracts which were not completed as of January 1, 2018. The adoption of these ASUs did not have and is not expected to have a material impact on the Company’s consolidated financial position, results of operations or cash flows or its business processes, systems and controls.

The adoption of ASC Topic 606 resulted in an increase in revenues of $0.1 million and $0.9 million for the three and nine months ended September 30, 2018, respectively, and primarily had the following impact on the Company’s financial statements:

 

Beginning in January 1, 2018, the Company defers the incremental costs of obtaining contracts as contract acquisition assets resulting in a net decrease of $2.0 million and $6.6 million in sales and marketing expense in the condensed consolidated statements of operations for the three and nine months ended September 30, 2018, respectively, and corresponding increase in other assets on the condensed consolidated balance sheets. Contract acquisition assets are amortized to sales and marketing expense in the consolidated statements of operations over the period in which services are expected to be provided to the customer, which is estimated to be approximately 4 years. Prior to the adoption of ASC Topic 606, the cost of obtaining a contract was recognized as it was incurred.

 

Beginning in the first quarter of 2018, the Company recognizes revenue from estimated unredeemed gift cards that are not subject to unclaimed property laws over the expected customer redemption period, rather than when the likelihood of redemption became remote. The Company recorded a cumulative-effect adjustment to opening retained earnings as of January 1, 2018 of $0.9 million related to unredeemed gift cards, breakage income of $0.3 million and $0.9 million in revenues in the condensed consolidated statements of operations during the three and nine months ended September 30, 2018, respectively, and a corresponding decrease in other accruals of $2.0 million on the condensed consolidated balance sheets.

 

Changes in the timing of revenue recognition under ASC Topic 606 related to incentives, refunds and adjustments resulted in a $0.1 million decrease and $0.1 million increase in revenues in the condensed consolidated statements of operations during the three and nine months ended September 30, 2018, respectively.

 

The adoption of ASC Topic 606 had no impact to the Company’s total net cash provided by or used in operations, investing or financing activities within the Company’s condensed consolidated statement of cash flows for the nine months ended September 30, 2018.

See Note 3, Revenue, for additional details.

v3.10.0.1
Revenue
9 Months Ended
Sep. 30, 2018
Revenue From Contract With Customer [Abstract]  
Revenue

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. Restaurants pay a commission, typically a percentage of the transaction, on orders that are processed through the platform. Most of the restaurants on the Company’s platform can choose their level of commission rate, at or above a base rate. A restaurant can choose to pay a higher rate that affects its prominence and exposure to diners on the platform. Additionally, restaurants that use the Company’s delivery services pay an additional commission for the use of those services. The Company may also charge a delivery fee 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 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 to the diner for delivery services provided by the Company. 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 related to current orders that create an obligation to discount future orders, the Company allocates the incentives that are expected to be redeemed proportionally to current and future orders based on their relative expected transaction prices.  

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. The Company generally accumulates funds and remits the net proceeds to the restaurants on at least a monthly basis, depending on the payment terms with the restaurant. 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.

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.

During the three months ended September 30, 2018, the Company recognized a small amount of revenues from software and professional services, which are generally recognized ratably over the subscription period beginning on the date the software is available. Revenues for certain professional services may be recognized in full once the services are performed if they are distinct and separately identifiable.  

Accounts Receivable

Accounts receivable primarily represent the net cash due from the Company’s payment processor for cleared transactions and amounts owed from corporate customers, 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 based on historical loss experience and any current or forecasted specific risks.

Deferred Revenues

The Company’s deferred revenues consist primarily of gift card liabilities and certain incentive liabilities. These amounts are included within other accruals on the consolidated balance sheets and 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 contracts including certain commissions and bonuses and related payroll taxes as contract acquisition assets within other assets on the consolidated balance sheets. Contract acquisition assets are amortized using the straight-line method 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. During the three and nine months ended September 30, 2018, the Company deferred $2.4 million and $7.3 million, respectively, of contract acquisitions costs. During the three and nine months ended September 30, 2018, the Company amortized $0.4 million and $0.7 million, respectively, of related expense.

v3.10.0.1
Acquisitions
9 Months Ended
Sep. 30, 2018
Business Combinations [Abstract]  
Acquisitions

4. Acquisitions

2018 Acquisitions

On September 13, 2018, the Company acquired SCVNGR, Inc. d/b/a LevelUp (“LevelUp”) for approximately $369.7 million, including $367.6 million of cash paid (net of cash acquired of $6.0 million), $2.6 million of other non-cash consideration and a net working capital adjustment receivable of $0.5 million. LevelUp is a leading provider of mobile diner engagement and payment solutions for national and regional restaurant brands. The acquisition of LevelUp is expected to simplify the Company’s integrations with restaurants’ systems, increase diner engagement and accelerate product development.

The Company assumed LevelUp employees’ unvested incentive stock option (“ISO”) awards as of the closing date. Approximately $2.6 million of the fair value of the assumed ISO awards granted to acquired LevelUp employees was attributable to the pre-combination services of the LevelUp awardees and was included in the $369.7 million purchase price. This amount is reflected within goodwill in the purchase price allocation. As of the acquisition date, post-combination expense of approximately $17.0 million is expected to be recognized related to the assumed ISO awards over the remaining post-combination service period.

The results of operations of LevelUp have been included in the Company’s financial statements since September 13, 2018 but did not have a material impact on the Company’s condensed consolidated results of operations for the three and nine months ended September 30, 2018.

The excess of the consideration transferred in the acquisition over the net amounts assigned to the fair value of the assets was recorded as goodwill, which represents the value of LevelUp’s technology team and the ability to simplify integrations with restaurants on the Company’s platform. The goodwill related to this acquisition of $295.5 million is not deductible for income tax purposes.

The assets acquired and liabilities assumed of LevelUp were recorded at their estimated fair values as of the closing date of September 13, 2018.

The following table summarizes the preliminary purchase price allocation acquisition-date fair values of the asset and liabilities acquired in connection with the LevelUp acquisition:

 

 

 

 

LevelUp

 

 

 

 

(in thousands)

 

Accounts receivable

 

 

$

6,201

 

Prepaid expenses and other current assets

 

 

 

1,396

 

Property and equipment

 

 

 

895

 

Restaurant relationships

 

 

 

10,217

 

Diner acquisition

 

 

 

3,912

 

Below-market lease intangible

 

 

 

2,205

 

Developed technology

 

 

 

20,107

 

Goodwill

 

 

 

295,488

 

Net deferred tax asset

 

 

 

32,267

 

Accounts payable and accrued expenses

 

 

 

(3,031

)

Total purchase price net of cash acquired

 

 

$

369,657

 

Net working capital adjustment receivable

 

 

 

530

 

Fair value of assumed ISOs attributable to pre-combination service

 

 

 

(2,594

)

Net cash paid

 

 

$

367,593

 

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 $281.8 million, including $281.4 million in net cash paid and $0.3 million of other non-cash consideration. Of such amount, $28.8 million will be held in escrow for an 18-month period after closing to secure the Company’s indemnification rights under the purchase agreement. 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 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 $281.8 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 is 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 $51.2 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 were 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

 

 

Total

 

 

(in thousands)

 

Cash

$

40

 

 

$

86

 

 

$

126

 

Accounts receivable

 

8,267

 

 

 

307

 

 

 

8,574

 

Prepaid expenses and other current assets

 

221

 

 

 

 

 

 

221

 

Property and equipment

 

1,113

 

 

 

 

 

 

1,113

 

Restaurant relationships

 

126,232

 

 

 

35,217

 

 

 

161,449

 

Diner acquisition

 

35,226

 

 

 

1,354

 

 

 

36,580

 

Trademarks

 

2,225

 

 

 

74

 

 

 

2,299

 

Developed technology

 

2,559

 

 

 

1,955

 

 

 

4,514

 

Goodwill

 

135,955

 

 

 

17,452

 

 

 

153,407

 

Accounts payable and accrued expenses

 

(30,082

)

 

 

(5,237

)

 

 

(35,319

)

Total purchase price plus cash acquired

 

281,756

 

 

 

51,208

 

 

 

332,964

 

Fair value of replacement RSUs attributable to pre-combination service

 

(274

)

 

 

 

 

 

(274

)

Cash acquired

 

(40

)

 

 

(86

)

 

 

(126

)

Net cash paid

$

281,442

 

 

$

51,122

 

 

$

332,564

 

 

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:

 

 

 

Valuation Method

 

 

 

LevelUp

 

Foodler

 

Eat24

Restaurant relationships

 

 

With or without comparative business valuation

 

Multi-period excess earnings

 

Multi-period excess earnings

Diner acquisition

 

 

Cost to recreate

 

Cost to recreate

 

Cost to recreate

Developed technology

 

 

Multi-period excess earnings

 

Cost to recreate

 

Cost to recreate

Trademark

 

 

n/a

 

Relief  from royalty

 

Relief  from royalty

The fair value of the 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. 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.

The Company incurred certain expenses directly and indirectly related to acquisitions which were recognized in general and administrative expenses within the condensed consolidated statements of operations for the three months ended September 30, 2018 and 2017 of $2.6 million and $1.7 million, respectively, and for the nine months ended September 30, 2018 and 2017 of $5.1 million and $3.6 million, respectively.

Pro Forma

The following unaudited pro forma information presents a summary of the operating results of the Company for the three and nine months ended September 30, 2018 and 2017 as if the acquisitions of LevelUp, Eat24 and Foodler had occurred as of January 1 of the year prior to acquisition:

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

 

(in thousands, except per share data)

 

Revenues

$

255,777

 

 

$

190,833

 

 

$

746,545

 

 

$

562,364

 

Net income

 

22,352

 

 

 

5,084

 

 

 

75,348

 

 

 

15,869

 

Net income per share attributable to common shareholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

0.25

 

 

$

0.06

 

 

$

0.85

 

 

$

0.18

 

Diluted

$

0.24

 

 

$

0.06

 

 

$

0.82

 

 

$

0.18

 

 

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 replacement awards, interest expense for transaction financings and other adjustments, as well as the pro forma tax impact of such adjustments for the three and nine months ended September 30, 2018 and 2017 were as follows:

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

 

(in thousands)

 

Depreciation and amortization

$

(186

)

 

$

2,085

 

 

$

(248

)

 

$

9,488

 

Transaction costs

 

(2,646

)

 

 

(1,799

)

 

 

(5,010

)

 

 

846

 

Stock-based compensation

 

(458

)

 

 

728

 

 

 

2,325

 

 

 

3,748

 

Interest expense

 

33

 

 

 

1,128

 

 

 

244

 

 

 

3,547

 

Other

 

 

 

 

1,571

 

 

 

 

 

 

4,401

 

Income tax (benefit) expense

 

964

 

 

 

(1,546

)

 

 

796

 

 

 

(9,367

)

 

The unaudited pro forma revenues and net income are not intended to represent or be indicative of the Company’s condensed consolidated results of operations or financial condition that would have been reported had the acquisitions been completed as of the beginning of the periods presented and should not be taken as indicative of the Company’s future consolidated results of operations or financial condition.

v3.10.0.1
Marketable Securities
9 Months Ended
Sep. 30, 2018
Investments Debt And Equity Securities [Abstract]  
Marketable Securities

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 September 30, 2018 and December 31, 2017 were as follows:

 

 

 

September 30, 2018

 

 

 

Amortized Cost

 

 

Unrealized Gains

 

 

Unrealized Losses

 

 

Estimated

Fair Value

 

 

 

(in thousands)

 

Cash and cash equivalents

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial paper

 

$

10,231

 

 

$

 

 

$

(12

)

 

$

10,219

 

Short-term investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial paper

 

 

14,938

 

 

 

 

 

 

(112

)

 

 

14,826

 

Corporate bonds

 

 

1,749

 

 

 

 

 

 

 

 

 

1,749

 

Total

 

$

26,918

 

 

$

 

 

$

(124

)

 

$

26,794

 

 

 

 

December 31, 2017

 

 

 

Amortized Cost

 

 

Unrealized Gains

 

 

Unrealized Losses

 

 

Estimated

Fair Value

 

 

 

(in thousands)

 

Cash and cash equivalents

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial paper

 

$

39,979

 

 

$

 

 

$

(43

)

 

$

39,936

 

Corporate bonds

 

 

1,250

 

 

 

 

 

 

 

 

 

1,250

 

Short-term investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial paper

 

 

21,480

 

 

 

 

 

 

(99

)

 

 

21,381

 

Corporate bonds

 

 

2,125

 

 

 

 

 

 

(1

)

 

 

2,124

 

Total

 

$

64,834

 

 

$

 

 

$

(143

)

 

$

64,691

 

 

All of the Company’s marketable securities were classified as held-to-maturity investments and have maturities within one year of September 30, 2018. Approximately $40 million of the Company’s marketable securities matured during the nine months ended September 30, 2018, which was invested in other interest-bearing accounts upon maturity.

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 September 30, 2018 and December 31, 2017 were as follows:

 

 

 

September 30, 2018

 

 

 

Less Than 12 Months

 

 

12 Months or Greater

 

 

Total

 

 

 

Estimated

Fair Value

 

 

Unrealized Loss

 

 

Estimated

Fair Value

 

 

Unrealized

 Loss

 

 

Estimated

Fair Value

 

 

Unrealized Loss

 

 

 

(in thousands)

 

Commercial paper

 

$

25,045

 

 

$

(124

)

 

$

 

 

$

 

 

$

25,045

 

 

$

(124

)

Total

 

$

25,045

 

 

$

(124

)

 

$

 

 

$

 

 

$

25,045

 

 

$

(124

)

 

 

 

December 31, 2017

 

 

 

Less Than 12 Months

 

 

12 Months or Greater

 

 

Total

 

 

 

Estimated

Fair Value

 

 

Unrealized Loss

 

 

Estimated

Fair Value

 

 

Unrealized

 Loss

 

 

Estimated

Fair Value

 

 

Unrealized Loss

 

 

 

(in thousands)

 

Commercial paper

 

$

61,317

 

 

$

(142

)

 

$

 

 

$

 

 

$

61,317

 

 

$

(142

)

Corporate bonds

 

 

3,374

 

 

 

(1

)

 

 

 

 

 

 

 

 

3,374

 

 

 

(1

)

Total

 

$

64,691

 

 

$

(143

)

 

$

 

 

$

 

 

$

64,691

 

 

$

(143

)

 

The Company recognized interest income during the three months ended September 30, 2018 and 2017 of $1.3 million and $0.5 million, respectively, and for the nine months ended September 30, 2018 and 2017 of $3.2 million and $1.5 million, respectively, within net interest (income) expense on the condensed consolidated statements of operations. During the three and nine months ended September 30, 2018 and 2017, the Company did not recognize any other-than-temporary impairment losses related to its marketable securities.

The Company’s marketable securities are classified within Level 2 of the fair value hierarchy (see Note 14, Fair Value Measurement, for further details).

v3.10.0.1
Goodwill and Acquired Intangible Assets
9 Months Ended
Sep. 30, 2018
Goodwill And Intangible Assets Disclosure [Abstract]  
Goodwill and Acquired Intangible Assets

6. Goodwill and Acquired Intangible Assets

The components of acquired intangible assets as of September 30, 2018 and December 31, 2017 were as follows:

 

 

 

September 30, 2018

 

 

December 31, 2017

 

 

 

Gross Carrying

Amount

 

 

Accumulated

Amortization

 

 

Net Carrying

Value

 

 

Gross Carrying

Amount

 

 

Accumulated

Amortization

 

 

Net Carrying

Value

 

 

 

(in thousands)

 

Restaurant relationships

 

$

467,797

 

 

$

(96,321

)

 

$

371,476

 

 

$

457,580

 

 

$

(76,852

)

 

$

380,728

 

Diner acquisition

 

 

44,159

 

 

 

(7,982

)

 

 

36,177

 

 

 

40,247

 

 

 

(1,906

)

 

 

38,341

 

Developed technology

 

 

28,630

 

 

 

(8,591

)

 

 

20,039

 

 

 

8,523

 

 

 

(6,418

)

 

 

2,105

 

Trademarks

 

 

2,225

 

 

 

(2,225

)

 

 

 

 

 

2,225

 

 

 

(402

)

 

 

1,823

 

Below-market lease intangible

 

 

2,206

 

 

 

(21

)

 

 

2,185

 

 

 

 

 

 

 

 

 

 

Other

 

 

3,676

 

 

 

(2,362

)

 

 

1,314

 

 

 

6,888

 

 

 

(4,008

)

 

 

2,880

 

Total amortizable intangible assets

 

 

548,693

 

 

 

(117,502

)

 

 

431,191

 

 

 

515,463

 

 

 

(89,586

)

 

 

425,877

 

Indefinite-lived trademarks

 

 

89,676

 

 

 

 

 

 

89,676

 

 

 

89,676

 

 

 

 

 

 

89,676

 

Total acquired intangible assets

 

$

638,369

 

 

$

(117,502

)

 

$

520,867

 

 

$

605,139

 

 

$

(89,586

)

 

$

515,553

 

The gross carrying amount and accumulated amortization of the Company’s other intangible assets as of September 30, 2018 were adjusted by $3.2 million and $2.5 million, respectively, for certain assets that were no longer in use. Amortization expense for acquired intangible assets was $10.0 million and $6.4 million for the three months ended September 30, 2018 and 2017, respectively, and $31.1 million and $16.8 million for the nine months ended September 30, 2018 and 2017, respectively. Amortization of the acquired below-market lease intangible is recognized as rent expense within the condensed consolidated statements of operations.

 

The changes in the carrying amount of goodwill during the nine months ended September 30, 2018 were as follows:

 

 

 

Goodwill

 

 

Accumulated Impairment Losses

 

 

Net Book Value

 

 

 

(in thousands)

 

Balance as of December 31, 2017

 

$

589,862

 

 

$

 

 

$

589,862

 

Acquisition of LevelUp

 

 

295,488

 

 

 

 

 

 

295,488

 

Balance as of September 30, 2018

 

$

885,350

 

 

$

 

 

$

885,350

 

 

During the nine months ended September 30, 2018, the Company recorded additions to acquired intangible assets of $36.4 million as a result of the acquisition of LevelUp. The components of the acquired intangible assets added during the nine months ended September 30, 2018 were as follows:

 

 

Nine Months Ended September 30, 2018

 

 

 

Amount

 

 

Weighted-Average

Amortization

Period

 

 

 

(in thousands)

 

 

(years)

 

Developed technology

 

$

20,107

 

 

 

6.0

 

Restaurant relationships

 

 

10,217

 

 

 

19.0

 

Diner acquisition

 

 

3,912

 

 

 

5.0

 

Below-market lease intangible

 

 

2,205

 

 

 

5.8

 

Total

 

$

36,441

 

 

 

 

 

 

 

Estimated future amortization expense of acquired intangible assets as of September 30, 2018 was as follows:

 

 

 

(in thousands)

 

The remainder of 2018

 

$

10,117

 

2019

 

 

38,485

 

2020

 

 

37,315

 

2021

 

 

37,304

 

2022

 

 

35,334

 

Thereafter

 

 

272,636

 

Total

 

$

431,191

 

 

v3.10.0.1
Property and Equipment
9 Months Ended
Sep. 30, 2018
Property Plant And Equipment [Abstract]  
Property and Equipment

7. Property and Equipment

The components of the Company’s property and equipment as of September 30, 2018 and December 31, 2017 were as follows:

 

 

 

September 30, 2018

 

 

December 31, 2017

 

 

 

(in thousands)

 

Developed software

 

$

78,332

 

 

$

52,041

 

Computer equipment

 

 

44,896

 

 

 

31,601

 

Leasehold improvements

 

 

31,809

 

 

 

23,400

 

Furniture and fixtures

 

 

8,704

 

 

 

6,857

 

Purchased software and digital assets

 

 

3,581

 

 

 

2,881

 

Construction in progress

 

 

5,559

 

 

 

 

Property and equipment

 

 

172,881

 

 

 

116,780

 

Accumulated depreciation and amortization

 

 

(67,447

)

 

 

(45,396

)

Property and equipment, net

 

$

105,434

 

 

$

71,384

 

The Company recorded depreciation and amortization expense for property and equipment other than developed software of $5.7 million and $2.9 million for the three months ended September 30, 2018 and 2017, respectively, and $16.2 million and $8.0 million for the nine months ended September 30, 2018 and 2017, respectively.

The gross carrying amount and accumulated amortization of the Company’s leasehold improvements, developed software, furniture and fixtures and purchased software and digital assets as of September 30, 2018 were adjusted in aggregate by $8.6 million and $8.2 million, respectively, for certain assets that were no longer in use. The Company capitalized developed software costs of $10.8 million and $6.8 million for the three months ended September 30, 2018 and 2017, respectively, and $28.1 million and $18.9 million for the nine months ended September 30, 2018 and 2017, respectively. Amortization expense for developed software costs, recognized in depreciation and amortization in the condensed consolidated statements of operations, for the three months ended September 30, 2018 and 2017 was $5.3 million and $3.3 million, respectively, and $14.5 million and $8.3 million for the nine months ended September 30, 2018 and 2017, respectively.

v3.10.0.1
Commitments and Contingencies
9 Months Ended
Sep. 30, 2018
Commitments And Contingencies Disclosure [Abstract]  
Commitments and Contingencies

8. Commitments and Contingencies

Legal

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 (the “Court”), Case No. 3:11-cv-1810 (“’1810 action”).

In March 2012, Ameranth initiated eight additional actions for infringement of a related patent, U.S. Patent No. 8,146,077 (“’077 patent”), in the same forum, including separate actions against Grubhub Holdings Inc., Case No. 3:12-cv-739 (“’739 action”), and Seamless North America, LLC, Case No. 3:12-cv-737 (“’737 action”). In August 2012, the Court severed the claims against Grubhub Holdings Inc. and Seamless North America, LLC in the ’1810 action and consolidated them with the ’739 action and the ’737 action, respectively. Later, the Court consolidated these separate cases against Grubhub Holdings Inc. and Seamless North America, LLC, along with the approximately 40 other cases Ameranth filed in the same district, with the original ’1810 action. In their answers, Grubhub Holdings Inc. and Seamless North America, LLC denied infringement and interposed various defenses, including non-infringement, invalidity, unenforceability and inequitable conduct.

The consolidated district court case was stayed until January 2017, when Ameranth’s motion to lift the stay and proceed on only the ‘077 patent was granted. In September 2018, the court granted summary judgment of unpatentability on the ‘077 patent and vacated the December 3, 2018 jury trial date for the claims against Grubhub Holdings Inc. and Seamless North America, LLC. 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. However, the Company is unable to predict the likelihood of success of Ameranth’s infringement claims and is unable to predict the likelihood of success of its counterclaims. The Company has not recorded an accrual related to this lawsuit as of September 30, 2018, as it does not believe a material loss is probable. It is a reasonable possibility that a loss may be incurred; however, the possible range of loss is not estimable given the status of the case and the uncertainty as to whether the claims at issue are with or without merit, will be settled out of court, or will be determined in the Company’s favor, whether the Company may be required to expend significant management time and financial resources on the defense of such claims, and whether the Company will be able to recover any losses under its insurance policies.

In addition to the matter 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 Ninth Circuit. 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.

v3.10.0.1
Debt
9 Months Ended
Sep. 30, 2018
Debt Disclosure [Abstract]  
Debt

9. Debt

The following table summarizes the carrying value of the Company’s debt as of September 30, 2018 and December 31, 2017:

 

 

September 30, 2018

 

 

December 31, 2017

 

 

 

(in thousands)

 

Term loan

 

$

121,875

 

 

$

124,219

 

Revolving loan

 

 

175,000

 

 

 

50,000

 

Total debt

 

 

296,875

 

 

 

174,219

 

Less current portion

 

 

(6,250

)

 

 

(3,906

)

Less unamortized deferred debt issuance costs

 

 

(552

)

 

 

(668

)

Long-term debt

 

$

290,073

 

 

$

169,645

 

On October 10, 2017, the Company entered into a credit agreement which provides, among other things, for aggregate revolving loans up to $225 million and term loans in an aggregate principal amount of $125 million (the “Credit Agreement”). In addition, the Company may incur up to $150 million of incremental revolving loans or incremental revolving term loans pursuant to the terms and conditions of the Credit Agreement. The credit facility will be available to the Company until October 9, 2022. There have been no changes in the terms of the Credit Agreement during the nine months ended September 30, 2018.

During the nine months ended September 30, 2018, the Company borrowed $175.0 million of revolving loans under the Credit Agreement. The Company utilized the revolving loan proceeds to finance a portion of the purchase price and transaction costs in connection with the acquisition of LevelUp. During the nine months ended September 30, 2018, the Company made principal payments of $52.3 million from cash on hand. As of September 30, 2018, outstanding borrowings under the Credit Agreement were $296.9 million.  The fair value of the Company’s outstanding debt approximates its carrying value as of September 30, 2018 (see Note 14, Fair Value Measurement, for additional details). The Company was in compliance with the covenants of the Credit Agreement as of September 30, 2018. Additional capacity under the Credit Agreement may be used for general corporate purposes, including funding working capital and future acquisitions.

  As of September 30, 2018, total unamortized debt issuance costs of $2.0 million were recorded as other assets and as a reduction of long-term debt on the condensed 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 Agreement. The Company recognized interest expense of $1.7 million and $0.2 million, during the three months ended September 30, 2018 and 2017, respectively, and $4.6 million and $0.6 million during the nine months ended September 30, 2018 and 2017, respectively.

v3.10.0.1
Stock-Based Compensation
9 Months Ended
Sep. 30, 2018
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]  
Stock-Based Compensation

10. Stock-Based Compensation

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 awards and restricted stock units.

Stock-based Compensation Expense

The total stock-based compensation expense related to all stock-based awards was $14.2 million and $8.5 million during the three months ended September 30, 2018 and 2017, respectively, and $36.4 million and $23.9 million during the nine months ended September 30, 2018 and 2017, respectively. As of September 30, 2018, $175.7 million of total unrecognized stock-based compensation expense is expected to be recognized over a weighted-average period of 3.0 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 units in excess of the deferred tax assets that were previously recorded. During the three months ended September 30, 2018 and 2017, the Company recognized excess tax benefits from stock-based compensation of $7.6 million and $2.2 million, respectively, and $21.5 million and $5.7 million during the nine months ended September 30, 2018 and 2017, respectively, within income tax (benefit) expense on the condensed consolidated statements of operations and within cash flows from operating activities on the condensed consolidated statements of cash flows.

The Company capitalized stock-based compensation expense as website and software development costs of $2.6 million and $1.2 million during the three months ended September 30, 2018 and 2017, respectively, and $6.3 million and $3.3 million during the nine months ended September 30, 2018 and 2017, respectively.

Stock Options

The Company granted 584,305, including unvested ISOs assumed with the acquisition of LevelUp, and 618,899 stock options during the nine months ended September 30, 2018 and 2017, respectively. 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. Beginning in the first quarter of 2018, expected volatility is 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. The assumptions used to determine the fair value of the stock options granted during the nine months ended September 30, 2018 and 2017 were as follows: 

 

 

 

Nine Months Ended September 30,

 

 

 

2018

 

 

2017

 

Weighted-average fair value options granted

 

$

65.86

 

 

$

15.19

 

Average risk-free interest rate

 

 

2.55

%

 

 

1.65

%

Expected stock price volatility (a)

 

 

46.1

%

 

 

48.7

%

Dividend yield

 

None

 

 

None

 

Expected stock option life (years) (b)

 

 

3.64

 

 

 

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 the 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, 2017 and September 30, 2018, and changes during the nine months ended September 30, 2018, were as follows

 

 

Options

 

 

Weighted-Average

Exercise Price

 

 

Aggregate Intrinsic

Value

(thousands)

 

 

Weighted-Average

Exercise Term

(years)

 

Outstanding at December 31, 2017

 

 

2,705,849

 

 

$

25.53

 

 

$

125,197

 

 

 

7.28

 

Granted

 

 

584,305

 

 

 

68.74

 

 

 

 

 

 

 

 

 

Forfeited

 

 

(115,035

)

 

 

34.21

 

 

 

 

 

 

 

 

 

Exercised

 

 

(487,317

)

 

 

26.70

 

 

 

 

 

 

 

 

 

Outstanding at September 30, 2018

 

 

2,687,802

 

 

 

34.34

 

 

 

280,279

 

 

 

7.11

 

Vested and expected to vest at September 30, 2018

 

 

2,682,769

 

 

 

34.28

 

 

 

279,912

 

 

 

7.10

 

Exercisable at September 30, 2018

 

 

1,415,269

 

 

$

21.73

 

 

$

165,427

 

 

 

6.10

 

 

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. The aggregate intrinsic value of assumed LevelUp ISOs as of September 30, 2018 was approximately $23.0 million. 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 stock options exercised during the three months ended September 30, 2018 and 2017 was $13.6 million and $5.6 million, respectively. The aggregate intrinsic value of awards exercised during the nine months ended September 30, 2018 and 2017 was $36.1 million and $13.7 million, respectively.

The Company recorded compensation expense for stock options of $4.5 million and $3.0 million for the three months ended September 30, 2018 and 2017, respectively, and $9.4 million and $8.9 million for the nine months ended September 30, 2018 and 2017, respectively. As of September 30, 2018, total unrecognized compensation cost, adjusted for estimated forfeitures, related to non-vested stock options was $40.1 million and is expected to be recognized over a weighted-average period of 2.7 years, including post-combination expense of approximately $14.5 million expected to be recognized related to the assumed LevelUp ISO awards.

Restricted Stock Units

Non-vested restricted stock units as of December 31, 2017 and September 30, 2018, and changes during the nine months ended September 30, 2018 were as follows:

 

 

 

Restricted Stock Units

 

 

 

Shares

 

 

Weighted-Average

Grant Date Fair

Value

 

Outstanding at December 31, 2017

 

 

2,454,801

 

 

$

37.56

 

Granted

 

 

1,107,806

 

 

 

94.35

 

Forfeited

 

 

(292,409

)

 

 

51.67

 

Vested

 

 

(796,579

)

 

 

35.94

 

Outstanding at September 30, 2018

 

 

2,473,619

 

 

$

61.84

 

 

Compensation expense related to restricted stock units was $9.7 million and $5.5 million during the three months ended September 30, 2018 and 2017, respectively, and $27.0 million and $15.0 million during the nine months ended September 30, 2018 and 2017, respectively. The aggregate fair value as of the vest date of restricted stock units that vested during the three months ended September 30, 2018 and 2017 was $26.3 million and $5.7 million, respectively, and $76.3 million and $19.9 million during the nine months ended September 30, 2018 and 2017, respectively. As of September 30, 2018, $135.6 million of total unrecognized compensation cost, adjusted for estimated forfeitures, related to 2,458,380 non-vested restricted stock units expected to vest with weighted-average grant date fair values of $61.60 is expected to be recognized over a weighted-average period of 3.0 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.

v3.10.0.1
Income Taxes
9 Months Ended
Sep. 30, 2018
Income Tax Disclosure [Abstract]  
Income Taxes

11. Income Taxes

The Company’s effective tax rate was negative 5.7% and 25.4% during the three months ended September 30, 2018 and 2017, respectively, and 3.2% and 29.5% during the nine months ended September 30, 2018 and 2017, respectively. The income tax expense included the net impact of excess tax benefits for stock-based compensation of $7.6 million and $2.2 million for the three months ended September 30, 2018 and 2017, respectively, and $21.5 million and $5.7 million for the nine months ended September 30, 2018 and 2017, respectively (see Note 10, Stock-based Compensation, for additional details). Additionally, the federal corporate income tax rate decreased from 35% to 21% during the same periods as a result of the Tax Cuts and Jobs Act.

In July 2018, the examination in New York for corporate income tax returns for the tax years ended December 31, 2014, 2015 and 2016 was completed with no material findings. The Company does not expect any material additional tax liabilities, penalties and/or interest as a result of the audit.

v3.10.0.1
Stockholders' Equity
9 Months Ended
Sep. 30, 2018
Equity [Abstract]  
Stockholders' Equity

12. Stockholders’ Equity

As of September 30, 2018 and December 31, 2017, 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 September 30, 2018 and December 31, 2017, there were 500,000,000 shares of common stock authorized. At September 30, 2018 and December 31, 2017, there were 90,598,259 and 86,790,624 shares issued and outstanding, respectively. The Company did not hold any shares as treasury shares as of September 30, 2018 or December 31, 2017.

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 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. The repurchased stock may be retired or held as authorized but unissued 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 nine months ended September 30, 2018, the Company did not repurchase any shares of its common stock.

Preferred Stock

The Company was authorized to issue 25,000,000 shares of preferred stock. There were no issued or outstanding shares of preferred stock as of September 30, 2018 or December 31, 2017.

The Company’s equity as of December 31, 2017 and September 30, 2018, and changes during the nine months ended September 30, 2018, were as follows:

 

 

 

(in thousands)

 

Balance at December 31, 2017

 

$

1,117,816

 

Net income

 

 

83,631

 

Cumulative effect of change in accounting principle(a)

 

 

882

 

Currency translation

 

 

(392

)

Stock-based compensation

 

 

42,755

 

Shares repurchased and retired to satisfy tax withholding upon vesting

 

 

(28,238

)

Stock option exercises, net of withholdings and other

 

 

13,010

 

Stock-based compensation, assumed ISO awards

 

 

2,594

 

Issuance of common stock

 

 

200,000

 

Balance at September 30, 2018

 

$

1,432,058

 

 

(a)

See Note 2, Significant Accounting Policies, for additional details related to the impact of the adoption of ASC Topic 606 during the nine months ended September 30, 2018.

 

v3.10.0.1
Earnings Per Share Attributable to Common Stockholders
9 Months Ended
Sep. 30, 2018
Earnings Per Share [Abstract]  
Earnings Per Share Attributable to Common Stockholders

13. Earnings Per Share Attributable to Common Stockholders

Basic earnings per share is computed by dividing net income 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.

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 nine months ended September 30, 2018 (see Note 12, Stockholders’ Equity).

The following tables present the calculation of basic and diluted net income per share attributable to common stockholders for the three and nine months ended September 30, 2018 and 2017:

 

Three Months Ended September 30, 2018

 

 

Three Months Ended September 30, 2017

 

 

Income

(Numerator)

 

 

Shares

(Denominator)

 

 

Per  Share

Amount

 

 

Income

(Numerator)

 

 

Shares

(Denominator)

 

 

Per  Share

Amount

 

 

(in thousands, except per share data)

 

Basic EPS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to common stockholders

$

22,745

 

 

 

90,494

 

 

$

0.25

 

 

$

12,988

 

 

 

86,449

 

 

$

0.15

 

Effect of Dilutive Securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock options

 

 

 

 

1,704

 

 

 

 

 

 

 

 

 

 

1,105

 

 

 

 

 

Restricted stock units

 

 

 

 

1,480

 

 

 

 

 

 

 

 

 

 

989

 

 

 

 

 

Diluted EPS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to common stockholders

$

22,745

 

 

 

93,678

 

 

$

0.24

 

 

$

12,988

 

 

 

88,543

 

 

$

0.15

 

 

 

Nine Months Ended September 30, 2018

 

 

Nine Months Ended September 30, 2017

 

 

Income

(Numerator)

 

 

Shares

(Denominator)

 

 

Per  Share

Amount

 

 

Income

(Numerator)

 

 

Shares

(Denominator)

 

 

Per  Share

Amount

 

 

(in thousands, except per share data)

 

Basic EPS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to common stockholders

$

83,631

 

 

 

89,027

 

 

$

0.94

 

 

$

45,457

 

 

 

86,162

 

 

$

0.53

 

Effect of Dilutive Securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock options

 

 

 

 

1,649

 

 

 

 

 

 

 

 

 

 

951

 

 

 

 

 

Restricted stock units

 

 

 

 

1,415

 

 

 

 

 

 

 

 

 

 

675

 

 

 

 

 

Diluted EPS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to common stockholders

$

83,631

 

 

 

92,091

 

 

$

0.91

 

 

$

45,457

 

 

 

87,788

 

 

$

0.52

 

 

The number of shares of common stock underlying stock-based awards excluded from the calculation of diluted net income per share attributable to common stockholders because their effect would have been antidilutive for the three and nine months ended September 30, 2018 and 2017 were as follows:  

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

Anti-dilutive shares underlying stock-based awards:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock options

 

 

251,582

 

 

 

685,671

 

 

 

251,582

 

 

 

685,671

 

Restricted stock units

 

 

84,668

 

 

 

84,358

 

 

 

84,668

 

 

 

84,358

 

 

v3.10.0.1
Fair Value Measurement
9 Months Ended
Sep. 30, 2018
Fair Value Disclosures [Abstract]  
Fair Value Measurement

14. 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

Assets and liabilities valued based on observable market data for similar instruments, such as quoted prices for similar assets or liabilities.

 

Level 3

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 and certain money market funds 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 Company’s long-term debt is classified as Level 3 within the fair value hierarchy because it is valued using an income approach, which utilizes a discounted cash flow technique that considers 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 September 30, 2018 and December 31, 2017:

 

 

 

September 30, 2018

 

 

December 31, 2017

 

 

 

Level 2

 

Level 3

 

Carrying Value

 

 

Level 2

 

Level 3

 

Carrying Value

 

 

 

(in thousands)

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

18

 

$

 

$

18

 

 

$

93

 

$

 

$

93

 

Commercial paper

 

 

25,045

 

 

 

 

25,169

 

 

 

61,317

 

 

 

 

61,459

 

Corporate bonds

 

 

1,749

 

 

 

 

1,749

 

 

 

3,374

 

 

 

 

3,375

 

Total assets

 

$

26,812

 

$

 

$

26,936

 

 

$

64,784

 

$

 

$

64,927

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term debt, including current maturities

 

 

 

 

303,001

 

 

296,875

 

 

 

 

 

175,700

 

 

174,219

 

Total liabilities

 

$

 

$

303,001

 

$

296,875

 

 

$

 

$

175,700

 

$

174,219

 

 

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.

v3.10.0.1
Subsequent Events
9 Months Ended
Sep. 30, 2018
Subsequent Events [Abstract]  
Subsequent Events

On September 25, 2018, the Company entered into a share purchase agreement by and among the Company, Grubhub Holdings Inc., Tapingo Ltd. (“Tapingo”), Shareholder Representative Services LLC, solely in its capacity as representative of the securityholders, and other parties signatory thereto, to acquire all of the issued and outstanding shares of Tapingo. Tapingo is a leading platform for campus food ordering with direct integration into college meal plans and point of sale systems. The acquisition is expected to enhance the Company’s diner network on college campuses.

 

On September 12, 2018, the Company entered into a definitive agreement to complete the acquisition of substantially all of the restaurant and diner network assets of OrderUp, Inc. (“OrderUp”), a wholly-owned subsidiary of Groupon, Inc. The Company previously completed the acquisition of certain assets of OrderUp on September 14, 2017.

 

Pursuant to the purchase agreements, the Company will acquire Tapingo and certain additional assets of OrderUp for total aggregate consideration of approximately $170 million, subject to customary adjustments and closing conditions. The purchase price is currently expected to be funded through a combination of cash on hand and proceeds from borrowings under the Company’s existing Credit Agreement.

v3.10.0.1
Significant Accounting Policies (Policies)
9 Months Ended
Sep. 30, 2018
Accounting Policies [Abstract]  
Basis of Presentation and Principles of Consolidation

Basis of Presentation and Principles of Consolidation

The accompanying unaudited condensed consolidated interim financial statements include the accounts of Grubhub Inc. and have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the rules and regulations of the United States Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. These unaudited condensed consolidated interim financial statements include all wholly-owned subsidiaries and reflect all normal and recurring adjustments, as well as any other than normal adjustments, that are, in the opinion of management, necessary for a fair presentation of the results for the interim periods and should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017 filed with the SEC on February 28, 2018 (the “2017 Form 10-K”). All significant intercompany transactions have been eliminated in consolidation. Operating results for the three and nine months ended September 30, 2018 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2018.

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 historic accounting guidance under ASC Topic 605. See Recently Issued Accounting Pronouncements and Note 3, Revenue, below for additional details.

Use of Estimates

Use of Estimates

The preparation of condensed consolidated financial statements in accordance with GAAP requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and the related disclosures at the date of the financial statements, as well as the reported amounts of revenue and expenses during the periods presented. Estimates include revenue recognition, the allowance for doubtful accounts, website and internal-use software development costs, goodwill, depreciable lives of property and equipment, recoverability of intangible assets with definite lives and other long-lived assets, stock-based compensation and income taxes. Actual results could differ from these estimates.  

Changes in Accounting Principle

Changes in Accounting Principle

See “Recently Issued Accounting Pronouncements” below for a description of accounting principle changes adopted during the nine months ended September 30, 2018 related to revenue and the statement of cash flows. There have been no other material changes to the Company’s significant accounting policies described in the 2017 Form 10-K.

Recently Issued Accounting Pronouncements

Recently Issued Accounting Pronouncements

In August 2018, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update No. 2018-15, “Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract” (“ASU 2018-15”). ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in hosting arrangements that are service contracts and that include an internal-use software license with the requirement for capitalizing implementation costs incurred to develop or obtain internal-use software. The capitalized implementation costs are required to be expensed over the term of the hosting arrangement. The guidance also clarifies the presentation requirements for reporting such costs in the entity’s financial statements. The Company has elected to early adopt ASU 2018-15. The amendments will be applied prospectively to all implementation costs incurred after the date of adoption. The adoption of ASU 2018-15 is not expected to have a material impact on the Company’s consolidated financial position, results of operations or cash flows.

In May 2017, the FASB issued Accounting Standards Update No. 2017-09, “Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting” (“ASU 2017-09”). ASU 2017-09 provides clarification on when modification accounting should be used for changes to the terms or conditions of a share-based payment award. This ASU does not change the accounting for modifications but clarifies that modification accounting guidance should only be applied if there is a change to the value, vesting conditions, or award classification and would not be required if the changes are considered non-substantive. ASU 2017-09 is effective for the Company beginning in the first quarter of 2018 on a prospective basis. The adoption of ASU 2017-09 has not had and is not expected to have a material impact on the Company’s consolidated financial position, results of operations or cash flows.

In August 2016, the FASB issued Accounting Standards Update No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments” (“ASU 2016-15”). ASU 2016-15 adds or clarifies guidance on the classification of certain cash receipts and payments in the statement of cash flows with the intent of reducing diversity in practice related to eight types of cash flows including, among others, debt prepayment or debt extinguishment costs, contingent consideration payments made after a business combination, and separately identifiable cash flows and application of the predominance principle. In addition, in November 2016, the FASB issued Accounting Standards Update No. 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash” (“ASU 2016-18”). ASU 2016-18 requires companies to include amounts generally described as restricted cash and restricted cash equivalents in cash and cash equivalents when reconciling beginning-of-period and end-of-period total amounts shown on the statement of cash flow. ASU 2016-15 and ASU 2016-18 were effective for and adopted by the Company beginning in the first quarter of 2018. The amendments were applied using a retrospective transition method to each period presented and impacted the Company’s presentation of the consolidated statements of cash flows. The adoption of ASU 2016-15 and ASU 2016-18 had no material impact on the Company’s consolidated financial position, results of operations or cash flows as the Company’s restricted cash balances are immaterial.

In June 2016, 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 considerations 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 is not expected to have a material impact on the Company’s consolidated financial position, results of operations or cash flows.

In February 2016, the FASB issued Accounting Standards Update No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). Under ASU 2016-02, a lessee will recognize in the statement of financial position a liability to make lease payments and a right-of-use asset for all leases (with the exception of short-term leases) at the commencement date. The recognition, measurement, and presentation of expenses and cash flows arising from a lease under ASU 2016-02 will not significantly change from current GAAP. ASU 2016-02 is effective beginning in the first quarter of 2019 with early adoption permitted. In July 2018, the FASB issued Accounting Standards Update No. 2018-11 “Leases (Topic 842): Targeted Improvements” (“ASU 2018-11”), which provides for the election of transition methods between the modified retrospective method and the optional transition relief method. The modified retrospective method is applied to all prior reporting periods presented with a cumulative-effect adjustment recorded in the earliest comparative period while the optional transition relief method is applied beginning in the period of adoption with a cumulative-effect adjustment recorded in the first quarter of 2019. The Company will apply the optional transition relief method and has elected the optional practical expedient package, which includes retaining the current classification of leases. The Company is currently evaluating the impact of adoption of ASU 2016-02 on its consolidated financial statements under ASU 2018-11. Management anticipates that it will result in a significant increase in the Company’s long-term assets and liabilities but will have no material impact to its results of operations or cash flows.     

In May 2014, and in subsequent updates, the FASB issued ASC Topic 606, Revenue from Contracts with Customers, which supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, including most industry-specific requirements. ASC Topic 606 establishes a five-step revenue recognition process in which an entity will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. ASC Topic 606 also requires enhanced disclosures regarding the nature, amount, timing and uncertainty of revenues and cash flows from contracts with customers. ASC Topic 606 was effective for and adopted by the Company in the first quarter of 2018. The Company applied the modified retrospective approach to contracts which were not completed as of January 1, 2018. The adoption of these ASUs did not have and is not expected to have a material impact on the Company’s consolidated financial position, results of operations or cash flows or its business processes, systems and controls.

The adoption of ASC Topic 606 resulted in an increase in revenues of $0.1 million and $0.9 million for the three and nine months ended September 30, 2018, respectively, and primarily had the following impact on the Company’s financial statements:

 

Beginning in January 1, 2018, the Company defers the incremental costs of obtaining contracts as contract acquisition assets resulting in a net decrease of $2.0 million and $6.6 million in sales and marketing expense in the condensed consolidated statements of operations for the three and nine months ended September 30, 2018, respectively, and corresponding increase in other assets on the condensed consolidated balance sheets. Contract acquisition assets are amortized to sales and marketing expense in the consolidated statements of operations over the period in which services are expected to be provided to the customer, which is estimated to be approximately 4 years. Prior to the adoption of ASC Topic 606, the cost of obtaining a contract was recognized as it was incurred.

 

Beginning in the first quarter of 2018, the Company recognizes revenue from estimated unredeemed gift cards that are not subject to unclaimed property laws over the expected customer redemption period, rather than when the likelihood of redemption became remote. The Company recorded a cumulative-effect adjustment to opening retained earnings as of January 1, 2018 of $0.9 million related to unredeemed gift cards, breakage income of $0.3 million and $0.9 million in revenues in the condensed consolidated statements of operations during the three and nine months ended September 30, 2018, respectively, and a corresponding decrease in other accruals of $2.0 million on the condensed consolidated balance sheets.

 

Changes in the timing of revenue recognition under ASC Topic 606 related to incentives, refunds and adjustments resulted in a $0.1 million decrease and $0.1 million increase in revenues in the condensed consolidated statements of operations during the three and nine months ended September 30, 2018, respectively.

 

The adoption of ASC Topic 606 had no impact to the Company’s total net cash provided by or used in operations, investing or financing activities within the Company’s condensed consolidated statement of cash flows for the nine months ended September 30, 2018.

See Note 3, Revenue, for additional details.

Accounts Receivable

Accounts Receivable

Accounts receivable primarily represent the net cash due from the Company’s payment processor for cleared transactions and amounts owed from corporate customers, 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 based on historical loss experience and any current or forecasted specific risks.

Deferred Revenues

Deferred Revenues

The Company’s deferred revenues consist primarily of gift card liabilities and certain incentive liabilities. These amounts are included within other accruals on the consolidated balance sheets and 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.

v3.10.0.1
Acquisitions (Tables)
9 Months Ended
Sep. 30, 2018
LevelUp  
Business Acquisition [Line Items]  
Schedule of Acquisition Date Fair Value of Assets and Liabilities

The following table summarizes the preliminary purchase price allocation acquisition-date fair values of the asset and liabilities acquired in connection with the LevelUp acquisition:

 

 

 

 

LevelUp

 

 

 

 

(in thousands)

 

Accounts receivable

 

 

$

6,201

 

Prepaid expenses and other current assets

 

 

 

1,396

 

Property and equipment

 

 

 

895

 

Restaurant relationships

 

 

 

10,217

 

Diner acquisition

 

 

 

3,912

 

Below-market lease intangible

 

 

 

2,205

 

Developed technology

 

 

 

20,107

 

Goodwill

 

 

 

295,488

 

Net deferred tax asset

 

 

 

32,267

 

Accounts payable and accrued expenses

 

 

 

(3,031

)

Total purchase price net of cash acquired

 

 

$

369,657

 

Net working capital adjustment receivable

 

 

 

530

 

Fair value of assumed ISOs attributable to pre-combination service

 

 

 

(2,594

)

Net cash paid

 

 

$

367,593

 

 

Eat24 and Foodler  
Business Acquisition [Line Items]  
Schedule of Acquisition Date Fair Value of Assets and Liabilities

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

 

 

Total

 

 

(in thousands)

 

Cash

$

40

 

 

$

86

 

 

$

126

 

Accounts receivable

 

8,267

 

 

 

307

 

 

 

8,574

 

Prepaid expenses and other current assets

 

221

 

 

 

 

 

 

221

 

Property and equipment

 

1,113

 

 

 

 

 

 

1,113

 

Restaurant relationships

 

126,232

 

 

 

35,217

 

 

 

161,449

 

Diner acquisition

 

35,226

 

 

 

1,354

 

 

 

36,580

 

Trademarks

 

2,225

 

 

 

74

 

 

 

2,299

 

Developed technology

 

2,559

 

 

 

1,955

 

 

 

4,514

 

Goodwill

 

135,955

 

 

 

17,452

 

 

 

153,407

 

Accounts payable and accrued expenses

 

(30,082

)

 

 

(5,237

)

 

 

(35,319

)

Total purchase price plus cash acquired

 

281,756

 

 

 

51,208

 

 

 

332,964

 

Fair value of replacement RSUs attributable to pre-combination service

 

(274

)

 

 

 

 

 

(274

)

Cash acquired

 

(40

)

 

 

(86

)

 

 

(126

)

Net cash paid

$

281,442

 

 

$

51,122

 

 

$

332,564

 

 

LevelUp,Eat24 and Foodler  
Business Acquisition [Line Items]  
Valuation Methods for Intangible Assets Acquired

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:

 

 

 

Valuation Method

 

 

 

LevelUp

 

Foodler

 

Eat24

Restaurant relationships

 

 

With or without comparative business valuation

 

Multi-period excess earnings

 

Multi-period excess earnings

Diner acquisition

 

 

Cost to recreate

 

Cost to recreate

 

Cost to recreate

Developed technology

 

 

Multi-period excess earnings

 

Cost to recreate

 

Cost to recreate

Trademark

 

 

n/a

 

Relief  from royalty

 

Relief  from royalty

 

Pro Forma Summary of Operation

The following unaudited pro forma information presents a summary of the operating results of the Company for the three and nine months ended September 30, 2018 and 2017 as if the acquisitions of LevelUp, Eat24 and Foodler had occurred as of January 1 of the year prior to acquisition:

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

 

(in thousands, except per share data)

 

Revenues

$

255,777

 

 

$

190,833

 

 

$

746,545

 

 

$

562,364

 

Net income

 

22,352

 

 

 

5,084

 

 

 

75,348

 

 

 

15,869

 

Net income per share attributable to common shareholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

0.25

 

 

$

0.06

 

 

$

0.85

 

 

$

0.18

 

Diluted

$

0.24

 

 

$

0.06

 

 

$

0.82

 

 

$

0.18

 

 

Pro Forma Adjustments

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 replacement awards, interest expense for transaction financings and other adjustments, as well as the pro forma tax impact of such adjustments for the three and nine months ended September 30, 2018 and 2017 were as follows:

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

 

(in thousands)

 

Depreciation and amortization

$

(186

)

 

$

2,085

 

 

$

(248

)

 

$

9,488

 

Transaction costs

 

(2,646

)

 

 

(1,799

)

 

 

(5,010

)

 

 

846

 

Stock-based compensation

 

(458

)

 

 

728

 

 

 

2,325

 

 

 

3,748

 

Interest expense

 

33

 

 

 

1,128

 

 

 

244

 

 

 

3,547

 

Other

 

 

 

 

1,571

 

 

 

 

 

 

4,401

 

Income tax (benefit) expense

 

964

 

 

 

(1,546

)

 

 

796

 

 

 

(9,367

)

 

v3.10.0.1
Marketable Securities (Tables)
9 Months Ended
Sep. 30, 2018
Investments Debt And Equity Securities [Abstract]  
Summary of Held-to-Maturity Marketable Securities

The amortized cost, unrealized gains and losses and estimated fair value of the Company’s held-to-maturity marketable securities as of September 30, 2018 and December 31, 2017 were as follows:

 

 

 

September 30, 2018

 

 

 

Amortized Cost

 

 

Unrealized Gains

 

 

Unrealized Losses

 

 

Estimated

Fair Value

 

 

 

(in thousands)

 

Cash and cash equivalents

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial paper

 

$

10,231

 

 

$

 

 

$

(12

)

 

$

10,219

 

Short-term investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial paper

 

 

14,938

 

 

 

 

 

 

(112

)

 

 

14,826

 

Corporate bonds

 

 

1,749

 

 

 

 

 

 

 

 

 

1,749

 

Total

 

$

26,918

 

 

$

 

 

$

(124

)

 

$

26,794

 

 

 

 

December 31, 2017

 

 

 

Amortized Cost

 

 

Unrealized Gains

 

 

Unrealized Losses

 

 

Estimated

Fair Value

 

 

 

(in thousands)

 

Cash and cash equivalents

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial paper

 

$

39,979

 

 

$

 

 

$

(43

)

 

$

39,936

 

Corporate bonds

 

 

1,250

 

 

 

 

 

 

 

 

 

1,250

 

Short-term investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial paper

 

 

21,480

 

 

 

 

 

 

(99

)

 

 

21,381

 

Corporate bonds

 

 

2,125

 

 

 

 

 

 

(1

)

 

 

2,124

 

Total

 

$

64,834

 

 

$

 

 

$

(143

)

 

$

64,691

 

 

Summary of Continuous Unrealized Loss on Marketable Securities

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 September 30, 2018 and December 31, 2017 were as follows:

 

 

 

September 30, 2018

 

 

 

Less Than 12 Months

 

 

12 Months or Greater

 

 

Total

 

 

 

Estimated

Fair Value

 

 

Unrealized Loss

 

 

Estimated

Fair Value

 

 

Unrealized

 Loss

 

 

Estimated

Fair Value

 

 

Unrealized Loss

 

 

 

(in thousands)

 

Commercial paper

 

$

25,045

 

 

$

(124

)

 

$

 

 

$

 

 

$

25,045

 

 

$

(124

)

Total

 

$

25,045

 

 

$

(124

)

 

$

 

 

$

 

 

$

25,045

 

 

$

(124

)

 

 

 

December 31, 2017

 

 

 

Less Than 12 Months

 

 

12 Months or Greater

 

 

Total

 

 

 

Estimated

Fair Value

 

 

Unrealized Loss

 

 

Estimated

Fair Value

 

 

Unrealized

 Loss

 

 

Estimated

Fair Value

 

 

Unrealized Loss

 

 

 

(in thousands)

 

Commercial paper

 

$

61,317

 

 

$

(142

)

 

$

 

 

$

 

 

$

61,317

 

 

$

(142

)

Corporate bonds

 

 

3,374

 

 

 

(1

)

 

 

 

 

 

 

 

 

3,374

 

 

 

(1

)

Total

 

$

64,691

 

 

$

(143

)

 

$

 

 

$

 

 

$

64,691

 

 

$

(143

)

 

v3.10.0.1
Goodwill and Acquired Intangible Assets (Tables)
9 Months Ended
Sep. 30, 2018
Goodwill And Intangible Assets Disclosure [Abstract]  
Components of Acquired Intangible Assets (Finite Lived)

The components of acquired intangible assets as of September 30, 2018 and December 31, 2017 were as follows:

 

 

 

September 30, 2018

 

 

December 31, 2017

 

 

 

Gross Carrying

Amount

 

 

Accumulated

Amortization

 

 

Net Carrying

Value

 

 

Gross Carrying

Amount

 

 

Accumulated

Amortization

 

 

Net Carrying

Value

 

 

 

(in thousands)

 

Restaurant relationships

 

$

467,797

 

 

$

(96,321

)

 

$

371,476

 

 

$

457,580

 

 

$

(76,852

)

 

$

380,728

 

Diner acquisition

 

 

44,159

 

 

 

(7,982

)

 

 

36,177

 

 

 

40,247

 

 

 

(1,906

)

 

 

38,341

 

Developed technology

 

 

28,630

 

 

 

(8,591

)

 

 

20,039

 

 

 

8,523

 

 

 

(6,418

)

 

 

2,105

 

Trademarks

 

 

2,225

 

 

 

(2,225

)

 

 

 

 

 

2,225

 

 

 

(402

)

 

 

1,823

 

Below-market lease intangible

 

 

2,206

 

 

 

(21

)

 

 

2,185

 

 

 

 

 

 

 

 

 

 

Other

 

 

3,676

 

 

 

(2,362

)

 

 

1,314

 

 

 

6,888

 

 

 

(4,008

)

 

 

2,880

 

Total amortizable intangible assets

 

 

548,693

 

 

 

(117,502

)

 

 

431,191

 

 

 

515,463

 

 

 

(89,586

)

 

 

425,877

 

Indefinite-lived trademarks

 

 

89,676

 

 

 

 

 

 

89,676

 

 

 

89,676

 

 

 

 

 

 

89,676

 

Total acquired intangible assets

 

$

638,369

 

 

$

(117,502

)

 

$

520,867

 

 

$

605,139

 

 

$

(89,586

)

 

$

515,553

 

 

Components of Acquired Intangible Assets (Infinite Lived)

The components of acquired intangible assets as of September 30, 2018 and December 31, 2017 were as follows:

 

 

September 30, 2018

 

 

December 31, 2017

 

 

 

Gross Carrying

Amount

 

 

Accumulated

Amortization

 

 

Net Carrying

Value

 

 

Gross Carrying

Amount

 

 

Accumulated

Amortization

 

 

Net Carrying

Value

 

 

 

(in thousands)

 

Restaurant relationships

 

$

467,797

 

 

$

(96,321

)

 

$

371,476

 

 

$

457,580

 

 

$

(76,852

)

 

$

380,728

 

Diner acquisition

 

 

44,159

 

 

 

(7,982

)

 

 

36,177

 

 

 

40,247

 

 

 

(1,906

)

 

 

38,341

 

Developed technology

 

 

28,630

 

 

 

(8,591

)

 

 

20,039

 

 

 

8,523

 

 

 

(6,418

)

 

 

2,105

 

Trademarks

 

 

2,225

 

 

 

(2,225

)

 

 

 

 

 

2,225

 

 

 

(402

)

 

 

1,823

 

Below-market lease intangible

 

 

2,206

 

 

 

(21

)

 

 

2,185

 

 

 

 

 

 

 

 

 

 

Other

 

 

3,676

 

 

 

(2,362

)

 

 

1,314

 

 

 

6,888

 

 

 

(4,008

)

 

 

2,880

 

Total amortizable intangible assets

 

 

548,693

 

 

 

(117,502

)

 

 

431,191

 

 

 

515,463

 

 

 

(89,586

)

 

 

425,877

 

Indefinite-lived trademarks

 

 

89,676

 

 

 

 

 

 

89,676

 

 

 

89,676

 

 

 

 

 

 

89,676

 

Total acquired intangible assets

 

$

638,369

 

 

$

(117,502

)

 

$

520,867

 

 

$

605,139

 

 

$

(89,586

)

 

$

515,553

 

 

Changes in Carrying Amount of Goodwill

The changes in the carrying amount of goodwill during the nine months ended September 30, 2018 were as follows:

 

 

 

Goodwill

 

 

Accumulated Impairment Losses

 

 

Net Book Value

 

 

 

(in thousands)

 

Balance as of December 31, 2017

 

$

589,862

 

 

$

 

 

$

589,862

 

Acquisition of LevelUp

 

 

295,488

 

 

 

 

 

 

295,488

 

Balance as of September 30, 2018

 

$

885,350

 

 

$

 

 

$

885,350

 

 

Components of Acquired Intangibles Assets Added During the Period (Finite Lived)

The components of the acquired intangible assets added during the nine months ended September 30, 2018 were as follows:

 

 

Nine Months Ended September 30, 2018

 

 

 

Amount

 

 

Weighted-Average

Amortization

Period

 

 

 

(in thousands)

 

 

(years)

 

Developed technology

 

$

20,107

 

 

 

6.0

 

Restaurant relationships

 

 

10,217

 

 

 

19.0

 

Diner acquisition

 

 

3,912

 

 

 

5.0

 

Below-market lease intangible

 

 

2,205

 

 

 

5.8

 

Total

 

$

36,441

 

 

 

 

 

 

Estimated Future Amortization of Acquired Intangible Assets

 

Estimated future amortization expense of acquired intangible assets as of September 30, 2018 was as follows:

 

 

 

(in thousands)

 

The remainder of 2018

 

$

10,117

 

2019

 

 

38,485

 

2020

 

 

37,315

 

2021

 

 

37,304

 

2022

 

 

35,334

 

Thereafter

 

 

272,636

 

Total

 

$

431,191

 

 

v3.10.0.1
Property and Equipment (Tables)
9 Months Ended
Sep. 30, 2018
Property Plant And Equipment [Abstract]  
Components of Property and Equipment

The components of the Company’s property and equipment as of September 30, 2018 and December 31, 2017 were as follows:

 

 

 

September 30, 2018

 

 

December 31, 2017

 

 

 

(in thousands)

 

Developed software

 

$

78,332

 

 

$

52,041

 

Computer equipment

 

 

44,896

 

 

 

31,601

 

Leasehold improvements

 

 

31,809

 

 

 

23,400

 

Furniture and fixtures

 

 

8,704

 

 

 

6,857

 

Purchased software and digital assets

 

 

3,581

 

 

 

2,881

 

Construction in progress

 

 

5,559

 

 

 

 

Property and equipment

 

 

172,881

 

 

 

116,780

 

Accumulated depreciation and amortization

 

 

(67,447

)

 

 

(45,396

)

Property and equipment, net

 

$

105,434

 

 

$

71,384

 

 

v3.10.0.1
Debt (Tables)
9 Months Ended
Sep. 30, 2018
Debt Disclosure [Abstract]  
Schedule of Debt

The following table summarizes the carrying value of the Company’s debt as of September 30, 2018 and December 31, 2017:

 

 

September 30, 2018

 

 

December 31, 2017

 

 

 

(in thousands)

 

Term loan

 

$

121,875

 

 

$

124,219

 

Revolving loan

 

 

175,000

 

 

 

50,000

 

Total debt

 

 

296,875

 

 

 

174,219

 

Less current portion

 

 

(6,250

)

 

 

(3,906

)

Less unamortized deferred debt issuance costs

 

 

(552

)

 

 

(668

)

Long-term debt

 

$

290,073

 

 

$

169,645

 

 

v3.10.0.1
Stock-Based Compensation (Tables)
9 Months Ended
Sep. 30, 2018
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]  
Assumptions Used to Determine Fair Value of Stock Options Granted

The assumptions used to determine the fair value of the stock options granted during the nine months ended September 30, 2018 and 2017 were as follows: 

 

 

 

Nine Months Ended September 30,

 

 

 

2018

 

 

2017

 

Weighted-average fair value options granted

 

$

65.86

 

 

$

15.19

 

Average risk-free interest rate

 

 

2.55

%

 

 

1.65

%

Expected stock price volatility (a)

 

 

46.1

%

 

 

48.7

%

Dividend yield

 

None

 

 

None

 

Expected stock option life (years) (b)

 

 

3.64

 

 

 

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 the LevelUp assumed ISO awards was calculated based on their respective remaining vesting periods as of the acquisition date.

 

Summary of Stock Option Activity

Stock option awards as of December 31, 2017 and September 30, 2018, and changes during the nine months ended September 30, 2018, were as follows

 

 

Options

 

 

Weighted-Average

Exercise Price

 

 

Aggregate Intrinsic

Value

(thousands)

 

 

Weighted-Average

Exercise Term

(years)

 

Outstanding at December 31, 2017

 

 

2,705,849

 

 

$

25.53

 

 

$

125,197

 

 

 

7.28

 

Granted

 

 

584,305

 

 

 

68.74

 

 

 

 

 

 

 

 

 

Forfeited

 

 

(115,035

)

 

 

34.21

 

 

 

 

 

 

 

 

 

Exercised

 

 

(487,317

)

 

 

26.70

 

 

 

 

 

 

 

 

 

Outstanding at September 30, 2018

 

 

2,687,802

 

 

 

34.34

 

 

 

280,279

 

 

 

7.11

 

Vested and expected to vest at September 30, 2018

 

 

2,682,769

 

 

 

34.28

 

 

 

279,912

 

 

 

7.10

 

Exercisable at September 30, 2018

 

 

1,415,269

 

 

$

21.73

 

 

$

165,427

 

 

 

6.10

 

 

Non-vested Restricted Stock Units

Non-vested restricted stock units as of December 31, 2017 and September 30, 2018, and changes during the nine months ended September 30, 2018 were as follows:

 

 

 

Restricted Stock Units

 

 

 

Shares

 

 

Weighted-Average

Grant Date Fair

Value

 

Outstanding at December 31, 2017

 

 

2,454,801

 

 

$

37.56

 

Granted

 

 

1,107,806

 

 

 

94.35

 

Forfeited

 

 

(292,409

)

 

 

51.67

 

Vested

 

 

(796,579

)

 

 

35.94

 

Outstanding at September 30, 2018

 

 

2,473,619

 

 

$

61.84

 

 

v3.10.0.1
Stockholders' Equity (Tables)
9 Months Ended
Sep. 30, 2018
Equity [Abstract]  
Equity and Changes in Equity During Period

The Company’s equity as of December 31, 2017 and September 30, 2018, and changes during the nine months ended September 30, 2018, were as follows:

 

 

 

(in thousands)

 

Balance at December 31, 2017

 

$

1,117,816

 

Net income

 

 

83,631

 

Cumulative effect of change in accounting principle(a)

 

 

882

 

Currency translation

 

 

(392

)

Stock-based compensation

 

 

42,755

 

Shares repurchased and retired to satisfy tax withholding upon vesting

 

 

(28,238

)

Stock option exercises, net of withholdings and other

 

 

13,010

 

Stock-based compensation, assumed ISO awards

 

 

2,594

 

Issuance of common stock

 

 

200,000

 

Balance at September 30, 2018

 

$

1,432,058

 

 

(a)

See Note 2, Significant Accounting Policies, for additional details related to the impact of the adoption of ASC Topic 606 during the nine months ended September 30, 2018.

 

v3.10.0.1
Earnings Per Share Attributable to Common Stockholders (Tables)
9 Months Ended
Sep. 30, 2018
Earnings Per Share [Abstract]  
Computation of Basic and Diluted Net Income Per Share

The following tables present the calculation of basic and diluted net income per share attributable to common stockholders for the three and nine months ended September 30, 2018 and 2017:

 

Three Months Ended September 30, 2018

 

 

Three Months Ended September 30, 2017

 

 

Income

(Numerator)

 

 

Shares

(Denominator)

 

 

Per  Share

Amount

 

 

Income

(Numerator)

 

 

Shares

(Denominator)

 

 

Per  Share

Amount

 

 

(in thousands, except per share data)

 

Basic EPS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to common stockholders

$

22,745

 

 

 

90,494

 

 

$

0.25

 

 

$

12,988

 

 

 

86,449

 

 

$

0.15

 

Effect of Dilutive Securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock options

 

 

 

 

1,704

 

 

 

 

 

 

 

 

 

 

1,105

 

 

 

 

 

Restricted stock units

 

 

 

 

1,480

 

 

 

 

 

 

 

 

 

 

989

 

 

 

 

 

Diluted EPS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to common stockholders

$

22,745

 

 

 

93,678

 

 

$

0.24

 

 

$

12,988

 

 

 

88,543

 

 

$

0.15

 

 

 

Nine Months Ended September 30, 2018

 

 

Nine Months Ended September 30, 2017

 

 

Income

(Numerator)

 

 

Shares

(Denominator)

 

 

Per  Share

Amount

 

 

Income

(Numerator)

 

 

Shares

(Denominator)

 

 

Per  Share

Amount

 

 

(in thousands, except per share data)

 

Basic EPS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to common stockholders

$

83,631

 

 

 

89,027

 

 

$

0.94

 

 

$

45,457

 

 

 

86,162

 

 

$

0.53

 

Effect of Dilutive Securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock options

 

 

 

 

1,649

 

 

 

 

 

 

 

 

 

 

951

 

 

 

 

 

Restricted stock units

 

 

 

 

1,415

 

 

 

 

 

 

 

 

 

 

675

 

 

 

 

 

Diluted EPS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to common stockholders

$

83,631

 

 

 

92,091

 

 

$

0.91

 

 

$

45,457

 

 

 

87,788

 

 

$

0.52

 

 

Anti-dilutive Securities Excluded from Calculation of Diluted Net Income Per Share

 

The number of shares of common stock underlying stock-based awards excluded from the calculation of diluted net income per share attributable to common stockholders because their effect would have been antidilutive for the three and nine months ended September 30, 2018 and 2017 were as follows:  

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

Anti-dilutive shares underlying stock-based awards:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock options

 

 

251,582

 

 

 

685,671

 

 

 

251,582

 

 

 

685,671

 

Restricted stock units

 

 

84,668

 

 

 

84,358

 

 

 

84,668

 

 

 

84,358

 

 

v3.10.0.1
Fair Value Measurement (Tables)
9 Months Ended
Sep. 30, 2018
Fair Value Disclosures [Abstract]  
Schedule of Fair Value and Carrying Value of Assets and Liabilities Recorded at Other Than Fair Value

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 September 30, 2018 and December 31, 2017:

 

 

 

September 30, 2018

 

 

December 31, 2017

 

 

 

Level 2

 

Level 3

 

Carrying Value

 

 

Level 2

 

Level 3

 

Carrying Value

 

 

 

(in thousands)

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

18

 

$

 

$

18

 

 

$

93

 

$

 

$

93

 

Commercial paper

 

 

25,045

 

 

 

 

25,169

 

 

 

61,317

 

 

 

 

61,459

 

Corporate bonds

 

 

1,749

 

 

 

 

1,749

 

 

 

3,374

 

 

 

 

3,375

 

Total assets

 

$

26,812

 

$

 

$

26,936

 

 

$

64,784

 

$

 

$

64,927

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term debt, including current maturities

 

 

 

 

303,001

 

 

296,875

 

 

 

 

 

175,700

 

 

174,219

 

Total liabilities

 

$

 

$

303,001

 

$

296,875

 

 

$

 

$

175,700

 

$

174,219

 

 

v3.10.0.1
Significant Accounting Policies - Additional Information (Detail) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2018
Sep. 30, 2017
Sep. 30, 2018
Sep. 30, 2017
Jan. 01, 2018
Dec. 31, 2017
Significant Accounting Policies [Line Items]            
Revenues $ 247,225 $ 163,059 $ 719,536 $ 477,987    
Effect on sales and marketing 49,426 $ 35,138 144,413 $ 105,346    
Retained earnings 354,504   354,504     $ 269,992
Other accruals 33,186   $ 33,186     $ 26,818
Capitalized Contract Cost            
Significant Accounting Policies [Line Items]            
Contract acquisition assets, estimated service period     4 years      
Adjustments | ASC Topic 606            
Significant Accounting Policies [Line Items]            
Revenues 100   $ 900      
Adjustments | ASC Topic 606 | Adjustment, Unredeemed Gift Card Breakage Income            
Significant Accounting Policies [Line Items]            
Revenues 300   900      
Retained earnings         $ 900  
Other accruals (2,000)   (2,000)      
Adjustments | ASC Topic 606 | Incentives, Refunds and Adjustments            
Significant Accounting Policies [Line Items]            
Revenues (100)   100      
Adjustments | ASC Topic 606 | Capitalized Contract Cost            
Significant Accounting Policies [Line Items]            
Effect on sales and marketing (2,000)   (6,600)      
Effect on other assets $ 2,000   $ 6,600      
Contract acquisition assets, estimated service period     4 years      
v3.10.0.1
Revenue - Additional Information (Detail) - USD ($)
$ in Millions
3 Months Ended 9 Months Ended
Sep. 30, 2018
Sep. 30, 2018
Capitalized Contract Cost [Line Items]    
Capitalized contract acquisition costs $ 2.4 $ 7.3
Contract acquisition assets amortization $ 0.4 $ 0.7
Capitalized Contract Cost    
Capitalized Contract Cost [Line Items]    
Contract acquisition assets, estimated service period   4 years
v3.10.0.1
Acquisitions - Additional Information (Detail) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 13, 2018
Oct. 10, 2017
Aug. 23, 2017
Sep. 30, 2018
Sep. 30, 2017
Sep. 30, 2018
Sep. 30, 2017
Dec. 31, 2017
Business Acquisition [Line Items]                
Net cash payments to acquire businesses           $ 366,856 $ 51,859  
Fair value of replacement awards granted to acquired business employees           2,594    
Net working capital adjustment receivable           530 887  
Goodwill       $ 885,350   885,350   $ 589,862
General and administrative expenses                
Business Acquisition [Line Items]                
Direct and indirect expense incurred related to acquisitions       $ 2,600 $ 1,700 $ 5,100 $ 3,600  
LevelUp                
Business Acquisition [Line Items]                
Acquisition date Sep. 13, 2018              
Total purchase price net of cash acquired $ 369,657              
Net cash payments to acquire businesses 367,593              
Cash acquired in business acquisition 6,000              
Net working capital adjustment receivable 530              
Goodwill 295,488              
LevelUp | ISO                
Business Acquisition [Line Items]                
Fair value of replacement awards granted to acquired business employees 2,594              
Post combination expense expected to be recognized related to replacement awards $ 17,000              
Eat24                
Business Acquisition [Line Items]                
Acquisition date   Oct. 10, 2017            
Net cash payments to acquire businesses   $ 281,442            
Cash acquired in business acquisition   40            
Goodwill   135,955            
Total purchase price plus cash acquired   281,756            
Escrow related to indemnification rights under purchase agreement   $ 28,800            
Period of escrow   18 months            
Eat24 | Restricted Stock Units                
Business Acquisition [Line Items]                
Fair value of replacement awards granted to acquired business employees   $ 274            
Post combination expense expected to be recognized related to replacement awards   4,100            
Foodler                
Business Acquisition [Line Items]                
Acquisition date     Aug. 23, 2017          
Net cash payments to acquire businesses     $ 51,122          
Cash acquired in business acquisition     86          
Goodwill     17,452          
Total purchase price plus cash acquired     51,208          
Eat24 and Foodler                
Business Acquisition [Line Items]                
Net cash payments to acquire businesses   332,564            
Cash acquired in business acquisition   126            
Goodwill   153,407            
Total purchase price plus cash acquired   332,964            
Goodwill expected to be deductible for income tax purposes     $ 153,400          
Eat24 and Foodler | Restricted Stock Units                
Business Acquisition [Line Items]                
Fair value of replacement awards granted to acquired business employees   $ 274            
v3.10.0.1
Schedule of Acquisition-Date Fair Value of Assets and Liabilities (Detail) - USD ($)
$ in Thousands
9 Months Ended
Sep. 13, 2018
Oct. 10, 2017
Aug. 23, 2017
Sep. 30, 2018
Sep. 30, 2017
Dec. 31, 2017
Business Acquisition [Line Items]            
Goodwill       $ 885,350   $ 589,862
Net working capital adjustment receivable       530 $ 887  
Fair value of assumed equity awards attributable to pre-combination service       (2,594)    
Net cash paid       366,856 $ 51,859  
LevelUp            
Business Acquisition [Line Items]            
Accounts receivable $ 6,201          
Prepaid expenses and other current assets 1,396          
Property and equipment 895          
Intangible assets       36,441    
Goodwill 295,488          
Net deferred tax asset 32,267          
Accounts payable and accrued expenses (3,031)          
Total purchase price net of cash acquired 369,657          
Net working capital adjustment receivable 530          
Cash acquired (6,000)          
Net cash paid 367,593          
LevelUp | ISO            
Business Acquisition [Line Items]            
Fair value of assumed equity awards attributable to pre-combination service (2,594)          
LevelUp | Restaurant relationships            
Business Acquisition [Line Items]            
Intangible assets 10,217     10,217    
LevelUp | Diner acquisition            
Business Acquisition [Line Items]            
Intangible assets 3,912     3,912    
LevelUp | Below-market lease intangible            
Business Acquisition [Line Items]            
Intangible assets 2,205     2,205    
LevelUp | Developed technology            
Business Acquisition [Line Items]            
Intangible assets $ 20,107     $ 20,107    
Eat24            
Business Acquisition [Line Items]            
Cash   $ 40        
Accounts receivable   8,267        
Prepaid expenses and other current assets   221        
Property and equipment   1,113        
Goodwill   135,955        
Accounts payable and accrued expenses   (30,082)        
Total purchase price plus cash acquired   281,756        
Cash acquired   (40)        
Net cash paid   281,442        
Eat24 | Restricted Stock Units            
Business Acquisition [Line Items]            
Fair value of assumed equity awards attributable to pre-combination service   (274)        
Eat24 | Restaurant relationships            
Business Acquisition [Line Items]            
Intangible assets   126,232        
Eat24 | Diner acquisition            
Business Acquisition [Line Items]            
Intangible assets   35,226        
Eat24 | Developed technology            
Business Acquisition [Line Items]            
Intangible assets   2,559        
Eat24 | Trademarks            
Business Acquisition [Line Items]            
Intangible assets   2,225        
Foodler            
Business Acquisition [Line Items]            
Cash     $ 86      
Accounts receivable     307      
Goodwill     17,452      
Accounts payable and accrued expenses     (5,237)      
Total purchase price plus cash acquired     51,208      
Cash acquired     (86)      
Net cash paid     51,122      
Foodler | Restaurant relationships            
Business Acquisition [Line Items]            
Intangible assets     35,217      
Foodler | Diner acquisition            
Business Acquisition [Line Items]            
Intangible assets     1,354      
Foodler | Developed technology            
Business Acquisition [Line Items]            
Intangible assets     1,955      
Foodler | Trademarks            
Business Acquisition [Line Items]            
Intangible assets     $ 74      
Eat24 and Foodler            
Business Acquisition [Line Items]            
Cash   126        
Accounts receivable   8,574        
Prepaid expenses and other current assets   221        
Property and equipment   1,113        
Goodwill   153,407        
Accounts payable and accrued expenses   (35,319)        
Total purchase price plus cash acquired   332,964        
Cash acquired   (126)        
Net cash paid   332,564        
Eat24 and Foodler | Restricted Stock Units            
Business Acquisition [Line Items]            
Fair value of assumed equity awards attributable to pre-combination service   (274)        
Eat24 and Foodler | Restaurant relationships            
Business Acquisition [Line Items]            
Intangible assets   161,449        
Eat24 and Foodler | Diner acquisition            
Business Acquisition [Line Items]            
Intangible assets   36,580        
Eat24 and Foodler | Developed technology            
Business Acquisition [Line Items]            
Intangible assets   4,514        
Eat24 and Foodler | Trademarks            
Business Acquisition [Line Items]            
Intangible assets   $ 2,299        
v3.10.0.1
Acquisitions - Valuation Methods for Intangible Assets Acquired (Detail)
9 Months Ended
Sep. 30, 2018
Restaurant relationships | LevelUp  
Business Acquisition [Line Items]  
Valuation Method With or without comparative business valuation
Restaurant relationships | Foodler  
Business Acquisition [Line Items]  
Valuation Method Multi-period excess earnings
Restaurant relationships | Eat24  
Business Acquisition [Line Items]  
Valuation Method Multi-period excess earnings
Diner acquisition | LevelUp  
Business Acquisition [Line Items]  
Valuation Method Cost to recreate
Diner acquisition | Foodler  
Business Acquisition [Line Items]  
Valuation Method Cost to recreate
Diner acquisition | Eat24  
Business Acquisition [Line Items]  
Valuation Method Cost to recreate
Developed technology | LevelUp  
Business Acquisition [Line Items]  
Valuation Method Multi-period excess earnings
Developed technology | Foodler  
Business Acquisition [Line Items]  
Valuation Method Cost to recreate
Developed technology | Eat24  
Business Acquisition [Line Items]  
Valuation Method Cost to recreate
Trademarks | Foodler  
Business Acquisition [Line Items]  
Valuation Method Relief from royalty
Trademarks | Eat24  
Business Acquisition [Line Items]  
Valuation Method Relief from royalty
v3.10.0.1
Pro forma Summary of Operation (Detail) - LevelUp,Eat24 and Foodler - USD ($)
$ / shares in Units, $ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2018
Sep. 30, 2017
Sep. 30, 2018
Sep. 30, 2017
Business Acquisition [Line Items]        
Revenues $ 255,777 $ 190,833 $ 746,545 $ 562,364
Net income $ 22,352 $ 5,084 $ 75,348 $ 15,869
Net income per share attributable to common shareholders:        
Basic $ 0.25 $ 0.06 $ 0.85 $ 0.18
Diluted $ 0.24 $ 0.06 $ 0.82 $ 0.18
v3.10.0.1
Pro Forma Adjustments for Additional Amortization of That Would Have Been Recognized on the Intangible Assets (Detail) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2018
Sep. 30, 2017
Sep. 30, 2018
Sep. 30, 2017
Business Acquisition Pro Forma Information Nonrecurring Adjustment [Line Items]        
Interest expense $ 1,700 $ 200 $ 4,600 $ 600
Income tax (benefit) expense (1,234) 4,432 2,721 19,043
LevelUp,Eat24 and Foodler | Pro Forma        
Business Acquisition Pro Forma Information Nonrecurring Adjustment [Line Items]        
Depreciation and amortization (186) 2,085 (248) 9,488
Transaction costs (2,646) (1,799) (5,010) 846
Stock-based compensation (458) 728 2,325 3,748
Interest expense 33 1,128 244 3,547
Other   1,571   4,401
Income tax (benefit) expense $ 964 $ (1,546) $ 796 $ (9,367)
v3.10.0.1
Summary of Held-to-Maturity Marketable Securities (Detail) - USD ($)
$ in Thousands
Jun. 30, 2018
Dec. 31, 2017
Schedule Of Held To Maturity Securities [Line Items]    
Amortized Cost $ 26,918 $ 64,834
Unrealized Losses (124) (143)
Estimated Fair Value 26,794 64,691
Commercial Paper | Cash and Cash Equivalents    
Schedule Of Held To Maturity Securities [Line Items]    
Amortized Cost 10,231 39,979
Unrealized Losses (12) (43)
Estimated Fair Value 10,219 39,936
Commercial Paper | Short Term Investments    
Schedule Of Held To Maturity Securities [Line Items]    
Amortized Cost 14,938 21,480
Unrealized Losses (112) (99)
Estimated Fair Value 14,826 21,381
Corporate Bonds | Cash and Cash Equivalents    
Schedule Of Held To Maturity Securities [Line Items]    
Amortized Cost   1,250
Estimated Fair Value   1,250
Corporate Bonds | Short Term Investments    
Schedule Of Held To Maturity Securities [Line Items]    
Amortized Cost 1,749 2,125
Unrealized Losses   (1)
Estimated Fair Value $ 1,749 $ 2,124
v3.10.0.1
Marketable Securities - Additional Information (Detail) - USD ($)
3 Months Ended 9 Months Ended
Sep. 30, 2018
Sep. 30, 2017
Sep. 30, 2018
Sep. 30, 2017
Schedule Of Held To Maturity Securities [Line Items]        
Marketable securities matured during the period and held in other interest-bearing accounts $ 40,000,000   $ 40,000,000  
Other-than-temporary impairment losses related to marketable securities 0 $ 0 0 $ 0
Net Interest (Income) Expense        
Schedule Of Held To Maturity Securities [Line Items]        
Interest income $ 1,300,000 $ 500,000 $ 3,200,000 $ 1,500,000
v3.10.0.1
Summary of Continuous Unrealized Loss on Marketable Securities (Detail) - USD ($)
$ in Thousands
Sep. 30, 2018
Dec. 31, 2017
Schedule Of Held To Maturity Securities [Line Items]    
Estimated Fair Value, Less Than 12 Months $ 25,045 $ 64,691
Unrealized Loss, Less Than 12 Months (124) (143)
Estimated Fair Value, 12 Months or Greater 0 0
Unrealized Loss, 12 Months or Greater 0 0
Estimated Fair Value, Total 25,045 64,691
Unrealized Loss, Total (124) (143)
Commercial Paper    
Schedule Of Held To Maturity Securities [Line Items]    
Estimated Fair Value, Less Than 12 Months 25,045 61,317
Unrealized Loss, Less Than 12 Months (124) (142)
Estimated Fair Value, 12 Months or Greater 0 0
Unrealized Loss, 12 Months or Greater 0 0
Estimated Fair Value, Total 25,045 61,317
Unrealized Loss, Total $ (124) (142)
Corporate Bonds    
Schedule Of Held To Maturity Securities [Line Items]    
Estimated Fair Value, Less Than 12 Months   3,374
Unrealized Loss, Less Than 12 Months   (1)
Estimated Fair Value, 12 Months or Greater   0
Unrealized Loss, 12 Months or Greater   0
Estimated Fair Value, Total   3,374
Unrealized Loss, Total   $ (1)
v3.10.0.1
Components of Acquired Intangible Assets (Detail) - USD ($)
$ in Thousands
Sep. 30, 2018
Dec. 31, 2017
Schedule Of Finite And Indefinite Lived Intangible Assets [Line Items]    
Amortizable intangible assets, Gross Carrying Amount $ 548,693 $ 515,463
Amortizable intangible assets, Accumulated Amortization (117,502) (89,586)
Amortizable intangible assets, Net Carrying Value 431,191 425,877
Indefinite-lived trademarks 89,676 89,676
Total acquired intangible assets, Gross Carrying Amount 638,369 605,139
Total acquired intangible assets, Net Carrying Value 520,867 515,553
Restaurant relationships    
Schedule Of Finite And Indefinite Lived Intangible Assets [Line Items]    
Amortizable intangible assets, Gross Carrying Amount 467,797 457,580
Amortizable intangible assets, Accumulated Amortization (96,321) (76,852)
Amortizable intangible assets, Net Carrying Value 371,476 380,728
Diner acquisition    
Schedule Of Finite And Indefinite Lived Intangible Assets [Line Items]    
Amortizable intangible assets, Gross Carrying Amount 44,159 40,247
Amortizable intangible assets, Accumulated Amortization (7,982) (1,906)
Amortizable intangible assets, Net Carrying Value 36,177 38,341
Developed technology    
Schedule Of Finite And Indefinite Lived Intangible Assets [Line Items]    
Amortizable intangible assets, Gross Carrying Amount 28,630 8,523
Amortizable intangible assets, Accumulated Amortization (8,591) (6,418)
Amortizable intangible assets, Net Carrying Value 20,039 2,105
Trademarks    
Schedule Of Finite And Indefinite Lived Intangible Assets [Line Items]    
Amortizable intangible assets, Gross Carrying Amount 2,225 2,225
Amortizable intangible assets, Accumulated Amortization (2,225) (402)
Amortizable intangible assets, Net Carrying Value   1,823
Below-market lease intangible    
Schedule Of Finite And Indefinite Lived Intangible Assets [Line Items]    
Amortizable intangible assets, Gross Carrying Amount 2,206  
Amortizable intangible assets, Accumulated Amortization (21)  
Amortizable intangible assets, Net Carrying Value 2,185  
Other    
Schedule Of Finite And Indefinite Lived Intangible Assets [Line Items]    
Amortizable intangible assets, Gross Carrying Amount 3,676 6,888
Amortizable intangible assets, Accumulated Amortization (2,362) (4,008)
Amortizable intangible assets, Net Carrying Value $ 1,314 $ 2,880
v3.10.0.1
Goodwill and Acquired Intangible Assets - Additional Information (Detail) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2018
Sep. 30, 2017
Sep. 30, 2018
Sep. 30, 2017
Finite Lived Intangible Assets [Line Items]        
Intangible assets amortization expense $ 10,000 $ 6,400 $ 31,100 $ 16,800
LevelUp        
Finite Lived Intangible Assets [Line Items]        
Acquired other intangible assets 36,441   36,441  
Other intangible assets        
Finite Lived Intangible Assets [Line Items]        
Gross carrying amount of intangible assets no longer in use 3,200   3,200  
Accumulated amortization of intangible assets no longer in use $ 2,500   $ 2,500  
v3.10.0.1
Schedule of Carrying Amount of Goodwill (Detail)
$ in Thousands
9 Months Ended
Sep. 30, 2018
USD ($)
Goodwill And Intangible Assets Disclosure [Abstract]  
Goodwill, Begining Balance $ 589,862
Goodwill, Acquisition 295,488
Goodwill, Ending Balance 885,350
Net Book Value, Beginning Balance 589,862
Net Book Value, Acquisition 295,488
Net Book Value, Ending Balance $ 885,350
v3.10.0.1
Components of Acquired Intangibles Assets Added During the Period (Detail) - LevelUp - USD ($)
$ in Thousands
9 Months Ended
Sep. 30, 2018
Sep. 13, 2018
Finite Lived Intangible Assets [Line Items]    
Acquired other intangible assets $ 36,441  
Developed technology    
Finite Lived Intangible Assets [Line Items]    
Acquired other intangible assets $ 20,107 $ 20,107
Weighted-Average Amortization Period 6 years  
Restaurant relationships    
Finite Lived Intangible Assets [Line Items]    
Acquired other intangible assets $ 10,217 10,217
Weighted-Average Amortization Period 19 years  
Diner acquisition    
Finite Lived Intangible Assets [Line Items]    
Acquired other intangible assets $ 3,912 3,912
Weighted-Average Amortization Period 5 years  
Below-market lease intangible    
Finite Lived Intangible Assets [Line Items]    
Acquired other intangible assets $ 2,205 $ 2,205
Weighted-Average Amortization Period 5 years 9 months 18 days  
v3.10.0.1
Estimated Future Amortization of Acquired Intangible Assets (Detail) - USD ($)
$ in Thousands
Sep. 30, 2018
Dec. 31, 2017
Goodwill And Intangible Assets Disclosure [Abstract]    
The remainder of 2018 $ 10,117  
2019 38,485  
2020 37,315  
2021 37,304  
2022 35,334  
Thereafter 272,636  
Amortizable intangible assets, Net Carrying Value $ 431,191 $ 425,877
v3.10.0.1
Components of Property and Equipment (Detail) - USD ($)
$ in Thousands
Sep. 30, 2018
Dec. 31, 2017
Property Plant And Equipment [Line Items]    
Property and equipment $ 172,881 $ 116,780
Accumulated depreciation and amortization (67,447) (45,396)
Property and equipment, net 105,434 71,384
Developed software    
Property Plant And Equipment [Line Items]    
Property and equipment 78,332 52,041
Computer equipment    
Property Plant And Equipment [Line Items]    
Property and equipment 44,896 31,601
Leasehold improvements    
Property Plant And Equipment [Line Items]    
Property and equipment 31,809 23,400
Furniture and fixtures    
Property Plant And Equipment [Line Items]    
Property and equipment 8,704 6,857
Purchased Software and Digital Assets    
Property Plant And Equipment [Line Items]    
Property and equipment 3,581 $ 2,881
Construction in progress    
Property Plant And Equipment [Line Items]    
Property and equipment $ 5,559  
v3.10.0.1
Property and Equipment - Additional Information (Detail) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2018
Sep. 30, 2017
Sep. 30, 2018
Sep. 30, 2017
Property Plant And Equipment [Line Items]        
Depreciation and amortization $ 20,987 $ 12,613 $ 61,787 $ 33,067
Capitalized developed software costs 10,800 6,800 28,100 18,900
Property And Equipment Excluding Developed Software        
Property Plant And Equipment [Line Items]        
Depreciation and amortization 5,700 2,900 16,200 8,000
Leasehold Improvements, Developed Software, Furniture and Fixtures and Purchased Software and Digital Assets        
Property Plant And Equipment [Line Items]        
Gross carrying amount of property and equipment no longer in use 8,600   8,600  
Accumulated amortization of property and equipment no longer in use 8,200   8,200  
Developed software        
Property Plant And Equipment [Line Items]        
Depreciation and amortization $ 5,300 $ 3,300 $ 14,500 $ 8,300
v3.10.0.1
Commitments and Contingencies - Additional Information (Detail)
$ in Millions
Sep. 30, 2018
USD ($)
Maximum | Merger Income Tax Consequences  
Loss Contingencies [Line Items]  
Indemnification related to business combination $ 15.0
v3.10.0.1
Schedule of Debt (Detail) - USD ($)
$ in Thousands
Sep. 30, 2018
Dec. 31, 2017
Debt Instrument [Line Items]    
Total debt $ 296,875 $ 174,219
Less current portion (6,250) (3,906)
Less unamortized deferred debt issuance costs (552) (668)
Long-term debt 290,073 169,645
Term loan    
Debt Instrument [Line Items]    
Total debt 121,875 124,219
Revolving loan    
Debt Instrument [Line Items]    
Total debt $ 175,000 $ 50,000
v3.10.0.1
Debt - Additional Information (Detail) - USD ($)
3 Months Ended 9 Months Ended
Oct. 10, 2017
Sep. 30, 2018
Sep. 30, 2017
Sep. 30, 2018
Sep. 30, 2017
Dec. 31, 2017
Debt Instrument [Line Items]            
Long-term debt   $ 296,875,000   $ 296,875,000   $ 174,219,000
Proceeds from borrowings       175,000,000    
Repayment of borrowings       52,344,000    
Unamortized Debt Issuance Expense   2,000,000   2,000,000    
Interest expense   1,700,000 $ 200,000 4,600,000 $ 600,000  
Revolving Loans            
Debt Instrument [Line Items]            
Long-term debt   175,000,000   175,000,000   50,000,000
Term Loans            
Debt Instrument [Line Items]            
Long-term debt   $ 121,875,000   121,875,000   $ 124,219,000
Credit Agreement            
Debt Instrument [Line Items]            
Credit facility, additional borrowing capacity $ 150,000,000          
Credit facility, expiration date Oct. 09, 2022          
Credit Agreement | Revolving Loans            
Debt Instrument [Line Items]            
Credit facility, maximum borrowing capacity $ 225,000,000          
Proceeds from borrowings       $ 175,000,000    
Credit Agreement | Term Loans            
Debt Instrument [Line Items]            
Long-term debt $ 125,000,000          
v3.10.0.1
Stock-Based Compensation - Additional Information (Detail) - USD ($)
$ / shares in Units, $ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2018
Sep. 30, 2017
Sep. 30, 2018
Sep. 30, 2017
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]        
Stock-based compensation $ 14,200 $ 8,500 $ 36,445 $ 23,913
Total unrecognized stock-based compensation expense $ 175,700   175,700  
Unrecognized compensation expense recognition period 3 years      
Stock-based compensation capitalized as website and software development cost $ 2,600 1,200 $ 6,300 $ 3,300
Options, Granted     584,305 618,899
Aggregate intrinsic value of awards exercised 13,600 5,600 $ 36,100 $ 13,700
Aggregate intrinsic value 165,427   165,427  
Stock Options        
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]        
Stock-based compensation $ 4,500 3,000 9,400 8,900
Unrecognized compensation expense recognition period 2 years 8 months 12 days      
Unrecognized stock-based compensation expense $ 40,100   40,100  
Restricted Stock Units        
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]        
Stock-based compensation $ 9,700 5,500 27,000 15,000
Unrecognized compensation expense recognition period 3 years      
Fair value of awards vested during the period $ 26,300 5,700 76,300 19,900
Unrecognized compensation expense related to share based awards other than options $ 135,600   $ 135,600  
Non-vested restricted stock units or awards expected to vest 2,458,380   2,458,380  
Weighted average grant date fair value $ 61.60   $ 61.60  
LevelUp        
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]        
Aggregate intrinsic value $ 23,000   $ 23,000  
LevelUp | Stock Options        
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]        
Unrecognized stock-based compensation expense 14,500   14,500  
Income Tax Expense        
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]        
Recognized excess tax benefits from stock-based compensation 7,600 2,200 21,500 5,700
Excess tax benefits from stock-based compensation $ 7,600 $ 2,200 $ 21,500 $ 5,700
v3.10.0.1
Assumptions Used to Determine Fair Value of Stock Options Granted (Detail) - $ / shares
9 Months Ended
Sep. 30, 2018
Sep. 30, 2017
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]    
Weighted-average fair value options granted $ 65.86 $ 15.19
Average risk-free interest rate 2.55% 1.65%
Expected stock price volatility [1] 46.10% 48.70%
Dividend yield 0.00% 0.00%
Expected stock option life (years) [2] 3 years 7 months 20 days 4 years
[1] 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.
[2] The expected term for the LevelUp assumed ISO awards was calculated based on their respective remaining vesting periods as of the acquisition date.
v3.10.0.1
Stock Option Activity (Detail) - USD ($)
$ / shares in Units, $ in Thousands
9 Months Ended 12 Months Ended
Sep. 30, 2018
Sep. 30, 2017
Dec. 31, 2017
Options      
Options, Beginning Balance 2,705,849    
Options, Granted 584,305 618,899  
Options, Forfeited (115,035)    
Options, Exercised (487,317)    
Options, Ending Balance 2,687,802   2,705,849
Options, Vested and expected to vest 2,682,769    
Options, Exercisable 1,415,269    
Weighted-Average Exercise Price      
Weighted-Average Exercise Price, Beginning Balance $ 25.53    
Weighted-Average Exercise Price, Granted 68.74    
Weighted-Average Exercise Price, Forfeited 34.21    
Weighted-Average Exercise Price, Exercised 26.70    
Weighted-Average Exercise Price, Ending Balance 34.34   $ 25.53
Weighted-Average Exercise Price, Vested and expected to vest 34.28    
Weighted-Average Exercise Price, Exercisable $ 21.73    
Aggregate Intrinsic Value/Weighted-Average Exercise Term      
Aggregate Intrinsic Value $ 280,279   $ 125,197
Aggregate Intrinsic Value, Vested and expected to vest 279,912    
Aggregate Intrinsic Value, Exercisable $ 165,427    
Weighted-Average Exercise Term, Outstanding Balance 7 years 1 month 9 days   7 years 3 months 10 days
Weighted-Average Exercise Term, Vested and expected to vest 7 years 1 month 6 days    
Weighted-Average Exercise Term, Exercisable 6 years 1 month 6 days    
v3.10.0.1
Non-vested Restricted Stock Units (Detail) - Restricted Stock Units
9 Months Ended
Sep. 30, 2018
$ / shares
shares
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]  
Shares, Beginning Balance | shares 2,454,801
Shares, Granted | shares 1,107,806
Shares, Forfeited | shares (292,409)
Shares, Vested | shares (796,579)
Shares, Ending Balance | shares 2,473,619
Weighted-Average Grant Date Fair Value, Beginning Balance | $ / shares $ 37.56
Weighted-Average Grant Date Fair Value, Granted | $ / shares 94.35
Weighted-Average Grant Date Fair Value, Forfeited | $ / shares 51.67
Weighted-Average Grant Date Fair Value, Vested | $ / shares 35.94
Weighted-Average Grant Date Fair Value, Ending Balance | $ / shares $ 61.84
v3.10.0.1
Income Taxes - Additional Information (Detail) - USD ($)
$ in Millions
3 Months Ended 9 Months Ended
Sep. 30, 2018
Sep. 30, 2017
Sep. 30, 2018
Sep. 30, 2017
Income Tax Disclosure [Abstract]        
Effective income tax rate (5.70%) 25.40% 3.20% 29.50%
Excess tax benefits from stock-based compensation $ 7.6 $ 2.2 $ 21.5 $ 5.7
Corporate income tax rate 21.00% 35.00% 21.00% 35.00%
Income tax examination description     In July 2018, the examination in New York for corporate income tax returns for the tax years ended December 31, 2014, 2015 and 2016 was completed with no material findings. The Company does not expect any material additional tax liabilities, penalties and/or interest as a result of the audit.  
v3.10.0.1
Stockholders' Equity - Additional Information (Detail) - USD ($)
9 Months Ended
Apr. 25, 2018
Sep. 30, 2018
Dec. 31, 2017
Jan. 22, 2016
Class Of Stock [Line Items]        
Number of votes per share   one vote per share    
Common stock, shares authorized   500,000,000 500,000,000  
Common stock, shares issued   90,598,259 86,790,624  
Common stock, shares outstanding   90,598,259 86,790,624  
Treasury stock, shares   0 0  
Preferred Stock, shares authorized   25,000,000 25,000,000  
Preferred Stock, shares issued   0 0  
Preferred Stock, shares outstanding   0 0  
Common stock | Stock Repurchase Program        
Class Of Stock [Line Items]        
Stock repurchase program, announced date   Jan. 25, 2016    
Common stock repurchased, Shares   0    
Common stock | Maximum | Stock Repurchase Program        
Class Of Stock [Line Items]        
Authorized to repurchase of common stock       $ 100,000,000
Common stock | Accredited Investor        
Class Of Stock [Line Items]        
Aggregate purchase price   $ 200,000,000    
Investment Agreement | Common stock | Accredited Investor        
Class Of Stock [Line Items]        
Shares issued and sold 2,820,464      
Aggregate purchase price $ 200,000,000      
v3.10.0.1
Equity and Changes in Equity During Period (Detail) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2018
Sep. 30, 2017
Sep. 30, 2018
Sep. 30, 2017
Class Of Stock [Line Items]        
Balance at beginning of period     $ 1,117,816  
Net income $ 22,745 $ 12,988 83,631 $ 45,457
Currency translation (92) $ 299 (392) $ 749
Stock-based compensation     42,755  
Shares repurchased and retired to satisfy tax withholding upon vesting     (28,238)  
Stock option exercises, net of withholdings and other     13,010  
Stock-based compensation, assumed ISO awards     2,594  
Balance at end of period 1,432,058   1,432,058  
Common stock | Accredited Investor        
Class Of Stock [Line Items]        
Issuance of common stock     200,000  
ASC Topic 606        
Class Of Stock [Line Items]        
Cumulative effect of change in accounting principle [1] $ 882   $ 882  
[1] See Note 2, Significant Accounting Policies, for additional details related to the impact of the adoption of ASC Topic 606 during the nine months ended September 30, 2018
v3.10.0.1
Earnings Per Share Attributable to Common Stockholders - Additional Information (Detail)
Apr. 25, 2018
shares
Investment Agreement | Common stock | Accredited Investor  
Class Of Stock [Line Items]  
Shares issued and sold 2,820,464
v3.10.0.1
Computation of Basic and Diluted Net Income Per Share (Detail) - USD ($)
$ / shares in Units, shares in Thousands, $ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2018
Sep. 30, 2017
Sep. 30, 2018
Sep. 30, 2017
Schedule Of Earnings Per Share Basic And Diluted By Common Class [Line Items]        
Net income attributable to common stockholders $ 22,745 $ 12,988 $ 83,631 $ 45,457
Basic EPS, Shares        
Weighted average number of shares outstanding, basic 90,494 86,449 89,027 86,162
Diluted EPS, shares        
Weighted average number of shares outstanding, diluted 93,678 88,543 92,091 87,788
Basic EPS, per share amount        
Net income attributable to common stockholders, per share amount $ 0.25 $ 0.15 $ 0.94 $ 0.53
Diluted EPS, per share amount        
Net income attributable to common stockholders plus assumed conversions, per share amount $ 0.24 $ 0.15 $ 0.91 $ 0.52
Stock Options        
Effect of Dilutive Securities, shares        
Stock options and Restricted stock units, shares 1,704 1,105 1,649 951
Restricted Stock Units        
Effect of Dilutive Securities, shares        
Stock options and Restricted stock units, shares 1,480 989 1,415 675
v3.10.0.1
Anti-dilutive Securities Excluded from Calculation of Diluted Net Income Per Share (Detail) - shares
3 Months Ended 9 Months Ended
Sep. 30, 2018
Sep. 30, 2017
Sep. 30, 2018
Sep. 30, 2017
Stock Options        
Anti-dilutive shares underlying stock-based awards:        
Anti-dilutive shares underlying stock-based awards 251,582 685,671 251,582 685,671
Restricted Stock Units        
Anti-dilutive shares underlying stock-based awards:        
Anti-dilutive shares underlying stock-based awards 84,668 84,358 84,668 84,358
v3.10.0.1
Schedule of Fair Value and Carrying Value of Assets and Liabilities Recorded at Other Than Fair Value (Detail) - USD ($)
$ in Thousands
Sep. 30, 2018
Dec. 31, 2017
Fair Value | Level 2    
Assets    
Assets, fair value disclosure $ 26,812 $ 64,784
Fair Value | Level 3    
Liabilities    
Long-term debt, including current maturities 303,001 175,700
Total liabilities 303,001 175,700
Carrying Value    
Assets    
Assets, fair value disclosure 26,936 64,927
Liabilities    
Long-term debt, including current maturities 296,875 174,219
Total liabilities 296,875 174,219
Money Market Funds | Fair Value | Level 2    
Assets    
Assets, fair value disclosure 18 93
Money Market Funds | Carrying Value    
Assets    
Assets, fair value disclosure 18 93
Commercial Paper | Fair Value | Level 2    
Assets    
Assets, fair value disclosure 25,045 61,317
Commercial Paper | Carrying Value    
Assets    
Assets, fair value disclosure 25,169 61,459
Corporate Bonds | Fair Value | Level 2    
Assets    
Assets, fair value disclosure 1,749 3,374
Corporate Bonds | Carrying Value    
Assets    
Assets, fair value disclosure $ 1,749 $ 3,375
v3.10.0.1
Subsequent Events - Additional Information (Detail)
$ in Millions
Sep. 25, 2018
USD ($)
Tapingo and Certain Additinal Assets of OrderUp  
Subsequent Event [Line Items]  
Total aggregate consideration $ 170