GRUBHUB INC., 10-K filed on 3/1/2021
Annual Report
v3.20.4
Document and Entity Information - USD ($)
12 Months Ended
Dec. 31, 2020
Feb. 19, 2021
Jun. 30, 2020
Cover [Abstract]      
Document Type 10-K    
Amendment Flag false    
Document Annual Report true    
Document Period End Date Dec. 31, 2020    
Document Transition Report false    
Document Fiscal Year Focus 2020    
Document Fiscal Period Focus FY    
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    
ICFR Auditor Attestation Flag true    
Entity Shell Company false    
Entity Common Stock, Shares Outstanding   93,256,029  
Entity Current Reporting Status Yes    
Entity Voluntary Filers No    
Entity Well-known Seasoned Issuer Yes    
Entity Interactive Data Current Yes    
Entity Public Float     $ 5,297,564,059
Entity File Number 1-36389    
Entity Tax Identification Number 46-2908664    
Entity Incorporation, State or Country Code DE    
Entity Address, Address Line One 111 W. Washington Street    
Entity Address, Address Line Two Suite 2100    
Entity Address, City or Town Chicago    
Entity Address, State or Province IL    
Entity Address, Postal Zip Code 60602    
City Area Code 877    
Local Phone Number 585-7878    
Title of 12(b) Security Common Stock, $0.0001 par value per share    
Security Exchange Name NYSE    
Documents Incorporated by Reference Portions of the Registrant’s Definitive Proxy Statement relating to the Annual Meeting of Stockholders, tentatively scheduled to be held on June 16, 2021, are incorporated by reference into Part III of this Annual Report on Form 10-K.    
v3.20.4
Consolidated Statements of Operations - USD ($)
shares in Thousands, $ in Thousands
12 Months Ended
Dec. 31, 2020
Dec. 31, 2019
Dec. 31, 2018
Income Statement [Abstract]      
Revenues $ 1,819,982 $ 1,312,151 $ 1,007,257
Costs and expenses:      
Operations and support 1,169,126 675,471 454,321
Sales and marketing 402,503 310,299 214,290
Technology (exclusive of amortization) 122,949 115,297 82,278
General and administrative 132,553 101,918 85,465
Depreciation and amortization 141,821 115,449 85,940
Total costs and expenses 1,968,952 1,318,434 922,294
Income (loss) from operations (148,970) (6,283) 84,963
Interest expense, net 27,988 20,493 3,530
Income (loss) before provision for income taxes (176,958) (26,776) 81,433
Income tax (benefit) expense (21,097) (8,210) 2,952
Net income (loss) attributable to common stockholders $ (155,861) $ (18,566) $ 78,481
Net income (loss) per share attributable to common stockholders      
Basic $ (1.69) $ (0.20) $ 0.88
Diluted $ (1.69) $ (0.20) $ 0.85
Weighted-average shares used to compute net income (loss) per share attributable to common stockholders:      
Basic 92,328 91,247 89,447
Diluted 92,328 91,247 92,354
v3.20.4
Consolidated Statements of Comprehensive Income (Loss) - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2020
Dec. 31, 2019
Dec. 31, 2018
Statement Of Income And Comprehensive Income [Abstract]      
Net income (loss) $ (155,861) $ (18,566) $ 78,481
OTHER COMPREHENSIVE INCOME (LOSS)      
Foreign currency translation adjustments 353 263 (663)
COMPREHENSIVE INCOME (LOSS) $ (155,508) $ (18,303) $ 77,818
v3.20.4
Consolidated Balance Sheets - USD ($)
$ in Thousands
Dec. 31, 2020
Dec. 31, 2019
CURRENT ASSETS:    
Cash and cash equivalents $ 360,232 $ 375,909
Short-term investments 53,126 49,275
Accounts receivable, less allowances for doubtful accounts 111,802 119,658
Income tax receivable 22,472 3,960
Prepaid expenses and other current assets 24,765 17,515
Total current assets 572,397 566,317
PROPERTY AND EQUIPMENT:    
Property and equipment, net of depreciation and amortization 216,146 172,744
OTHER ASSETS:    
Other assets 49,201 26,836
Deferred tax assets, non-current 142  
Operating lease right-of-use asset 88,227 100,632
Goodwill 1,007,968 1,007,968
Acquired intangible assets, net of amortization 454,838 500,481
Total other assets 1,600,376 1,635,917
TOTAL ASSETS 2,388,919 2,374,978
CURRENT LIABILITIES:    
Restaurant food liability 141,802 131,753
Accounts payable 19,859 26,748
Accrued payroll 27,346 19,982
Current operating lease liability 17,897 9,376
Other accruals 149,278 61,504
Total current liabilities 356,182 249,363
LONG-TERM LIABILITIES:    
Deferred taxes, non-current 17,777 27,163
Noncurrent operating lease liability 103,416 111,056
Long-term debt 494,103 493,009
Other accruals 644 817
Total long-term liabilities 615,940 632,045
Commitments and contingencies
STOCKHOLDERS’ EQUITY:    
Preferred Stock, $0.0001 par value. Authorized: 25,000,000 shares as of December 31, 2020 and December 31, 2019; issued and outstanding: no shares as of December 31, 2020 and December 31, 2019.
Common stock, $0.0001 par value. Authorized: 500,000,000 shares at December 31, 2020 and December 31, 2019; issued and outstanding: 93,046,676 and 91,576,060 shares as of December 31, 2020 and December 31, 2019, respectively 9 9
Accumulated other comprehensive loss (1,275) (1,628)
Additional paid-in capital 1,243,135 1,164,400
Retained earnings 174,928 330,789
Total stockholders’ equity 1,416,797 1,493,570
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 2,388,919 $ 2,374,978
v3.20.4
Consolidated Balance Sheets (Parenthetical) - $ / shares
Dec. 31, 2020
Dec. 31, 2019
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 93,046,676 91,576,060
Common stock, shares outstanding 93,046,676 91,576,060
v3.20.4
Statements of Cash Flows - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2020
Dec. 31, 2019
Dec. 31, 2018
CASH FLOWS FROM OPERATING ACTIVITIES      
Net income (loss) $ (155,861) $ (18,566) $ 78,481
Adjustments to reconcile net income (loss) to net cash from operating activities:      
Depreciation 42,446 30,237 21,647
Amortization of intangible assets and developed software 99,375 85,212 64,293
Stock-based compensation 84,485 72,879 55,261
Deferred taxes (9,528) (7,726) 1,724
Other 8,529 8,531 5,552
Change in assets and liabilities, net of the effects of business acquisitions:      
Accounts receivable 6,924 (11,591) (6,092)
Income taxes receivable (18,512) 5,989 (1,356)
Prepaid expenses and other assets (22,569) (13,854) (16,270)
Restaurant food liability 10,106 4,380 2,921
Accounts payable (2,014) 1,978 11,160
Accrued payroll 7,362 1,804 3,621
Other accruals 84,251 23,349 4,585
Net cash provided by operating activities 134,994 182,622 225,527
CASH FLOWS FROM INVESTING ACTIVITIES      
Purchases of investments (112,313) (85,989) (57,197)
Proceeds from maturity of investments 108,779 51,366 67,166
Capitalized website and development costs (57,179) (48,524) (31,180)
Purchases of property and equipment (62,999) (55,167) (43,033)
Acquisition of other intangible assets (510) (9,980) (11,851)
Acquisitions of businesses, net of cash acquired   127 (517,909)
Other cash flows from investing activities (525) (250)  
Net cash used in investing activities (124,747) (148,417) (594,004)
CASH FLOWS FROM FINANCING ACTIVITIES      
Proceeds from the issuance of long-term debt 175,000 500,000 222,000
Repayments of borrowings under the credit facility (175,000) (342,313) (53,906)
Taxes paid related to net settlement of stock-based compensation awards (34,621) (23,753) (35,599)
Proceeds from exercise of stock options 9,588 4,469 14,190
Payments for debt issuance costs (89) (9,136)  
Proceeds from the issuance of common stock     200,000
Other cash flows from financing activities (2,149)    
Net cash provided by (used in) financing activities (27,271) 129,267 346,685
Net change in cash, cash equivalents, and restricted cash (17,024) 163,472 (21,792)
Effect of exchange rates on cash, cash equivalents and restricted cash 327 320 (645)
Cash, cash equivalents, and restricted cash at beginning of year 379,594 215,802 238,239
Cash, cash equivalents, and restricted cash at end of year 362,897 379,594 215,802
SUPPLEMENTAL DISCLOSURE OF NON-CASH ITEMS      
Cash paid for income taxes 216 1,163 7,895
Capitalized property, equipment and website and development costs in accounts payable at year end 931 5,627 7,463
Net working capital adjustment receivable     127
Fair value of equity awards assumed on acquisition     2,966
RECONCILIATION OF CASH, CASH EQUIVALENTS, AND RESTRICTED CASH      
Cash and cash equivalents $ 360,232 375,909 211,245
Restricted cash included in prepaid expenses and other current assets   $ 501 $ 1,398
Restricted Cash, Current, Asset, Statement of Financial Position [Extensible List] us-gaap:PrepaidExpenseAndOtherAssetsCurrent us-gaap:PrepaidExpenseAndOtherAssetsCurrent us-gaap:PrepaidExpenseAndOtherAssetsCurrent
Restricted cash included in other assets $ 2,665 $ 3,184 $ 3,159
Restricted Cash, Noncurrent, Asset, Statement of Financial Position [Extensible List] us-gaap:OtherAssetsNoncurrent us-gaap:OtherAssetsNoncurrent us-gaap:OtherAssetsNoncurrent
Total cash, cash equivalents, and restricted cash $ 362,897 $ 379,594 $ 215,802
v3.20.4
Consolidated Statements of Changes in Stockholders' Equity - USD ($)
$ in Thousands
Total
Cumulative Effect, Period of Adoption, Adjustment
Common stock
Additional Paid-in Capital
Accumulated Other Comprehensive Income (Loss)
Retained Earnings
Retained Earnings
Cumulative Effect, Period of Adoption, Adjustment
Balance, beginning at Dec. 31, 2017 $ 1,117,816 $ 882 $ 9 $ 849,043 $ (1,228) $ 269,992 $ 882
Balance, beginning (in shares) at Dec. 31, 2017     86,790,624        
Net income (loss) $ 78,481         $ 78,481  
Accounting Standards Update [Extensible List] us-gaap:AccountingStandardsUpdate201409Member         us-gaap:AccountingStandardsUpdate201409Member  
Currency translation $ (663)       (663)    
Stock-based compensation 64,266     64,266      
Stock option exercises and vesting of restricted stock units, net of withholdings and other 14,190     14,190      
Stock option exercises and vesting of restricted stock units, net of withholdings and other (in shares)     1,512,426        
Issuance of common stock, investments 200,000     200,000      
Issuance of common stock, investments (in shares)     2,820,464        
Issuance of common stock, acquisitions 2,966     2,966      
Shares repurchased and retired to satisfy tax withholding upon vesting (35,599)     (35,599)      
Shares repurchased and retired to satisfy tax withholding upon vesting (in shares)     (366,966)        
Balance, ending at Dec. 31, 2018 1,442,339   $ 9 1,094,866 (1,891) $ 349,355  
Balance, ending (in shares) at Dec. 31, 2018     90,756,548        
Net income (loss) (18,566)         (18,566)  
Currency translation 263       263    
Stock-based compensation 88,818     88,818      
Stock option exercises and vesting of restricted stock units, net of withholdings and other 4,469     4,469      
Stock option exercises and vesting of restricted stock units, net of withholdings and other (in shares)     1,174,002        
Shares repurchased and retired to satisfy tax withholding upon vesting (23,753)     (23,753)      
Shares repurchased and retired to satisfy tax withholding upon vesting (in shares)     (354,490)        
Balance, ending at Dec. 31, 2019 1,493,570   $ 9 1,164,400 (1,628) 330,789  
Balance, ending (in shares) at Dec. 31, 2019     91,576,060        
Net income (loss) (155,861)         (155,861)  
Currency translation 353       353    
Stock-based compensation 103,768     103,768      
Stock option exercises and vesting of restricted stock units, net of withholdings and other 9,588     9,588      
Stock option exercises and vesting of restricted stock units, net of withholdings and other (in shares)     2,035,034        
Shares repurchased and retired to satisfy tax withholding upon vesting (34,621)     (34,621)      
Shares repurchased and retired to satisfy tax withholding upon vesting (in shares)     (564,418)        
Balance, ending at Dec. 31, 2020 $ 1,416,797   $ 9 $ 1,243,135 $ (1,275) $ 174,928  
Balance, ending (in shares) at Dec. 31, 2020     93,046,676        
v3.20.4
Organization
12 Months Ended
Dec. 31, 2020
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 takeout marketplace for restaurant pick-up and delivery orders. The Company connects diners and restaurants through restaurant technology and easy-to-use platforms. Diners enter their delivery address or use geo-location within the mobile applications and the Company displays the menus and other relevant information for restaurants in its network. Orders may be placed directly online, via mobile applications or over the phone. The Company primarily charges restaurant partners a per order commission that is percentage-based. In many markets, the Company also provides delivery services to restaurants on its platform that do not have their own delivery operations. The Company’s takeout marketplace, and related platforms where the Company provides marketing services to generate orders, are collectively referred to as the “Platform”.

v3.20.4
Summary of Significant Accounting Policies
12 Months Ended
Dec. 31, 2020
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The Company’s consolidated financial statements were prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The accompanying consolidated financial statements include all wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. The consolidated statements of operations include the results of entities acquired from the dates of the acquisitions for accounting purposes.

Changes in Accounting Principle

See “Recently Issued Accounting Pronouncements” below for a description of accounting principle changes adopted during the year ended December 31, 2020 related to credit losses.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and the related disclosures at the date of the financial statements, as well as the reported amounts of revenue and expenses during the periods presented. These estimates, judgments and assumptions take into account historical and forward-looking factors that the Company believes are reasonable including, but not limited to, the potential impact arising from the COVID-19 pandemic and measures implemented to prevent its spread. As the extent and duration of the impact from the COVID-19 pandemic remain unclear, the Company’s estimates and assumptions may evolve as conditions change. Significant items subject to such estimates, judgments and assumptions include revenue recognition, website and internal-use software development costs, goodwill, valuation and recoverability of intangible assets with finite lives and other long-lived assets, stock-based compensation, and income taxes. To the extent there are material differences between these estimates, judgments or assumptions and actual results, the Company’s consolidated financial statements will be affected. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require management’s judgment in its application.

Cash and Cash Equivalents

Cash includes demand deposits with banks or financial institutions. Cash equivalents include short-term, highly liquid investments that are both readily convertible to known amounts of cash, and that are so near their maturity that they present minimal risk of changes in value because of changes in interest rates. The Company’s cash equivalents include only investments with original maturities of three months or less. The Company regularly maintains cash in excess of federally insured limits at financial institutions. Cash and cash equivalents exclude the Company’s restricted cash balances of $2.7 million and $3.7 million as of December 31, 2020 and 2019, respectively, which are included within prepaid expenses and other current assets and other long-term assets on the consolidated balance sheets.

Marketable Securities

Marketable securities consist primarily of commercial paper and investment grade U.S. and non-U.S.-issued corporate debt securities. The Company invests in a diversified portfolio of marketable securities and limits the concentration of its investment in any particular security. Marketable securities with original maturities of three months or less are included in cash and cash equivalents and marketable securities with original maturities greater than three months, but less than one year, are included in short term investments on the consolidated balance sheets. The Company determines the classification of its marketable securities as available-for-sale or held-to-maturity at the time of purchase and reassesses these determinations at each balance sheet date. Debt securities are classified as held-to-maturity when the Company has the intent to hold the securities to maturity. Held-to-maturity securities are stated at amortized cost. The amortized cost of debt securities is adjusted for the amortization of premiums and accretion of discounts to maturity, which is recognized as interest income within net interest expense in the consolidated statements of operations. Interest income is recognized when earned.

The Company adopted Accounting Standards Update No. 2016-13, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”) on January 1, 2020 using the modified-retrospective approach. Under ASU 2016-13, the Company estimates the allowance for expected credit losses, if any, on its held-to-maturity investments based on our investment loss history as well as external market data of similar securities and other factors, including those related to current market conditions and events. See Note 6, Marketable Securities, for additional details.

Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss consists of foreign currency translation adjustments. The financial statements of the Company’s foreign subsidiaries are translated from their functional currency into U.S. dollars. Assets and liabilities are translated at period end rates of exchange, and revenue and expenses are translated using average rates of exchange. The resulting gain or loss is included in accumulated other comprehensive loss on the consolidated balance sheets.

Property and Equipment, Net

Property and equipment is recorded at cost and depreciated using the straight-line method over the estimated useful lives of the related assets. The useful lives are as follows:

 

 

Estimated Useful Life

Computer equipment

 

2-3 years

Furniture and fixtures

 

5 years

Developed software

 

1-3 years

Purchased software and digital assets

 

3-5 years

Leasehold improvements

 

Shorter of expected useful life or lease term

Maintenance and repair costs are charged to expense as incurred. Major improvements, which extend the useful life of the related asset, are capitalized. Upon disposal of a fixed asset, the Company records a gain or loss based on the difference between the proceeds received and the net book value of the disposed asset.

Accounts Receivable, Net

See Note 4, Revenue, below for a description of the Company’s accounts receivable accounting policy. 

Advertising Costs

Advertising costs are generally expensed as incurred in connection with the requisite service period. Certain advertising production costs are capitalized and expensed when the advertisement first takes place. For the years ended December 31, 2020, 2019 and 2018, expenses attributable to advertising totaled approximately $307.3 million, $237.1 million and $170.3 million, respectively. Advertising costs are recorded in sales and marketing expense on the Company’s consolidated statements of operations.

Stock-Based Compensation

The Company measures compensation expense for all stock-based awards, including stock options and restricted stock units, at fair value on the date of grant and recognizes compensation expense over the service period on a straight-line basis for awards expected to vest.

The Company uses the Black-Scholes option-pricing model to determine the fair value for stock options. Management has determined the Black-Scholes fair value of stock option awards and related stock-based compensation expense with the assistance of third-party valuations. Determining the fair value of stock-based awards at the grant date requires judgment. The determination of the grant date fair value of options using an option-pricing model is affected by the Company’s common stock fair value as well as assumptions regarding a number of other complex and subjective variables. If any of the assumptions used in the Black-Scholes model changes significantly, stock-based compensation for future awards may differ materially compared with the awards granted previously.

The Black-Scholes option-pricing model requires the use of highly subjective and complex assumptions, including the expected term and the price volatility of the underlying stock, which determine the fair value of stock-based awards. These assumptions include:

 

Risk-free rate. Risk-free interest rates are derived from U.S. Treasury securities as of the option grant date.

 

Expected dividend yields. Expected dividend yields are based on our historical dividend payments, which have been zero to date (excluding the preferred stock tax distributions made by Seamless Holdings prior to 2015).

 

Volatility. Expected volatility is based on the historical and implied volatilities of the Company’s own common stock.

 

 

Expected term. The expected term calculation for option awards considers a combination of the Company’s historical and estimated future exercise behavior.

 

Forfeiture rate. Forfeiture rates are estimated using historical actual forfeiture trends as well as our judgment of future forfeitures. These rates are evaluated at least annually and any change in compensation expense is recognized in the period of the change. The estimation of stock awards that will ultimately vest requires judgment and, to the extent actual results or updated estimates differ from our current estimates, such amounts will be recorded as a cumulative adjustment in the period in which the estimates are revised. The Company considers many factors when estimating expected forfeitures, including the types of awards and employee class. Actual results, and future changes in estimates, may differ substantially from management’s current estimates.

See Note 12, Stock-Based Compensation, for the weighted-average assumptions used to estimate the fair value of options granted during the years ended December 31, 2020, 2019 and 2018.

Income Tax (Benefit) Expense

Income tax (benefit) expense is determined using the asset and liability method. Under this method, deferred tax assets and liabilities are calculated based upon the temporary differences between the financial statement and income tax bases of assets and liabilities using the enacted tax rates that are applicable in a given year. The utilization of deferred tax assets is limited by the amount of taxable income expected to be generated within the allowable carryforward period and other factors. Management also considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. The Company records a valuation allowance to reduce deferred tax assets to the amount management believes is more likely than not to be realized.

The Company generated a significant U.S. deferred tax asset in 2020 as a result of the sale of intellectual property intangibles by Tapingo Ltd, the Company’s Israeli subsidiary, to Grubhub Holdings Inc. In performing its analysis of whether a valuation allowance to reduce the deferred income tax asset was necessary as of December 31, 2020, the Company evaluated the data and believes that it is more likely than not that the deferred tax assets in the U.S. will be not realized. In the fourth quarter of 2020, the Company entered a three-year cumulative loss position and due to the uncertainty caused in part by COVID-19, the Company is no longer relying on forecasted earnings as a source of positive evidence that the Company will be able to utilize its deferred tax assets. As such, management determined that a full valuation allowance was required as of December 31, 2020. As of December 31, 2020 and 2019, a valuation allowance of $61.7 million and $15.7 million, respectively, was recorded on the Company’s consolidated balance sheets. See Note 13, Income Taxes, for additional information. Adjustments to the valuation allowance are recognized as expense in the period in which such determination is made. The calculation of income tax liabilities involves significant judgment in estimating the impact of uncertainties and complex tax laws. In addition, the Company’s tax returns are subject to audit by various U.S. and foreign tax authorities. Resolution of these uncertainties in a manner inconsistent with our expectations could have a material impact on the Company’s financial position and results of operations.

The Company utilizes a two-step approach to recognizing and measuring uncertain tax positions (“tax contingencies”). The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount which is more than 50% likely to be realized upon ultimate settlement. The Company considers many factors when evaluating and estimating its tax positions and tax benefits, which may require periodic adjustments, and which may not accurately forecast actual outcomes.

Due to the reduced cost of repatriating unremitted earnings as a result of U.S. tax legislation signed into law in December of 2017, the Tax Cuts and Jobs Act (the “Tax Act”), the Company plans to repatriate cash from the U.K. to the U.S. The Company estimated no additional tax liability as of December 31, 2020 and 2019 as there are no applicable withholding taxes for the transaction. Management regularly evaluates whether foreign earnings are expected to be permanently reinvested. This evaluation requires judgment about the future operating and liquidity needs of the Company’s foreign subsidiary. Changes in economic and business conditions, foreign or U.S. tax laws, or the Company’s financial situation could result in changes in these judgments and the need to record additional tax liabilities.

The Company includes interest and penalties related to tax contingencies in the provision for income taxes in the consolidated statements of operations. Management does not expect the total amount of unrecognized tax benefits to significantly change in the next twelve months.

Intangible Assets

The estimated fair values of acquired intangible assets are determined as of the acquisition date based on significant management estimates included in established valuation techniques with the assistance of third-party valuations. See Note 5, Acquisitions, for the estimated acquisition date fair values and valuation methodologies of assets acquired in the periods presented. Intangible assets with finite useful lives are amortized using the straight-line method over their estimated useful lives and are reviewed for impairment. The Company evaluates intangible assets with finite and indefinite useful lives and other long-lived assets for impairment whenever events or circumstances indicate that they may not be recoverable, or at least annually. If management determines in its qualitative assessment that it is more likely than not that the assets may not be recoverable, the recoverability of finite and other long-lived assets is measured by comparing the carrying amount of an asset group to the future undiscounted net cash flows expected to be generated by that asset group. The Company groups assets for purposes of such review at the lowest level for which identifiable cash flows of the asset group are largely independent of the cash flows of the other groups of assets and liabilities. The amount of impairment to be recognized for finite and indefinite-lived intangible assets and other long-lived assets is calculated as the difference between the carrying value and the fair value of the asset group, generally measured by discounting estimated future cash flows. There were no impairment indicators present during the years ended December 31, 2020, 2019 or 2018.

Website and Software Development Costs

The costs incurred in the preliminary stages of website and software development are expensed as incurred. Once an application has reached the development stage, internal and external costs, if direct and incremental and deemed by management to be significant, are capitalized and amortized on a straight-line basis over the estimated useful life of the application. Maintenance and enhancement costs, including those costs in the post-implementation stages, are typically expensed as incurred, unless such costs relate to substantial upgrades and enhancements to the website or software that result in added functionality, in which case the costs are capitalized and amortized on a straight-line basis over the estimated useful lives. Amortization expense related to capitalized website and software development costs is included in depreciation and amortization in the consolidated statements of operations. The Company capitalized $76.0 million, $64.5 million and $41.1 million of website development costs during the years ended December 31, 2020, 2019 and 2018, respectively.

Goodwill

Goodwill represents the excess of the cost of an acquired business over the fair value of the assets acquired at the date of acquisition. The Company’s methodology for allocating the purchase price of acquisitions is based on established valuation techniques that consider a number of factors, including valuations performed by third-party appraisers. As of December 31, 2020, the Company had $1,008.0 million in goodwill on its consolidated balance sheets. The Company assesses the impairment of goodwill at least annually and whenever events or changes in circumstances indicate that goodwill may be impaired. Absent any special circumstances that could require an interim test, the Company has elected to test for goodwill impairment at September 30 of each year. The Company has one reporting unit in testing goodwill for impairment.

In testing goodwill for impairment, the Company may elect to utilize a qualitative assessment to evaluate whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the qualitative assessment indicates that goodwill impairment is more likely than not, the Company performs a quantitative impairment test. The Company would recognize an impairment charge for the amount by which the reporting unit’s carrying amount exceeds its fair value, if any, not to exceed the carrying amount of goodwill.

Management determined the fair value of the Company as of September 30, 2020 by using a market-based approach that utilized our market capitalization, as adjusted for factors such as a control premium. After consideration of the Company’s market capitalization, business growth and other factors, management determined that it was more likely than not that the fair value of the Company exceeded its carrying amount at September 30, 2020 and that further analysis was not required.

Additionally, as part of the interim review for indicators of impairment, management analyzed potential changes in value based on operating results for the three months ended December 31, 2020 compared to expected results. Management also considered how the Company’s market capitalization, business growth and other factors used in the September 30, 2020 impairment analysis, could be impacted by changes in market conditions and economic events. For example, as a result of the proposed Transaction, a component of the Company’s implied enterprise value contemplates the share price of JET as attributed to the Company. If JET’s share price were to decline, the overall consideration associated with the Transaction could be reduced which could result in a future goodwill impairment triggering event. Additionally, COVID-19 has impacted our restaurant partners and has affected the Company’s business as described in Part II, Item 7, Management's Discussion and Analysis, of this Annual Report on Form 10-K. Management considered these trends in performing its assessment of whether an interim impairment review was required. Based on this interim assessment, management concluded that as of December 31, 2020, there were no events or changes in circumstances that indicated it was more likely than not that the Company’s fair value was below its carrying value.

The Company determined there was no goodwill impairment during the years ended December 31, 2020, 2019 and 2018. Nevertheless, significant changes in global economic and market conditions could result in changes to expectations of future financial results and key valuation assumptions. Such changes could result in revisions of management’s estimates of the Company’s fair value and could result in a material impairment of goodwill.

Debt Issuance Costs

The Company has incurred debt issuance costs in connection with its debt facilities and related amendments. Amounts paid directly to lenders are classified as issuance costs. Commitment fees and other costs directly associated with obtaining credit facilities are deferred financing costs which are recorded in the consolidated balance sheets and amortized over the term of the facility. The Company allocated deferred debt issuance costs incurred for its credit facility between the revolver and term loan based on their relative borrowing capacity. Deferred debt issuance costs associated with the revolving credit facility are recorded within other assets and those associated with the term loan and senior notes are recorded as a reduction of the carrying value of the debt on the consolidated balance sheets. All deferred debt issuance costs are amortized using the effective interest rate method to interest expense within net interest expense on the Company’s consolidated statements of operations. The Company records the write-off of unamortized debt issuance costs upon the extinguishment or modification of the related debt facility within interest expense in the consolidated statements of operations. See Note 11, Debt, for additional details.

Fair Value

Accounting standards define fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. The standards also establish a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. See Note 17, Fair Value Measurement, for details of the fair value hierarchy and the related inputs used by the Company.

Concentration of Credit Risk

Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of accounts receivable. For the years ended December 31, 2020, 2019 and 2018, the Company had no customers which accounted for more than 10% of revenue or accounts receivable.

Revenue Recognition

See Note 4, Revenue, below for a description of the Company’s revenue recognition policy.

Lease Obligations

On January 1, 2019, the Company adopted Accounting Standards Codification Topic 842, Leases (“ASC Topic 842”) using the modified retrospective transition approach by applying the new standard to all leases existing at the date of initial application. The Company elected the optional practical expedient package which, among other things, includes retaining the historical classification of leases.

Under ASC Topic 842, the Company determines if an arrangement is a lease at inception of a contract. Leases with an initial term of 12 months or less are not recorded on the balance sheet. Non-lease components associated with lease components in the Company’s lease contracts are treated as a single lease component. Operating lease right-of-use assets and liabilities commencing after January 1, 2019 are recognized at commencement date based on the present value of lease payments over the lease term. The right-of-use asset also includes any lease payments made prior to commencement and is recorded net of any lease incentives received. Because the rate implicit in each lease is not readily determinable, the Company uses its incremental borrowing rate to determine the present value of the lease payments. To determine the incremental borrowing rate, the Company uses information including the risk-free interest rate for the remaining lease term, the Company’s implied credit rating and interest rates of similar debt instruments of entities with comparable credit ratings. The Company recognizes rent expense on a straight-line basis over the lease term, which is allocated on a headcount basis to operations and support, sales and marketing, technology and general and administrative costs and expenses in the consolidated statements of operations.

Prior period amounts have not been adjusted and continue to be reported under ASC Topic 840 with the difference between cash rent payments and straight-lined rent expenses recorded as a deferred rent liability presented within other accruals in the consolidated balance sheets. The Company also has landlord-funded leasehold improvements that were recorded as tenant allowances, which were amortized as a reduction of rent expense over the noncancelable terms of the operating leases.

Segments

The Company has one reportable segment, which has been identified based on how the chief operating decision maker manages the business, makes operating decisions and evaluates operating performance.

Recently Issued Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (the “FASB”) issued ASU 2016-13, which 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 that requires entities to incorporate considerations of historical information, current information and reasonable and supportable forecasts. This ASU also expands disclosure requirements. ASU 2016-13 was effective for and adopted by the Company in the first quarter of 2020. The guidance was applied using the modified-retrospective approach. The adoption of ASU 2016-13 did not have a material impact on the Company’s consolidated financial position, results of operations or cash flows as credit losses were not expected to be significant. The Company will continue to monitor the impact of the COVID-19 pandemic on expected credit losses.

v3.20.4
Merger Agreement
12 Months Ended
Dec. 31, 2020
Merger Agreement and Acquisitions

5. Acquisitions

There were no acquisitions during the years ended December 31, 2020 and 2019.

2018 Acquisitions

On November 7, 2018, the Company acquired all of the issued and outstanding shares of Tapingo Ltd. (“Tapingo”) for approximately $152.1 million, including $151.7 million of cash paid (net of cash acquired of $1.5 million) and $0.4 million of other non-cash consideration. Tapingo is a leading platform for campus food ordering with direct integration into college meal plans and point of sale systems. The acquisition of Tapingo has enhanced the Company’s diner network on college campuses.

On September 13, 2018, the Company acquired SCVNGR, Inc. d/b/a LevelUp (“LevelUp”) for approximately $369.4 million, including $366.8 million of cash paid (net of cash acquired of $6.0 million) and $2.6 million of other non-cash consideration. LevelUp is a leading provider of mobile diner engagement and payment solutions for national and regional restaurant brands. The acquisition of LevelUp has simplified the Company’s integrations with restaurants’ systems, increased diner engagement and accelerated product development.

The Company assumed Tapingo and LevelUp employees’ unvested incentive stock option (“ISO”) awards as of the respective closing dates. Approximately $0.4 million and $2.6 million of the fair value of the assumed ISO awards granted to acquired Tapingo and LevelUp employees, respectively, was attributable to the pre-combination services of the awardees and was included in the respective purchase prices. These amounts are reflected within goodwill in the respective purchase price allocations. As of the respective acquisition dates, aggregate post-combination expense of approximately $21.4 million was expected to be recognized related to the combined assumed ISO awards over the remaining post-combination service periods.

The results of operations of Tapingo and LevelUp have been included in the Company’s financial statements since November 7, 2018 and September 13, 2018, respectively.

The excess of the consideration transferred in the acquisitions over the amounts assigned to the fair value of the net assets acquired was recorded as goodwill, which represents the value of LevelUp’s technology team, the ability to simplify integrations with restaurants on the Company’s platform and the expanded breadth and depth of the Company’s network of diners and campus relationships. The total goodwill related to the acquisitions of Tapingo and LevelUp of $418.1 million is not deductible for income tax purposes.

The assets acquired and liabilities assumed of Tapingo and LevelUp were recorded at their estimated fair values as of the closing dates of November 7, 2018 and September 13, 2018, respectively. See Note 6, Goodwill and Acquired Intangible Assets, for a description of changes to the purchase price allocations for Tapingo and LevelUp during the year ended December 31, 2019.

The following table summarizes the final purchase price allocation acquisition-date fair values of the assets and liabilities acquired in connection with the Tapingo and LevelUp acquisitions:

 

Tapingo

 

 

LevelUp

 

 

Total

 

 

(in thousands)

 

Accounts receivable

$

3,101

 

 

$

6,201

 

 

$

9,302

 

Prepaid expenses and other current assets

 

843

 

 

 

1,396

 

 

 

2,239

 

Property and equipment

 

 

 

 

895

 

 

 

895

 

Other assets

 

163

 

 

 

 

 

 

163

 

Restaurant relationships

 

11,279

 

 

 

10,217

 

 

 

21,496

 

Diner acquisition

 

 

 

 

3,912

 

 

 

3,912

 

Below-market lease intangible

 

 

 

 

2,205

 

 

 

2,205

 

Developed technology

 

9,755

 

 

 

20,107

 

 

 

29,862

 

Goodwill

 

121,908

 

 

 

296,198

 

 

 

418,106

 

Net deferred tax asset

 

9,582

 

 

 

31,545

 

 

 

41,127

 

Accounts payable and accrued expenses

 

(4,573

)

 

 

(3,249

)

 

 

(7,822

)

Total purchase price net of cash acquired

$

152,058

 

 

$

369,427

 

 

$

521,485

 

Fair value of assumed ISOs attributable to pre-combination service

 

(372

)

 

 

(2,594

)

 

 

(2,966

)

Net cash paid

$

151,686

 

 

$

366,833

 

 

$

518,519

 

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 and developed technology as follows:

 

Valuation Method

 

Tapingo

 

LevelUp

Restaurant relationships

Multi-period excess earnings

 

With or without comparative business valuation

Diner acquisition

n/a

 

Cost to recreate

Developed technology

Cost to recreate

 

Multi-period excess earnings

The fair value of the LevelUp below-market lease was measured based on the present value of the difference between the contractual amounts to be paid pursuant to the lease and an estimate of current fair market lease rates measured over the non-cancelable remaining term of the lease.

These fair value measurements were based on significant inputs not observable in the market and thus represent Level 3 measurements within the fair value hierarchy. Unobservable inputs were reflective of the types of assumptions that market participants would use in measuring the fair values of similar assets and liabilities such as, among others, discount rates, estimated future cash flows, initial developer costs, expected profits, royalty rates, rates of attrition and expected rates of return.

The Company incurred certain expenses directly and indirectly related to mergers and acquisitions of $12.1 million, $2.7 million, and $6.9 million which were recognized in general and administrative expenses within the consolidated statements of operations for the years ended December 31, 2020, 2019 and 2018, respectively.

Merger Agreement  
Merger Agreement and Acquisitions

3. Merger Agreement

On June 10, 2020, the Company entered into an Agreement and Plan of Merger (as amended on September 4, 2020, the “Merger Agreement”) with Just Eat Takeaway.com N.V. (“JET”), Checkers Merger Sub I, Inc., a Delaware corporation and wholly owned subsidiary of JET (“Merger Sub I”), and Checkers Merger Sub II, Inc., a Delaware corporation and wholly owned subsidiary of JET (“Merger Sub II”). Pursuant to the Merger Agreement, Merger Sub I will be merged with and into the Company (the “Initial Merger”), with the Company continuing as the surviving company in the Initial Merger (the “Initial Surviving Company”). Immediately thereafter, the Initial Surviving Company will merge with and into Merger Sub II (the “Subsequent Merger” and, together with the Initial Merger, the “Transaction”), with Merger Sub II continuing as the surviving company.

On and subject to the terms and conditions set forth in the Merger Agreement, at the effective time of the Initial Merger, each issued and outstanding share of our common stock (other than any shares of our common stock owned by the Company, JET, Merger Sub I, Merger Sub II or any other direct or indirect wholly owned subsidiary of JET), will be converted into one share of common stock, par value $0.0001 per share, of the Initial Surviving Company (the “Initial Surviving Company Stock”). Each such share of Initial Surviving Company Stock will immediately thereafter be automatically exchanged for 0.6710 American depositary shares of JET (“JET ADS”), with each JET ADS representing one share in the share capital of JET with a nominal value of €0.04 per share (“JET Shares”) (the “Merger Consideration”). The Transaction is expected to close in the first half of 2021.

v3.20.4
Revenue
12 Months Ended
Dec. 31, 2020
Revenue From Contract With Customer [Abstract]  
Revenue

4. Revenue

Revenues are recognized when control of the promised goods or services is transferred to the customer, in the amount that reflects the consideration the Company expects to receive in exchange for those good or services.

The Company generates revenues primarily when diners place an order on the Platform through its mobile applications, its websites, or through third-party websites that incorporate the Company’s API or one of the Company’s listed phone numbers. Restaurant partners generally pay a commission, typically a percentage of the transaction, on orders that are processed through the Platform. Most of the restaurant partners on the Company’s Platform can choose their level of commission rate, at or above a base rate. A restaurant partner can choose to pay a higher rate that affects its prominence and exposure to diners on the Platform. Additionally, restaurant partners on the Platform that use the Company’s delivery services pay an additional commission for the use of those services. The Company may also charge fees directly to the diner.

Revenues from online and phone pick-up and delivery orders are recognized when the orders are transmitted to the restaurants, including revenues for managed delivery services due to the simultaneous nature of the Company’s delivery operations. The amount of revenue recognized by the Company is based on the arrangement with the related restaurant and is adjusted for any expected refunds or adjustments, which are estimated using an expected value approach based on historical experience and any cash credits related to the transaction, including incentive offers provided to restaurants and diners. The Company also recognizes as revenue any fees charged directly to the diner.

Judgement is required in determining whether the Company is the principal or the agent in transactions with restaurants, diners and its delivery network. 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. We do not pre-purchase or otherwise control the food prepared by restaurants prior to the takeout order being transferred to the diner. The Company is the principal in the transaction with respect to credit card processing and managed delivery services because it controls the respective services. The Company’s conclusion that it is the principal for credit card processing and managed delivery services is based on the totality of the facts and circumstances that affect the substance of the arrangement for credit card processing and delivery services, including the Company’s stated terms and conditions, contractual agreements, and its customary business practices. The Company controls managed delivery services as it is contractually responsible to its restaurant partners to provide delivery services, directs its network of delivery partners to render food delivery services, bears all of the cost of delivery service problems and inefficiencies, and has full discretion in establishing restaurant delivery commissions, diner delivery fees and amounts paid to its delivery network. As a result, costs incurred for processing the credit card transactions and providing delivery services are included in operations and support expense in the consolidated statements of operations.

The Company periodically provides incentive offers to restaurants and diners to use our platform. These promotions are generally cash credits to be applied against purchases. These incentive offers are recorded as a reduction in revenues, generally on the date the corresponding order revenue is recognized. For those incentives that create an obligation to discount current or future orders, management applies judgment in allocating the incentives that are expected to be redeemed proportionally to current and future orders based on their relative expected transaction prices.

The Company also generates revenue from fees paid by diners for GH+, our subscription product. GH+ subscribers receive unlimited deliveries with $0 delivery fee on qualifying orders from GH+ restaurants. Revenue generated from the Company’s GH+ subscriptions is recognized on a ratable basis over the contractual period, which is generally one month.

The Company derives some revenues from mobile application development professional services and access to the respective order ahead platforms and related services. Revenues for professional services and related platform access fees are generally recognized ratably over the subscription period beginning on the date the platform access becomes available to the customer. Revenues for certain professional services may be recognized in full once the services are performed if they are distinct. The Company also generates a small amount of revenues directly from companies that participate in our corporate ordering program and by selling advertising to third parties on our allmenus.com website. The Company does not anticipate that the foregoing will generate a material portion of our revenues in the foreseeable future.

For most orders, diners use a credit card to pay for their meal when the order is placed. For these transactions, the Company collects the total amount of the diner’s order net of payment processing fees from the payment processor and remits the net proceeds to the restaurant less commission and other fees. The Company generally accumulates funds and remits the net proceeds to the restaurant partners on at least a monthly basis, depending on the payment terms with the restaurant. Non-partnered restaurants are paid at the time of the order. The Company also accepts payment for orders via gift cards offered on its platform. For gift cards that are not subject to unclaimed property laws, the Company recognizes revenue from estimated unredeemed gift cards, based on its historical breakage experience, over the expected customer redemption period.

Certain governmental taxes are imposed on the products and services provided through the Company’s platform and are included in the order fees charged to the diner and collected by the Company. Sales taxes are either remitted to the restaurant for payment or are paid directly to certain states. These fees are recorded on a net basis, and, as a result, are excluded from revenues.

Accounts Receivable, Net

Accounts receivable primarily represent the net cash due from the Company’s payment processors for cleared transactions and amounts owed from corporate and other institutional customers and Enterprise restaurants, which are generally invoiced on a monthly basis. The carrying amount of the Company’s receivables is reduced by an allowance for doubtful accounts that reflects management’s best estimate of amounts that will not be collected. These uncollected amounts are generally not recovered from the restaurants. The allowance is recorded through a charge to bad debt expense which is recognized within general and administrative expense in the consolidated statements of operations. The allowance is based on expected credit losses which incorporate historical loss experience and any specific risks, current or forecasted, identified in collection matters.

Management provides for probable uncollectible amounts through a charge against bad debt expense and a credit to an allowance based on its assessment of the current status of individual accounts. Balances still outstanding after management has used reasonable collection efforts are written off against the allowance. The Company does not charge interest on trade receivables.

The Company incurs expenses for uncollected credit card receivables (or “chargebacks”), including fraudulent orders, when a diner’s card is authorized but fails to process, and for other unpaid credit card receivables. The majority of the Company’s chargeback expense is recorded directly to general and administrative expense in the consolidated statements of operations as the charges are incurred; however, a portion of the allowance for doubtful accounts includes a reserve for estimated chargebacks on the net cash due from the Company’s payment processors as of the end of the period.

Changes in the Company’s allowance for doubtful accounts for the periods presented were as follows:

 

 

 

 

 

 

 

 

 

 

 

December 31, 2020

 

 

December 31,  2019

 

Balance at beginning of period

 

$

2,812

 

 

$

1,460

 

Additions to expense

 

 

102

 

 

 

1,497

 

Write-offs, net of recoveries and other adjustments

 

 

(438

)

 

 

(145

)

Balance at end of period

 

$

2,476

 

 

$

2,812

 

 

 

Deferred Revenues

The Company’s deferred revenues consist primarily of gift card liabilities, certain incentive liabilities as well as customer billings for professional services recognized ratably over the subscription period. These amounts are included within other accruals on the consolidated balance sheets. See Note 9, Other Accruals, for the Company’s gift card liabilities as of December 31, 2020 and 2019. Other deferred revenues are not material to the Company’s consolidated financial position. The majority of gift cards and incentives issued by the Company are redeemed within a year.

Contract Acquisition Costs

The Company defers the incremental costs of obtaining and renewing restaurant and corporate and campus program customer contracts, primarily consisting of commissions and bonuses and related payroll taxes, as contract acquisition assets within other assets on the consolidated balance sheets. Contract acquisition assets are amortized on a straight-line basis to sales and marketing expense in the consolidated statements of operations over the useful life of the contract, which is estimated to be approximately 4 years based on anticipated customer renewals. During the years ended December 31, 2020 and 2019, the Company deferred $32.3 million and $16.5 million of contract acquisitions costs, respectively, and amortized $10.4 million and $4.5 million of related expense, respectively.

v3.20.4
Acquisitions
12 Months Ended
Dec. 31, 2020
Business Combinations [Abstract]  
Merger Agreement and Acquisitions

5. Acquisitions

There were no acquisitions during the years ended December 31, 2020 and 2019.

2018 Acquisitions

On November 7, 2018, the Company acquired all of the issued and outstanding shares of Tapingo Ltd. (“Tapingo”) for approximately $152.1 million, including $151.7 million of cash paid (net of cash acquired of $1.5 million) and $0.4 million of other non-cash consideration. Tapingo is a leading platform for campus food ordering with direct integration into college meal plans and point of sale systems. The acquisition of Tapingo has enhanced the Company’s diner network on college campuses.

On September 13, 2018, the Company acquired SCVNGR, Inc. d/b/a LevelUp (“LevelUp”) for approximately $369.4 million, including $366.8 million of cash paid (net of cash acquired of $6.0 million) and $2.6 million of other non-cash consideration. LevelUp is a leading provider of mobile diner engagement and payment solutions for national and regional restaurant brands. The acquisition of LevelUp has simplified the Company’s integrations with restaurants’ systems, increased diner engagement and accelerated product development.

The Company assumed Tapingo and LevelUp employees’ unvested incentive stock option (“ISO”) awards as of the respective closing dates. Approximately $0.4 million and $2.6 million of the fair value of the assumed ISO awards granted to acquired Tapingo and LevelUp employees, respectively, was attributable to the pre-combination services of the awardees and was included in the respective purchase prices. These amounts are reflected within goodwill in the respective purchase price allocations. As of the respective acquisition dates, aggregate post-combination expense of approximately $21.4 million was expected to be recognized related to the combined assumed ISO awards over the remaining post-combination service periods.

The results of operations of Tapingo and LevelUp have been included in the Company’s financial statements since November 7, 2018 and September 13, 2018, respectively.

The excess of the consideration transferred in the acquisitions over the amounts assigned to the fair value of the net assets acquired was recorded as goodwill, which represents the value of LevelUp’s technology team, the ability to simplify integrations with restaurants on the Company’s platform and the expanded breadth and depth of the Company’s network of diners and campus relationships. The total goodwill related to the acquisitions of Tapingo and LevelUp of $418.1 million is not deductible for income tax purposes.

The assets acquired and liabilities assumed of Tapingo and LevelUp were recorded at their estimated fair values as of the closing dates of November 7, 2018 and September 13, 2018, respectively. See Note 6, Goodwill and Acquired Intangible Assets, for a description of changes to the purchase price allocations for Tapingo and LevelUp during the year ended December 31, 2019.

The following table summarizes the final purchase price allocation acquisition-date fair values of the assets and liabilities acquired in connection with the Tapingo and LevelUp acquisitions:

 

Tapingo

 

 

LevelUp

 

 

Total

 

 

(in thousands)

 

Accounts receivable

$

3,101

 

 

$

6,201

 

 

$

9,302

 

Prepaid expenses and other current assets

 

843

 

 

 

1,396

 

 

 

2,239

 

Property and equipment

 

 

 

 

895

 

 

 

895

 

Other assets

 

163

 

 

 

 

 

 

163

 

Restaurant relationships

 

11,279

 

 

 

10,217

 

 

 

21,496

 

Diner acquisition

 

 

 

 

3,912

 

 

 

3,912

 

Below-market lease intangible

 

 

 

 

2,205

 

 

 

2,205

 

Developed technology

 

9,755

 

 

 

20,107

 

 

 

29,862

 

Goodwill

 

121,908

 

 

 

296,198

 

 

 

418,106

 

Net deferred tax asset

 

9,582

 

 

 

31,545

 

 

 

41,127

 

Accounts payable and accrued expenses

 

(4,573

)

 

 

(3,249

)

 

 

(7,822

)

Total purchase price net of cash acquired

$

152,058

 

 

$

369,427

 

 

$

521,485

 

Fair value of assumed ISOs attributable to pre-combination service

 

(372

)

 

 

(2,594

)

 

 

(2,966

)

Net cash paid

$

151,686

 

 

$

366,833

 

 

$

518,519

 

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 and developed technology as follows:

 

Valuation Method

 

Tapingo

 

LevelUp

Restaurant relationships

Multi-period excess earnings

 

With or without comparative business valuation

Diner acquisition

n/a

 

Cost to recreate

Developed technology

Cost to recreate

 

Multi-period excess earnings

The fair value of the LevelUp below-market lease was measured based on the present value of the difference between the contractual amounts to be paid pursuant to the lease and an estimate of current fair market lease rates measured over the non-cancelable remaining term of the lease.

These fair value measurements were based on significant inputs not observable in the market and thus represent Level 3 measurements within the fair value hierarchy. Unobservable inputs were reflective of the types of assumptions that market participants would use in measuring the fair values of similar assets and liabilities such as, among others, discount rates, estimated future cash flows, initial developer costs, expected profits, royalty rates, rates of attrition and expected rates of return.

The Company incurred certain expenses directly and indirectly related to mergers and acquisitions of $12.1 million, $2.7 million, and $6.9 million which were recognized in general and administrative expenses within the consolidated statements of operations for the years ended December 31, 2020, 2019 and 2018, respectively.

v3.20.4
Marketable Securities
12 Months Ended
Dec. 31, 2020
Investments Debt And Equity Securities [Abstract]  
Marketable Securities

6. Marketable Securities

The amortized cost, unrealized gains and losses and estimated fair value of the Company’s held-to-maturity marketable securities as of December 31, 2020 and 2019 were as follows:

 

 

 

December 31, 2020

 

 

 

Amortized Cost

 

 

Unrealized Gains

 

 

Unrealized Losses

 

 

Estimated Fair Value

 

 

 

(in thousands)

 

Cash and cash equivalents

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial paper

 

$

15,498

 

 

$

 

 

$

(3

)

 

$

15,495

 

Short-term investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial paper

 

 

46,978

 

 

 

 

 

 

(33

)

 

 

46,945

 

Corporate bonds

 

 

6,148

 

 

 

1

 

 

 

(1

)

 

 

6,148

 

Total

 

$

68,624

 

 

$

1

 

 

$

(37

)

 

$

68,588

 

 

 

 

December 31, 2019

 

 

 

Amortized Cost

 

 

Unrealized Gains

 

 

Unrealized Losses

 

 

Estimated Fair Value

 

 

 

(in thousands)

 

Cash and cash equivalents

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial paper

 

$

17,548

 

 

$

 

 

$

(34

)

 

$

17,514

 

Corporate bonds

 

 

1,300

 

 

 

 

 

 

 

 

 

1,300

 

Short-term investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial paper

 

 

46,971

 

 

 

 

 

 

(195

)

 

 

46,776

 

Corporate bonds

 

 

2,304

 

 

 

2

 

 

 

 

 

 

2,306

 

Total

 

$

68,123

 

 

$

2

 

 

$

(229

)

 

$

67,896

 

 

All of the Company’s marketable securities were classified as held-to-maturity investments and have maturities within one year of December 31, 2020. The Company evaluated its marketable securities aggregated by credit rating agency rating, all of which are highly rated, investment grade securities, considering historical investment losses, current market conditions and historical recovery rates of similar securities and determined that no material credit losses were expected as of December 31, 2020.

The gross unrealized losses, estimated fair value and length of time the individual marketable securities were in a continuous loss position for those marketable securities in an unrealized loss position as of December 31, 2020 and 2019 were as follows:

 

 

 

December 31, 2020

 

 

 

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

 

$

62,440

 

 

$

(36

)

 

$

 

 

$

 

 

$

62,440

 

 

$

(36

)

Corporate bonds

 

 

4,569

 

 

 

(1

)

 

 

 

 

 

 

 

 

4,569

 

 

 

(1

)

Total

 

$

67,009

 

 

$

(37

)

 

$

 

 

$

 

 

$

67,009

 

 

$

(37

)

 

 

 

December 31, 2019

 

 

 

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

 

$

64,290

 

 

$

(229

)

 

$

 

 

$

 

 

$

64,290

 

 

$

(229

)

Total

 

$

64,290

 

 

$

(229

)

 

$

 

 

$

 

 

$

64,290

 

 

$

(229

)

 

 

 

The Company recognized interest income during the years ended December 31, 2020, 2019 and 2018 of $1.7 million, $3.9 million and $4.0 million, respectively, within net interest expense in the consolidated statements of operations. During the years ended December 31, 2020, 2019 and 2018, 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 17, Fair Value Measurement, for further details).

v3.20.4
Goodwill and Acquired Intangible Assets
12 Months Ended
Dec. 31, 2020
Goodwill And Intangible Assets Disclosure [Abstract]  
Goodwill and Acquired Intangible Assets

7. Goodwill and Acquired Intangible Assets

The components of acquired intangible assets as of December 31, 2020 and 2019 were as follows:

 

 

 

December 31, 2020

 

 

December 31, 2019

 

 

 

Gross Carrying

Amount

 

 

Accumulated

Amortization

 

 

Net Carrying

Value

 

 

Gross Carrying

Amount

 

 

Accumulated

Amortization

 

 

Net Carrying

Value

 

 

 

(in thousands)

 

Restaurant relationships

 

$

492,791

 

 

$

(158,885

)

 

$

333,906

 

 

$

497,788

 

 

$

(135,482

)

 

$

362,306

 

Diner acquisition

 

 

48,293

 

 

 

(29,567

)

 

 

18,726

 

 

 

48,293

 

 

 

(19,909

)

 

 

28,384

 

Developed technology

 

 

34,095

 

 

 

(21,696

)

 

 

12,399

 

 

 

35,826

 

 

 

(15,916

)

 

 

19,910

 

Other

 

 

2,918

 

 

 

(2,787

)

 

 

131

 

 

 

2,918

 

 

 

(2,713

)

 

 

205

 

Total amortizable intangible assets

 

 

578,097

 

 

 

(212,935

)

 

 

365,162

 

 

 

584,825

 

 

 

(174,020

)

 

 

410,805

 

Indefinite-lived trademarks

 

 

89,676

 

 

 

 

 

 

89,676

 

 

 

89,676

 

 

 

 

 

 

89,676

 

Total acquired intangible assets

 

$

667,773

 

 

$

(212,935

)

 

$

454,838

 

 

$

674,501