GRUBHUB INC., 10-Q filed on 5/6/2021
Quarterly Report
v3.21.1
Document and Entity Information - shares
3 Months Ended
Mar. 31, 2021
Apr. 30, 2021
Cover [Abstract]    
Document Type 10-Q  
Amendment Flag false  
Document Period End Date Mar. 31, 2021  
Document Fiscal Year Focus 2021  
Document Fiscal Period Focus Q1  
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   93,347,973
Entity Current Reporting Status Yes  
Entity Shell Company false  
Entity File Number 1-36389  
Entity Tax Identification Number 46-2908664  
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, $0.0001 par value per share  
Security Exchange Name NYSE  
Entity Incorporation, State or Country Code DE  
Document Transition Report false  
Document Quarterly Report true  
Entity Interactive Data Current Yes  
v3.21.1
Condensed Consolidated Balance Sheets - USD ($)
$ in Thousands
Mar. 31, 2021
Dec. 31, 2020
CURRENT ASSETS:    
Cash and cash equivalents $ 348,837 $ 360,232
Short-term investments 55,824 53,126
Accounts receivable, less allowances for doubtful accounts 104,727 111,802
Income tax receivable 22,229 22,472
Prepaid expenses and other current assets 20,408 24,765
Total current assets 552,025 572,397
PROPERTY AND EQUIPMENT:    
Property and equipment, net of depreciation and amortization 217,677 216,146
OTHER ASSETS:    
Other assets 54,373 49,201
Deferred tax assets, non-current 142 142
Operating lease right-of-use asset 85,150 88,227
Goodwill 1,007,968 1,007,968
Acquired intangible assets, net of amortization 445,136 454,838
Total other assets 1,592,769 1,600,376
TOTAL ASSETS 2,362,471 2,388,919
CURRENT LIABILITIES:    
Restaurant food liability 136,280 141,802
Accounts payable 16,877 19,859
Accrued payroll 40,871 27,346
Current operating lease liability 17,598 17,897
Other accruals 180,412 149,278
Total current liabilities 392,038 356,182
LONG-TERM LIABILITIES:    
Deferred taxes, non-current 16,823 17,777
Noncurrent operating lease liability 100,251 103,416
Long-term debt 494,330 494,103
Other accruals 6 644
Total long-term liabilities 611,410 615,940
Commitments and contingencies
STOCKHOLDERS’ EQUITY:    
Preferred Stock, $0.0001 par value. Authorized: 25,000,000 shares as of March 31, 2021 and December 31, 2020; issued and outstanding: no shares as of March 31, 2021 and December 31, 2020.
Common stock, $0.0001 par value. Authorized: 500,000,000 shares at March 31, 2021 and December 31, 2020; issued and outstanding: 93,306,390 and 93,046,676 shares as of March 31, 2021 and December 31, 2020, respectively 9 9
Accumulated other comprehensive loss (1,167) (1,275)
Additional paid-in capital 1,260,714 1,243,135
Retained earnings 99,467 174,928
Total stockholders’ equity 1,359,023 1,416,797
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 2,362,471 $ 2,388,919
v3.21.1
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares
Mar. 31, 2021
Dec. 31, 2020
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 93,306,390 93,046,676
Common stock, shares outstanding 93,306,390 93,046,676
v3.21.1
Condensed Consolidated Statements of Operations (Unaudited) - USD ($)
shares in Thousands, $ in Thousands
3 Months Ended
Mar. 31, 2021
Mar. 31, 2020
Income Statement [Abstract]    
Revenues $ 550,592 $ 362,980
Costs and expenses:    
Operations and support 393,486 214,561
Sales and marketing 127,234 90,742
Technology (exclusive of amortization) 31,951 31,273
General and administrative 29,124 38,949
Depreciation and amortization 37,717 33,363
Total costs and expenses 619,512 408,888
Loss from operations (68,920) (45,908)
Interest expense, net 7,158 6,380
Loss before provision for income taxes (76,078) (52,288)
Income tax benefit (617) (18,861)
Net loss attributable to common stockholders $ (75,461) $ (33,427)
Net loss per share attributable to common stockholders    
Basic $ (0.81) $ (0.36)
Diluted $ (0.81) $ (0.36)
Weighted-average shares used to compute net loss per share attributable to common stockholders:    
Basic 93,215 91,793
Diluted 93,215 91,793
v3.21.1
Condensed Consolidated Statements of Comprehensive Loss (Unaudited) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2021
Mar. 31, 2020
Statement Of Income And Comprehensive Income [Abstract]    
Net loss $ (75,461) $ (33,427)
OTHER COMPREHENSIVE INCOME (LOSS)    
Foreign currency translation adjustments 108 (643)
COMPREHENSIVE LOSS $ (75,353) $ (34,070)
v3.21.1
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2021
Mar. 31, 2020
CASH FLOWS FROM OPERATING ACTIVITIES    
Net loss $ (75,461) $ (33,427)
Adjustments to reconcile net loss to net cash from operating activities:    
Depreciation 12,294 8,658
Amortization of intangible assets and developed software 25,423 24,705
Stock-based compensation 20,954 20,185
Deferred taxes (954) (2,725)
Other (448) 3,479
Change in assets and liabilities:    
Accounts receivable 6,861 (18,333)
Income taxes receivable 243 (16,311)
Prepaid expenses and other assets (83) (4,602)
Restaurant food liability (5,522) 20,857
Accounts payable (3,460) 4,678
Accrued payroll 13,525 4,277
Other accruals 30,583 26,085
Net cash provided by operating activities 23,955 37,526
CASH FLOWS FROM INVESTING ACTIVITIES    
Purchases of investments (31,150) (19,790)
Proceeds from maturity of investments 28,465 32,900
Capitalized website and development costs (13,848) (14,243)
Purchases of property and equipment (9,833) (19,678)
Acquisition of other intangible assets   (510)
Other cash flows from investing activities (200) (250)
Net cash used in investing activities (26,566) (21,571)
CASH FLOWS FROM FINANCING ACTIVITIES    
Proceeds from borrowings under the credit facility   175,000
Taxes paid related to net settlement of stock-based compensation awards (9,028) (8,051)
Proceeds from exercise of stock options 1,088 1,414
Other cash flows from financing activities (900)  
Net cash provided by (used in) financing activities (8,840) 168,363
Net change in cash, cash equivalents, and restricted cash (11,451) 184,318
Effect of exchange rates on cash, cash equivalents and restricted cash 66 (600)
Cash, cash equivalents, and restricted cash at beginning of year 362,897 379,594
Cash, cash equivalents, and restricted cash at end of the period 351,512 563,312
SUPPLEMENTAL DISCLOSURE OF NON-CASH ITEMS    
Capitalized property, equipment and website and development costs in accounts payable at period end 2,233 3,830
RECONCILIATION OF CASH, CASH EQUIVALENTS, AND RESTRICTED CASH    
Cash and cash equivalents 348,837 560,708
Restricted cash included in other assets $ 2,675 $ 2,604
Restricted Cash, Noncurrent, Asset, Statement of Financial Position [Extensible List] Other assets Other assets
Total cash, cash equivalents, and restricted cash $ 351,512 $ 563,312
v3.21.1
Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited) - USD ($)
$ in Thousands
Total
Common stock
Additional paid-in capital
Accumulated other comprehensive loss
Retained earnings
Balance, beginning at Dec. 31, 2019 $ 1,493,570 $ 9 $ 1,164,400 $ (1,628) $ 330,789
Balance, beginning (in shares) at Dec. 31, 2019   91,576,060      
Net loss (33,427)       (33,427)
Currency translation (643)     (643)  
Stock-based compensation 24,994   24,994    
Stock option exercises and vesting of restricted stock units, net of withholdings and other 1,414   1,414    
Stock option exercises and vesting of restricted stock units, net of withholdings and other (in shares)   494,525      
Shares repurchased and retired to satisfy tax withholding upon vesting (8,051)   (8,051)    
Shares repurchased and retired to satisfy tax withholding upon vesting (in shares)   (153,607)      
Balance, ending at Mar. 31, 2020 1,477,857 $ 9 1,182,757 (2,271) 297,362
Balance, ending (in shares) at Mar. 31, 2020   91,916,978      
Balance, beginning at Dec. 31, 2020 1,416,797 $ 9 1,243,135 (1,275) 174,928
Balance, beginning (in shares) at Dec. 31, 2020   93,046,676      
Net loss (75,461)       (75,461)
Currency translation 108     108  
Stock-based compensation 25,519   25,519    
Stock option exercises and vesting of restricted stock units, net of withholdings and other 1,088   1,088    
Stock option exercises and vesting of restricted stock units, net of withholdings and other (in shares)   382,040      
Shares repurchased and retired to satisfy tax withholding upon vesting (9,028)   (9,028)    
Shares repurchased and retired to satisfy tax withholding upon vesting (in shares)   (122,326)      
Balance, ending at Mar. 31, 2021 $ 1,359,023 $ 9 $ 1,260,714 $ (1,167) $ 99,467
Balance, ending (in shares) at Mar. 31, 2021   93,306,390      
v3.21.1
Organization
3 Months Ended
Mar. 31, 2021
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”.

v3.21.1
Significant Accounting Policies
3 Months Ended
Mar. 31, 2021
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, 2020 filed with the SEC on March 1, 2021 (the “2020 Form 10-K”). All significant intercompany transactions have been eliminated in consolidation. Operating results for the three months ended March 31, 2021 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2021.

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. 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 impacts arising from the COVID-19 pandemic and measures implemented to prevent its spread. As the extent and duration of the impacts 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. Actual results could differ significantly from these estimates.  

Changes in Accounting Principle

There have been no material changes to the Company’s significant accounting policies described in the 2020 Form 10-K.

Recently Issued Accounting Pronouncements

There were no recently issued accounting pronouncements that had or are expected to have a material impact on our financial statements.

v3.21.1
Merger Agreement
3 Months Ended
Mar. 31, 2021
Business Combinations [Abstract]  
Merger Agreement

3. Merger Agreement

On June 10, 2020, the Company entered into an Agreement and Plan of Merger (as amended on September 4, 2020 and March 12, 2021, 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 newly issued American depositary shares of JET (“JET ADS”) representing 0.6710 shares of the share capital of JET with a nominal value of €0.04 per share (“JET Shares”), with each JET ADS representing one-fifth of one JET Share (the “Merger Consideration”).

The registration statement and preliminary proxy statement in respect of the Transaction were publicly filed with the SEC on April 27, 2021, and the Grubhub special stockholder meeting to approve the Transaction and related matters as described in the preliminary proxy statement is expected to take place in June 2021. Subject to the satisfaction of customary closing conditions, Grubhub anticipates closing the Transaction shortly following the Grubhub special stockholder meeting.

The Company incurred certain expenses directly and indirectly related to mergers and acquisitions which were recognized in general and administrative expenses within the condensed consolidated statements of operations of $0.8 million and $0.7 million for the three months ended March 31, 2021 and 2020, respectively.

v3.21.1
Marketable Securities
3 Months Ended
Mar. 31, 2021
Investments Debt And Equity Securities [Abstract]  
Marketable Securities

4. Marketable Securities

The amortized cost, unrealized gains and losses and estimated fair value of the Company’s held-to-maturity marketable securities as of March 31, 2021 and December 31, 2020 were as follows:

 

 

March 31, 2021

 

 

 

Amortized Cost

 

 

Unrealized Gains

 

 

Unrealized Losses

 

 

Estimated

Fair Value

 

 

 

(in thousands)

 

Cash and cash equivalents

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial paper

 

$

12,858

 

 

$

 

 

$

(3

)

 

$

12,855

 

Short-term investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial paper

 

 

50,203

 

 

 

 

 

 

(32

)

 

 

50,171

 

Corporate bonds

 

 

5,621

 

 

 

 

 

 

(1

)

 

 

5,620

 

Total

 

$

68,682

 

 

$

 

 

$

(36

)

 

$

68,646

 

 

 

 

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

 

 

All of the Company’s marketable securities were classified as held-to-maturity investments and have maturities within one year of March 31, 2021. 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 March 31, 2021.

 

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 March 31, 2021 and December 31, 2020 were as follows:

 

 

March 31, 2021

 

 

 

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

 

$

63,026

 

 

$

(35

)

 

$

 

 

$

 

 

$

63,026

 

 

$

(35

)

Corporate bonds

 

 

4,119

 

 

 

(1

)

 

 

 

 

 

 

 

 

4,119

 

 

 

(1

)

Total

 

$

67,145

 

 

$

(36

)

 

$

 

 

$

 

 

$

67,145

 

 

$

(36

)

 

 

 

 

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

)

The Company recognized interest income during the three months ended March 31, 2021 and 2020 of $0.1 million and $0.9 million, respectively, within net interest expense on the condensed consolidated statements of operations. During the three months ended March 31, 2021 and 2020, 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 13, Fair Value Measurement, for further details).

v3.21.1
Goodwill and Acquired Intangible Assets
3 Months Ended
Mar. 31, 2021
Goodwill And Intangible Assets Disclosure [Abstract]  
Goodwill and Acquired Intangible Assets

5. Goodwill and Acquired Intangible Assets

The components of acquired intangible assets as of March 31, 2021 and December 31, 2020 were as follows:

 

 

March 31, 2021

 

 

December 31, 2020

 

 

 

Gross Carrying

Amount

 

 

Accumulated

Amortization

 

 

Net Carrying

Value

 

 

Gross Carrying

Amount

 

 

Accumulated

Amortization

 

 

Net Carrying

Value

 

 

 

(in thousands)

 

Restaurant relationships

 

$

492,791

 

 

$

(165,316

)

 

$

327,475

 

 

$

492,791

 

 

$

(158,885

)

 

$

333,906

 

Diner acquisition

 

 

48,293

 

 

 

(31,982

)

 

 

16,311

 

 

 

48,293

 

 

 

(29,567

)

 

 

18,726

 

Developed technology

 

 

34,095

 

 

 

(22,534

)

 

 

11,561

 

 

 

34,095

 

 

 

(21,696

)

 

 

12,399

 

Other

 

 

2,918

 

 

 

(2,805

)

 

 

113

 

 

 

2,918

 

 

 

(2,787

)

 

 

131

 

Total amortizable intangible assets

 

 

578,097

 

 

 

(222,637

)

 

 

355,460

 

 

 

578,097

 

 

 

(212,935

)

 

 

365,162

 

Indefinite-lived trademarks

 

 

89,676

 

 

 

 

 

 

89,676

 

 

 

89,676

 

 

 

 

 

 

89,676

 

Total acquired intangible assets

 

$

667,773

 

 

$

(222,637

)

 

$

445,136

 

 

$

667,773

 

 

$

(212,935

)

 

$

454,838

 

 

Amortization expense for acquired intangible assets recognized within depreciation and amortization on the condensed consolidated statements of operations was $9.7 million and $12.7 million for the three months ended March 31, 2021 and 2020, respectively.

During the three months ended March 31, 2021, there were no changes in the carrying amount of goodwill of $1,008.0 million.

Estimated future amortization expense of acquired intangible assets as of March 31, 2021 was as follows:

 

 

(in thousands)

 

The remainder of 2021

 

$

29,107

 

2022

 

 

36,847

 

2023

 

 

30,348

 

2024

 

 

28,141

 

2025

 

 

25,736

 

Thereafter

 

 

205,281

 

Total

 

$

355,460

 

 

 

v3.21.1
Property and Equipment
3 Months Ended
Mar. 31, 2021
Property Plant And Equipment [Abstract]  
Property and Equipment

6. Property and Equipment

The components of the Company’s property and equipment as of March 31, 2021 and December 31, 2020 were as follows:

 

 

March 31, 2021

 

 

December 31, 2020

 

 

 

(in thousands)

 

Developed software

 

$

239,276

 

 

$

223,596

 

Computer equipment

 

 

121,337

 

 

 

112,564

 

Leasehold improvements

 

 

74,292

 

 

 

74,092

 

Furniture and fixtures

 

 

13,594

 

 

 

13,587

 

Purchased software and digital assets

 

 

19,771

 

 

 

18,432

 

Construction in progress

 

 

258

 

 

 

256

 

Property and equipment

 

 

468,528

 

 

 

442,527

 

Accumulated depreciation and amortization

 

 

(250,851

)

 

 

(226,381

)

Property and equipment, net

 

$

217,677

 

 

$

216,146

 

 

The gross carrying amount and accumulated amortization of the Company’s developed software as of March 31, 2021 were each adjusted by $3.5 million for certain fully amortized assets that were no longer in use. The Company recorded depreciation and amortization expense for property and equipment other than developed software of $12.3 million and $8.7 million for the three months ended March 31, 2021 and 2020, respectively.

The Company capitalized developed software costs of $19.2 million and $19.0 million for the three months ended March 31, 2021 and 2020, respectively. Amortization expense for developed software costs, recognized in depreciation and amortization in the condensed consolidated statements of operations, was $15.7 million and $12.0 million for the three months ended March 31, 2021 and 2020, respectively.

v3.21.1
Commitments and Contingencies
3 Months Ended
Mar. 31, 2021
Commitments And Contingencies Disclosure [Abstract]  
Commitments and Contingencies

7. 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, Case No. 3:11-cv-1810. Ameranth subsequently initiated additional actions for infringement of a related patent, including separate actions against Grubhub Holdings Inc., Case No. 3:12-cv-739, and Seamless North America, LLC, Case No. 3:12-cv-737, which were consolidated along with approximately 40 other cases Ameranth filed in the same district.

In September 2018, the district court granted summary judgment (on another defendant’s motion) of unpatentability on the sole remaining patent and vacated the December 3, 2018 jury trial date for the claims against Grubhub Holdings Inc. and Seamless North America, LLC. In October 2018, the district court entered final judgment on all claims in the case in which summary judgment was granted, and then stayed the remaining cases (including the cases against Grubhub and Seamless). Ameranth then appealed this decision to the U.S. Court of Appeals for the Federal Circuit. In November 2019, the Federal Circuit affirmed the district court’s findings of unpatentability in all material respects, and remanded certain dependent claims to the district court. In June 2020, Ameranth filed a petition for a Writ of Certiorari with the Supreme Court of the United States, which the Court subsequently denied in October 2020. The Company believes this case lacks merit and that it has strong defenses to all of the infringement claims. The Company intends to defend the suit vigorously. The Company has not recorded an accrual related to this lawsuit as of March 31, 2021, as it does not believe a material loss is probable.

On November 20, 2019, a purported stockholder of the Company filed a putative class action complaint against the Company, Chief Executive Officer Matthew Maloney, and President and Chief Financial Officer Adam DeWitt in the United States District Court for the Northern District of Illinois, Case No. 19 Civ. 7665.  The complaint, which was amended on July 24, 2020, asserts violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, based on its allegation that the defendants made false and misleading statements about the Company’s growth, competitive landscape, and strategy.  The complaint seeks unspecified compensatory damages and attorneys’ fees, among other relief. Grubhub filed a motion to dismiss the complaint, which is now fully briefed before the court. The defendants believe that the complaint is without merit and that a material loss is not probable. However, given the early stage of the proceedings, a reasonable estimate of the amount of any possible loss or range of loss cannot be made at this time.

In addition to the matters described above, from time to time, the Company is involved in various other legal proceedings arising from the normal course of business activities, including labor and employment claims, some of which relate to the alleged misclassification of independent contractors. The Company currently has a number of pending putative class actions, Private Attorney General Act lawsuits and arbitrations alleging the misclassification of independent contractors. Legislation in this area continues to evolve, and therefore, the Company expects to continue to receive an increased number of misclassification claims. Nonetheless, the Company believes that its approach to classification is supported by the law and intends to continue to defend itself vigorously in these matters. 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. During the year ended December 31, 2020, the Company made payments of $12.5 million related to the settlement of certain of these matters.

v3.21.1
Debt
3 Months Ended
Mar. 31, 2021
Debt Disclosure [Abstract]  
Debt

8. Debt

The following table summarizes the carrying value of the Company’s debt as of March 31, 2021 and December 31, 2020:

 

 

March 31, 2021

 

 

December 31, 2020

 

 

 

(in thousands)

 

Senior Notes

 

$

500,000

 

 

$

500,000

 

Less unamortized deferred debt issuance costs

 

 

(5,670

)

 

 

(5,897

)

Long-term debt

 

$

494,330

 

 

$

494,103

 

Senior Notes

On June 10, 2019, the Company’s wholly-owned subsidiary, Grubhub Holdings Inc., issued $500.0 million in aggregate principal amount of 5.500% senior notes due July 1, 2027 (“Senior Notes”) in a private placement exempt from the registration requirements of the Securities Act of 1933, as amended. Interest is payable on the Senior Notes semi-annually on January and July of each year, beginning on January 1, 2020. The interest payment due on January 1, 2021 of $13.8 million was paid in December 2020. There have been no changes in the terms of the Senior Notes as described in Part II, Item 8, Note 11, Debt, to the Company’s 2020 Form 10-K.

Credit Agreement

On February 6, 2019, the Company entered into an amended and restated credit agreement (as amended on May 8, 2020, the “Credit Agreement”) which provides, among other things, for aggregate revolving loans up to $225 million and provided for term loans in an aggregate principal amount of $325 million. The $325 million term loan portion of the Credit Agreement was extinguished on June 10, 2019. In addition to the revolving loans available under the Credit Agreement, the Company may also incur up to $250 million of incremental revolving or term loans pursuant to the terms and conditions of the Credit Agreement. The credit facility under the Credit Agreement will be available to the Company until February 5, 2024. There have been no material changes in the terms of the Credit Agreement as described in Part II, Item 8, Note 11, Debt, to the Company’s 2020 Form 10-K.

Other Information

As of March 31, 2021, the Company’s outstanding debt consisted of $500.0 million in Senior Notes. 

See Note 13, Fair Value Measurement, for the fair value of the Company’s Senior Notes as of March 31, 2021. The Company was in compliance with the financial covenants of its debt facilities as of March 31, 2021. Additional capacity under the Credit Agreement may be used for general corporate purposes, including funding working capital and future acquisitions.

As of March 31, 2021 and December 31, 2020, unamortized debt issuance costs of $1.0 million and $1.1 million, respectively, related to the revolving loan facility and $5.7 million and $5.9 million, respectively, related to the Senior Notes were recorded as other assets and as a reduction of long-term debt, respectively, on the condensed consolidated balance sheets.

Interest expense includes interest on outstanding borrowings, amortization of debt issuance costs and commitment fees on the undrawn portion available under the credit facility, net of capitalized borrowing costs. The Company recognized interest expense of $7.3 million during each of the three months ended March 31, 2021 and 2020. 

v3.21.1
Stock-Based Compensation
3 Months Ended
Mar. 31, 2021
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]  
Stock-Based Compensation

9. 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 $21.0 million and $20.2 million during the three months ended March 31, 2021 and 2020, respectively. As of March 31, 2021, $227.9 million of total unrecognized stock-based compensation expense is expected to be recognized over a weighted-average period of 2.9 years.

Excess tax deficiencies reflect the total realized value of the Company’s tax deductions from individual stock option exercise transactions and the vesting of restricted stock units deficient of the deferred tax assets that were previously recorded. During the three months ended March 31,2020, the Company recognized excess tax deficiencies from stock-based compensation of $2.5 million within income tax benefit in the condensed consolidated statements of operations and within cash flows from operating activities in the condensed consolidated statements of cash flows. Excess tax benefits (deficiencies) had no impact on income tax benefit during the three months ended March 31, 2021.

The Company capitalized stock-based compensation expense as website and software development costs of $4.6 million and $4.8 million during the three months ended March 31, 2021 and 2020, respectively.

Stock Options

The Company granted 16,841 and 224,509 stock options under the 2015 Plan during the three months ended March 31, 2021 and 2020, 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. 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 three months ended March 31, 2021 and 2020 were as follows:

 

 

Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

Weighted-average fair value options granted

 

$

31.02

 

 

$

19.67

 

Average risk-free interest rate

 

 

0.33

%

 

 

1.44

%

Expected stock price volatility

 

 

55.9

%

 

 

48.3

%

Dividend yield

 

None

 

 

None

 

Expected stock option life (years)

 

 

4.00

 

 

 

4.00

 

 

Stock option awards as of December 31, 2020 and March 31, 2021, and changes during the three months ended March 31, 2021, were as follows:

 

 

Options

 

 

Weighted-Average

Exercise Price

 

 

Aggregate Intrinsic Value (thousands)

 

 

Weighted-Average

Exercise Term

(years)

 

Outstanding at December 31, 2020

 

 

2,511,570

 

 

$

41.58

 

 

$

88,030

 

 

 

5.80

 

Granted

 

 

16,841

 

 

 

72.54

 

 

 

 

 

 

 

 

 

Forfeited

 

 

(2,433

)

 

 

26.34

 

 

 

 

 

 

 

 

 

Exercised

 

 

(34,204

)

 

 

32.24

 

 

 

 

 

 

 

 

 

Outstanding at March 31, 2021

 

 

2,491,774

 

 

 

41.93

 

 

 

59,508

 

 

 

5.60

 

Vested and expected to vest at March 31, 2021

 

 

2,452,818

 

 

 

41.60

 

 

 

59,267

 

 

 

5.55

 

Exercisable at March 31, 2021

 

 

2,065,269

 

 

$

36.98

 

 

$

57,112

 

 

 

5.07

 

 

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between the fair value of the common stock and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their in-the-money options on each date. This amount will change in future periods based on the fair value of the Company’s stock and the number of options outstanding. The aggregate intrinsic value of awards exercised was $1.4 million and $2.0 million during the three months ended March 31, 2021 and 2020, respectively.

The Company recorded compensation expense for stock options of $2.1 million and $3.2 million for the three months ended March 31, 2021 and 2020, respectively. As of March 31, 2021, total unrecognized compensation cost, adjusted for estimated forfeitures, related to non-vested stock options was $11.0 million and is expected to be recognized over a weighted-average period of 1.8 years.

Restricted Stock Units

Non-vested restricted stock units as of December 31, 2020 and March 31, 2021, and changes during the three months ended March 31, 2021 were as follows:

 

 

Restricted Stock Units

 

 

 

Shares

 

 

Weighted-Average

Grant Date Fair

Value

 

Outstanding at December 31, 2020

 

 

3,088,736

 

 

$

61.47

 

Granted

 

 

1,456,877

 

 

 

72.56

 

Forfeited

 

 

(156,491

)

 

 

63.93

 

Vested

 

 

(347,836

)

 

 

61.71

 

Outstanding at March 31, 2021

 

 

4,041,286

 

 

$

65.35

 

Compensation expense related to restricted stock units was $18.9 million and $17.0 million during the three months ended March 31, 2021 and 2020, respectively. The aggregate fair value as of the vest date of restricted stock units that vested during the three months ended March 31, 2021 and 2020 was $25.6 million and $22.5 million, respectively. As of March 31, 2021, $216.9 million of total unrecognized compensation cost, adjusted for estimated forfeitures, related to 3,580,526 non-vested restricted stock units expected to vest with weighted-average grant date fair values of $65.44, is expected to be recognized over a weighted-average period of 2.9 years. The fair value of these awards was determined based on the Company’s stock price at the grant date and assumes no expected dividend payments through the vesting period.

v3.21.1
Income Taxes
3 Months Ended
Mar. 31, 2021
Income Tax Disclosure [Abstract]  
Income Taxes

10. Income Taxes

The Company’s effective tax rate was 0.8% and 36.1% during the three months ended March 31, 2021 and 2020, respectively, for an income tax benefit in all periods presented. The effective income tax rate for the three months ended March 31, 2021 reflects the impact of the full valuation allowance against U.S. deferred tax assets as of March 31, 2021. On March 27, 2020, Congress enacted the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which includes provisions, among others, that allow the Company to carryback net operating losses to a year with a higher federal income tax rate and technical corrections to tax depreciation methods for qualified improvement property. The income tax benefit for the three months ended March 31, 2020 included a $6.8 million benefit related to net operating losses that can now be carried back as a result of the CARES Act, partially offset by tax deficiencies on stock-based compensation of $2.5 million (see Note 9, Stock-Based Compensation, for additional details).

The Company is currently under examination by the Internal Revenue Service for its federal income tax return for the tax year ended December 31, 2017. The Company does not believe, but cannot predict with certainty, that there will not be any additional tax liabilities, penalties and/or interest as a result of the audit.

v3.21.1
Stockholders' Equity
3 Months Ended
Mar. 31, 2021
Equity [Abstract]  
Stockholders' Equity

11. Stockholders’ Equity

As of March 31, 2021 and December 31, 2020, 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 March 31, 2021 and December 31, 2020, there were 500,000,000 shares of common stock authorized. At March 31, 2021 and December 31, 2020, there were 93,306,390 and 93,046,676 shares issued and outstanding, respectively. The Company did not hold any shares as treasury shares as of March 31, 2021 or December 31, 2020.

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 “Repurchase Program”). Repurchased stock may be retired or held as treasury shares. The repurchase authorizations do not obligate the Company to acquire any particular amount of common stock or adopt any

particular method of repurchase and may be modified, suspended or terminated at any time at management’s discretion, however, pursuant to the terms of the Merger Agreement, and subject to certain limited exceptions, the Company may not repurchase its common stock. The Company did not repurchase any shares of its common stock during the three months ended March 31, 2021 pursuant to the Repurchase Program, and does not expect to repurchase any shares of its common stock in connection with the Repurchase Program prior to the consummation of the Transaction or earlier termination of the Merger Agreement.

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 March 31, 2021 or December 31, 2020.

v3.21.1
Earnings Per Share Attributable to Common Stockholders
3 Months Ended
Mar. 31, 2021
Earnings Per Share [Abstract]  
Earnings Per Share Attributable to Common Stockholders

12. Earnings Per Share Attributable to Common Stockholders

Basic earnings per share is computed by dividing net income (loss) attributable to common stockholders by the weighted-average number of common shares outstanding during the period without consideration for common stock equivalents. Diluted net income per share attributable to common stockholders is computed by dividing net income by the weighted-average number of common shares outstanding during the period and potentially dilutive common stock equivalents, including stock options and restricted stock units, except in cases where the effect of the common stock equivalent would be antidilutive. Potential common stock equivalents consist of common stock issuable upon exercise of stock options and vesting of restricted stock units using the treasury stock method. For periods of net loss, basic and diluted earnings per share are the same as the effect of the assumed exercise of stock options and vesting of restricted stock units is anti-dilutive.

The following table presents the calculation of basic and diluted net loss per share attributable to common stockholders for the three months ended March 31, 2021 and 2020:

 

Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

 

 

(in thousands, except per share data)

Basic loss per share:

 

 

 

 

 

 

 

 

Net loss attributable to common stockholders (numerator)

$

(75,461

)

 

$

(33,427

)

 

Shares used in computation (denominator)

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding

 

93,215

 

 

 

91,793

 

 

Basic loss per share

$

(0.81

)

 

$

(0.36

)

 

Diluted loss per share:

 

 

 

 

 

 

 

 

Net loss attributable to common stockholders (numerator)

$

(75,461

)

 

$

(33,427

)

 

Shares used in computation (denominator)

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding

 

93,215

 

 

 

91,793

 

 

Effect of dilutive securities:

 

 

 

 

 

 

 

 

Stock options

 

 

 

 

 

 

Restricted stock units

 

 

 

 

 

 

Weighted-average diluted shares

 

93,215

 

 

 

91,793

 

 

Diluted loss per share

$

(0.81

)

 

$

(0.36

)

 

 

The number of shares of common stock underlying stock-based awards excluded from the calculation of diluted net loss per share attributable to common stockholders because their effect would have been antidilutive for the three months ended March 31, 2021 and 2020 were as follows:  

 

Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

 

 

(in thousands)

Anti-dilutive shares underlying stock-based awards:

 

 

 

 

 

 

 

 

Stock options

 

2,492

 

 

 

2,908

 

 

Restricted stock units

 

4,041

 

 

 

4,403

 

 

 

v3.21.1
Fair Value Measurement
3 Months Ended
Mar. 31, 2021
Fair Value Disclosures [Abstract]  
Fair Value Measurement

13. 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, certain money market funds and Senior Notes are classified as Level 2 within the fair value hierarchy because they are valued using inputs other than quoted prices in active markets that are observable directly or indirectly. 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 March 31, 2021 and December 31, 2020: 

 

 

March 31, 2021

 

 

December 31, 2020

 

 

 

Level 2

 

Carrying Value

 

 

Level 2

 

Carrying Value

 

 

 

(in thousands)

 

Assets