Waitr Holdings Inc (WTRH) 2021 Q2 法說會逐字稿

Good afternoon, everyone. I would like to welcome all of you to the Waitr Holdings, Inc. Second Quarter 2021 Conference Call. Today's call is being recorded.

With us today are Waitr's Chief Executive Officer, Carl Grimstad; and Chief Financial Officer, Leo Leonid Bogdanov. By now, you should have access to our earnings press release. If not, it may be found at sec.gov or our Investor Relations website at investors.waitrapp.com.

Before I turn the call over to management, I would like to remind you that certain statements and projections in this call about our future business and financial results constitute forward-looking statements. These statements are based on management's current business and market expectations, and our actual results could differ materially from those projected in the forward-looking statements. Please see the risk factors contained in our annual report on Form 10-K and in our Form 10-Qs for a discussion of risks that may cause our actual results to vary from these forward-looking statements.

Finally, please note that on today's call, management may refer to non-GAAP financial measures. Please refer to Waitr's second quarter 2021 earnings release for a full reconciliation of its non-GAAP financial measures to the most comparable GAAP financial measures.

I would like to now turn the call over to Waitr's CEO, Carl Grimstad, who will give an overview of the company's business activities and developments for the second quarter of 2021. He will then turn the call over to Leo Bogdanov, who will provide an overview of the company's operating and financial results. We will then open the call for Q&A. Carl?

Thank you. Hello, everyone, and thank you for joining our call today.

This quarter, we strengthened our market presence in the on-demand delivery sector by partnering with a number of national brands, including Potbelly, Long John Silver's, Smoothie King, Applebee's, Red Robin and KFC. With the onboarding of these popular chains and our continued addition of independent restaurants, we now have over 25,000 partnered restaurants on our platform. We continue to support our restaurant partners and communities we serve and are hopeful that the recent signs of recovery from COVID-related impacts continue and that the emergence of COVID variance does not result in more hardships for the restaurant industry as a whole.

As I've mentioned many times before, our strategy is to increase our ecosystem of restaurants, diners and independent contract drivers. As the size of this group increases, we plan to introduce additional products and services that are anticipated to create larger revenue and earnings growth opportunities.

To that extent, during the quarter, we methodically invested our capital in various initiatives, which are positioning the company for future growth. These include additional investments in our technology platforms with new product offerings, bolstering our customer and partner support teams as well as continued opportunistic expansion into new markets, all of which we believe are necessary for the core delivery business.

Additionally, we continued to strategically invest in our independent contract driver base in the second quarter of 2021, ensuring adequate driver supply. This has resulted in the highest level of active independent contractor drivers since the company's inception at approximately 34,000 drivers.

We have very recently executed 3 definitive purchase agreements to purchase payment processing companies ProMerchant, Cape Cod Merchant Services and Flow Payments. The combination of these businesses will continue to broaden the company's capabilities beyond third-party food delivery. We are excited to close these transactions in the near term.

During the quarter, we also made an investment in Figure Technology in their Series-D financing round. Figure is on the cutting edge of payment solutions and utilizes blockchain technology for loan origination, equity management, private fund services, banking and payments. We are also working on an agreement with their affiliate, Figure Payments, with the goal of leveraging their underlying technology within our constituent base of diners, restaurant partners and independent contract drivers to facilitate alternative payment and disbursement options. This is anticipated to further intertwine our business with transformative fintech solutions.

As previously announced, we also have recently launched a strategic initiative to change our name and visual identity in a comprehensive company rebrand. We look to identify a corporate name and brand that unifies our current service offering and better reflects our long-term business strategy. The rebranding strategy reflects our ongoing commitment to innovation, continued expansion into new delivery verticals and other business ventures.

We are looking forward to the second half of the year as we continue to make long-term investments in the company and focus on fundamental, operational and strategic initiatives necessary to grow the business.

With that, I'm going to turn it over to Leo, our Chief Financial Officer, for a recap of second quarter results.

Thank you, Carl. I'd like to now review our second quarter 2021 financial results.

Revenue for the second quarter of 2021 was $49.2 million compared to $50.9 million in the first quarter of 2021, $60.5 million in the second quarter of 2020. For the 6 months ended June 30, 2021, revenue was $100.1 million compared to $104.7 million for the 6 months ended June 30, 2020. Adjusted EBITDA for the second quarter of 2021 was $2.5 million compared to $8.3 million in the first quarter of 2021 and $16.7 million in the second quarter of 2020.

Loss per share for the second quarter of 2021 was $0.05 compared to a loss per share of $0.03 in the first quarter of 2021 and earnings per diluted share of $0.10 for the second quarter of 2020. Adjusted loss per diluted share for the second quarter of 2021 was $0.04 compared to adjusted earnings per diluted share of $0.01 in the first quarter of 2021 and $0.11 in the second quarter of 2020.

Cash on hand totaled $60.5 million as of June 30, 2021. Total outstanding long-term debt as of June 30, 2021, was $84.5 million, consisted primarily of our $35 million term loans, $49.5 million of convertible notes.

That concludes the recap of our second quarter 2021 financial results. We'll now go into a short Q&A session.

(Operator Instructions) And at this time, we'll go first to Dan Kurnos of The Benchmark Company.

Can you guys hear me?

Yes. Perfectly, Dan.

All right. Great. Sorry about that. I think I must have been on mute. Carl, can we just start off by level setting sort of expectations around the pieces here? As we kind of look at the core business and the trajectory, maybe just help us think as you kind of go through this rebrand sort of what the organic trends are right now. And as you make these investments, I guess maybe if you could sort of break out short-term versus long-term what the margin flow-through is this quarter. Obviously, some investment, historically, you'd said kind of north of 20%, how do we think about it in the near term and in the long term?

Yes. So let's start with that first. I still think long term, those margins that we've talked about are attainable. But as I've said in the past, it's going to be more than just last-mile delivery, right? It's going to be supplemental businesses like payments and other things that are going to combine for more of an offering to our customer base than just free delivery here, free delivery there.

I mean, Dan, ultimately, we're in this business now where we can't be a mini me of DoorDash, right? We have to be more than that. We can't play the game that they play. And that's why I've always talked about our 3 main constituents and thinking beyond just the last-mile delivery. The addition of these payment businesses is really the first big step in giving ourselves the capability to offer a full suite of payment services not only to our installed base, but beyond that, into other verticals and what have you.

So I still think long term, those EBITDA margins are attainable, but not purely just from last-mile delivery. In the short term, I think that this quarter is about as soft as the aggregate EBITDA will hit. I think that the rest of the year rebounds a little bit will be the timing of some of the impact of our POS integrators -- integrations with 2 big third parties.

Historically, the quarter on the top line is a little softer, at least it was last year than the second quarter. But I do see a rebound in the fourth quarter. It has been tricky to predict the top line of the business, and that's why we've been reticent to get out over our skis with it because the impact of COVID where, as we've talked about in the past, has been great in validating last-mile delivery, but it also creates a nightmare of projecting. If -- let's just say, if stimulus, for example, didn't hit in mid-March, Q2's revenue number would have been bigger than Q1. And if -- I think if we scrape out the effects of the pandemic since last year, the business is essentially where it would have been, but only profitable today where it wasn't prior to the pandemic.

So from a base business, that's where we start from and then we build from there with our strategy.

Got it. That's helpful. And can you just -- I mean you brought it up a couple of times in that response, but maybe just talk a little bit more about the strategic rationale of the acquisition, how quickly you can move that into adjacencies and sort of how that filters through from top to bottom over the course of the year.

Yes. I think in -- potentially in 2022, that could represent 10% growth to the business just on its own. And it's a multipronged strategy. So these businesses are like mini iPayments, which was my old company, right? They offer a broad suite of payment solutions across all types of SIC codes of merchants, right?

So sure, we have the low-hanging fruit of our 25,000 restaurants that are captive for us to go after. But then we have every merchant category that you can imagine with several of what's in vogue marketing strategies that payments companies use today.

So I mean that business on its own, I expect, even without the synergistic aspect of having an embedded merchant base that's already doing business with us, is going to be -- is going to drive some really nice revenue growth and earnings over time and give us that one other stickiness, that additional product, to our merchant partner that we can deliver to him in a packaged offering that will make financial sense.

Got it. And then if I could just sneak one more in. Just in terms of the adjacencies, still no update on cannabis. I know that's kind of a longer-tail opportunity. Grocery seems to be growing all right. Maybe just talk through kind of how the ancillaries are developing at this point. And is that included in that 10% upside from payments? Or is that payments alone and then the ancillaries plus the core last-mile delivery is the remainder?

Yes. I think that's payments. The number I was throwing out was them on their own. These other verticals -- cannabis is tricky, right, as everyone knows. As we sit here today, traditional payment methods are not available to retailers in cannabis nor are the ability to deliver their product like we can deliver a cheeseburger, right?

So there are all types of regulatory dynamics around both of those things, all of which we are working on. And you could be assured that our solution is going to comply with all regulatory entities. And it's state by state. And it's not quite -- alcohol isn't as quite as onerous, but it's the same thing with -- as we've expanded state-by-state in alcohol delivery, there are a number of dynamics there that you have to comply with.

All that being said, the more gray it is, the more difficult it is for someone to step into that business is what's attractive to us, right? Because we're going to do the work. We're going to come up with a solution that marries both payments and delivery. And everyone seems to be afraid of the last-mile delivery because they think it's such a money drain and it cannot be done profitably.

And if we've done anything else last year, I think we've shown that we can do that component of it and at a profitable level. And I think that that's going to be a super important skill for this business and super valuable to many different players that are selling goods and services in the future. Because if all they're going to be left with is a duopoly, it's not going to bode well for pricing or flexibility or competitiveness. And it seems like that's the direction the Ubers and the DoorDashes are going.

And so I think we'll be a refreshing alternative to whether it's the restaurant industry or the convenience store industry, obviously, cannabis, but across the board.

And we'll go to our next question from Jeff Van Sinderen of B. Riley.

I just wanted to follow up a little bit more on the driver cost picture. Maybe you can speak to that and give us kind of the outlook there.

Yes. As we got a lot of color from Uber in and around their investor -- their "investment" in drivers, and I think it was pretty well documented that we've had a tight labor market for a period of time, usually coincides with subsidies.

So I think that the -- if we consider it an investment in Q1 and Q2, it probably impacted notably the EBITDA line. That being said, whatever we did resulted in a lot of success, right? We have the highest driver count that we ever had. We have our lowest delivery times that we've ever had, at least since I've been here.

I do think that those elevated costs are trending lower, and we're starting to see that in July. So I don't think that, that continues to get any worse. I think that has peaked.

Okay. And then if we can kind of just look at the -- I guess your thinking around the sales and marketing and G&A lines for Q3 or for second half. Those were a little bit higher than we expected in Q2. So just wondering directionally where those might head.

Yes. So a couple of things about that. The push into QSR, which is a necessary strategy long term for the business, right? You need that level of restaurant selection because you don't want your customer that once a month wants a Big Mac to remember in his mind, "Oh, well, that's not on the Waitr platform in my market, so I have to go to a competitor." Super important that impacted top line revenue, at least in the short term as we've seen revenue per order come down slightly because even though it's still healthy margin, it's not as high margin as your independent restaurant.

We did some additional couponing to try to reactivate some dormant diners in the quarter. I think that, that will bode well. And then we opened -- this year, we've opened maybe some 100 new markets, smaller markets. And when we go into these markets, we do start with some lower rates that over time do increase contractually.

So I think those were well thought out. I think they were smart. I think that we'll continue on the strategy of these opening these smaller markets. But I don't think you see things get more heavy-handed than you saw them in this quarter.

Okay. And then just kind of looking at the operating profitability profile, when do -- when would you expect to return to operating profitability?

I'm not sure I understand the question. When you say operating...

Yes. I'm just looking at the operating margin line.

Leo, what line is he actually pointing to? Why don't you explain because I don't seem to understand.

Yes. Sorry, I'm just looking at the income from operations, that line, which was a little bit lower than we expected. I'm just wondering if that -- when you would see that line getting back to positive.

So what number are we looking at, Jeff?

$3,092,000, I believe, negative.

Leo, can you help me out here?

Sure, Jeff. Yes. I think we probably expect to rebound there in some time in 2022, that's the expectation at this stage.

Okay. So 2022. Got it. Helpful. Okay. And then I just had one more. Just was curious on the investment in the blockchain application, anything you can help us with there?

Yes. So are you familiar with Figure Technologies?

Not especially.

All right. So Figure is founded by a guy named Mike Cagney, who is also the founder of SoFi. And they're a blockchain-enabled company that has been focused on the mortgage industry. They also have a product that is called Figure Pay that they aim to essentially disenfranchise member banks and reduce the cost of interchange.

So as you know, there are a number of these DeFi or challenger banks that have popped up that are attacking all different revenue streams from established banks. In the Visa, Mastercard world, member banks earn something called interchange, right, to -- essentially, they say that, that is for credit risk, marketing, maintaining of their networks and what have you. Well, Figure Pay aims to sit in between the merchant and the consumer and offer the ability to transact and, in some cases, have a non-collateralized short-term loan like an after pay, if you will, to pay for their goods.

So if you think about our constituents, again, merchants, consumers, you think about we pay drivers every day, this is a super interesting, innovative payment-related product and offering to offer to -- I mean just remember, there's 2 million active diners on our network, but 6 million people have downloaded that app. You've got 25,000 merchants, right? And then you have another 34,000 drivers. It's a super valuable ecosystem that a company like Figure or other payments companies find super valuable.

So with the addition of these payment businesses that we purchased and our ability to market their Figure Pay solution, it's one additional product offering that is innovative besides traditional credit card processing.

And so that concludes today's question-and-answer session. I will now turn the call back to Carl Grimstad for any additional or closing comments.

No closing comments other than thanks for your interest. We continue to be excited about the future of our business and the rest of this year and have a nice night. Thank you.

And that does conclude today's call. Thank you for your participation. You may now disconnect.