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Summary

  • Appears to have a first-mover advantage in the space of online/mobile restaurant pickup & deliveries services.
  • 2013 sales grew 67% to $137 million for 2013 vs 2012.
  • Priced about the same price-to-sales as Open Table (OPEN).

Based in Chicago, IL, GrubHub (NYSE:GRUB) scheduled a $148 million IPO on the NYSE with a market capitalization of $1.65 billion at a price range midpoint of $21 for Friday, April 4, 2014.

The full IPO calendar is available at IPOpremium.

SEC Documents
Manager, Joint managers: Citigroup, Morgan Stanley, Allen & Company
Co-Managers: BMO Capital Markets, Canaccord Genuity, Raymond James, William Blair

End of lockup (180 days): Wednesday, October 1, 2014

End of 25-day quiet period: Tuesday, April 29, 2014

Summary
GRUB appears to have a first-mover advantage in the space of online/mobile restaurant pickup & deliveries services.

December quarter sales vs September quarter sales grew 38% to $49 million. Other metrics grew as well:
. Daily average grubs (meals) grew 37%
. Gross food sales grew 40% to $370 million
. Active diners grew 12% after growing 160% for the Sept quarter vs the June quarter.

GRUB is priced about the same price-to-sales as Open Table (NASDAQ:OPEN), and is actually is priced at a discount regarding price-to-book and price-to-tangible book value.

The market caps are about the same and GRUB's sales growth is higher, as is the P/E.

Valuation
Glossary

Valuation Ratios

Mrkt

Price /

Price /

Price /

Price /

% offered

Annualizing Dec qtr

Cap (MM)

Sls

Erngs

BkVlue

TanBV

in IPO

Grubhub

$1,646

8.4

257.3

2.5

12.1

9%

Compare

Open Table

$1,830

8.8

44.4

8.0

18.3

Conclusion
Buy Grub on the IPO. 43% of the IPO is going to selling shareholders.

To put the conclusions and observations in context, the following is reorganized, edited and summarized from the full S-1 referenced above.

Business
GRUB is the leading online and mobile platform for restaurant pick-up and delivery orders, which it refers to as takeout.

GRUB processed more than 135,000 combined Daily Average Grubs in 2013 and had $1.3 billion of combined Gross Food Sales on its platforms in 2013.

GRUB connects local restaurants with hungry diners in more than 600 cities across the United States and is focused on transforming the takeout experience.

For restaurants, GRUB generates higher margin takeout orders at full menu prices. GRUB's platform empowers diners with a "direct line" into the kitchen, avoiding the inefficiencies, inaccuracies and frustrations associated with paper menus and phone orders. GRUB has a powerful two-sided network that creates additional value for both restaurants and diners as it grows.

GRUB's target market is primarily independent restaurants.

Restaurant market
These independent restaurants, which account for 61% of all U.S. restaurants (according to Euromonitor), remain local, highly fragmented and are mostly owner-operated family businesses.

According to Euromonitor, Americans spent $204 billion at these 350,000 independent restaurants in 2012. GRUB believes that Americans spent $67 billion on takeout at these independent restaurants.

For restaurants, takeout enables them to grow their business without adding seating capacity or wait staff. Advertising for takeout, typically done through the distribution of menus to local households or advertisements in local publications, is often inefficient and requires upfront payment with no certainty of success.

In contrast, GRUB provides the 28,800 restaurants on its platform (as of December 31, 2013) with an efficient way to generate more takeout orders. GRUB enables restaurants to access local diners at the moment when those diners are hungry and ready to purchase takeout.

GRUB only gets paid for orders produced
In addition, GRUB does not charge the restaurants in its network any upfront or subscription fees, GRUB does not require any discounts from their full price menus and it only gets paid for the orders it generates for them, providing restaurants with a low-risk, high-return solution. GRUB charges restaurants a per-order commission that is primarily percentage-based.

Seasonal
In metropolitan markets, GRUB generally experiences a relative increase in diner activity from September to April and a relative decrease in diner activity from May to August.

In addition, GRUB benefits from increased order volume in campus markets when school is in session and experiences a decrease in order volume when school is not in session, during summer breaks and other vacation periods.

Diner activity can also be impacted by colder or more inclement weather, which typically increases order volume, and warmer or sunny weather, which typically decreases order volume.

Dividend Policy
No dividends are planned.

Intellectual Property
As of January 31, 2014, GRUB had more than 40 trademarks registered in the United States, including: "GrubHub," "happy eating," "Seamless," "OrderHub" and "Your food is here."

GRUB also has filed other trademark applications in the United States and abroad and may pursue additional trademark registrations to the extent it believes it will be beneficial and cost-effective.

As of January 31, 2014, GRUB had three patents issued in the United States and 15 patent applications pending in the United States, which seeks to cover proprietary inventions relevant to its products and services. GRUB may pursue additional patent protection to the extent it believes it will be beneficial and cost effective.

GRUB is the registered holder of a variety of domestic and international domain names that include the terms "GrubHub," "Seamless," "Allmenus," "MenuPages" and certain of its other trademarks and similar variations of such terms.

Competition
GRUB primarily competes with the traditional offline ordering process used by the vast majority of restaurants and diners involving paper menus that restaurants distribute to diners, as well as advertising that restaurants place in local publications to attract diners.

For diners, GRUB competes with the traditional ordering process by aggregating restaurant and menu information in one place online, so that it is easier and more convenient to find a desirable restaurant option and place a customized order without having to interact directly with the restaurants.

5% stockholders
J. William Gurley 8.3%
Justin L. Sadrian 9.1%
Benjamin Spero 12.0%

Use of proceeds
43% of IPO proceeds is going to selling shareholders. GRUB expects to net $76 million from its IPO. Proceeds are allocated as follows:

for working capital and other general corporate purposes.

Disclaimer: This GRUB IPO report is based on a reading and analysis of GRUB's S-1 filing, which can be found here, and a separate, independent analysis by IPOdesktop.com. There are no unattributed direct quotes in this article.

Source: IPO Preview: GrubHub