Waitr Holdings, Inc. (WTRH) CEO Carl Grimstad on Q1 2022 Results - Earnings Call Transcript

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Waitr Holdings, Inc. (NASDAQ:WTRH) Q1 2022 Earnings Conference Call May 9, 2022 5:00 PM ET

Company Participants

Carl Grimstad - CEO & Chairman

Leonid Bogdanov - CFO

Conference Call Participants

Daniel Kurnos - The Benchmark Company

Operator

Good afternoon, everyone. I would like to welcome all of you to the Waitr Holdings, Inc. First Quarter 2022 Conference Call. With us today are Waitr's Chief Executive Officer; Carl Grimstad; and Chief Financial Officer, Leo Bogdanov. By now, you should have access to the company's earnings press release. If not, it may be found at sec.gov or their 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 future business and financial results constitute forward-looking statements. These statements are based on management's current business and market expectations, and actual results could differ materially from those projected in the forward-looking statements. Please see the risk factors contained in the company's annual report on Form 10-K for a discussion of risks that may cause 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 first quarter 2022 earnings release for a full reconciliation of its non-GAAP financial measures to the most comparable GAAP financial measures.

I would now like to turn the conference call over to Waitr's CEO, Carl Grimstad, who will give an overview of the company's business activities and developments for the first quarter of 2022. 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?

Carl Grimstad

Thank you. Hello, everyone, and welcome to the first quarter 2022 earnings call. In the first quarter, we focused on the continued build-out and optimization of several key integrations with third-party aggregators such as Google food ordering and Olo dispatch. We also completed our direct integration with Panera Bread and are in various stages of integrating with several other national QSR and convenience store brands, such as 7-Eleven. We anticipate these integrations will be finalized in the second and third quarters of 2022 and provide access to over 2,000 serviceable QSR locations. These partnerships, along with our existing integrations with point-of-sale systems such as It's CheckMate. Charlie, Olo Rails, Ordermark and Otter have provided access to thousands of new restaurants to the platforms and should bring increased visibility, increased diner access and increased order flow.

The evolution of this company over the last 2-plus years has shown that we are keenly focused on enhancing and refining our delivery capabilities by leveraging our vast active driver base and offering a wider inventory to consumers. As such, we continue to expand our deliver anything initiative with the progression of instituting direct connections with several online ordering platforms to facilitate last-mile delivery services. As consumer demand drives the necessity for faster delivery of a broader range of products, this will expand the total addressable market and open the door for increased revenue potential through various channels. In turn, this will also explain the earnings potential for our active drivers.

We are also anticipating commercializing our in-house instant pay technology, which thus far is only being utilized to facilitate payments to our independent contract drivers. Through this service, we currently offer a variety of payment options, including PayPal, Zelle as well as other forms of payment through our partnerships with Figure Pay and Prize Out. Our drivers appreciate the flexibility of disbursement options, and we hope to expand this to both the restaurant industry and other verticals to provide faster access to earned income.

Through our presence in many pronounced college sports markets, we have recognized the need for a better in-stadium dining experience at these events that cuts down on wait times and brings the delivery experience to these venues. We have successfully implemented this technology into our existing application, and this has already resulted in streamlined in-stadium dining experiences in several stadiums across the South, including the University of Alabama, LSU, and the New Orleans Saints home of the Super Dome. The convenience of in-stadium ordering capabilities will be a vehicle to expand our presence within our core markets and potentially provide an entrance into new territories.

We now provide payment processing services for over 2,300 merchants, and we expect this to continue to grow on a monthly basis. During the first quarter of 2022, we hired 2 industry veterans in the company's first-ever Chief Information Officer and Chief Technology Officer positions. These individuals bring a high caliber of technical abilities and have already begun the process to unify our applications under one umbrella. Once completed, this single platform will provide for cost efficiencies, maximize product build cycles and feature enhancements and simplify our overall service and support operations. This is an important step as this consolidated technology platform will serve as the foundation of our rebrand strategy under the ASAP name. We believe that this will unify the service offering from our existing brands and better embody the future direction of our company.

We continue to experience adverse effects of the current macroeconomic environment, particularly within our core Southern markets, most notably due to rising gas prices and inflationary pressures. We believe these factors contribute to our muted order flow in the first quarter of 2022. While we can't control these external factors, we do acknowledge the pronounced impact that this has had on the economy and the downstream effect on our consumers. Consumers have become even more price-conscious, and thus, it is critical to provide further lower-cost options. The previous mentioned integrations with major QSR brands will continue to widen the varying price points available on our platforms.

With that, I'd like to turn the call over to Leo, our Chief Financial Officer.

Leonid Bogdanov

Thank you, Carl. I'd like to review our first quarter 2022 financial results. Revenue for the first quarter of 2022 was $35 million compared to $50.9 million in the first quarter of 2021 due in part to the lack of government stimulus statements in the first quarter of 2022 compared to the first quarter of 2021. Adjusted EBITDA for the first quarter of 2022 was a net loss of $1.8 million compared to adjusted EBITDA of $8.3 million in the first quarter of 2021. Net loss for the first quarter of 2022 was $77.2 million or $0.50 per share compared to a net loss of $3.7 million or $0.03 per share in the first quarter of 2021. Net loss for the first quarter of 2022 included noncash $67.2 million goodwill impairment charge.

Cash on hand totaled $54.9 million as of March 31, 2022. Total outstanding long-term debt as of March 31, 2022, was $84.5 million, consistent primarily of our $35 million term loans and $49.5 million of convertible notes. As of May 9, 2022, we have amended the terms of our debt agreement and have agreed with our lender to pay down a portion of our outstanding debt balance by $20 million to approximately $65 million as well as extending the maturity of both debt instruments to May 15, 2024.

That concludes the recap of first quarter 2022 financial results. We will now go into a short Q&A session.

Question-and-Answer Session

Operator

[Operator Instructions]. Our first question today comes from Dan Kurnos from The Benchmark Company.

Daniel Kurnos

Carl, just on the sort of high level on the food side of the equation, adding a bunch of QSR makes sense. You can see from your AOV that inflation is kind of creeping through already. Can you just talk about timing for implementation when you brought on a lot of the online ordering platforms that took 6, 12 months. So just can you help us think through timing to onboard these other restaurant options and what that might mean for the impact to order flow?

Carl Grimstad

Well, yes, a good point to pick up on the AOV going up. It -- that's not because of price increases from our side. It's just, generally speaking, food costs have just continued to rise. And a lot of the growth that we've seen in our markets is really driven by these lower cost options. I think that by third quarter, most of these integrations will be operational. And I've long said, Dan, even back in the COVID period of time, if our consumer is hurting financially, it will impact their decision-making process. And we've traditionally been an independent restaurant-focused business, and it's hard to argue with the fact that it's more expensive at an independent restaurant than QSR. So I think that between the ordering platforms and the direct integrations with a lot of the POS companies that are embedded in these QSR organizations, we should start to really see some results or at least balancing in the third quarter.

Daniel Kurnos

Got it. That's helpful. And then just quickly I scanned through the Q. The payment fees are running at like $2.5 million. I mean that's a run rate of $10 million a year. That seems like it's growing. I know you've talked about it before. Can you just talk about sort of the trajectory there? You talked about 2,300 merchants. Just -- maybe just give us a sense of how rapidly that's growing. And obviously, I would think that would be margin accretive to the overall profile of the business.

Carl Grimstad

Yes. As you know, I was in the payments business for 1.5 decades, and we continue to build out these businesses. It's quite viable. You're right. It is growing on a monthly basis. The goal is to have our internal sales signing north of 500 accounts per month by the end of the year. We're right around 300 right now, maybe a little bit underneath that. And that's merchants of all types. So we're attacking our restaurant portfolio, but we're also signing merchants of other SIC codes to traditional credit card processing.

So that will continue to grow. That grows by adding one more merchant. And the combination of attacking the embedded restaurant base that we have as well as just continuing to build out a full-service ISO, if you will, within Waitr will continue. The problem is it's still -- even at the $2.5 million on a $10 million run rate, it's still small to the overall revenue base of the business. So it just will take time. We're actively looking at other assets within the payment space that will speed the growth up and increase the sheer mass of the payments business. But we're completely focused on that. That's a very low-risk, high-return strategy. It just needs to get bigger.

Daniel Kurnos

Got it. Yes, that makes sense, that we won't discuss what portion of that is at the EV at the moment, Carl, because I don't want to frustrate you. The question on the cost side, obviously, is just one of maintaining at this point. The volatility has been crazy, but now that you have kind of a clear baseline, I assume there's ways to kind of rightsize operations to fit the trajectory here. And you also paid down agreement with the lender pushing out the debt, paying down debt. I assume that's going to be the primary use of cash in the near term. And given how friendly your lender has been, I would assume that that's probably overall not really a major issue at this point unless things drastically change between now and, say, the next 24 months.

Carl Grimstad

Yes. We have a great relationship with our lender. And I think that a lot of people quickly forget that when we started on this project, the business had over $130 million of debt on a negative EBITDA business that was not in strong financial shape, right? And it's easy to ignore the balance sheet, but I never have. And at the end of the day, the focus has always had to be controlling and strengthening that balance sheet because that's the only thing that can kill us. We have a viable business. We're expanding into other areas. last mile delivery is here to stay.

But the fact that we have extended the maturities and we continue to pay down that debt aggressively is super important and super important to all constituents. It might not be as exciting about talking about some of these other things, but we inherited that balance sheet, and we're quite proud of the fact that we've reduced it by 50% because that is the one thing that you can't lose track of.

Daniel Kurnos

Got it. That's super helpful. For whatever it's worth, Carl, you actually came in slightly ahead of what I thought you'd do in Q1, so actually pretty good results, I think, in this environment. So I appreciate it.

Carl Grimstad

Thank you.

Operator

Ladies and gentlemen, with that, we'll conclude today's question-and-answer session. I'd like to turn the floor back over to Carl Grimstad for any closing remarks.

Carl Grimstad

Thanks again for everyone's continued interest. We continue to -- as we've put forth in the earnings release, there's a lot of projects that we've been working on that will pay dividends in the future. It's just not necessarily dividends, but it should lead to higher revenue and profitability in the future. So thanks again, and we'll talk to you next quarter.

Operator

Ladies and gentlemen, with that, we'll conclude today's conference call and presentation. We do thank you for joining. You may now disconnect your lines.

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