GRUB a definite buy...I.P.O. release date 04 Apr 2014 Dallas Salazar Long/short equity, deep value, contrarian, event-driven Profile| Send Message| Follow (128) GrubHub: A History Of Smart Acquisitions And No Debt Make This IPO A Rare Opportunity Apr. 3, 2014 11:53 AM ET | About: GRUB Summary GRUB is a rare chance to own a market leader at IPO. GRUB will look to quickly expand its revenues and footprint with acquisitions in the short term. GRUB has found a recipe for monetizing recent societal and behavioral changes. Who is GrubHub? GrubHub Inc. (GRUB) is the leading online and mobile platform for restaurant pick-up and delivery orders. They processed more than 135,000 combined Daily Average Grubs in 2013 and had approximately $1.3 billion of combined Gross Food Sales on their platforms in 2013. They connect local restaurants with hungry diners in more than 600 cities across the United States and are focused on transforming the takeout experience. They operate a software platform that has several variations available for tailoring to local restaurants and large corporations needs. GrubHub Inc. is participating in an IPO on Friday, April 4th, 2014. They are expected to offer 7.03 million shares at between $23-$25 per share. Citi and Morgan Stanley are the main underwriters handling the offering. What do they do and how do they expect to maintain a competitive advantage going forward? GRUB operates a multi strategy software platform that connects hungry diners with local restaurants. They also operate a corporate program that helps businesses address inefficiencies in food ordering and associated billing. Their target market is primarily independent restaurants broken down to local markets. These independent restaurants, which account for 61% of all U.S. restaurants (according to a 2013 industry report prepared by Euromonitor International), remain local, highly fragmented and are mostly owner-operated businesses. According to Euromonitor, Americans spent $204 billion at these approximately 350,000 independent restaurants in 2012. GRUB believes that Americans spent approximately $67 billion on takeout at these independent restaurants, which sums up their interest in essentially running a social network/dating site/toll road that connects people to food and vice versa. GRUB noticed a need, a developing transition to all things mobile, a behavioral change in society, a hugely fragmented market, and an obvious way to become a value add to both parties involved and they have become the market leader in the services they provide. Normally, a description of the target market, the total, and then potentially capturable market is needed to better explain how the company going public expects to remain in business but I think in this case the above are self explanatory. Weve all ordered take out, weve all eaten at establishments where weve paid for food, and I dont think the size of the restaurant industry or how the process of ordering food takes place is in question. GRUB hopes to capture a large portion of the local restaurant market in the US and then internationally, which is a simple explanation but I hope is understandable. Its also their simple business model and the obviousness of their necessity as a partner for local restaurants that helps make them a stock with a very bright future but more on that later. GRUBs platform consists of several different products, all that work together to create a well oiled machine. The GrubHub product, the marquee product in the umbrella, consists of a web and mobile based platform that acts as a search engine for local restaurants that diners can use to place online orders instead of calling in directly to the restaurant. The other products in the umbrella are as follows (from the S-1 filing): Seamless Corporate Program On the Seamless Platform, we provide a corporate program that helps businesses address inefficiencies in food ordering and associated billing. Our corporate program offers employees a wide variety of food and ordering options, including options for individual meals, group ordering and catering, as well as proprietary tools that consolidate all food ordering into a single online account that enables companies to proactively manage food spend by automating the enforcement of budgets and rules. Our corporate tools provide consolidated ordering and invoicing, eliminating the need for employee expense reports and therefore significantly reducing administrative overhead relating to office food ordering. Allmenus and MenuPages Allmenus and MenuPages, both of which were acquired in September 2011 by GrubHub Holdings and Seamless North America, LLC, respectively, provide an aggregated database of approximately 275,000 menus from restaurants across all 50 states. The websites are searchable by cuisine type, restaurant name, menu items and other criteria. For those restaurants whose menus are posted on allmenus or MenuPages and who are also part of our restaurant network, we provide a link from their menus to our websites, through which diners can then place their orders, providing us with an efficient customer acquisition channel. OrderHub and Boost Restaurants have historically received orders from GrubHub through a facsimile or email and are required to confirm the order over the phone. Though most of our restaurants still use this traditional method, several thousand restaurants use our tablet solutions, OrderHub and Boost. These tools can electronically receive and display orders at the restaurant, providing operators with the capability to acknowledge receipt of the order and update the estimated completion time and status with an easy-to-use application. OrderHub and Boost allow us to monitor orders through the takeout process (receipt, ready for pickup, on the way, etc.). In turn, we can make that information available to hungry diners who are waiting for their orders, thus providing greater transparency, reducing their frustration and making the takeout experience more enjoyable. As shown, GRUBs products work to position them as the one stop shop of takeout ordering. They have managed by organic innovation or by strategic acquisition to create an incredibly efficient and fluid company that allows any single product under the umbrella to depend on the other products to address any needs or shortfalls. They have also set up a business model that makes their services accessible, capital light, and a low risk for their customers. All which has lead to amazing numbers that well discuss in detail.
Posted on: Thu, 03 Apr 2014 17:16:40 +0000
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