GRUBHUB INC. The following should be read in conjunction with the condensed consolidated financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q and with the audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the fiscal year endedDecember 31, 2019 ("2019 Form 10-K") filed with theUnited States Securities and Exchange Commission (the "SEC") onFebruary 28, 2020 . In addition to historical condensed consolidated financial information, the following discussion contains forward-looking statements that reflect the Company's plans, estimates, and beliefs. Actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences, such as the impact of the COVID-19 pandemic ("COVID-19"), include those discussed below and elsewhere in this Quarterly Report on Form 10-Q, including those set forth in "Cautionary Statement Regarding Forward-Looking Statements" below. Company OverviewGrubhub Inc. and its wholly-owned subsidiaries (collectively referred to as the "Company," "Grubhub ," "we," "us," and "our") is a leading online and mobile platform for restaurant pick-up and delivery orders, which the Company refers to as takeout. The Company currently connects more than 300,000 restaurants, of which more than 245,000 are partnered restaurants, with hungry diners in thousands of cities acrossthe United States and is focused on transforming the takeout experience. For restaurant partners,Grubhub generates higher margin takeout orders at full menu prices. TheGrubhub platform empowers diners with a "direct line" into the kitchen, avoiding the inefficiencies, inaccuracies and frustrations associated with paper menus and phone orders. The Company has a powerful takeout marketplace that creates additional value for both restaurants and diners as it grows. The Company's takeout marketplace, and related platforms where the Company provides marketing services to generate orders, are collectively referred to as the "Platform". The Company charges restaurant partners on the Platform a per-order commission that is primarily percentage-based. Most of the restaurant partners on the Company's Platform can choose their level of commission rate, at or above the base rate. A restaurant can choose to pay a higher rate, which affects its prominence and exposure to diners on the Platform. In many markets, the Company also provides delivery services to restaurants on its Platform that do not have their own delivery operations. Additionally, restaurant partners that use the Company's delivery services pay an additional commission on the transaction for the use of those services. As ofSeptember 30, 2020 , the Company was providing delivery services in approximately 460 of the largest core-based statistical areas across the country.
Just Eat Takeaway.com Transaction
OnJune 10, 2020 , the Company entered into a definitive agreement with Just Eat Takeaway.com N.V. ("JET") whereby JET is to acquire 100% of the Company's shares in an all-stock transaction (the "Transaction"). JET, headquartered inAmsterdam , is a leading global online food delivery marketplace outsideChina . The Transaction represents JET's entry into online food delivery inthe United States . Under the terms of the Transaction,Grubhub shareholders will be entitled to receive American depositary shares representing 0.6710 Just Eat Takeaway.com shares in exchange for eachGrubhub share, representing implied value of$75.15 for eachGrubhub share based on JET's then-current stock price at the time the Transaction was announced and implying total equity consideration of approximately$7.3 billion . The Transaction is expected to be completed in the first half of 2021 and is subject to certain conditions includingGrubhub shareholder approval and certain customary closing conditions. The Transaction has received all required regulatory clearances and JET shareholders have approved the Transaction. For additional information, see Note 3, Merger Agreement. Impact of COVID-19 Over the past few months, the Company has been monitoring the impact of the COVID-19 pandemic on our business, our industry and the broader economy. The pandemic has had a significant, adverse impact on our restaurant partners, largely due to restrictions on in-restaurant dining, which have contributed to changes in diner behavior. While the Company initially experienced somewhat reduced order volume at the end of the first quarter of 2020, the Company saw significantly improved trends in the second and third quarters as new diners and new restaurants joined the Platform as a substitute for in-restaurant dining. The sustainability of our restaurant, driver and diner network remains paramount. Therefore, since the onset of the pandemic, the Company has sought out ways to support its restaurants and drivers including investments in programs designed to drive more business to our restaurant partners including promotions, reduced fees and product improvements as well as personal protection kits and higher pay and bonuses for drivers. The Company may continue to invest in such programs while the COVID-19 pandemic persists. We believe that the Company will emerge from these events well positioned for long-term growth and profitability, however, the Company cannot reasonably estimate the duration or severity of the economic impact to diners and restaurants of the restrictions on daily life to curb the spread of COVID-19, or the ultimate impact on the Company's operations and liquidity. The Company will continue to actively monitor the situation and may take further actions as may be required by federal, state or local or authorities, or that we determine are in the best interests of our network of restaurants, drivers, diners and employees. For further discussion, see Part II, Item 1A, Risk Factors, as well as management's discussion under "Key Business Metrics," "Results of Operations," and "Liquidity and Capital Resources" below. 17 --------------------------------------------------------------------------------
Key Business Metrics
Within this Management's Discussion and Analysis of Results of Operations, the Company discusses key business metrics, including Active Diners, Daily Average Grubs and Gross Food Sales. Key business metrics include transactions placed on the Platform where the Company provides marketing services to generate orders. The Platform excludes transactions where the Company exclusively provides technology or fulfillment services. Key business metrics reflect results of acquired businesses from the relevant acquisition dates. The Company's key business metrics are defined as follows:
• Active Diners. The number of unique diner accounts from which an order
has been placed in the past twelve months through the Company's Platform.
Some diners could have more than one account if they were to set up
multiple accounts using a different e-mail address for each account. As a
result, it is possible that the
diners more than once during any given period.
• Daily Average Grubs. The number of orders placed on the Company's
Platform divided by the number of days for a given period.
• Gross Food Sales. The total value of food, beverages, taxes, prepaid
gratuities, and any diner-paid fees processed through the Company's
Platform. The Company includes all revenue generating orders placed on its
Platform in this metric; however, revenues are recognized on a net basis
for the Company's commissions from the transaction, which are a percentage
of the total Gross Food Sales for such transaction.
The Company's key business metrics were as follows for the periods presented:
Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 % Change 2020 2019 % Change
Active Diners 29,956,000 21,197,000 41 % 29,956,000 21,197,000 41 %
Daily Average Grubs 668,600 457,300 46 % 610,900 488,800 25 %
Gross Food Sales (in millions) $ 2,353.5
68 %$ 6,308.2 $ 4,361.6 45 % During the three and nine months endedSeptember 30, 2020 , the Company experienced growth across all of its key business metrics as compared to the same periods in the prior year. This growth was primarily as a result of increased product and brand awareness by diners largely driven by accelerated adoption of online food ordering as a result of COVID-19, marketing efforts and word-of-mouth referrals, better restaurant choices for diners in our markets and technology and product improvements. Gross Food Sales increased disproportionately to Daily Average Grubs due to higher average order size, which was primarily a result of changing diner behavior as a result of COVID-19. COVID-19 impacted all of our key business metrics as a result of changing diner behaviors. Additionally, the Company's investment in programs to support restaurants during the COVID-19 pandemic including funding coupons, lower diner facing fees and increased advertising during the three and nine months endedSeptember 30, 2020 resulted in incremental Daily Average Grubs and Gross Food Sales. 18
--------------------------------------------------------------------------------
Results of Operations
Three Months Ended
The following table sets forth the Company's results of operations for the three months endedSeptember 30, 2020 as compared to the same period in the prior year presented in dollars and as a percentage of revenues: Three Months Ended September 30, 2020 2019 % of % of $ % Amount revenue Amount revenue Change Change (in thousands, except percentages) Revenues$ 493,981 100 %$ 322,053 100 %$ 171,928 53 % Costs and expenses: Operations and support 316,456 64 % 161,387 50 % 155,069 96 % Sales and marketing 97,817 20 % 71,617 22 % 26,200 37 % Technology (exclusive of amortization) 30,796 6 % 29,483 9 % 1,313 4 % General and administrative 27,484 6 % 25,329 8 % 2,155 9 % Depreciation and amortization 36,556 7 % 30,649 10 % 5,907 19 % Total costs and expenses(a) 509,109 103 % 318,465 99 % 190,644 60 %
Income (loss) from operations (15,128 ) nm 3,588
1 % (18,716 ) nm
Interest expense - net 6,979 1 % 6,025 2 % 954 16 %
Loss before provision for income
taxes (22,107 ) nm (2,437 ) nm (19,670 ) nm
Income tax benefit (12,869 ) nm (3,447 ) nm (9,422 ) 273 %
Net income (loss) attributable
to common stockholders $ (9,238 ) nm $ 1,010 0 % $ (10,248 ) nm
NON-GAAP FINANCIAL MEASURES:
Adjusted EBITDA(b) $ 43,785 9 % $ 53,828 17 % $ (10,043 ) (19 %)
(a) Totals of percentage of revenues may not foot due to rounding.
(b) For an explanation of Adjusted EBITDA as a measure of the Company's operating
performance and a reconciliation to net income, see "Non-GAAP Financial
Measure-Adjusted EBITDA."
nm Not meaningful
Revenues
Revenues increased by $171.9 million , or 53%, for the three months ended
September 30, 2020 compared to the same period in 2019. The increase was largely
related to a 46% increase in Daily Average Grubs to 668,600 during the three
months ended September 30, 2020 from 457,300 during the same period in 2019
driven by improved diner retention and frequency as well as significant growth
in Active Diners, which increased from 21.2 million to 30.0 million at the end
of each period. The growth in Active Diners and Daily Average Grubs was
primarily as a result of increased product and brand awareness by diners largely
driven by accelerated adoption of online food ordering as a result of COVID-19,
marketing efforts and word-of-mouth referrals, better restaurant choices for
diners in our markets and technology and product improvements. In addition,
revenue increased during the three months ended September 30, 2020 compared to
2019 due to a 15% higher average order size, partially offset by a 200 basis
point decrease in our average revenue capture rate of Gross Food Sales. The
higher average order size was mostly driven by changing diner behavior as a
result of COVID-19 including family or group orders. The decrease in our average
revenue capture rate was primarily driven by our restaurant support programs
including temporary COVID-19 related fee caps, funding coupons and lower
restaurant and diner facing fees which reduced revenue.
19
--------------------------------------------------------------------------------Operations and Support
Operations and support expense increased by$155.1 million , or 96%, for the three months endedSeptember 30, 2020 compared to the same period in 2019. This increase was primarily attributable to an 146% increase in expenses related to delivering orders as well as expenses incurred to support the 68% growth in Gross Food Sales including payment processing costs, Platform infrastructure expenses and customer care and operations personnel costs. Delivery expenses increased disproportionally with revenue growth during the three months endedSeptember 30, 2020 compared to the prior year period due to the increase inGrubhub -delivered orders in proportion to total orders.
Sales and Marketing
Sales and marketing expense increased by$26.2 million , or 37%, for the three months endedSeptember 30, 2020 compared to the same period in 2019. The increase was primarily attributable to an increase of$21.4 million in the Company's advertising campaigns across various media channels including incremental spend to support restaurants in response to COVID-19, as well as an increase in salaries and commissions due to a 16% growth in our sales and marketing teams and the expansion of our restaurant network. Sales and marketing expense as a percentage of revenue decreased from 22% during the three months endedSeptember 30, 2019 to 20% during the same period in 2020.
Technology (exclusive of amortization)
Technology expense increased by
General and Administrative
General and administrative expense increased by
Depreciation and Amortization
Depreciation and amortization expense increased by$5.9 million , or 19%, for the three months endedSeptember 30, 2020 compared to the same period in 2019. The increase was primarily attributable to the increase in capital spending on internally developed software, restaurant facing technology and office equipment to support the growth of the business.
Interest Expense - net
Net interest expense increased by
Income Tax Benefit
Income tax benefit increased by$9.4 million for the three months endedSeptember 30, 2020 compared to the same period in 2019. The increase in income tax benefit was primarily due to the decrease in income before provision for income taxes due to the factors described above as well as a$4.2 million increase in discrete excess tax benefits on stock-based compensation as compared to the prior year period. The Company anticipates the potential for increased periodic volatility in future effective tax rates as a result of discrete excess tax benefits (deficiencies) from stock-based compensation. The Company calculated the income tax benefit for the periods presented based on the expected annual effective tax rate as adjusted to reflect the tax impact of items discrete to the fiscal period. 20 --------------------------------------------------------------------------------
Nine Months Ended
The following table sets forth the Company's results of operations for the nine months endedSeptember 30, 2020 as compared to the same period in the prior year presented in dollars and as a percentage of revenues: Nine Months Ended September 30, 2020 2019 % of % of $ % Amount revenue Amount revenue Change Change (in thousands, except percentages) Revenues$ 1,316,243 100 %$ 970,881 100 %$ 345,362 36 % Costs and expenses: Operations and support 849,884 65 % 485,143 50 % 364,741 75 % Sales and marketing 282,563 21 % 224,199 23 % 58,364 26 % Technology (exclusive of amortization) 92,297 7 % 86,133 9 % 6,164 7 % General and administrative 98,670 7 % 73,900 8 % 24,770 34 % Depreciation and amortization 104,476 8 % 82,961 9 % 21,515 26 % Total costs and expenses(a) 1,427,890 108 % 952,336 98 % 475,554 50 % Income (loss) from operations (111,647 ) nm 18,545 2 % (130,192 ) nm Interest expense - net 20,175 2 % 14,304 1 % 5,871 41 % Income (loss) before provision for income taxes (131,822 ) nm 4,241 0 % (136,063 ) nm Income tax benefit (43,746 ) nm (4,911 ) nm (38,835 ) nm Net income (loss) attributable to common stockholders$ (88,076 ) nm$ 9,152
1 %
NON-GAAP FINANCIAL MEASURES: Adjusted EBITDA(b)$ 78,099 6 %$ 159,451 16 %$ (81,352 ) 51 % (a) Totals of percentage of revenues may not foot due to rounding. (b) For an explanation of Adjusted EBITDA as a measure of the Company's
operating performance and a reconciliation to net income, see "Non-GAAP
Financial Measure-Adjusted EBITDA."
nm Not meaningful
Revenues
Revenues increased by $345.4 million , or 36%, for the nine months ended
September 30, 2020 compared to the same period in 2019. Revenue increased during
the nine months ended September 30, 2020 compared to the same period in 2019
primarily due to a 25% increase in Daily Average Grubs and a 15% higher average
order size. Daily Average Grubs increased to 610,900 during the nine months
ended September 30, 2020 from 488,800 during the same period in 2019 driven by
improved diner retention and frequency as well as significant growth in Active
Diners, which increased from 21.2 million to 30.0 million at the end of each
period. The growth in Active Diners and Daily Average Grubs was primarily as a
result of increased product and brand awareness by diners largely driven by
accelerated adoption of online food ordering as a result of COVID-19, marketing
efforts and word-of-mouth referrals, better restaurant choices for diners in our
markets and technology and product improvements. The higher average order size
was primarily driven by changing diner behavior as a result of COVID-19
including family or group orders. The increase in revenues was partially offset
by a 140 basis point decrease in our average revenue capture rate of Gross Food
Sales. The decrease in our average revenue capture rate was primarily driven by
our restaurant support programs including temporary COVID-19 related fee caps,
funding coupons and lower restaurant and diner facing fees which reduced
revenue.
Operations and Support
Operations and support expense increased by$364.7 million , or 75%, for the nine months endedSeptember 30, 2020 compared to the same period in 2019. This increase was primarily attributable to a 115% increase in expenses related to delivering orders as well as expenses incurred to support the 45% growth in Gross Food Sales and the increase in restaurants available on the Platform including payment processing costs, customer care and operations personnel costs and other Platform infrastructure expenses. Delivery expenses increased disproportionally with revenue growth during the nine months endedSeptember 30, 2020 compared to the prior year period due to the increase inGrubhub -delivered orders in proportion to total orders as well as incremental expenses for personal protection equipment kits, higher pay and bonuses for drivers in response to COVID-19. 21 --------------------------------------------------------------------------------
Sales and Marketing
Sales and marketing expense increased by$58.4 million , or 26%, for the nine months endedSeptember 30, 2020 compared to the same period in 2019. The increase was primarily attributable to an increase of$44.2 million in the Company's advertising campaigns across various media channels including incremental spend to support restaurants in response to COVID-19, as well as an increase in salaries, commissions and stock-based compensation expense due to a 23% growth in our sales and marketing teams and the expansion of the restaurant network.
Technology (exclusive of amortization)
Technology expense increased by$6.2 million , or 7%, for the nine months endedSeptember 30, 2020 compared to the same period in 2019. The increase was primarily attributable to 11% growth in the Company's technology team to support the growth and development of our platform. Technology team expenses, including related salaries, stock-based compensation expense, and payroll taxes, increased as a result of organic growth.
General and Administrative
General and administrative expense increased by$24.8 million , or 34%, for the nine months endedSeptember 30, 2020 compared to the same period in 2019. The increase was primarily attributable to a$12.5 million legal settlement accrual recorded during the nine months endedSeptember 30, 2020 (see Note 7, Commitments and Contingencies, for additional details), as well as an$8.4 million increase in merger and acquisition expenses primarily related to the Transaction and certain miscellaneous expenses to support the growth of the business.
Depreciation and Amortization
Depreciation and amortization expense increased by$21.5 million , or 26%, for the nine months endedSeptember 30, 2020 compared to the same period in 2019. The increase was primarily attributable to the increase in capital spending on internally developed software, restaurant facing technology and digital assets to support the growth of the business.
Interest Expense - net
Net interest expense increased by$5.9 million , or 41%, for the nine months endedSeptember 30, 2020 compared to the same period in 2019. The increase was primarily attributable to the increase in the average outstanding borrowings of long-term debt during the current period, primarily as a result of the issuance of$500.0 million of the Company's 5.500% Senior Notes inJune 2019 and$175.0 million in outstanding revolving loans drawn on the credit facility inMarch 2020 and repaid inMay 2020 . The increase was partially offset by the aggregate write-off of$1.9 million of unamortized debt issuance costs during the nine months endedSeptember 30, 2019 as a result of the extinguishment of the Company's term loan portion of the credit facility inJune 2019 and amendment of its existing credit agreement inFebruary 2019 .
Income Tax Benefit
Income tax benefit increased by$38.8 million for the nine months endedSeptember 30, 2020 compared to the same period in 2019. The increase in income tax benefit was primarily due to the decrease in income before provision for income taxes due to the factors described above and a$5.5 million benefit related to net operating losses that can now be carried back as a result of the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") enacted inMarch 2020 (see Note 10, Income Taxes, for additional details), partially offset by a$3.3 million decrease in discrete excess tax benefits on stock-based compensation as compared to the prior year period. The Company anticipates the potential for increased periodic volatility in future effective tax rates as a result of discrete excess tax benefits (deficiencies) from stock-based compensation. The Company calculated the income tax benefit for the periods presented based on the expected annual effective tax rate as adjusted to reflect the tax impact of items discrete to the fiscal period.
Non-GAAP Financial Measure - Adjusted EBITDA
Adjusted EBITDA is a financial measure that is not calculated in accordance with
GAAP. The Company defines Adjusted EBITDA as net income (loss) adjusted to
exclude acquisition, restructuring and certain legal costs, income taxes, net
interest expense, depreciation and amortization and stock-based compensation
expense. A reconciliation of Adjusted EBITDA to net income (loss), the most
directly comparable financial measure calculated and presented in accordance
with GAAP, is provided below. Adjusted EBITDA should not be considered as an
alternative to net income (loss) or any other measure of financial performance
calculated and presented in accordance with GAAP. The Company's Adjusted EBITDA
may not be comparable to similarly titled measures of other organizations
because other organizations may not calculate Adjusted EBITDA in the same
manner.
22
--------------------------------------------------------------------------------
The Company included Adjusted EBITDA in this Quarterly Report on Form 10-Q
because it is an important measure upon which management assesses the Company's
operating performance. The Company uses Adjusted EBITDA as a key performance
measure because management believes it facilitates operating performance
comparisons from period to period by excluding potential differences primarily
caused by variations in capital structures, tax positions, the impact of
acquisitions and restructuring, the impact of depreciation and amortization
expense on the Company's fixed assets and the impact of stock-based compensation
expense. Because Adjusted EBITDA facilitates internal comparisons of the
Company's historical operating performance on a more consistent basis, the
Company also uses Adjusted EBITDA for business planning purposes and in
evaluating business opportunities and determining incentive compensation for
certain employees. In addition, management believes Adjusted EBITDA and similar
measures are widely used by investors, securities analysts, ratings agencies and
other parties in evaluating companies in the industry as a measure of financial
performance and debt-service capabilities.
The Company's use of Adjusted EBITDA has limitations as an analytical tool, and
you should not consider it in isolation or as a substitute for analysis of the
Company's results as reported under GAAP. Some of these limitations are:
• Adjusted EBITDA does not reflect the Company's cash expenditures for
capital equipment or other contractual commitments.
• Although depreciation and amortization are non-cash charges, the assets
being depreciated and amortized may have to be replaced in the future, and
Adjusted EBITDA does not reflect capital expenditure requirements for such
replacements.
• Adjusted EBITDA does not reflect changes in, or cash requirements for, the
Company's working capital needs.
• Other companies, including companies in the same industry, may calculate
Adjusted EBITDA differently, which reduces its usefulness as a comparative
measure.
In evaluating Adjusted EBITDA, you should be aware that in the future the Company will incur expenses similar to some of the adjustments in this presentation. The presentation of Adjusted EBITDA should not be construed as indicating that the Company's future results will be unaffected by these expenses or by any unusual or non-recurring items. When evaluating the Company's performance, you should consider Adjusted EBITDA alongside other financial performance measures, including net income (loss) and other GAAP results.
The following table sets forth Adjusted EBITDA and a reconciliation to net income (loss) for each of the periods presented below:
Nine Months Ended September
Three Months Ended September 30, 30,
2020 2019 2020 2019
(in thousands)
Net income (loss) $ (9,238 ) $ 1,010 $ (88,076 ) $ 9,152
Income taxes (12,869 ) (3,447 ) (43,746 ) (4,911 )
Interest expense, net 6,979 6,025 20,175 14,304
Depreciation and amortization 36,556 30,649 104,476 82,961
EBITDA 21,428 34,237 (7,171 ) 101,506
Merger, acquisition, restructuring and
certain legal costs(a) 1,518 1,312 23,210 3,139
Stock-based compensation 20,839 18,279 62,060 54,806
Adjusted EBITDA $ 43,785 $ 53,828 $ 78,099 $ 159,451
(a) Merger, acquisition and restructuring costs include transaction and
integration-related costs associated with acquisitions and
restructuring initiatives. The Company recorded a
settlement accrual during the nine months ended
Note 7, Commitments and Contingencies, for additional details). Legal
costs included above are not expected to be recurring.
LIQUIDITY AND CAPITAL RESOURCES
As ofSeptember 30, 2020 , the Company had cash and cash equivalents of$405.3 million consisting of cash, money market funds, commercial paper and non-U.S. -issued corporate debt securities with original maturities of three months or less and short-term investments of$61.5 million consisting of commercial paper and other short-term corporate debt securities with original maturities greater than three months, but less than one year. The Company generates a significant amount of cash flows from operations and has additional availability under the credit facility. 23 -------------------------------------------------------------------------------- Amounts deposited with third-party financial institutions exceedFederal Deposit Insurance Corporation andSecurities Investor Protection insurance limits, as applicable. These cash, cash equivalents and short-term investments balances could be affected if the underlying financial institutions fail or if there are other adverse conditions in the financial markets. The Company has not experienced any loss or lack of access to its invested cash, cash equivalents or short-term investments; however, such access could be adversely impacted by conditions in the financial markets in the future. Management believes that the Company's existing cash, cash equivalents, short-term investments and borrowings available under its credit facility will be sufficient to meet its working capital requirements for at least the next twelve months. However, the Company's liquidity assumptions may prove to be incorrect, and the Company could utilize its available financial resources sooner than currently expected. In addition, the pandemic has resulted in, and may continue to result in, significant disruption of global financial markets, which could reduce our ability to access capital and could negatively affect our liquidity in the future. The Company's future capital requirements and the adequacy of available funds will depend on many factors, including those set forth in "Cautionary Statement Regarding Forward-Looking Statements" below. If the Company is unable to obtain needed additional funds, it will have to reduce operating costs, which could impair the Company's growth prospects and could otherwise negatively impact its business. During the period of uncertainty related to the COVID-19 pandemic, the Company will continue to monitor its liquidity and access to capital, but we currently believe that even in a prolonged pandemic, the Company has more than adequate capital to meet its operating needs. For most orders, diners use a credit card to pay for their meal when the order is placed. For these transactions, the Company collects the total amount of the diner's order net of payment processing fees from the payment processor and remits the net proceeds to the restaurant less commission and other fees. Outstanding credit card receivables are generally settled with the payment processors within one to four business days. The Company generally accumulates funds and remits the net proceeds to the restaurant partners on at least a monthly basis. Restaurant partners have different contractual arrangements regarding payment frequency. They may be paid bi-weekly, weekly, monthly or, in some cases, more frequently when requested by the restaurant. The Company generally holds accumulated funds prior to remittance to the restaurants in a non-interest-bearing operating bank account that is used to fund daily operations, including the liability to the restaurants. However, the Company is not restricted from earning investment income on these funds under its restaurant contract terms and has made short-term investments of proceeds in excess of the restaurant liability as described above. Non-partnered restaurants are paid at the time of the order. Seasonal fluctuations in the Company's business may also affect the timing of cash flows. In metropolitan markets, the Company 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, the Company benefits from increased order volume in its 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. These changes in diner activity and order volume have a direct impact on operating cash flows. While management expects this seasonal cash flow pattern to continue, changes in the Company's business model could affect the timing or seasonal nature of its cash flows. OnJune 10, 2019 , the Company's wholly-owned subsidiary,Grubhub Holdings Inc. , issued$500.0 million in aggregate principal amount of 5.500% senior notes dueJuly 1, 2027 ("Senior Notes"). Interest is payable on the Senior Notes semi-annually on January and July of each year, beginning onJanuary 1, 2020 . The first interest payment of$15.4 million was made inDecember 2019 . During the nine months endedSeptember 30, 2020 , the Company paid$13.8 million in interest on its Senior Notes. See Note 8, Debt, for additional details. OnFebruary 6, 2019 , the Company entered into an amended and restated credit agreement (the "Credit Agreement") which provides, among other things, for aggregate revolving loans up to$225 million . 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 untilFebruary 5, 2024 . OnMay 8, 2020 , the Company entered into Amendment No. 1 to its Credit Agreement (the "Amendment"). See Note 8, Debt, for additional details including a summary of the Amendment. As ofSeptember 30, 2020 , the Company's outstanding debt consisted of$500.0 million in Senior Notes. InMarch 2020 , the Company borrowed$175.0 million of revolving loans under the Credit Agreement as a precautionary measure in order to increase its cash position and preserve financial flexibility in light of uncertainty in the global markets resulting from the COVID-19 outbreak. The Company subsequently repaid the borrowings of$175.0 million in revolving loans onMay 5, 2020 . Following the revolving loan repayment, the undrawn portion of the revolving loan under the Credit Agreement of$225.0 million less$5.5 million of outstanding letters of credit issued under the Credit Agreement provided for additional capacity of$219.5 million available to the Company under the Credit Agreement as ofSeptember 30, 2020 that may be used for general corporate purposes. The agreements governing the Company's debt contain customary covenants that, among other things, may restrict the ability of the Company and the ability of certain of its subsidiaries to incur additional debt, pay dividends and make distributions, make certain 24
-------------------------------------------------------------------------------- investments and acquisitions, create liens, transfer and sell material assets and merge or consolidate. In addition, the Company's Credit Agreement requires the Company to satisfy certain financial covenants. These covenants are subject to a number of important exceptions and qualifications and also include customary events of default. Non-compliance with one or more of the covenants and restrictions could result in any amounts outstanding under the Company's debt facilities becoming immediately due and payable. The Company was in compliance with the financial covenants of its debt facilities as ofSeptember 30, 2020 . The Company expects to remain in compliance for the foreseeable future. OnJanuary 22, 2016 , the Company's Board of Directors approved a program (the "Repurchase 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 onJanuary 25, 2016 . The 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. During the nine months endedSeptember 30, 2020 and 2019, the Company did not repurchase any of its common stock pursuant to the Repurchase Program, and does not expect to repurchase any of its common stock prior to the consummation of the Transaction or earlier termination of the Merger Agreement. Since inception of the program, the Company has repurchased and retired 724,473 shares of our common stock at a weighted-average share price of$20.37 , or an aggregate of$14.8 million . The following table sets forth certain cash flow information for the periods presented: Nine Months Ended September 30, 2020 2019 (in thousands) Net cash provided by operating activities$ 155,462 $ 156,004 Net cash used in investing activities (109,709 ) (104,552 ) Net cash provided by (used in) financing activities (17,229 ) 132,088
Cash Flows Provided by Operating Activities
For the nine months endedSeptember 30, 2020 , net cash provided by operating activities was$155.5 million compared to$156.0 million for the same period in 2019. The slight decrease in cash flows from operations was driven by an$89.9 million decrease in net income excluding non-cash expenses, largely offset by the changes in operating assets and liabilities. During the nine months endedSeptember 30, 2020 and 2019, significant changes in the Company's operating assets and liabilities resulted from the following:
• an increase in accrued expenses of
ended
advertising costs, diner gift card liabilities, driver payments, a
million legal settlement accrual and interest expense compared to an
increase of $24.5 million for the nine months ended September 30, 2019 ;
• a decrease in accounts receivable of $42.6 million for the nine months
ended
nine months ended
receipt of processor payments to the Company at quarter-end and a decrease
in corporate receivables as a result of the impact of COVID-19 on
corporate ordering;
• an increase in income tax receivable of
ended
income taxes and a
resulting from the CARES Act enacted in
of $7.7 million for the nine months ended September 30, 2019 ; and
• a decrease in restaurant food liability of
months ended
for the nine months ended
to restaurant partners at quarter-end.
Cash Flows Used in Investing Activities
The Company's investing activities during the periods presented consisted primarily of the purchase of property and equipment and the development of theGrubhub platform to support the growth of the business, purchases of and proceeds from maturities of short-term investments and the acquisition of other intangible assets. For the nine months endedSeptember 30, 2020 , net cash used in investing activities was$109.7 million compared to$104.6 million for the same period in the prior year. The slight increase in net cash used in investing activities during the nine months endedSeptember 30, 2020 was primarily due to an increase in the purchases of investments of$37.8 million , an increase in the purchases of property and equipment of$10.5 million and an increase in the development of theGrubhub platform of$8.5 million . These changes 25 --------------------------------------------------------------------------------
were largely offset by an increase in proceeds from the maturity of investments
of
Cash Flows Provided by (Used in) Financing Activities
The Company's financing activities during the periods presented consisted primarily of proceeds from the issuance of long-term debt, repayments of borrowings under the Credit Agreement, and taxes paid related to net settlement of stock-based compensation awards.
For the nine months endedSeptember 30, 2020 , net cash used in financing activities was$17.2 million compared to net cash provided by financing activities of$132.1 million for the nine months endedSeptember 30, 2019 . The decrease in net cash provided by financing activities during the nine months endedSeptember 30, 2020 was primarily related to a$157.7 million decrease in proceeds, net of payments, from the issuance of long-term debt, partially offset by a$9.0 million decrease in payments for debt issuance costs.
Acquisitions of Other Intangible Assets
The Company paid$10.0 million in cash for the acquisition of certain restaurant and diner network assets during the year endedDecember 31, 2019 . In October of 2018, the Company completed the acquisition of substantially all of the restaurant and diner network assets of OrderUp for$18.5 million of which$11.8 million was paid in cash at closing,$6.4 million was paid in 2019 and the remaining$0.3 million was paid in the first quarter of 2020.
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