Grubhub Inc.

Overview Key strengths Key risks Leading marketplace and delivery services offering in certain U.S. markets like New York City. Ongoing delivery fee caps in New York City, high courier costs, and promotional investment significantly limit EBITDA generation. Parent, Just Eat Takeaway, has sufficient liquidity to fund Grubhub?s free operating cash flow deficits. Free operating cash flow deficits make the company reliant on its parent, Just Eat Takeaway, for liquidity. Unfavorable changes to employment laws could significantly increase the company?s cost base. At the onset of the COVID-19 pandemic, local governments in key Grubhub markets enacted commission fee caps to protect restaurants' sustainability. New York City, Grubhub's largest market, made fee caps permanent in August 2021, and we believe the company

...Fee caps in Grubhub Inc.'s key New York City market continue to weigh on profitability and cash flow. At the onset of the COVID-19 pandemic, local governments in key Grubhub markets enacted commission fee caps to protect restaurants' sustainability. New York City, Grubhub's largest market, made fee caps permanent in August 2021, and we believe the company has lost more than $400 million of EBITDA since the start of the pandemic due to fee caps. We assume fee caps will remain in place in our forecast, though Grubhub and its peers are challenging the ruling. In San Francisco, fee caps were recently revised to a tiered pricing model. A similar outcome In New York would significantly improve Grubhub's profitability. There is an uncertain path to sustained positive free operating cash flow generation. While a favorable ruling to eliminate or revise fee caps in New York City could provide over $100 million of annual incremental EBITDA, the outcome and timing of a ruling are out of Grubhub's control....

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