Stock Report: Waitr Holdings (WTRH)

THE HEDGEYE EDGE

We believe the growth of delivery globally in the restaurant industry will be significant, and there are going to be several ways to play the space. Internationally, we like Just Eat and Takeaway.com, while in the USA, GRUB has a significant advantage over its rivals. 

WTRH has about 2.0 million active diners across Waitr and the newly acquired Bite Squad. WTRH has an EV of $800 million and revenue estimates of $250 million for 2019.

Waitr is new to many people so management spent significant time with taking investors through the basics of the platform.

• WTRH recently announced the acquisition of BiteSquad giving them access to 300 more cities of which they only have overlap with 5 cities, so very complimentary footprint.
• We haven’t seen any major disruption from the entrance of larger national third-party delivery providers. First mover advantage is real in this industry.
• Waitr is more focused on mom and pop restaurants so they look to build a more equitable partnership with them.
• The money drivers make driving for Waitr versus others is very similar.
• Tight labor market does create some issues, monthly turnover around 30%.
• Waitr also does carryout fulfillment through their platform that they still get a 15% take-rate on, can be as high as 15 to 20% of sales currently depending on the market.
• The company is building a dashboard of data to provide for restaurants with additional data that will be for sale which provides them an additional revenue stream in the future.

We like WTRH for three key reasons:

1. The growth in the delivery industry
2. A strong business model driving strong relationships with restaurants and consumers
3. M&A – WTRH is looking to build out a strong restaurant/delivery ecosystem

When we look at the future of chain and independent restaurant operators, it will be important for delivery providers to be a single vertically integrated service that can fulfill all the needs of its restaurant partners. 

WTRH has a strong start with a tablet in every restaurant and local teams on the ground to focus on the convergence of services. As the delivery market is maturing, independent restaurant operators rely on 5 basic operating systems to manage the front of the house:

1. A delivery provider to process delivery and carryout orders online
2. Credit card transaction processor to handle card-present in-restaurant transactions
3. A loyalty program provider to manage their loyalty card and promotions process
4. A table management solution to manage their reservation/wait-list platform
5. An integrated delivery/dine-in POS provider.

WTRH is off to a strong start and has a solid management team and backers to become a significantly bigger company.

ONE-YEAR TRAILING CHART