One GrubHub IPO, Comin’ Right Up!

The company is growing at a hefty rate – and is even profitable.

   

A GrubHub IPO got one step closer to reality late last week after the company filed an S-1. The company operates a popular online and mobile platform that allows for pick-up and delivery of restaurant orders, and that popularity has driven rapidly growing revenues and even profitability.

Translation: The GrubHub IPO is going to get all sorts of traction when it hits the market, which probably will be within a month or so.

For the most part, Grubhub focuses on independent restaurants, which account for 61% of the industry. Many of these restaurants don’t have the resources to offer efficient mobile takeout services (ad expenses, building technologies, etc.). However, mobile takeout features can easily provide a lift in revenues as well as way to leverage existing resources, such as inventory, without having to add seating capacity or wait staff.

Of course, Grubhub essentially outsources all this. In fact, there is no upfront fee or requirements to provide discounts on the menus. The company only gets paid for orders that it generates from its platform.

In 2013, Grubhub’s revenues came to $137.1 million, up 67% on a year-over-year bias. During the period, net income was $6.7 million, and adjusted EBITDA was a juicy $38.1 million. Currently, the company processes more than 135,000 daily average orders and serves more than 600 cities across the U.S. That kind of growth is critical for a Grubhub IPO.

A key to the growth has been mobile. Keep in mind that Grubhub has apps for Apple’s (AAPL) iPhone and iPad as well as Google’s (GOOG) Android. From the fourth quarter of 2011 to the same period in 2013, orders from mobile went from 20% to 43%.

The technology is certainly important for diners. Let’s face it, the common approach for restaurants is to print out menus and rely on people to call in orders via phone. Grubhub, however, makes the process much easier. A customer can easily search for a restaurant and place an order by pressing some buttons on a smartphone.

Building this platform has not been easy, and it has taken the company more than a decade to be ready for a Grubhub IPO. A critical part of the strategy has been acquisitions, and the largest deal came in August, with the purchase of Seamless.

The Grubhub IPO is looking at a massive market opportunity. According the company’s S-1, the takeout segment generates about $67 billion in revenues. All in all, diners like the convenience and the diversified choices offered by takeout.

As for the Grubhub IPO, the company plans to issue shares on the NYSE under the ticker symbol of “GRUB.” The lead underwriters on the deal include Citigroup (C) and Morgan Stanley (MS).

Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO StrategiesAll About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, http://investorplace.com/ipo-playbook/grubhub-ipo/.

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