Earnings Transcript for JTKWY - Q4 Fiscal Year 2019

Operator: Ladies and gentlemen, thank you for standing by and welcome to the Grubhub Q4 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to Adam Patnaude, Head of Corporate Development and Investor Relations. You may begin your conference.

Adam Patnaude: Good morning everyone. Welcome to Grubhub's fourth quarter and full year 2019 earnings question-and-answer session call. I'm Adam Patnaude, Head of Investor Relations. Joining me today to discuss Grubhub's results are Founder and CEO, Matt Maloney; and our President and CFO, Adam DeWitt. This conference call is available via webcast on the Investor Relations section of our website at investors.grubhub.com. Today, we'll be answering questions about our fourth quarter and full year results, which are contained in our press release and also discussed in our shareholder letter. Both the press release and shareholder letter have been attached as exhibits to our current report on Form 8-K filed with the SEC and are posted on the Investor Relations section of our website. I'd like to take this opportunity to remind you that during this call we will make forward-looking statements, including guidance as to our future performance. These forward-looking statements are made in reliance on the Safe Harbor provisions of the Securities and Exchange Act of 1934 as amended and are subject to substantial risks and uncertainties that may cause actual results to differ materially from those in these forward-looking statements. For additional information concerning factors that could affect our financial results or cause actual results to differ materially, please refer to the cautionary statements included in our filings with the SEC, including the Risk Factors section of our Annual Report on Form 10-K for the fiscal year ended December 31, 2018 filed, with the SEC on February 28, 2019, and our quarterly report on Form 10-Q and our K for the fiscal year ended December 31, 2019. They'll be filed with the SEC. Our SEC filings are available electronically on our investor's website at investors.grubhub.com or the EDGAR portion of the SEC's website at www.sec.gov. Also, I'd like to remind you that during the course of this call, we will discuss non-GAAP financial measures in talking about our performance. Reconciliations to the most directly comparable GAAP financial measures are provided in the tables in the press release. Finally as a reminder, all of our key business metrics exclude transactions where Grubhub only provides technology or fulfillment services. And now, I'd like to hand the call over to Matt Maloney for a few opening comments. Matt?

Matt Maloney: Thank you, Adam, and thank you all for joining this earnings call, and we hope everyone has a chance to read the shareholder letter we posted yesterday afternoon as well as our press release. As discussed in both, we are pleased with the quarter and the progress we're making on our strategic initiatives, particularly against the backdrop of a continued competitive environment. Before Adam and I take your questions, we wanted to address the recent rumors regarding a potential sale process for Grubhub up front, so we can spend the rest of the call discussing our business, our results, and our outlook. As previously stated, the rumor the Grubhub was engaged in a sales process was and is not true. While we typically do not comment on speculation, the breath and conclusions of the media coverage of this particular rumor forced us in this case to set the record straight. We remain squarely focused on delivering shareholder value. We've been saying since we've been public that industry consolidation couldn't make sense. And like any responsible company, it is something that we are always looking at. But at the same time, we remain confident in our own strategy and will deliver long-term value to all of our shareholders. As we discussed in the letter, many of our recent initiatives are gaining traction and management and our teams remain laser focused on execution. We do not intend to address questions or provide further comments regarding M&A speculation on this call. With that out of the way, we'd like to open up the call to your questions. Operator?

Operator: [Operator Instructions] Your first question comes from Stephen Ju with Credit Suisse. Your line is open.

Stephen Ju: So Matt, can you give us a high level view on what you're seeing now within the broader promotional environment so far this year? We do understand that you guys are laying the groundwork to continue to compete aggressively even if the market does not rationalize near term, but curious to hear your thoughts on how the market has been behaving now? And I guess also in the spirit of asking for more information, since we're getting the unit economics for the independence versus partner QSR versus non partner. Any reason to believe the contribution profit for order will be all that different for pick up orders?

Matt Maloney: I'd say, we read the same articles that everyone else does, and I think there is a clear change in sentiment in the industry. But even if, there this change, I think, if you're, a company is losing a lot of money, you have a choice, you give up growth or you try to get to profitability or maintain that we are investing for growth story to keep raising money. So, it's not clear when or even if things are going to change. But from our vantage point, not much has seen since we last spoke in October. We're still seeing our peers subsidized all three legs of the marketplace to all the diners, the restaurants and the drivers. We talked about this in the first phase of the letter. Yes, more investors are focused on profitability but it'll take time to play out. I'd say in terms of the, what we're doing, the Perks program that we launched mid-last year has been a huge success for diners and for restaurant partners. Our diners have redeemed millions of dollars using Perks in the fourth quarter. There's hundreds of millions of dollars eligible for redemption out there for our diner base. We're seeing restaurants seeing a material increase of new diners and orders, which is logical by increasing economic incentives for their diners, but Perks is clearly making restaurants more competitive on our platform. And as I believe, you know, Perks are generally funded by the restaurant, so there is limited impact to our revenue per order if at all. In addition to the Perks program, which is an aggregation of multiple rewards and offers across our restaurant base, we've added 20 QSR loyalty programs to our marketplace as we outlined in the letter. But these are these are big brand enterprise restaurants have migrated their full loyalty program over to our marketplace, so that our diners can earn and burn rewards through our marketplace, which is further economic incentive. And we recently launched our SMB loyalty tools for independent restaurants that bring the best of breed loyalty programs, from the big brands down market into the independent mom and pop. So a lot of this work has really been building the foundation to allow restaurants to roll out material economic incentives for consumers, and now we're really focused on building that content. How do we aggressively promote and accelerate the rewards and offers that enterprises well as independent restaurants put on the platform because obviously, the more money available to redeem it directly impacts the overall cost of the items consumers are purchasing. And as we outlined in the last letter with the higher promiscuity, you see diners sampling multiple platforms, so we want to make sure that we're as aggressive possible stealing and maintaining that share.

Adam DeWitt: And then, Stephen on the pickup orders, it's a good question. So, I think it goes back to what we talked about in terms of how we make money, right? And we've always talked about how we create real shareholder value by connecting restaurants and diners and creating demand gen. And the demand gen for pickup order is really the same as demand gen for delivery order. You just have additional revenue and additional costs. So if you're thinking about what the contribution profit looks like on a pickup order, the end number looks a lot like, it does on a delivery order for an independent. In fact, it's exactly the same you just don't have the additional revenue from delivery and additional costs.

Operator: Your next question comes from Brian Nowak with Morgan Stanley. Your line is open.

Brian Nowak: I have a couple. So in the shareholder letter, you sort of talk about how the some of the initiatives that are going to take some time to have a significant impact on order growth and diner retention. I guess, Matt, so talk to us about sort of which of the initiatives that you've rolled out, you've really, really seen some early progress, where are you optimistic of kind of what you're seeing? And then, when you sort of think about taking time, what are sort of some of the key pieces you still have to roll out? And how long is going to take to really drive faster DAG growth from the initiative? If you can also the second one, sort of talk us through how you're thinking about DAG growth in 2020 and within the guidance?

Matt Maloney: I mean this is of the two core win is the, the supply initiative and the loyalty initiatives. The loyalty initiative, I spoke to a little bit right there. I think one of the key pieces that we haven't rolled out yet that we mentioned the letters a subscription program, which we're not ready to roll out yet because we haven't optimized it. We do a lot of work with experimentation, we always have there's a significant efforts and market piloting different programs in different markets. So you may see one offering one place and a different offering in different places. And we're just measuring the impact of conversion adoption frequency impact, and obviously, the economics behind it. So, when we are ready to launch that, everyone will be very aware of that. I think in terms of how long it takes, like I started, we built the infrastructure, around loyalty, we're going to continue building more, we're going to continue bringing on more enterprise partners. A lot of the cost of the initiative for loyalty was priming the pump. And so there's a fair amount of enterprise variants that we're actually funding rewards for right now. But the early signs that we're seeing is, like I said, significant, positive impact to new diners and orders for those brands. And what that means is the brands are just more competitive. If they have a loyalty offering on our platform, they're stealing share from other restaurants. And so that is a very positive sign for us that our tools are working as intended. With the independent restaurant loyalty programs which is going to take more time. We have hundreds of restaurants signed up in a matter of weeks. So sign up to the tool set, we want thousands 10s of thousands and we want the quadruple the amount of rewards and offers available on our platform, because we want to make it the place to go to find all the rewards all the offers possible. So certainly, how long they're going to take, I would say, next few months to nail down the subscription and roll it out. And then we're going to need at least, three to six months to continue to build content on the independent restaurant side and we're aggressively pursuing our enterprise partners, all of them are very interested in increasing their business. For the restaurant, for the restaurant initiatives, we told everyone into our last quarterly call that we wanted to double our restaurants in 2020. Well, and we've already done that. So, we're extremely, more aggressive than we were planning. And obviously, that's fantastic. There's more supply we have, the more likely we already gain the new diners, the more likely we are to retain diners, we've closed that competitive supply gap really aggressively and Adam can actually walk through some of the details on that and what we're excited about in terms of economics, and also follow-up with your DAG question.

Matt Maloney: So Brian on the, just a follow-up on the restaurant side, so I think they're, as you guys see, we're well on our way not well ahead of the inventory targets that we talked about last quarter in terms of doubling our inventory on the platform by the end of the year. I think we're already there. But, realizing that a lot of these, a lot of the ads while we made, while we had our best quarter ever on the independent side, a lot of those ads are on the non partner side. And we always talked about how those restaurants are not going to add a lot of volume in and of themselves, because the pricing so high, right? The objective of adding all that non-partnered inventory is really twofold. One is to capture new diners that we otherwise would might not have captured that are looking for those restaurants online. If they're searching for that restaurant, we want to make sure that they know that they're available on Grubhub. And then the second case is if we have a loyal Grubhub diner who is looking to order from their local favorite that's not on Grubhub, that we have that option for them on Grubhub, even if it's a little bit more expensive. At the same time though, we are also investing heavily in the sales force and signing a more independent restaurants than we ever have before. We talked a lot in the letter about the unit economics and how having a balance, the right balance between kind of independent and small chains and regional chains versus kind of very large now as QSR is really important for long-term healthy growth. And so we're doubling the size of our sales force. And I think we said in the letter we're signing up on a partner basis, when you look at our partner restaurants in the quarter, we signed up at least 5 independent and small chain partners for every QSR location that we lit up in the fourth quarter. So we're making a lot of progress there. But in terms of timing, the impact on the non-partner restaurants inventory is going to have. And the build of the partner restaurant is just going to take time it's blocking and tackling for many years, Matt and I have talked about how, this business, the marketplace, network effects take time to build. And in this case, you're talking about new diners and attrition changes that will take time to build. So we expect the restaurant supply initiatives to build the impact from those initiatives to build throughout the year, just like the royalty. So what does that mean for DAGs? Well, last quarter, we talked about an objective of 2020 of having DAG growth higher than DAG growth in the fourth quarter. When we think about growth in the fourth quarter, we typically don't talk about whether, but we thought it made sense to highlight, just because we thought the fourth quarter number was a little bit high. So we're really anchoring off of more like a 6% DAG growth for 2020. And I think that, our perspective has really change, we still think we're on track to have a full year DAG growth number that is higher than that. The first quarter does imply a little bit of deceleration, DAG growth kind of in the low-single-digits. But that's always been our expectation given the time that the initiatives will take to build. And then also some of the difficult competitions that we have with the really large Taco Bell campaign that we did last year launched plus free delivery for a couple months that added 150 basis points or so to growth. So long winded way of saying, we're still very much on track for a higher DAG growth rate in 2020 than the fourth quarter. But you're likely to see that start building in the second quarter. And more in the back half of the year's initiatives take effect.

Operator: Your next question comes from Heath Terry with Goldman Sachs. Your line is open.

Heath Terry: Couple of questions. As you look at the accelerating DAG growth for 2020 relative to revenue. How should we think about the impact of both the supply initiatives on take rate and particularly the relationship with non-partner restaurants? And as we think about the lifecycle of those non-partner restaurants that have been added? What pace and what rate do you see some of them converting to partner restaurants? What is that process look like and realizing it's so incredibly early? What levels of attrition have you, if any of you seen from restaurants who want to stay and have asked to stay off of the platform?

Matt Maloney: Yes, so, I'll try to tackle both those. In terms of take rate, there's puts in takes and let me answer the really micro question about non-partnered versus partnered and then I'll talk more broadly about takeaways, but if you look at, even if you look at the examples that we laid out in the letter, the capture rate is actually pretty similar between a non-partnered and a partnered, but as diners bearing all of the, all the costs. So from a revenue perspective, they're actually fairly close. I think, what's more going to drive the take rate up and down throughout the year, I think you'll continue to see a mix shift towards delivery in general, which will have kind of a tailwind on capture rate and I think you'll have a contra-balance or additional tailwind depending on how we're scaling up some of the things and Matt's talking about on the loyalty side, right, because all that flows through contract revenue, whether it's free delivery or some other promotion, or some other pricing. But a lot of the --- and that's kind of why we're not giving, frankly, why we have such a big range on the revenue guide for 2020 is because we know we're going to be investing and things that are contra-revenue, but we don't know how much and it depends on what's working and things that are working, we're probably going to invest more behind and things that aren't we'll probably pull back. But I think you have it. So, in summary, you'll have a natural kind of tailwind from a mixture towards delivery, but we're going to be doing a lot of things on the contra-revenue side that might balance that out. And then the second question was on, sorry about that second question was on the non-partnered and kind of how that's impacting our partner universe, I think, we've been very, I'm going to answer your question a little bit differently. So, we've been very sensitive to the idea that you put a non-partnered restaurant on a platform, and maybe either the restaurant says, well, this is a good relationship as there is -- we don't want to partner. Or it frustrates them and they don't want a partner. And so we've been spending a lot of time in our sales group, figuring out how adding, at this point, 150,000, non-partnered restaurants to the platform's impacting it. And what we've seen, and we think is for a whole bunch of reasons, what's our go through, but the summary is that we're, it's having zero impact on our ability to sell, meaning, we are just as productive in markets where we have virtually all of the restaurant inventory on our platform, either partnered and non-partnered. And overselling into is a non-partner. And so our reps are having just as much success, signing those non-partnered restaurants into partnered. And I think it's for a bunch of reasons, but, the primary one is that while non-partnered is a way for restaurants to get some volume. They're getting a lot less volume than they would as a partner restaurant. And the experience for the restaurant and for the diner is not as good as a partnered experience. And so we've seen in a lot of cases, or even some cases where restaurant will say, hey, we want to be a partner because we want to see what the volumes like and, we want to work with you to have better service for our diners, et cetera. So, far it hasn't impacted us at all. And that's why we're kind of full throttle on the sales force growth plans.

Operator: Your next question comes from Ron Josey with JMP Securities. Your line is open.

Ron Josey: Maybe I wanted to drill a little bit more further around the contribution profit per order that you laid out across the three different restaurants with partners, QSR, and independents? Just maybe longer term after this investment period, 12 to 18 months, do you think that contribution profit for all orders can turn positive? In other words, can delivery efficiency help improve these countries and profits or overtime, it's exactly what you're just talking about? Working with non-partners to become partners given the benefits around volume and experience?

Adam DeWitt: I think that, look I think, we laid it out like this in the letter, because we believe that there absolutely a structural difference that will be there for a very long time in terms of the economics between these types of orders. I think to your point, though, on the margin, I think we'll be able to pull some levers overall to move the profitability of all orders up a little. But there's such a difference between those 3 types of orders that that's going to create a, it's a very, there's kind of a permanent difference between them, right? And so, business mix has a real impact on your long-term profitability. We used to get a lot of questions around as you do more and more delivery versus restaurants doing the delivery isn't that going to hurt your profitability, or how do we think about profitability? That's not. As we've been saying lately, that's not really determined, right? We're generating just as much contribution profit on independent and small chain orders that we deliver as we are on small chain independent restaurants that deliver for themselves. And we're doing it in markets, that where we have significantly less scale than like a Chicago or Boston, or LA or New York, right? We have markets, where we're doing a couple hundred orders a day that are actually more profitable on a contribution profit basis for those independent small chain restaurants. And then Chicago, Boston, LA, New York. And so, we wanted to tell the story, because we think that this actually does have a long-term structural impact on your business. Now you may be able to move it up. I think a fair way to think about it is in terms of order of magnitude. In the third quarter, we had an EBITDA for order of $1.28. And our QSR mix hasn't really changed that much in the fourth quarter. And we think there's opportunity to move that up. But it's more to historical levels kind of $1.50, $1.60 than it is to kind of $2 and $2.50. And so, I know it's long winded. But even the answer your question is there's a little bit of room to move all this stuff up and as you get scale. But at the end of the day, the variable costs, of getting a driver to drive to the restaurant, pick up the food and drive to a home are really tough to manage down overtime.

Matt Maloney: Just tagging for quickly and everything as exactly right, I just want to focus on how you might be able to increase the average profit per order on each. I think you mentioned delivery, and I think that's the least likely least likely to impact. We're all, everyone kind of at the same plateau of efficiency. And so, even if we quadrupled our delivery scale, it's not going to have a dramatic or even material change that expense. I think there's a lot more flexibility in the independent contracting scenario, and that's why we focus so heavily there. Restaurants are willing to pay more than their competition in order to get more orders. And so whatever we can do to help restaurants would be more competitive on our platform, we'll drive our take rate you seen that year after year after year. On the QSR, they're just not going to pay for the demand gen, but what they will pay for, and it's not going to be huge, but they're going to pay for extra features and extra ability is to market consultant platform, for example, all the loyalty programs that we've been rolling out lately, that's brand new, that's new feature functionality. They want it. They are willing to pay a little bit more, but it's not going to be 5%, 10% of the order volume is more going to be kind of a other SaaS basis are so much smaller percentage. And this is why we invest heavily on the loyalty programs on the white label brand and work on the integration work, on anything that we can do to support their technology infrastructure, because we're clearly going to do that much, much better than any restaurant group themselves.

Operator: Your next question comes from John Egbert with Stifel. Please line is open.

John Egbert: We've seen the Grubhub Ultimate kiosks in action in Columbus Circle and we are very impressed with the user experience. I just have some questions on that product. Can you compare and contrast the product with offerings from companies like OLO? Where do you think Ultimate is most differentiated based on your feedback so far? And is there any difference in your business model and go to market strategy versus how your teams operated the LevelUp into and Tapingo services? And then just lastly, do you allow these terminals to except pickup or delivery orders from your competitors? Because it seems like that independence carry some value for restaurants?

Matt Maloney: Yes, you've tossed the basket at me there. Hey, of course, the Ultimate, I'm really excited about the Ultimate. It is a first of its kind platform to integrate not only our digital back-end, but with front of the house technology. And there are other platforms and services that are different elements of that ecosystem. But none have put it all together and then expose it online to consumers. Even in the home grow in QSR platforms for pre order, you don't have transparency into who's in line in front of you, you kind of have to go to the mosh pit in front of the pickup area, and wait around till they call your name. So, what we've done is we took all the pain points of the process, resolve them and it's significantly differentiated from anyone else in the platform and you humans and OLO, OLO effectively duct tapes platforms to POS systems. This is entirely different. We can integrate the Ultimate platform to a POS system. But right now it's running on its own as a standalone POS. I don't want to compare head to head with some of the more robust POS offerings, because it doesn't have all that feature functionality. Because we don't believe restaurant tours need all that feature functionality. We have clock in. For employees, we have cash drawer. We have hours. We have obviously menu management and a little, a modest amount of inventory, but we don't have the full suite of POS. So, it's not a head to head comparison with POS. But as we highlighted with our effort, it is exactly what the independent restaurant or the high velocity independent restaurant for once because we can make their restaurant significantly more efficient. And in his case, Joe saw a 10% increase in orders, because people were pre-ordering more frequently. And there they are in grand central and they would their customers are get off the train and if there was a line they wouldn't get something they walk on by the next shop, we're here now they can pre order on the train, they can see that there's 15 people ahead of them, they know exactly that their food will be ready and 9 minutes and 45 seconds, because the back of the house preparation is hitting the bump bar giving Grubhub real time insight into their velocity of preparation its degree of data fidelity nobody has in this in the entire industry. So we see an increase in demand. And then because he could repurpose the front of the house employees in order takers to either prep individuals or just let them go decrease his employee cost by 15%. Since you put it in, it's a slam dunk for these individuals. And we did this, because as we've said many times before, we see a tremendous amount of opportunity and pick up and the funny thing about our industry is everyone crows about the $300 billion Tam, but of course nobody acknowledges that half that isn't pickup which case we have the only valid pickup offering in the whole industry. So everyone's fighting over the 150 billion in delivery, which is a big addressable market. But here we have full Greenfields on the pickup opportunity was I have said multiple times, I think is the next supply side innovation. So we're really transitioning the way that consumers are interacting with the restaurants. We're facilitating that transition. We're providing the technology for restaurants and it always comes back down to demand generation. That's what we do. And that's what we're paid for. So we're helping these restaurants be more efficient drive more orders with technology, which is exactly our business model. So I think what other things you said, what is the go-to-market different for the other teams. As you know, this work came out of to Tapingo operation. It was piloted and executed across the campuses first. We have hundreds of these in campuses across the country and we're installing hundreds if not thousands over the next year. This is a custom made for the university campus application. Will we let our competitors execute orders across our Ultimate devices? Absolutely. We've already been talking to various groups and you brought up independent restaurants. I think it's more important for the larger restaurants that are going to have a larger footprint on competitive platforms. I think it's fine to take orders from our competitors since these restaurants are, they're migrating their entire ordering infrastructure on our platform. These Ultimate it's a 100% of that restaurant orders. And so being the glue that ultimately brings all the orders together in a more efficient way, I think makes a lot of sense and is a very competitive differentiating position for us to be in.

Operator: Your next question comes from Ralph Schackart with William Blair. Your line is open.

Ralph Schackart: Talk today about adding a record number of diners outside of Taco Bell quarter. Perhaps give us a sense of how the new supply restaurants impacted or drove this or maybe just what are the factors contributing to these strong diner ads? And then just maybe get a sense of how many of these diners have come back to the platform versus brand new? And then they just kind of taken a step back you obviously have several key initiatives for 2020 to retain and add new diners. I know still early but just any sense of maybe what's playing out better than expected versus maybe taking more time or effort than anticipated?

Adam DeWitt: I'll talk about the diners. I think there's a number of things that helps us in the quarter. To your point with just having more restaurant inventories better. We talked about there's two strong benefits for the non-partnered, one of the retention. The other is the new diner impact. And if you look at those, those restaurants, even though conversions a lot lower in general just because the diner fee is so high, a large, a much larger percentage of the diners that are ordering from those non-partnered restaurants are new diners to Grubhub when you compare that to partnered restaurants. So if you just look at the percentages on both, you'll see a much higher percentage of the total diners that are ordering or total orders on non-partners being new diners. I think adding the record as of independent or partnered restaurants as well, also helps us during the quarter and more restaurants you have, the more diners you get and I think we continue to be executing well, on the ad spend and marketing side. We talked about CPA. I think we talked about CPA in the letter. If we didn't, in general, it was very consistent with other quarters. And so, even though we have this kind of hyper competitive environment, we've still been very effective on the spend side. We did lay out in the letter also. The quality of new diners, from our perspective, what we were expecting, they were very much in line. I think, in general the same, there has, there are some headwinds, but we expected all those headwinds, we're, we continue to move away, say move away, but we continue to generate less new diners in New York less new diners in corporate and more away from those two markets and even to Chicago, LA, Boston, Philly, et cetera. So, you're seeing diners that have a natural ordering behavior that's slightly lower than existing diners. But, we also leaned into some tactics that that we that historically haven't had as strong a repeat rate, especially on the, when we're playing around pricing or priming the pump on loyalty or things like on the contra-revenue side, but what I will say is we still see a diner LTV that's much higher than our average GPA. So we feel good about the long-term value of those diners. And I don't, do you want to talk about this.

Matt Maloney: I mean, early indications there I feel like they're already starting to pay off but they're all just going to compound over time. So what Adam was saying about new diners on a non-partnered is exactly right, we accelerated the non-partner ads, so we're seeing a greater lift from that. But that's going to get bigger overtime and you're going to start to see, we will be less attrition or less diner turn, because we have all the restaurants they want the loyalty stuff. Again, we've we built the infrastructure. Now it's about content collection. So the millions of dollars, like I said, are being redeemed, right now were redeemed in the fourth quarter. And as we add more content and more rewards and offers, that's only going to increase. In addition to that, I think we haven't quite come out as aggressively as we're going to on the rewards element of our brand proposition. So as people are more aware, and realize that they can get the same food for significantly cheaper with rewards and other offers, I think that that's going to be more motivating. And that's going to have to amplify the population. So I think of it like a compounding function. And it's already starting to pay off, but we expect a much larger benefit later in the year.

Operator: Your next question comes from Brad Erickson with Needham & Company. Your line is open.

Brad Erickson: I guess Matt; historically, you've maintained that your customer acquisition cost is that you probably weren't willing to pay more to acquire a diner than they were worth, which obviously made sense. It's obviously changed here a little bit in the near-term given competitive challenges. So I guess the question is longer term. Is that something we should expect you to maybe look the other way on, meaning that you're willing to invest and forego profits for kind of a multiyear period as you work through this? Or is it something where you can kind of work through things more quickly, saying 2020 and get back to kind of your old philosophical views on LTV higher than track et cetera. Just any comments there would be great. Thanks.

Matt Maloney: I don't actually think that that's a fair characterization. I think the diners that we're acquiring now, still have a LTV that's higher than the CPA. I think we've been more aggressive on the front. Think about what our initiatives are, our initiatives aren't, these aren't advertising initiatives, right? These are restaurants apply and diner loyalty. So there are investments around the diner base to drive long-term value. But we haven't changed our framework really for the CPA versus LTV or whatever you want to call it. What we said is and I think you said it in the letter and if not, while the LTV on the newer diners is not as high as it has been in the past. It's still higher than the CPA. We don't -- one of the things that we thought about and we talked about quite a bit before last quarter's earnings call and earnings cycle. With the team was, we didn't want to do was just kind of prime our diner base with diners, who were low quality, right? That wasn't a long-term strategy that's viable, right? Just buying a bunch of orders doesn't help us in the long run. And so, that's not what these initiatives about. These initiatives are about long-term value of our existing diner base and potentially driving more new diner. So, I know that's not exactly what you're asked. But that's, kind of that's the philosophy and that's kind of why we are still thinking about, how much are we going to spend on TV this quarter? What kind of return are we getting in thinking about that type of framework with every channel and every marketing initiative?

Operator: Your last question comes from Maria Ripps with Canaccord. Your line is open.

Maria Ripps: So just to follow-up on Grubhub Ultimate, how many partners did you launch it with? And is it available to everyone on the platform at this point? And are there any benefits from this launch that are based into your full year outlook?

Matt Maloney: Yes, thanks Maria. For the Ultimate we launched with hundreds, actually I'm not sure about the exact number because we've put more out there since we're on. I want to say over 20 campuses with multiple devices and each, multiple meaning like over 10, an each and then a New York we were focused around Grand Central and Columbus Circle, you can find them there and then Chicago. There's a couple installations including a brand new food hall but just when, that just launched a week or two ago. So I'd say hundreds of devices are out there, we feel very confident talking about it. It's definitely ready for prime time. It is available to all of our restaurants part of the push in the press was to get the word out so we can build the queue and the waiting list for restaurants at one that we're now segmenting those groups based on geography, because, obviously, with tactical hardware rollouts, you want to aggregate the execution. And so we are, we're being thoughtful about how we do that. There's also a few pilot, check for a locations that we have across universities that are doing really well and we're going to be expanding those additionally. So it's available to everyone, there's a lot of them out there. And then I then, Adam can talk about the impact to forecast.

Adam DeWitt: Hey, Maria. So, it's a good question. So Ultimate, Matt talked about it at length earlier in terms of how great it is strategically in terms of capturing a large percentage of the winner all the all the restaurants volume through the platform. He also talked about how it's born out at Tapingo. And so if you think about Ultimate, it serves two functions, right? One is more like a SaaS function, where it's high volume transaction. And, that's the economics on those types of orders are going to be really thin. But what it does do is it opens up a new demand Gen opportunity for us. And so we're able to bring new diners to those restaurants, through the Ultimate platform. Via Grubhub marketplace, in the orders look a lot like traditional partner independent orders in terms of economics. The assumption or what's baked into the numbers for the rest of the year, there's obviously, a bunch of SaaS volume. That's not going to have a meaningful economic impact and won't be in our DAG number. And there's probably a much lower number, a smaller number of DAGs that are baked into the forecast and do have similar economics, but it's, I wouldn't characterize it as a as a significant driver of our ability to meet the accelerated DAG targets for this year. But I would characterize it as an upside opportunity to the current forecast over time.

Operator: Okay, I'll turn the call back over to presenters for closing remarks.

Matt Maloney: Thank you.

Adam DeWitt: Thanks for everyone's time today. I will talk to you guys next quarter.

Operator: This concludes today's conference call. You may now disconnect.