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Q2 2019 Earnings Call Transcript

Published: 10 Aug 2019

[Operator:]

Greetings, and welcome to the Waitr Holdings Second Quarter Earnings Conference Call. This conference call will include forward-looking statements within the meaning of the securities law. These forward-looking statements will include things about the company's strategic priorities and certain statements of expectation and plans.Forward-looking statements are subject to risks and uncertainties that could cause our results to differ materially from the forward-looking statements that are contained in our company's filings with the SEC, including the Risk Factors section in our Form 10-K. The company does not assume any obligation to publicly release any revisions to the forward-looking statements discussed during the call.In addition, on this call we will refer to certain non-GAAP financial measures to help understand the company's financial performance and to supplement the financial results that we provide in accordance with GAAP. The company has provided a reconciliation of these non-GAAP financial measures to their most directly comparable GAAP counterparts in our earnings release filed with the SEC earlier today and can be found on the Investors section of the Waitr website, at investors.waitrapp.com.Hosting today's call is Chris Meaux, Chairman of the Board; Adam Price, Chief Executive Officer; and Jeff Yurecko, Waitr's Chief Financial Officer.I would now like to turn the conference over to Mr. Meaux. Please go ahead.

[Chris Meaux:]

Good evening, everyone.When I started this company in 2013, I never could have imagined how much we would accomplish in such a short time. After five years, we have processed approximately 35 million orders, served customers in over 700 cities and grown to more than 16,000 employees.Now, moving forward, I have confidence that the right leadership is here to allow me to resign as Chief Executive Officer and focus on the long-term strategy as Chairman of the Board.Many of you already know we announced the promotion of Adam Price from Chief Logistics Officer to Chief Operating Officer on June 12. Adam has been a key part of our executive team since February of this year and was a founder of Homer Logistics, a logistics platform that enabled food delivery in New York City and other markets around the U.S. Homer used employee drivers to deliver millions of order from thousands of restaurants on third-party platforms, with a focus on profitable unit economics and efficiency.Adam has an infectious energy that has created great momentum in the company since he joined. He brings unparalleled knowledge about the physics of our industry and knows the levers to pull for growth and profitability.Adam will be moving into the CEO role. I'm happy to hand it over to Adam so he can give a high-level recap of the quarter and tell you about the opportunity we have at Waitr. Adam?

[Adam Price:]

Thank you, Chris, and good evening, everyone.I'll be discussing what differentiates Waitr, Q2 thoughts and recent initiatives. Jeff will then review our financial results, and then I will close our discussion with an update on guidance.Let's start by noting the history of Waitr and the evolution of the food delivery landscape over the last 12 months. Benefiting from the first-mover advantage, Waitr has been aggressively growing in small- and medium-sized markets over recent time. I firmly believe that the success stems from a unique relationship-based approach to a three-sided marketplace, as opposed to a more transactional-based approach by our competitors.Restaurants, and especially successful ones, are a hospitality-centric business. Therefore, by delivering food we are a natural extension of that space. To win, we need to deliver hospitality at its best, and Waitr has taken the right steps to set up that foundation. The way to create long-term value is to embody the same approach as our successful partners have for decades.There are three main stakeholders in our system

[Jeff Yurecko:]

Thank you, Adam.Now on to our second quarter results. Revenue increased $35.2 million, or 218%, year-over-year from $16.2 million to $51.3 million. On a pro forma basis revenue increased 41% year-over-year.Growth slowed slightly during Q2, as Adam discussed, due mainly to the delayed rollout of our planned revenue initiative, additional time needed to integrate Bite Squad, the seasonal effects of our business that are becoming more pronounced and increased competitive activity in some of our markets.Average Daily Orders were more than 55,000, an increase of 169% year-over-year, and Active Diners grew 248% year-over-year to 2.3 million [sic] diners, both driven by the acquisition of Bite Squad mines a strong organic growth.Gross Food Sales for the second quarter increased $117.4 million, or 179%, year-over-year to $183 million, with a slight Average Order Size increase of approximately 2%.Operations and support expenses increased $27.8 million in the quarter, to $39.7 million, driven by a significant increase in order volume. Our operations and support costs are comprised primarily of variable order fulfillment costs, such as the cost of our delivery drivers, credit card processing, customer support and the cost of our local market ground team.On an order basis, gross profit, defined as revenue less operations and support expenses, was approximately $2.30, or 23% of revenue, a change from $2.27, or 26% of revenue, in the prior year. The slight margin decline was driven primarily by the significant new market activity during 2019, as each new market adds dedicated fixed in-market costs and delivery tends to be inefficient in early months as markets scale.Sales and marketing expenses increased by $5 million, or 49%, sequentially in the second quarter versus the first quarter, driven by the full quarter inclusion of Bite Squad, increased investment in diner acquisition and brand awareness as well as strategic efforts to increase restaurant penetration across all markets in our expanding footprint.Customer acquisition costs increased in the second quarter compared to the first due to a media spend increase of $3.9 million, which related to certain new marketing campaigns that did not produce the intended result, combined with increased competitive spend. While overall CAC increased, within our core performance marketing channels CAC remained within a healthy range. As Adam mentioned, given our improved real-time monitoring now in place we can continue to invest aggressively.In addition to marketing, the cost of our restaurant sales team increased almost $1 million due to our long-term objective of continually improving variety for our diners.Research and development expenses increased $1.5 million, or 253%, year-over-year, due primarily to the ongoing build-out of the engineering team and the inclusion of the Bite Squad engineering team. We expect to increase R&D spend in the relatively short term as we accelerate product initiatives and add key members to our product and engineering team.General and administrative expenses increased $4.5 million, or 58%, year-over-year, driven primarily by increased corporate overhead to support continued growth. From the second quarter to the first quarter, removing the impact of one-time items and equity compensation, G&A decreased by approximately $1 million on a pro forma basis.Depreciation and amortization increased $4.5 million in the second quarter, from $276,000 in the second quarter last year, primarily as a result of the amortization of intangible assets from the Bite Squad merger.Net loss from the second quarter was a $24.9 million loss, or a loss of $0.32 per share, compared to a loss of $7.4 million, or $0.74 per share, in the second quarter last year. Second quarter net loss included $2.5 million of noncash stock compensation expenses considered within our adjusted EBITDA.Adjusted EBITDA for the second quarter was a $14.9 million loss, compared to a $2.2 million loss in the second quarter of 2018, as the company continues to invest heavily in growth and the supporting infrastructure. We continue to optimize for growth, integrate Bite Squad, and pursue strategic investments to bolster our team and infrastructure to strengthen our foundation and allow us to grow rapidly and efficiently into 2020 and beyond.Simultaneously, as already demonstrated in our Path to Profitability initiative discussed by Adam, management will continue to aggressively identify improvements to our business that drive continued efficiencies and clearly demonstrate our commitment to moving the business towards profitability.On May 21, 2019, we announced the closing of our follow-on public offering of 6,757,000 shares of Waitr's common stock at a price to the public of $7.40 per share, resulting in gross proceeds of $50 million, or $45.8 million net to our balance sheet.As of June 30, 2019, we had cash on hand of $72.8 million, consisting primarily of cash and money market deposits.We also had total outstanding long-term debt of approximately $127.3 million, consisting of $67 million of term loans and $60 million of notes.As of June 30, 2019, we had 76.1 million shares of common stock outstanding.Now I'll turn the call back over to Adam to wrap up before we take questions. Adam?

[Adam Price:]

Thank you, Jeff.Given the recent challenges in our business that I discussed earlier on the call and the timing of implementing the revenue initiatives, we are lowering full year revenue guidance to a range of $210 million to $220 million. While this is a reduction to our previous guidance, we expect to see quarter-over-quarter revenue growth for the rest of the year.Considering recent interest expressed in the company as a result of our dominant market position and the continued consolidation observed in the industry, we have engaged Evercore and Jefferies to advise us on strategic opportunities while management is focused on continuing to execute our business plan. It's important to note that we do not intend to publicly disclose or discuss further developments of the advisers' work unless and until our board has approved a specific course of action or we have otherwise determined that further disclosure is appropriate.We remain excited about the opportunities that lie ahead. We will continue to strengthen our team, pivot as necessary and lead Waitr down a clear path to profitability and growth.We now ask the Operator to open the lines for questions.

[Operator:]

Thank you. At this time, we will be conducting a question-and-answer session. [Operator Instructions].Thank you. And our first question comes from the line of Alex Fuhrman, with Craig-Hallum Capital. Please proceed with your question.

[Alex Fuhrman:]

Adam, congratulations on your promotion to the CEO role.

[Adam Price:]

Thank you.

[Alex Fuhrman:]

Wanted to ask about the new terms that you rolled out to restaurants last week. It looks like there's been just some local media articles that you may have lost some restaurants. Curious how those higher fees have been received by restaurants and if it's had a significant impact on the number of restaurants that you currently serve on the Waitr platform.

[Adam Price:]

Absolutely. Happy to elaborate on that. So I'll start by saying that the structure we rolled out, to reiterate what we talked about earlier, is a first in our industry. It's the only structure out there that aligns properly with the restaurant's incentives in running higher deliveries -- higher volumes of delivery and us in continuing a partnership to support that restaurant.And so we rolled this -- we took a lot of time to roll the strategy out and do it in the correct way, and I can clearly say that, happily say that the majority of restaurants have signed up and are -- sorry. Jeff, do you want to take over?

[Jeff Yurecko:]

Sure. So the MSA update went into effect on August 1, and I think, Alex, you may have noticed if you're looking at the site that some restaurants did go offline, and that was expected fully on our side. So about 35% of our restaurant base was impacted by the change, so a relatively small percent.As of today the vast majority of the affected restaurants are back online, and there's more going up every day. So additionally, we talked about on the call we've announced a lot of new partnership opportunities with some of the national chains, and then we continue to add new selection every day on top of that.

[Adam Price:]

Sorry about that, Alex. To add on to that, I'd just reiterate that this is not measurable in a week. We just rolled this out last week. We don't anticipate something like this to have an effect where all the restaurants immediately join. We do anticipate a loss of restaurants, but we want to see how this plays out really over the next 90 days to fully gather the impacts of it. But we see immediate positive result, and we're excited about that.

[Alex Fuhrman:]

Okay. Thanks, guys. That's helpful. And then just thinking about how these new terms are going to impact the model, obviously you're not giving any sort of EBITDA guidance or anything like that, but naturally just given that these fees are going up I'd have to assume that's beneficial to gross margin. Any way that you can quantify that for us, how we might see those higher fees floating through to your results?

[Jeff Yurecko:]

Sure. This is Jeff, here. I can give you a little bit of color. So in terms of the impact, because it's a tiered-pricing structure we can't be exact. And as we said, it's been a week at this point. So it's very early, and it wasn't just a simple step-up in the rates, easy to quantify.So with the tiered structure it's a bit harder to predict, but internally we've taken a conservative view on the impact for now until we have a better view later in the quarter. I can say we are expecting positive contributions to our unit economics. We do expect some positive contribution during Q3 and then likely even more so during Q4 when we'll have a full quarter impact to understand it better. But the impact is built into our revised guidance.I guess I'll touch on one other point. It is important to kind of note that to kind of help further with your question. Absent these take-rate increases, we are expecting sequential growth in the back half of the year.

[Operator:]

Our next question is from the line of Mark Mahaney, with RBC Capital. Please proceed with your question.

[Mark Mahaney:]

Great. Thanks. Two questions, please. First, it sounded like there's a shift maybe going on in terms of marketing strategy, some plans that didn't optimize as well as you would like. Could you talk about what sort of adjustments you plan on making to your marketing strategy in the back half of the year? And then are there any updates on kind of the penetration numbers you've disclosed in the past in some of your bigger markets or more mature markets like Lake Charles, data points that suggest the opportunity for you if you can expand that across multiple markets? So just any update on those penetration data points.

[Adam Price:]

Thank you. Happy to answer. I'll take the first question and let Jeff do the second one.So in terms of marketing I think I just want to frame it up with what was happening in Q2. So we were bringing together two completely different marketing leadership teams at that time from the Bite Squad system and the Waitr system. And both of those teams came together with different strategies of how to acquire customers and get installs and get orders.And we ended up rolling out strategies while trying to integrate those teams without really monitoring the correct metrics for the efficacy of those strategies. And so that's really where we saw the impact in Q2 and the cumulative impact of not getting those customers rolling in and affecting our guidance for the rest of the year.Moving forward, and kind of your question about what's changing, I think we are making two distinct changes. One is that we're coming up with a cohesive strategy that unifies the two groups, as opposed to focusing solely on the integration of the groups. And second is we're really leaning in on real-time monitoring of those strategies and the efficacy so that we know that the metrics we're looking at on a daily basis are holding true in terms of our LTV-to-CAC ratios.Jeff, do you want to take the second question about penetration?

[Jeff Yurecko:]

Yes, absolutely. So second part of your question, Mark, we had some slides that we put out a couple of months ago regarding kind of existing market penetration, and then we mentioned in the scripted portion that we're really heavily focused right now on really increasing that penetration. So that's both a restaurant and a population penetration.So the numbers we had discussed were our average Waitr market has about a 5% penetration and our top market has over a 30% penetration. So there's a ton of room on the upside in our existing markets, and that's really what we're focused on now.Along those same lines, we've noticed a direct correlation over time of restaurant penetration and restaurant variety that really helps drive increased penetration. So that's been a focus of ours since the combination, is looking at every single market, looking at penetration in the market and driving it as high as we possibly can.You'll notice that in some of our discussion our restaurant sales costs have gone up and have kind of really sequentially gone up over time. We had a heavy focus in Q2 on adding new restaurants, and we're going to continue investing in the restaurants. I think it's important to note that it's not a short-term customer acquisition strategy; it's really a long-term strategy that we're employing. So we fully expect to start to realize some of the benefits of our restaurant penetration, going forward.

[Adam Price:]

The last thing I'll add on penetration is just there's -- stepping into this role I've just seen there's really low-hanging fruit we have in both the operations side and product side of our business. And we talked in the script about product additions like loyalty and subscription. There's other initiatives we have that we didn't describe that we think really strong impacts are going to come from, in addition to things like targeted marketing campaigns and drip campaigns that classically Waitr hasn't instituted. But again, it's just a no-brainer and low-hanging fruit for us to really see improvements on the penetration in these existing markets with the really loyal customer base we have.

[Operator:]

Our next question is from the line of Dan Kurnos, with Benchmark Company. Please proceed with your question.

[Dan Kurnos:]

Adam, I guess I'm just trying to reconcile the strategic alternatives announcement today with what's happened over the last 12 months. And so given the challenges you've talked about in the marketplace, and they're all well documented, and that historically you guys hadn't necessarily seen as much competition or at least you'd been insulated, even as you pointed out, can you talk about your prospects as a standalone? Are the strategic alternatives sort of an acknowledgment that you need to scale up and partner with somebody? And if so, how do you think about the available opportunities to you, given that the differentiated W-2 model -- you have a differentiated W-2 model, versus most other guys that are contract?

[Adam Price:]

Absolutely. Thanks for the question. I'll start by saying, like, that we're incredibly confident in our standalone prospects. As we mentioned, we have an amazing foundation of loyal users. We have some really key geographic positions around the country with network effects. And I talked about the low-hanging fruit to kind of accelerate the growth in those existing and new markets. We're highly differentiated, and not in the sense of our W-2 model necessarily, but in the sense of our hospitality focus.And so I don't think we have concerns, and the reason we're exploring strategic alternatives has nothing to do with concerns about having a standalone business. I think it's much more of the awareness of what's going on in the space right now, and we can't neglect that.And so the only way we felt comfortable having the bandwidth to do both was to allow the management team here to focus on the standalone business aspect and to bring on Evercore and Jefferies to help us with the things that are happening on a regular basis in the space right now.So again I'd just reiterate we're incredibly confident with our position and what we're doing and the growth we see in front of us over the next 6 and 12 months, but we need the bandwidth to adapt to the external factors that are happening in the space at the same time.Jeff, do you want to talk about the W-2? The W-2 side of that question. Can you repeat the W-2 side of that question and what you meant by that? [Indiscernible].

[Dan Kurnos:]

I think people looking -- obviously, investors look at you guys having attractive and smaller markets. The biggest sort of question is who might be interested in a strategic partnership or even acquiring you might be put off, given that your business model is typically differentiated from the way the rest of the space runs itself. So I was just curious if you guys thought that was a hurdle and/or who might be a partner given that you are W-2 versus contracts for everybody else.

[Adam Price:]

That's a good question. I actually think the W-2 model has nothing to do with who would look at us as an advantage in terms of partnership or acquisition. The W-2 model is strictly related to our standalone viability and the levers we have to pull on for profitability. When somebody looks at our business, they're looking at our user base, our restaurant selection, our geographic position, the health of our cohorts. They're much less concerned about the operating model of the business, in my opinion.

[Dan Kurnos:]

Got it, Adam. That's helpful. And if I could just ask one just then about sort of the organic trajectory. If you're pulling back spend in the back half of the year with your new guide and sort of I guess we would assume that means you'll be marginally more profitable. Just how do we think sort of into 2020 about do you re-accelerate spend or does it take time to go through the integration process? Just help us understand what the growth trajectory looks like in the out years, especially since prior-launch markets obviously provide a lot of tailwind.

[Adam Price:]

I'll start by just saying I don't think we're saying that we're pulling back spend. I think we're just being much more strategic with how we're deploying our capital in light of an evolving food delivery landscape. I'll let Jeff kind of tell what that means in terms of a modeling standpoint.

[Jeff Yurecko:]

Sure. So we do truly believe there's a number of attractive new market opportunities. And so we did say we're going to focus our efforts on existing markets, but we're also going to be taking advantage of, in a much more selective way, some really good opportunities that we see.But I think we highlighted earlier after Mark's question was there's a ton of room in our existing markets. And in the short term we think that outweighs some of the new market opportunities. And what you just pointed out additionally, launching new cities is extremely capital- and resource-intensive for us. So slowing the pace of our expansion will help us really better deploy those resources to our existing markets with the intent of really igniting the existing markets. And again, those markets, oftentimes our existing markets being profitable already, it definitely should help improve in our cash flow, going forward.

[Operator:]

Our next question is from the line of Nicole Miller, with Piper Jaffray. Please proceed with your question.

[Nicole Miller:]

A couple of quick ones. Maybe I'll just pose them upfront. It sounds like that's easiest so far. You talked about seasonality impacting Q2 results. Could you just explain exactly what that was? And is there any seasonality we need to understand for the third and fourth quarter? The second question is around a question you answered earlier. I believe you said second half EBITDA would be up. I'm just wondering if that's a sequential or year-over-year comment, so that we don't just don't the wrong assumption. And what is the implied retention of the current base of restaurants that you have going to this new performance metric system that you will retain?

[Adam Price:]

Do you want to take the first, Jeff? And I can --

[Jeff Yurecko:]

Absolutely. So, the first question, so seasonality in Q2. So one thing to point out is the Easter shift, which I think we've pointed out on the last call. Easter typically impacts March and April. This year, it fell purely into April, which contributed to a slightly slower April.The seasonality in Q2 historically was always there, but with the overall business it's masked because we're experiencing such rapid growth and, effectively, outgrowing normal seasonality. So kind of now at the stage we're at, just the impact of seasonality from Q1 to Q2 was a little bit more pronounced.In terms of Q3 seasonality, Q3 and Q2 are generally in that same, under that same tone, relatively similar. Summer months are a little bit slower, and things tend to pick up a little bit going into the fall. And I think it's probably relevant to point out July inherently is always one of the slower months. This year, July also had a little bit of impact from the hurricane coming through our Gulf Coast markets. It shutdown seven markets over the course of anywhere from 0.5 day to 1.5 days over a weekend. So we definitely have a little bit of impact on July.What was the second question again, Nicole?

[Adam Price:]

Second half EBITDA.

[Jeff Yurecko:]

Oh, yes. Second half EBITDA. The way I think about it is Q2 was I think about kind of the peak of our EBITDA loss with a full quarter impact of kind of redundancies with the Bite Squad acquisition and some of the things that Adam mentioned earlier on the call. So a lot of the initiatives that we discussed on the call went into effect really right at the end of Q2 and some additional things we're working on into Q3. So we expect our loss to come down after Q2.

[Adam Price:]

Nicole, on your third question, implied retention. You probably had to ask that because I butchered my first response there. What I'll say there is we don't release exact numbers on restaurant retention, but I'll add that this is really early. We just released this contract change and it went into effect August 1.We knew going in to it that we wouldn't have 100% retention; that's just impossible. And what we've seen is that the clear majority of the restaurants that we sent out the contract changes to have already signed. They're live on the platform right now. And we're seeing the positive impacts as a result of that.It's really going to take a longer time period. There's six weeks here before a lot of these restaurants have their accountants get their books done and come back to them and say, why are you not taking this money from Waitr and getting back on the platform? And so it's really more of a 90-day process before we can truly see kind of the full impact in retention numbers on the restaurants that we're working with.And then the final comment on that is just to remember that the affected restaurants here were a fairly small subset of our overall restaurant base. This was just the Waitr brand platform restaurants. And a couple thousand of those weren't affected because they were primarily large chains that we had existing contracts with. So when you back that out, the overall impact of the restaurants that got the new contract signed, and we're talking about a significantly smaller set than the overall restaurant selection we have on the platform across both Waitr and Bite Squad.

[Operator:]

Our next question is from the line of Brent Thill, with Jefferies. Please proceed with your question.

[Brent Thill:]

Just as it relates to the competitive dynamics, you alluded to some change. I'm just curious if you could drill into what you saw this quarter that you maybe didn't see in the past.

[Adam Price:]

Absolutely. Thanks for your question. I'll start by saying we're, in all honesty, talking really only about one competitor here, and we're talking about a competitor that's arguably spending in an insustainable way. If you think about the markets and some of the tactics being used right now, if you go into a market and hand out free food, yes, you're going to get growth. That's just not the strategy we're taking.And so yes, we talked about those competitive headwinds and how they impacted our quarter, but I would just argue that we were very diligent in not reacting in a quick way to use the same strategies. And I think we've done a really good job as a management team to assess what went wrong, make the changes and chart a path forward that is heavily competitive against these types of tactics.Jeff, do you want to add anything to that? No?

[Brent Thill:]

And maybe if you can just touch real briefly, just to hit the other two points, the delay in the rollout, can you just walk through, like, again just what exactly happened? And just a follow-up, too, if maybe Jeff can even talk a little bit about the integration with Bite Squad. How much is left? Is this one to two quarters away before you feel like you're really seamlessly together? How long is that away from where we would anticipate, I know it will never be perfect, but where you feel like it's more seamless?

[Adam Price:]

Absolutely. When you say delay in rollout, you mean the master services agreement updates?

[Brent Thill:]

Just the delay, the comment you made in the release just in the delay of the rollout. Is that what you're referring to? There was no other issue? It was just that was the main issue?

[Adam Price:]

That was one of them. I think the parent theme of the quarter was we put a lot of intensive resources in our integration of the two companies. We're talking a merger of two equals here. And that can be a very distracting thing when you're in a highly competitive space.And so the delays that happened on initiatives, some of those being things that impacted our revenue for the quarter and adjusted our guidance, like rolling out the MSA changes, those things require a ton of resources. We have hundreds of people on the ground in these markets regularly talking to restaurants about the upcoming changes and navigating them through that in order to maximize the retention. So when those resources are instead focusing on integration and getting organizational alignment, they can't be doing things like MSA changes.So it affected MSA changes, it affected other areas of our business. And I think the big lesson learned in the quarter was really that in an environment that's this early on and is changing this quickly we need to be very smart about how we allocate our resources and the right areas to integrate and when to integrate them.And so I think we've made a lot of headway. Jeff can get into that, of, like, what's actually been completed and the time frame behind that. But I think I would just reiterate, and this is what we've said internal to the company, is our primary objective here is to set up a standalone business that wins. We have a highly differentiated model. We feel very confident about our relationship-focused approach. But we cannot lose that position at the cost of not integrating -- integrating at a faster pace. And so that's really where we're refocusing as a business, is winning the space and playing it smarter about the timing of the integration.

[Jeff Yurecko:]

And to give a little color on the integration, we talked a little bit about our Path to Profitability initiatives in the scripted portion, and that ties right together with integration and with some of the synergies that we've now realized and announced through that. So I think you can kind of point to the end of Q2 and some of the changes we made with some of the headcount reduction, et cetera, as kind of the sign of kind of Phase 1 of integration being completed, where we're operating as one team; so, 1 team, two brands. But it's just one team at this point. So the Phase 2 is really more on the technical aspect of things, on the technology platforms.

[Adam Price:]

That's right. That's really the last major hurdle, is we're running two different technology platforms. They're both -- we feel we can work these initiatives competently into both that we talk about

[Operator:]

Our last question will be coming from the line of Kunal Madhukar, with Deutsche Bank. Please proceed with your question.

[Kunal Madhukar:]

One, with regard to the cash that you have on the balance sheet, $72 million, and the cash burn that we saw with the free cash flow of negative $22 million for the quarter, you guided that EBITDA margin should improve, profitability should improve from current levels. And I also get that you talked about being incredibly confident in your ability to survive through with the amount of cash that you have. Can you talk to how we should kind of view the free cash flow over the next few quarters and how it gets you into free cash flow breakeven over whichever time frame that you want to choose to talk about? And then I have a follow-up.

[Jeff Yurecko:]

I can give a little color on that. So we did lay out long-term EBITDA expectations in Q2 supplemental slides, and really nothing has changed there. That's our long-term goal and that's what we're working towards, although we haven't really outlined, as you said, a time frame for getting there. But we are focused heavily on cash flow improvements. Internally, our objective is to grow fast but to grow smart. So we're being growth-oriented, but we're working on being extremely disciplined in how we do that.We're happy with our cash position today. We obviously raised some funds during the quarter which puts us in a really good spot. We've laid out some of the Path to Profitability initiatives in the scripted portion of the call. It kind of gives you a sense of the sort of things we're working on to improve our cash flows, including some unfortunate headcount reductions and some other areas that we had to consolidate.You combine these initiatives with that capital we raised and we feel really good about the runway that we have to continue to operate our long-term plan. While we aren't guiding EBITDA or profitability, I can say that we're happy with where we are today and we'll continue to outline the progress, going forward, on future calls as we make more progress on the initiatives here.

[Adam Price:]

And I can't reiterate enough how much of a lever driver efficiency is in our operational costs. Again, it's the biggest line item on our P&L. After the years of being entrenched in this space, there are just easy changes to make in both of the Bite Squad and Waitr platforms and how they're dispatching and routing drivers while they're on shift to deliver these orders that will make significant strides in the bottom line of the business on that front.

[Kunal Madhukar:]

Great. And then looking at the competition, it's tough to kind of compete with somebody that just offers free food, but that's somebody with $1 billion of cash sitting on their balance sheet. So you talked about how you kind of evolved your strategy and how to compete. What specifically are you doing to compete with the free food?

[Adam Price:]

That's a great question, actually. I'm glad you brought it up. I'll say that I don't necessarily think we're trying to compete with free food. Free food is a different type of customer in our experience than the customers we're going after. You really start to create a low-quality customer when you're reliant on nonstop promotions to attract that user base and the heart of that cohort. And that's something we've distinctly stayed away from.So I would say, yes, it's competitive and, yes, there is growth when you give out free food. I'm not sure I agree with the fact that we are competing for the same types of customers.In all of these markets, food delivery is in a very early stage, and there's a lot of varieties of customers and user cohorts that are going to pop out of these markets. And I would say we're going after the high lifetime value, higher average order size, independent restaurant connection, the customer searching for that independent restaurant. That's the user base we're going after.And so it's a little bit different than the free food strategy, which is why we don't necessarily have to have $1 billion on the balance sheet to offer these types of promotions. That's just not the growth plan of the business.

[Operator:]

Thank you. This concludes our question-and-answer session and also concludes our call. Thank you for your participation. Have a wonderful day.