Louisiana food delivery company Waitr's stock price fell by half Friday — sending the company's market value to $134 million from a peak of $910 million just five months ago.
The company was coming off a financial report Thursday and conference call with analyst's that outlined its financial losses during April-June, a shake-up of its workforce — including its top executive's role in the company — and a rustling of independent restaurant owners feathers with higher commissions as Waitr continues to maneuver its way in a restaurant food delivery market that's been consolidating in the past few years.
Waitr also revealed that it has hired strategic advisers to keep an eye on industry competitors and guide the company — potentially toward a merger or sale, though that was downplayed in discussions with analysts — as it continues to hemorrhage cash and its stock price dropped to a new low.
The company's stock price fell 50 percent Friday to $1.89 per share from $3.76 on Thursday and is down from $13 per share — its 52-week peak in March. The company's market capitalization value was $134 million as of Friday, down from $910 million on March 13. Waitr hit that mark just four months after it went public by being acquired by a company founded by a Texas billionaire for $308 million.
Analysts are split about Waitr's future potential. Daniel Kurnos, analyst at Benchmark Co., suggested that the stock is still a buy but lowered the price target from $18 to $8, according to his research note after the second-quarter results. Nicole Miller Regan downgraded Waitr from neutral to overweight and cut her price target from $11 to $4, pending any signs of improvement in the company's performance.
Ahead of Thursday's financial report, company founder Chris Meaux resigned as chief executive officer and will remain as chairman to lead Waitr's long-term strategy, while Adam Price, who joined the company in February, is the new CEO. He had been chief operations officer.
Waitr boasted to analysts in a conference call Thursday afternoon that it signed new deals to deliver meals from Subway, WingZone and Popeye's restaurants — all chains and a new direction for a company built on delivering meals for a network of independent restaurants with local flavors.
Some of those smaller restaurants balked when presented recently with new contract terms that increased the fees paid to Waitr; about 35% of restaurants under contract with Waitr were impacted, according to the company. The new pay model uses a sliding scale where the company takes a higher commission from restaurants that have a smaller volume of sales and a lower commission from those that have a larger volume.
An undisclosed number of restaurants went offline the first week of August when the new agreements went into effect, but the majority have returned, Price said in the conference call with analysts.
"We knew going into it that we wouldn't have 100% retention," Price said. "The clear majority of restaurants we sent the contracts to have already signed."
Waitr generated more revenue but like many startups in the industry struggles to post a profit.
Waitr generated $51 million in revenue during the second quarter, compared to $16.2 million during second-quarter 2018, but the bulk of that additional revenue came from adding Bite Squad through a $323 million acquisition in January. Minnesota-based Bite Squad accounted for $26.1 million in second-quarter revenue. Waitr still had a net loss of nearly $25 million during second quarter, up from a loss of $7.4 million a year ago.
Waitr noted that it laid off 100 office workers in June, which is expected to save the company $4 million each year. Waitr had not previously disclosed the number of layoffs, only acknowledging recently that the Bite Squad acquisition resulted in redundancies.
Waitr's overall workforce dropped from 22,000 employees — which includes drivers — in March to 16,000 workers in August.
Meanwhile, Meaux, who founded the company in 2013 in Lake Charles and also opened significant operations in Lafayette, will get paid after stepping down as CEO. He is slated to get $20,000 cash from the company as a lump sum, regulatory filings show. He's also expected to be paid his monthly salary until May 2020, which is worth another $112,800, in addition to $18,900 for his car and technology costs. Meaux could reap another $134,000 if he were to sell his 83,333 shares of Waitr stock, which was previously restricted. In 2018, Meaux's total compensation package was worth $3.4 million, with base salary of $150,000.
The executive compensation package for Price, the new CEO, was not disclosed. Price had been promoted to chief operating officer in June. The previous COO at Waitr earned $215,200 base salary and about $640,700 total compensation in 2018. Price joined Waitr as chief logistics officer in February.
He was the founder of New York-based Homer Logistics, a software startup that sells technology to promote efficiency of food delivery companies that was acquired by Waitr in January. Price holds a bachelor's degree in aerospace engineering from the University of California San Diego and has worked for ATA Engineering, which specializes in aviation and aerospace analysis and testing.
Waitr has hired Evercore and Jefferies as financial advisers to explore strategic alternatives that have the potential to increase stockholder value. Those options range from continuing its business plan to divesting some assets, acquisitions, mergers, taking the company private or a sale of the business. One goal of the advisers is to keep an eye on the food delivery market while Waitr executives focus on growing the business, Price told analysts.
“The reason we’re exploring these strategic alternatives has nothing to do with concerns about having a stand-alone business, I think it’s much more of an awareness about what’s going on in the space and we can’t neglect that,” Price said.
But the company isn't willing to disclose much about the adviser's work until it's been approved by the board.
Waitr does want to save money in one way. That's to make its drivers, who get paid per hour, more efficient and deliver more meals. If drivers deliver at least three food orders per hour the company's profit margin is 76% compared to 28% if drivers drop off only one order per hour, according to an investor presentation.
The company said it took longer to integrate its technology and workforce with Bite Squad, which resulted in lower revenue. Waitr dropped its total annual revenue range for 2019 to between $210 million to $220 million down from $250 million projected in May.
Waitr is active in more than 700 cities across 39 states and added 50 new cities during first-quarter this year. In December 2018, Bite Squad was in more than 150 cities across the country, but as of August it's only available in about 60 cities. Bite Squad moved out of Las Vegas and Austin, Texas, after Waitr bought it so the company could focus on smaller markets. There doesn't appear to be much of an overlap in the market footprint between Bite Squad and Waitr.
"Slowing the pace of our expansion will really help us deploy our resources in existing markets," Price said.
The food delivery market has been consolidating in recent years as the biggest companies have gotten even bigger. Since 2013, Grubhub has acquired Eat24, Tapingo, LevelUp, Foodler, LABite, DiningIn.com, Dashed, Delivered Dish and Seamless. Silicon Valley startup DoorDash acquired Rickshaw and plans to buy Caviar. Even UberEats, the food delivery arm of ride-hailing smartphone app Uber, acquired New York-based delivery startup Ando.