ASAP, Inc. (NASDAQ:WTRH) Q3 2022 Earnings Conference Call November 9, 2022 5:00 PM ET
Company Participants
Carl Grimstad – CEO
Armen Yeghyazarians – CFO
Conference Call Participants
Dan Kurnos – Benchmark
Operator
Good day. I would like to welcome all of you to the Waitr Holdings Inc., Third Quarter 2022 Conference Call. Today’s call is being recorded.
With us today are Waitr’s Chief Executive Officer, Carl Grimstad; and Chief Financial Officer, Armen Yeghyazarians. By now, you should have access to the company’s earnings press release. If not, it may be found at sec.gov or their Investor Relations website, at investors.waitrapp.com.
Before I turn the call over to management, I would like to remind you that certain statements and projections in this call about future businesses and financial results constitute forward-looking statements. These statements are based on management’s current business and market expectations, and actual results could differ materially from those projected in the forward-looking statements. Please see the risk factors contained in the company’s annual report on Form 10-K and quarterly reports on Form 10-Q for a discussion of risks that may cause actual results to vary from these forward-looking statements.
Finally, please note that on today’s call management may refer to non-GAAP financial measures. Please refer to Waitr’s third quarter 2022 earnings release for a full reconciliation of its non-GAAP financial measures to the most comparable GAAP financial measures.
I would now like to turn the call over to Waitr’s CEO, Carl Grimstad, who will give an overview of the company’s business activities and developments for the third quarter of 2022. He will then turn the call over to Armen Yeghyazarians, who will provide an overview of the company’s operating and financial results. Please go ahead.
Carl Grimstad
Thank you. Hello, everyone, and welcome to the third quarter 2022 earnings call.
In August 2022, we initiated our rebranding initiative and introduced our new deliver anything ASAP business model, expanding our food delivery services to a broader array of products. We are now delivering from retailers in industries such as apparel, luxury, sporting good, alcohol, auto part, electrical products and more.
Our recent partnership with NAPA Auto Parts is another example of our shift to delivering anything to consumers with the same excellent standard of service that we have always aimed to provide. We also entered into a partnership with Unilever, one of the world’s leading suppliers of ice cream products.
We continue to expand the use of our proprietary in-stadium ordering technology and currently have agreements with MetLife Stadium, the New York Giants, the New York Jets, the New Orleans Saints, the University of Alabama and the Louisiana State University, where we serve as the exclusive mobile ordering platform. We also recently secured a mobile ordering agreement with the Florida Panthers, the first agreement deal for the company with a National Hockey League team.
The MetLife Stadium agreement also provided an avenue to introduce the ASAP brand to the New York and New Jersey markets. We recently launched in select cities in central and northern New Jersey and in New York State, providing home and office delivery. In 2022, our traditional core payments business has more than doubled.
As of September 30, 2022, approximately 2,900 merchants are using our third-party payment processing services referred by ASAP. That is an increase of 80% through the nine months ended September 30, 2022.
With approximately 30,000 captive restaurant partners on the platform, we plan to continue to build on our ancillary revenue streams, with the goal to diversify the company further beyond third-party food delivery by offering merchant processing solutions. Macroeconomic factors, including inflation, higher gas prices and competition, continued to impact our markets and order volumes during the third quarter of 2022.
In response, we have focused our efforts on certain initiatives to improve our cash position, including our comprehensive rebranding, consolidation of our technology platforms into a single application and cost reductions where appropriate. We are making progress on the shift to one platform, which once completed should provide additional cost and resource savings.
As we mentioned in our August earnings call, during the second quarter of 2022, we negotiated the pay-down of approximately $21 million of debt, while extending the debt maturity to May 15, 2024. During the third quarter of 2022, we entered into an agreement with the lenders of our convertible notes, pursuant to which they converted approximately $6.8 million of notes and currently beneficially own approximately 13% of the company’s common stock.
This conversion reinforces their commitment to the company’s management team and strategy. Outstanding long-term debt as of November 9, 2022, totaled approximately $55.9 million, compared to $84.5 million at December 31, 2021.
We are pleased with the outcome of the shareholder vote at the reconvened Special Meeting of Stockholders on October 20, in which our stockholders approved an amendment to the company’s certificate of incorporation to effect the reverse stock split of the company’s common stock, within a set range, without reducing the authorized number of shares of the company common stock, if and when it’s determined by the company’s Board in its sole discretion.
On November 2, 2022, our Board adopted resolutions approving the reverse stock split at a reverse stock split ratio of 20:1 and authorized the company to file a certificate of amendment with the Secretary of State in the state of Delaware to amend the company’s third amended and restated certificate of incorporation to effect the reverse stock split on or prior to the time effective at 11:59 p.m., on November 21, 2022, or such other date as may be determined by any authorized officer of the company.
As a result of the reverse stock split, every 20 shares of the company’s common stock issued and outstanding immediately prior to the reverse stock split will be reduced to a smaller number of shares such that every 20 shares of the common stock held by a stockholder immediately prior to the reverse stock split will be combined and reclassified into one share of common stock.
Trading of the company’s common stock on the NASDAQ capital market is expected to continue on a split-adjusted basis as of the opening trading hours on November 22, 2022. Additionally, in connection with the company’s previously announced rebranding it is expected that the company’s common stock will begin trading on the NASDAQ capital market under the new trading symbol, ASAP.
Now I will turn it over to Armen, our Chief Financial Officer, for a recap of the third quarter results.
Armen Yeghyazarians
Thank you, Carl.
I would like to now review our third quarter 2022 financial results. Revenue for the third quarter 2022 was $25.1 million, compared to $43.4 million in the third quarter of 2021. For the nine months ended September 30, 2022, revenue was $91.4 million, compared to $143.5 million for the nine months ended September 30, 2021. The decline in revenue was primarily as a result of lower order volume driven by higher competitive environment of delivery business, partially offset by revenue from our third-party payment processing referral service operation.
Adjusted EBITDA for the third quarter of 2022 was a net loss of $4.7 million, compared to adjusted EBITDA of $3.1 million in the third quarter of 2021. Approximately $0.5 million of the third quarter 2022 loss is from an increase to an insurance reserve. Net loss for the third quarter of 2022 was $73.5 million, or a loss of $0.40 per share, compared to net income of $12.3 million, or $0.09 per share, in the third quarter of 2021.
Net loss for the third quarter of 2022 included a $53.9 million noncash goodwill impairment charge mainly due to continued decline in our stock price and market capitalization through September 30, 2022.
Net income for the third quarter of 2021 included a $16.7 million adjustment for the charge in an estimate of a medical contingency. Cash on hand totaled $20.1 million as of September 30, 2022. That concludes the recap of our third quarter 2022 financial results.
We will now go into a short Q&A session.
Question-and-Answer Session
Operator
[Operator Instructions] We will take our first question from Dan Kurnos, with Benchmark. Please go ahead.
Dan Kurnos
Great. Thanks Carl, obviously, a lot going on here between the rebrand, the partnerships, the stadium agreements. There’s a – we’ve seen for a while a fairly clear diversification effort here. Can we just talk a little bit about sort of the economic ramifications of everything that’s going on? And I know you’re going to probably want to highlight sort of the payments push because that’s got a really nice underlying profitability to it. But just how we think about top line relative to some of these expansive efforts? If there’s any economic outlay in the short term? And then if you want to, as I just said, kind of lay in sort of what this means longer term for payment expansion across multiple categories, potentially, that would be helpful.
Carl Grimstad
So let me kind of unpack that. Ultimately, because the core delivery basis has continued to have attendance over the course of the last 12 to 18 months, that’s the overarching driver to the financial performance. Obviously, you have to match expenses to your order flow. And as we’ve seen order flow denigrate, we’ve tried to move as quickly as possible to match in line our expenses with the current level of orders.
That being said, a number of the main drivers of cash pieces are legacy things, like the rebrand, [indiscernible] go-forward marketing expense. And just the continued work on our technology platform. We moved to one app. A lot of other minutia in and around cleaning the platforms up and bringing in kind of the next stage of functionality. Going forward, and you and I’ve talked about this over and over again, from the very beginning we always looked at this business as a payments business that also did last-mile delivery.
We think using the last-mile delivery as a differentiator to sell our payment processing services to merchants is the future of our business. We continue to add restaurants on the delivery side, and we continue to add nonrestaurant merchants on the payment side. We highlighted, albeit it’s still small relative to the entire business, but the growth is nothing to ignore. And I expect that as our focus continues to be in this direction, we will enjoy great results from that segment in 2023.
That has prompted us to make the decision to start reporting in the future the payments business broken out from the delivery business. I think that the way to think about all of these initiatives, whether it’s the in-stadium mobile ordering, the delivery of anything and everything, think of it as a resource. We’re establishing a vendor relationship with a retailer or restaurant, a sports team, a sports venue that gives us the ability to offer our payment processing services, which is kind of where the management team, we come from to begin with, and creating an alternative revenue stream beyond last-mile delivery. I mean, that’s the whole strategy in a nutshell.
Dan Kurnos
That’s super helpful and interesting to kind of hear we’re getting close to a breakout on the payment side. Can you – I guess, Carl, clearly, last mile is a differentiator. It seems to be enough. You clearly have a background in sort of the whole space. So I just – I guess, is there anything beyond it that really helps sort of solidify these wins in what has historically been a competitive marketplace? Because it sounds like you’re making pretty substantial inroads.
Carl Grimstad
Well, look, at the end of the day, and you see this in bits and pieces in the competitive landscape with the bigger companies, we think the heart of this business is the merchant or the restaurant or the retailer. And providing services that help that entity sell more product and make it easier for them to sell more product is at the heart of the strategy. When we talk to the sports franchises, it’s about helping them get their constituents to buy more product, service i.e., beer, soda, hot dogs or what-have-you and making it easy for them, right? We want to make it easy for our merchants to sell as much product as possible. That’s at the heart of it.
Now all of these things that come along with it, whether it’s the mobile ordering platform in a sports venue, whether it’s a competitive payment processing solution, whether it’s an easy-to-use delivery mechanism to offer to your customers, it’s all part of it. Whether it’s an ability to pay your employees same day or next day, right, in a digital fashion.
These are all things that we believe will help our core merchants sell more products, be more profitable and grow their businesses. That’s our mantra.
Dan Kurnos
Got it. Okay, super helpful, Carl. Thanks for all the color.
Carl Grimstad
Thank you, Dan.
Operator
And that’s all the time we have for questions today. At this time, I would like to turn the conference back over to management for any additional or closing remarks.
Carl Grimstad
Thank you. Thanks, everyone, for participating in today’s call. We appreciate your continued support. Have a nice evening.
Operator
This will conclude today’s call. Thank you for your participation, and you may now disconnect.
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