LANDCADIA HOLDINGS INC LCA
October 02, 2018 - 10:36pm EST by
repetek827
2018 2019
Price: 10.22 EPS 0 0
Shares Out. (in M): 53 P/E 0 0
Market Cap (in $M): 542 P/FCF 0 0
Net Debt (in $M): 0 EBIT 0 0
TEV ($): 0 TEV/EBIT 0 0

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Description

Long LCA-  $10.85

 

Tilman Fertitta-led Spac acquiring WAITR for $300mm which is growing quickly and poised to exploit the trend towards off-site ordering through delivery platforms.

 

Deal details:

Pro-forma enterprise value of $388 million

Implied revenue multiples of 6.0x - 6.5x, implied 2019E revenue multiples of 3.0x – 3.2x

$158 million of cash to fund growth initiatives and for general corporate purposes

Existing Waitr owners receive total consideration of $308 million

Transaction consideration includes $75 million of cash and 22.5 million of shares in Landcadia at close

 

 

Online market expected to more than double

 

  • $13b (6% of market) to $32B (11% ) by 2020

 

 

Market Leader in its local markets

 

  • Waitr is the leading online ordering and delivery platform in 32 of  its 34 markets ranked by number of restaurants online. Waitr has over 6,200 Restaurant Partners, 679,000 Active Diners and 6,100 drivers on the Waitr Platform. Typically operate in local market restaurants versus larger chains which are more competitive.  Competitors include GrubHub, UberEats, Doordash, Postmates, Caviar, DeliveryHero, Takeaway.com, JustEat

High Growth Business Model Built in Capital Efficient Manner

 

  • Gross Food Sales grown over 285% from 2016 to 2017 and net revenue by over 300%. Waitr’s growth has been almost entirely organic to date, focused on opening new markets quickly and efficiently. Cumulatively, Waitr has enabled 7.7 million orders and $274 million in Gross Food Sales from inception through the period ended June 30, 2018 and have done so with only $27 million in capital raised.  Identified 200 new markets to penetrate.

 

Benefits for restaurants, consumers and drivers

 

Restaurants:

 

 

  • Lower take rate relative to competitors.  Waitr’s charges 15% whereas comps are anywhere from 18-25%.
  • Access to incremental users and the opportunity to grow their consumer base. “Waitr’s customers access the Waitr application 18 times per month on average and with this increased exposure, orders on the Waitr Platform have seen a higher than average order value than orders placed in the restaurant and over the phone."
  • Incremental channels.   Delivery and takeout, online ordering and checkout on the Waitr App, website ordering and order online buttons on the websites of its Restaurant Partners
  • Restaurant Software Platform.   Easy to use software platform that Restaurants pay $1200-2000 to onboard per unit (menu onboarding and photographs) and $350/yr maintenance fee; Waitr’s platform also provides Restaurant Partners with actionable data on diners’ order history and trends allowing restaurants to offer more tailored dishes and suggest more add-on items, which increases order values.
  • Reliable Delivery.   Waitr’s platform provides its Restaurant Partners and diners with accurate and timely deliveries by connecting them with Waitr’s dedicated network of employee drivers. Employing our own drivers ensures that orders routed to them are delivered accurately and on time, as opposed to contract drivers, who have the option to opt into or out of a particular delivery.

 

Consumers:

  • Wide Selection.   The restaurants on Waitr’s platform represent a wide breadth of cuisines, price points and local favorites in each market to best serve the diverse tastes of its diners. Waitr offers diners the most selection, in terms of number of Restaurant Partners, in 32 of its 34 markets. Waitr has seen that as Waitr adds selection in certain markets, diner frequency increases.
  • Quick, Quality Service.  Waitr has live, customer support to assist diners, helping to ensure diner success when ordering on the platform
  • Discovery.   Diners use Waitr’s platform to find new restaurants and new dishes.

 

Drivers:

  • Steady employment.   Waitr offers drivers regular, scheduled employment.
  • Pay and Benefits.   Waitr pays its drivers by the hour at an attractive wage in the markets where Waitr operates. Benefits are offered to qualifying drivers
  • Flexibility.   Drivers are offered the ability to drive part time or full-time, day or night. Waitr’s drivers have the opportunity to schedule their own hours, work fulltime or parttime and can work either day or night. Further, Waitr offers its drivers the opportunity to exchange shifts with other drivers if needed.

 

Loyal Consumer base

Waitr’s Active Diners place 11 orders on average on an annualized basis based on its quarter ended June 30, 2018 total orders of 1.9 million. Waitr has grown the number of Active Diners on the Waitr Platform from approximately 243,000 for the second quarter of 2017 to approximately 679,000 for the second quarter of 2018 and still see rapid growth in both its new and existing markets.  Currently, 30 percent of Waitr customers are still active one year after their first purchases, compared against an average of just 23 percent for industry competitors.

Sticky Restaurant Base in a traditionally high turnover industry

 

  • 99% restaurant retention rate

 

Fertitta association will accelerate growth

 

  • Access to Tilman J. Fertitta and the Landry’s management team
  • Immediate access to restaurants to seed new growth markets
  • Promotion of Waitr as a delivery partner within Fertitta’s portfolio of over 4 million loyalty members across Landry’s restaurants (Landry’s, Lilly’s, SaltGrass Steakhouse etc) and Golden Nugget Casinos 
  • Elevated media exposure nationally and in strategic markets
  • Partnership with NBA Houston Rockets - over 9 million Facebook followers alone



Key operating metrics solid and growing



Three Months Ended

June 30,

Six Months Ended

June 30,

Year Ended

December 31,

2018

2017

2018

2017

2017

2016

2015

Active Diners

​678,818

          243,236           678,818             243,326             419,430      

117,887

10,046

Orders

​1,865,165

          780,670           3,394,384             1,358.286             3,400,052      

874,142

52,303

Average Daily Orders

​20.724

          8,674           18,858             7,546             9,315      

2,395

143

Restaurant Partners  

​6,264

          2,087           6,264             2,087             3617      

1,029

105

Gross Food Sales ($000)

​65,687

          27,810           119,813             48,400             121,081      

$

31,430

$

1,846

Average Order Size

    35.22           35.62           35.30             35.63             35.61           35.96           35.29    




 

 

Variant perception/why stock is down

 

  • Many investors who bought SPAC in 2016 were looking for a $1b deal in restaurants at 6-8x EBITDA leveraging Tillman’s storied success in that industry.  Instead, they got a much smaller VC deal in the internet space where Fertitta is unproven so many punted and the units have been stagnant for over a year. As the deal closes, new investors should be drawn to the high-growth story as it unfolds.

 

Undervalued relative to growth, comps, recent transactions in the space

 

-2020 can do $40m in EBITDA; 25x is $20/share or roughly a double

-GRUB trades at 35x 2020 EBITDA

-GRUB bought Eat24 for 4x revenue..would be $800mm or $15/share

 

WAITR

Projections

Income Statement ($ Mn except share and per share data)

2017A

2018E

2019E

2020E

Net Revenue (thousands)

$31,280

$67,135

$124,324

$211,351

 

y/y growth

289%

115%

85%

70%

           
 

Gross Margins

$8,446

$20,141

$39,784

$78,200

 

Gross Margins %

27%

30%

32%

37%

 

Cost of Sales

$22,834

$46,995

$84,541

$133,151

 

  % Rev

73%

70%

68%

63%

 

Sales and marketing

$13,390

$21,790

$31,790

$43,790

 

  % Rev

43%

32%

26%

21%

 

General and administrative

$6,256

$8,756

$11,256

$11,256

 

  % Rev

20%

18%

16%

14%

 

Depreciation and amortization

$300

$300

$300

$300

 

  % Rev

1%

0%

0%

0%

 

Total Operating Expenses

$42,780

$77,541

$127,587

$188,197

           

Income before income taxes

($11,500)

($10,705)

($3,562)

$22,854

 

Operating margin

   

-3%

11%

           
 

Provision for income taxes

$0

$0

$0

$6,856

Net Income/(loss)

($11,500)

($10,705)

($3,562)

$29,710

           
 

 

 

 

 

 

Net income

($11,500)

($10,705)

($3,562)

$29,710

 

+ Provision (benefit) for income taxes

$0

$0

$0

$6,856

 

+ D&A

$300

$300

$300

$300

EBITDA

($11,200)

($10,405)

($3,262)

$36,866



Shares outstanding determined by degree of redemption of SPAC Unitholders


Selected Unaudited Pro Forma Condensed Combined Statement of Operations Data

 


Minimum Redemptions Maximum Redemptions


Six Months Ended June 30, 2018 (000)

Revenues $28,569 $28,569
Net EPS– basic and diluted $(0.21) $(0.24)
Weighted-average shares outstanding  52,028,841 ​45,857,244

Selected Unaudited Pro Forma Condensed Combined Statement of Operations Data

Year Ended December 31, 2017 (000)

Revenues $22,911 $22,911
Net EPS– basic and dilute $ (0.52) $(0.59)
Weighted-average shares outstanding ​ 52,028,841 45,857,244


Selected Unaudited Pro Forma Condensed Combined Balance Sheet Data as of June 30, 2018 (000

Total asset $150,672 $87,829
Total liabilities $14,393 $14,393
Total stockholders’ equity $136,279 $73,436

 

 

 

Sources:Company filings, Industry publications.

I do not hold a position with the issuer such as employment, directorship, or consultancy.
I and/or others I advise do not hold a material investment in the issuer's securities.

Catalyst

 

 

 

  • Close of deal by end of 2018
  • Further M&A
  • Roadshows/conferences
  • Eventual clean up of warrants

 

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