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spk00: Good afternoon, everyone. I would like to welcome all of you to the Wader Holdings Incorporated Second Quarter 2021 Conference Call. Today's call is being recorded. With us today are Wader's Chief Executive Officer, Carl Grimstad, and Chief Financial Officer, Leo Bogdanoff. By now, you should have access to our earnings press release. If not, it may be found at sec.gov or our 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 our future business and financial results constitute forward-looking statements. These statements are based on management's current business and market expectations, and our actual results could differ materially from those projected in the forward-looking statements. Please see the risk factors contained in our annual report on Form 10-K and in our Form 10-Qs for discussion of risks that may cause our 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 Wader's second quarter 2021 earnings release for a full reconciliation of its non-GAAP financial measures to the most comparable GAAP financial measures. I would like to now turn the call over to Wader's CEO, Carl Grimstad, who will give an overview of the company's business activities and developments for the second quarter of 2021. He will then turn the call over to Leo Bogdanoff, who will provide an overview of the company's operating and financial results. We will then open the call for Q&A. Carl?
spk05: Thank you. Hello, everyone, and thank you for joining our call today. This quarter, we strengthened our market presence in the on-demand delivery sector by partnering with a number of national brands, including Potbelly, Long John Silver's, Smoothie King, Applebee's, Red Robin, and KFC. With the onboarding of these popular chains and our continued addition of independent restaurants, we now have over 25,000 partnered restaurants on our platform. We continue to support our restaurant partners and communities we serve and are hopeful that the recent signs of recovery from COVID-related impacts continue and that the emergence of COVID variants does not result in more hardships for the restaurant industry as a whole. As I've mentioned many times before, our strategy is to increase our ecosystem of restaurants, diners, and independent contract drivers. As the size of this group increases, we plan to introduce additional products and services that are anticipated to create larger revenue and earnings growth opportunities. To that extent, during the quarter, we methodically invested our capital in various initiatives, which are positioning the company for future growth. These include additional investments in our technology platform with new product offerings, bolstering our customer and partner support teams, as well as continued opportunistic expansion into new markets, all of which we believe are necessary for the core delivery business. Additionally, we continue to strategically invest in our independent contract driver base, in the second quarter of 2021, ensuring adequate driver supply. This has resulted in the highest level of active independent contractor drivers since the company's inception at approximately 34,000 drivers. We have very recently executed three definitive purchase agreements to purchase payment processing companies, pro merchant, Cape Cod Merchant Services, and flow payments. The combination of these businesses will continue to broaden the company's capabilities beyond third-party food delivery. We are excited to close these transactions in the near term. During the quarter, we also made an investment in FIGURE Technology in their Series D financing round. FIGURE is on the cutting edge of payment solutions and utilizes blockchain technology for loan origination equity management, private fund services, banking, and payments. We are also working on an agreement with their affiliate, Figure Payments, with the goal of leveraging their underlying technology within our constituent base of diners, restaurant partners, and independent contract drivers to facilitate alternative payment and disbursement options. This is anticipated to further intertwine our business with transformative FinTech solutions. As previously announced, we also have recently launched a strategic initiative to change our name and visual identity in a comprehensive company rebrand. We look to identify a corporate name and brand that unifies our current service offering and better reflects our long-term business strategy. The rebranding strategy reflects our ongoing commitment to innovation, continued expansion into new delivery verticals, and other business ventures. We are looking forward to the second half of the year as we continue to make long-term investments in the company and focus on fundamental operational and strategic initiatives necessary to grow the business. With that, I'm going to turn it over to Leo, our Chief Financial Officer, for a recap of second quarter results. Thank you, Carl.
spk04: I'd like to now review our second quarter of 2021 financial results. Revenue for the second quarter of 2021 was $49.2 million compared to $50.9 million in the first quarter of 2021, $60.5 million in the second quarter of 2020. With the six months ended June 30th, 2021, revenue was $100.1 million compared to $104.7 million with the six months ended June 30th, 2020. Adjusted EBITDA for the second quarter of 2021 was $2.5 million, compared to $8.3 million in the first quarter of 2021, and $16.7 million in the second quarter of 2020. Loss per share for the second quarter of 2021 was $0.05, compared to a loss per share of $0.03 in the first quarter of 2021, and earnings per diluted share of $0.10 for the second quarter of 2020. Adjusted loss per diluted share for the second quarter of 2021 was $0.04, compared to adjusted earnings per diluted share of $0.01 in the first quarter of 2021 and $0.11 in the second quarter of 2020. Cash on hand totaled $60.5 million as of June 30, 2021. Total outstanding long-term debt as of June 30, 2021 was $84.5 million, consisting primarily of our $35 million term loans and $49.5 million of convertible notes. That concludes the recap of our second quarter 2021 financial results.
spk01: We'll now go into a short Q&A session.
spk00: Thank you. If you would like to ask a question, please press star 1 on your telephone keypad. And if you're on speakerphone, please make sure that your mute function is turned off to allow your signal to reach our equipment. We will pause just a moment to allow everyone an opportunity to signal for questions. And at this time, we'll go first to
spk01: Dan Kournos of the Benchmark Company. And please go ahead, sir. Your line is open. Hi. Can you guys hear me?
spk03: Yes, perfectly, Dan. All right, great. Sorry about that. I think I must have been on mute. Carl, can we just start off by level setting sort of expectations around around the pieces here um you know we kind of look at the core business and the trajectory maybe just help us think uh you know as you kind of go through this rebrand sort of what the organic trends are uh right now and as you make these investments i guess maybe if you could sort of break out short-term versus long-term you know what the margin flow through is you know this quarter obviously some investment historically you'd said you know, kind of north of 20? How do we think about it in the near term and in the long term?
spk05: Yeah, so let's start with that first. I still think long term, those margins that we've talked about are attainable. But as I said in the past, it's going to be more than just last mile delivery, right? It's going to be supplemental businesses like payments and other things that are going to combine for more of an offering to our customer base than just free delivery here, free delivery there. I mean, you know, Dan, ultimately, we're in this business now where we can't be, you know, a mini me of DoorDash, right? We have to be more than that. We can't play the game that they play. And that's why I've always talked about our three main constituents, and thinking beyond just the last mile delivery. The addition of these payment businesses is really the first big step in giving ourselves the capability to offer a full suite of payment services, not only to our installed base, but beyond that into other verticals and what have you. So I still think long-term, those EBITDA margins are attainable, but not purely just from last mile delivery. In the short term, I think that this quarter is about as soft as the aggregate EBITDA will hit. I think that the rest of the year rebounds a little bit will be the timing of some of the impact of our POS integrations with two big third parties. Historically, the quarter on the top line is a little softer, at least it was last year, than the second quarter. But I do see a rebound in the fourth quarter. It has been tricky to predict the top line of the business, and that's why I've been reticent to get out over our skis with it because the impact of COVID, where, as we've talked about in the past, has been great in validating, you know, last mile delivery, but it also creates a nightmare of projecting. You know, let's just say if stimulus, for example, didn't hit in mid-March, Q2's revenue number would have been bigger than Q1, right? And I think if we scrape out the effects of the pandemic since last year, the business is essentially where it would have been but only profitable today where it wasn't prior to the pandemic. So from a base business, that's where we start from, and then we build from there with our strategies.
spk03: Got it. That's helpful. And can you just, I mean, you brought it up, you know, a couple of times in that response, but maybe just talk a little bit more about the strategic rationale of the acquisitions, you know, how quickly you can move that into adjacencies and sort of how that filters through from top to bottom over the course of the year.
spk05: Yeah, I think in, you know, potentially in, in 2022, that could represent 10% growth to the business just on its own. And it's a multi-pronged strategy. So these businesses are like mini iPayments, which was my old company, right? They offer a broad suite of payment solutions across all types of SIC codes of merchants, right? Sure, we have the low-hanging fruit of our 25,000 restaurants that are captive for us to go after, but then we have every merchant category that you can imagine with several of what's in vogue marketing strategies that payments companies use today. So, I mean, that business on its own, I expect, even without the synergistic aspect of having an embedded merchant base that's already doing business with us is going to drive some really nice revenue growth and earnings over time. And give us that one other stickiness, that additional product to our merchant partner that we can deliver to him in a packaged offering that will make financial sense.
spk03: Got it. Thanks. And then if I could just sneak one more in, just in terms of the adjacencies, you know, still no update on cannabis. I know that's kind of a longer tail opportunity. Grocery seems to be growing. All right. You know, maybe just talk through kind of how the ancillaries are developing at this point. And is that included in that 10% upside from payments or is that payments alone? And then the ancillary plus the core last mile delivery is the remainder.
spk05: Yeah, I think that's payments. The number I was throwing out was them on their own. These other verticals, you know, cannabis is tricky, right? As everyone knows, as we sit here today, traditional payment methods are not available to retailers in cannabis, nor are... the ability to deliver their product like we can deliver a cheeseburg, right? So there are all types of regulatory dynamics around both of those things, all of which we are working on. And you could be assured that our solution is going to comply with all regulatory entities. And it's state by state. And, you know, it's not quite – Alcohol isn't quite as onerous, but it's the same thing as we've expanded state by state in alcohol delivery. There are a number of dynamics there that you have to comply with. All that being said, the more gray it is, the more difficult it is for someone to step into that business is what's attractive to us, right? Because we're going to do the work. We're going to come up with a solution. that marries both payments and delivery. And everyone seems to be afraid of the last mile delivery because they think it's such a money drain and it cannot be done profitably. And if we've done anything else last year, I think we've shown that we can do that component of it at a profitable level. And I think that that's gonna be a super important uh, skill for this business and super valuable to many different players that are serving, that are selling goods and services in the future. Because if all they're going to be left with is a duopoly, it's not going to bode well for pricing or flexibility or competitiveness. And, you know, it seems like that's the direction the Ubers and the DoorDashes are going. Um, And, you know, so I think we'll be, you know, a refreshing alternative to whether it's the restaurant industry or the convenience store industry, obviously cannabis, but across the board.
spk01: Got it. Thanks for all the color, Carl. I really appreciate it. And we'll go to our next question from Jeff Van Zenderen of B. Reilly.
spk02: Yes, I just wanted to follow up a little bit more on the driver cost picture. Maybe you can speak to that and give us kind of the outlook there.
spk05: Yeah, you know, as we got a lot of color from Uber in and around their quote unquote investor, the investment in drivers. And, you know, I think it was pretty well documented that we've had a tight labor market for a period of time. usually coincides with subsidies. So I think that if we consider it an investment in Q1 and Q2, it probably impacted, you know, notably the EBITDA line. That being said, whatever we did resulted in a lot of success, right? We have a highest driver count that we ever had. we have our lowest delivery times that we've ever had, at least since I've been here. I do think that those elevated costs are trending lower, and we're starting to see that in July. So I don't think that that continues to get any worse. I think that has peaked.
spk02: Okay. And then if we can kind of just look at the, I guess you're thinking around the Sales and marketing and G&A lines for Q3 or for second half, those were a little bit higher than we expected in Q2. So just wondering directionally where those might head.
spk01: Yeah, so a couple of things about that.
spk05: The push into QSR, which is, you know, a necessary push strategy long-term for the business, right? You need that level of restaurant selection because, you know, you don't want your customer that, you know, once a month wants a Big Mac to remember in his mind, oh, well, that's not on the waiter platform in my market, so I have to go to a competitor. Super important. That impacted top-line revenue, at least in the short term, as we've seen revenue per order come down slightly because even though it's still healthy margin, it's not as high a margin as your independent restaurant. We did some additional couponing to try to reactivate some dormant diners in the quarter. I think that will bode well. And then we opened – this year we've opened maybe some 100 new markets, smaller markets. And when we go into these markets, we do start with some lower rates that over time do increase contractually. So I think those were well thought out. I think they were smart. I think that we'll continue – on this strategy of opening these smaller markets. But I don't think you see things get more heavy-handed than you saw them in this quarter.
spk02: Okay. And then just kind of looking at the operating profitability profile, when would you expect to return to operating profitability?
spk01: Okay. I'm not sure I understand the question. Yeah, I'm just looking at the operating margin line. Leo, what line is he actually pointing to?
spk05: Why don't you explain? Because I don't seem to understand.
spk02: Yeah, sorry. I'm just looking at the income from operations, that line, which was a little bit lower than we expected. I'm just wondering when you would see that line getting back to positive.
spk01: So what number are we looking at, Jeff? 3,092,000, I believe. Negative. Leo, can you help me out here?
spk04: Sure, Jeff. Yeah, I think we probably expect to rebound there and sometime in 2022. That's the expectation at this stage.
spk02: Okay. So 2022. Got it. Helpful. Okay. And then I just had one more. Just was curious on the investment in the blockchain application. Anything you can help us with there?
spk05: Yeah. So are you familiar with figure technologies?
spk02: Not especially. Okay.
spk05: All right, so Figure is founded by a guy named Mike Cagney, who is also the founder of SoFi. And they're a blockchain-enabled company that has been focused on the mortgage industry. They also have a product that is called FigurePay that they aim to – essentially disenfranchise, um, member banks and reduce the cost of interchange. So as, as you know, there are a number of these defy or challenger banks that have popped up that are attacking all different revenue streams from established banks. Um, in the Visa MasterCard world, um, member banks earn something called interchange, right? Essentially, they say that that is for credit risk, marketing, maintaining of their networks, and what have you. Well, figure pay aims to sit in between the merchant and the consumer and offer the ability to transact and, in some cases, have a non-collateralized short-term loan, like an afterpay, if you will, to pay for their goods. So, you know, if you think about our constituents again, merchants, consumers, you think about we pay drivers every day. This is a super interesting, innovative way payment-related product and offering to offer to, I mean, just remember, there's 2 million active diners on our network, but 6 million people have downloaded that app. You've got 25,000 merchants, right? And then you have another 34,000 drivers. It's a super valuable ecosystem that, you know, a company like Figure or other payments companies you know, find super valuable. So with the addition of these payment businesses that we purchased and our ability to market their figure pay solution, you know, it's, you know, one additional product offering that, you know, is innovative besides traditional credit card processing.
spk01: Okay, fair enough. Thanks for taking my questions and best of luck.
spk00: And so that concludes today's question and answer session. I will now turn the call back to Carl Grimstead for any additional or closing comments.
spk05: No closing comments other than thanks for your interest. We continue to be excited about the future of our our business, and the rest of this year. And have a nice night. Thank you.
spk00: And so that does conclude today's call. Thank you for your participation. You may now disconnect.
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