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Edited Transcript of WTRH earnings conference call or presentation 7-Nov-19 10:00pm GMT

Q3 2019 Waitr Holdings Inc Earnings Call

HOUSTON Nov 17, 2019 (Thomson StreetEvents) -- Edited Transcript of Waitr Holdings Inc earnings conference call or presentation Thursday, November 7, 2019 at 10:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Adam Simowitz-Price

Waitr Holdings Inc. - CEO & Director

* Karl D. Meche

Waitr Holdings Inc. - CAO

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Conference Call Participants

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* Alex Joseph Fuhrman

Craig-Hallum Capital Group LLC, Research Division - Senior Research Analyst

* Daniel Louis Kurnos

The Benchmark Company, LLC, Research Division - MD & Internet, Publishing & Broadcasting Analyst

* Kunal Madhukar

Deutsche Bank AG, Research Division - Research Associate

* Nicole Miller Regan

Piper Jaffray Companies, Research Division - MD & Senior Research Analyst

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Presentation

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Operator [1]

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Greetings, and welcome to Waitr Holdings Third 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'll 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 the 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.waitr.com.

Hosting today's call is Adam Price, Chief Executive Officer; and Karl Meche, Chief Accounting Officer.

I would now like to turn the call over to Mr. Price. Please go ahead, sir.

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Adam Simowitz-Price, Waitr Holdings Inc. - CEO & Director [2]

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Hello, everyone. Welcome to the third quarter earnings call for Waitr. Although the third quarter was a challenging time in the sector, I want to reiterate our confidence in our cash position, changes we are making to the business and the past success of Waitr.

This is my first quarter as CEO. And while I see a business with challenges, I also see a business with many opportunities. External perception is clear; there are multiple concerns about our business. I want to talk about some of these throughout this call and stress that although this business may be challenged, we have a focused approach on how to sustain our business to bring value to shareholders over the long term.

My confidence about the path forward starts with Waitr's foundation. The building blocks at Waitr are incredibly strong. First, we were first mover in small- to medium-sized markets around the U.S. and have stayed focused on that strategy. As a result, even after the last year of intense competitive pressure, Waitr is still first in market share in 9 out of our top 10 markets, and first or second in market share in 19 out of our top 20 markets. These markets are in place all around the U.S., from Florida, Minnesota, to Louisiana, to Hawaii.

Second, even with the update to our restaurant take rates in August, Waitr's active restaurant base has increased from the start of the year to over 20,000 restaurant partners, all of whom have signed revenue share agreements for every order processed.

Third, there are still many areas for Waitr to streamline operations, increase revenue from our current platform and build a sustainable business.

These are just some of the things I have seen in this business over the last quarter that give me confidence. In order to succeed, we know that we need to move quickly towards profitability. With an adjusted EBITDA loss of $15.4 million for Q3 and ending cash balance of $52 million, we are taking large, tangible steps towards operating on a break-even or profitable basis.

We have been and continue to streamline operations, making improvements that create better customer experiences while also reducing overhead in our operation. During our last earnings call, we disclosed that we instituted actions and plans to achieve over $8 million in annualized savings. As a result, we saw a decrease of $2.4 million in operations and support costs quarter-over-quarter in large part due to these changes. During the past few months, we ramped up initiatives to streamline operations and make improvements which we are confident will maximize long-term shareholder value. These additional changes are expected to bring an incremental $30 million in annualized savings during 2020.

I'd like to discuss some of these changes that constitute these savings. Recently, we began a process to reduce our staff by approximately 300 people, which will amount to an expected $19 million in annual payroll savings. These reductions and savings are being realized across multiple departments.

For example, in sales, we have implemented a more automated customer relationship management system and are constructing a sales development representative lead generation process. This will allow our field sales team to be more efficient with their time. These changes allowed a higher sales velocity while reducing our sales team size by 50%.

For restaurant onboarding, we have automated our process, improved software tools, leveraged partnerships with vendors and consolidated back office teams. This will decrease the amount of time it takes for a new partner to get from contract execution to live on the platform by up to 75%.

For customer support, consolidation and cross-training of teams has resulted in significantly increased service levels and improved response time since first quarter while also reducing costs. Specifically, the overall average response time to customers has improved by over 90% since Q1.

For field operations, we have analyzed overhead needs across each of our markets against driver turnover costs, customer delivery times and other metrics. We have moved to virtual management of a subset of markets based on observation that in-market management is not necessary to achieve best-in-class customer experiences until a certain scale of delivery volume is achieved.

We have also decided to close approximately 35 markets by the end of Q4 because of low revenue contribution, coupled with high customer acquisition costs and driver subsidies. These were noncore markets and clearly unprofitable. Additionally, managing these markets came at the opportunity cost of growth and penetration in our numerous core markets.

In addition to department restructuring and market closures, we anticipate additional annual savings coming from the continued development and improvement of driver efficiency. Driver labor is still the largest line item on our costs, totaling $23 million for Q3 alone. Incremental improvement resulting from better scheduling and routing has enormous potential to drive down our per-order delivery cost.

Over Q3, our operations, engineering and data science teams rolled out the first version of automated order assignment in Waitr-branded markets and is implementing this across all markets during Q4. Again, we anticipate that our total changes in operations, along with our market closures, will amount to approximately $30 million in annual savings, putting us on a clear path to profitability.

As you might expect, this magnitude of change requires a renewed commitment from the senior team and, at times, a new operating approach. For this reason, we saw the departure of our CFO, Jeff Yurecko, at the end of last month as well as 2 Board members. We are actively interviewing qualified candidates for both the CFO role and Board positions to help us through this time and set us up for continued growth in the future.

With Jeff Yurecko's departure, Karl Meche, our Chief Accounting Officer, is taking over principal financial responsibilities. Now I want to turn it over to Karl.

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Karl D. Meche, Waitr Holdings Inc. - CAO [3]

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Thank you, Adam. Third quarter revenue increased 153% during the quarter to $49.2 million. On a pro forma basis, third quarter revenue increased by 20% year-over-year driven by organic growth. On a sequential quarter basis, however, revenue declined by $2.1 million or 4% from the prior quarter on lower order volume due to a number of factors, including summer month seasonality, weather events, such as hurricanes Barry and Dorian, and Tropical Storm Imelda, which temporarily ceased operations in certain markets, as well as the effects of increased competitive activity. These declines were partly offset by an increase in revenue per order attributable to the rollout of our new master services agreement for restaurants, which took effect in August.

Average daily orders were more than $48,000 for the quarter, an increase of 98% year-over-year and a 12% increase on a pro forma basis. On a sequential basis, average daily orders declined by 14% due to the factors previously noted.

Active Diners grew 184% year-over-year to 2.4 million diners as of September 30, 2019, driven largely by the acquisition of Bite Squad combined with organic growth. On a pro forma basis, Active Diners increased by 38% year-over-year and also increased slightly from the second quarter.

Gross food sales for the third quarter of 2019 totaled $161.4 million compared to $77.7 million for the third quarter of 2018, an increase of 108%, with average order size also increasing by just under 4% from $35.14 to $36.43. On a pro forma basis, gross food sales increased 12% year-over-year.

Operations and support expenses for the third quarter were $37.3 million, a year-over-year increase of $23.3 million driven by the significant increase in order volume. On a sequential basis, however, operations and support costs decreased by $2.4 million from the prior quarter, driven largely by lower driver costs as well as savings achieved from our June staff reduction.

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 a per order basis, gross profit for the quarter, which we define as revenue less operations and support expenses, was approximately $2.69 or 24% of revenue, a change from $2.42 or 28% of revenue in the prior year. The improvement in gross profit per order was attributable to the improved revenue per order from the MSA changes in August. However, the slight gross margin decline was driven by the significant new market activity during 2019 as each new market adds dedicated fixed end market costs and delivery tends to be inefficient in early months until scale is achieved.

Sales and marketing expenses were $15.9 million for the quarter, a $600,000 increase over the second quarter. The third quarter included incremental digital and traditional media spend associated with our fall marketing campaign, which launched in the latter part of September and ran into October. We expect our sales and marketing expenses to decline next quarter with the bulk of the fall marketing spend behind us.

Research and development expenses increased $1.1 million or 143% year-over-year due primarily to the ongoing build-out of the engineering team and the inclusion of the Bite Squad engineering team. Relative to the second quarter, R&D expenses were lower by approximately $200,000 as we capitalized a larger portion of these costs this quarter in connection with various product enhancement initiatives. We expect R&D spend to increase slightly in the relative short term as we continue to focus on product initiatives and add key members to our product and engineering teams.

General and administrative expenses increased $6.5 million or 103% year-over-year, driven primarily by the Bite Squad acquisition and increased corporate overhead. From the second quarter to third quarter, removing the impact of onetime items and noncash equity compensation, G&A remained relatively flat.

Depreciation and amortization increased $4.5 million in the third quarter from $400,000 in the third quarter of last year, primarily a result of the amortization of intangible assets from the Bite Squad merger.

Net loss for the third quarter was $220.1 million or a loss of $2.89 per share compared to a loss of $6.5 million or $0.64 per share in the third quarter of last year. Third quarter net loss included $2.2 million of noncash stock compensation expenses and $192.1 million of noncash impairment charges, both considered within our adjusted EBITDA.

Adjusted EBITDA for the third quarter was a $15.4 million loss compared to a $2.5 million loss in the third quarter of 2018 as the company remained largely positioned for growth.

As of September 30, 2019, we had cash on hand of $52.2 million, consisting primarily of cash and money market deposits. We also had total outstanding long-term debt of approximately $129.2 million, consisting primarily of $68.3 million of term loans and $60.7 million of convertible notes.

As already mentioned by Adam, management continues to aggressively identify improvements to the business that drive continued efficiencies and clearly demonstrate our commitment to moving the business towards profitability.

I'll now turn the call back over to Adam to wrap up before we take questions. Adam?

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Adam Simowitz-Price, Waitr Holdings Inc. - CEO & Director [4]

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Thank you, Karl. Before we get to questions, I will touch on the strategic review process and forward-looking financials.

We have completed the review of strategic alternatives first announced in the prior earnings call. The Board has concluded that the company will best serve the interests of our stockholders at this time by focusing on executing our strategic plan as an independent public company.

Moving on to forward-looking financials. In light of our ongoing search for a new CFO, the principal individual who owns this, we are suspending guidance and the previous guidance should no longer be relied upon. Once we have a CFO in place who has had time to analyze the business, we plan to implement guidance again.

Because we won't be commenting on guidance, we did want to provide information on customer trends, order volumes and operations performance through the end of October. Since the start of July, delivery volumes have been stable, declining only 1% to 2% as of the end of October. Please note that we also significantly slowed down launching new markets over this period as well. Since the start of August, the number of distinct diners per week has trended slightly upward and is not declining. Over the last 3 months, we have seen an increase in both average market share and average gross sales in our larger-volume market. Over the last 6 months, our operations team was delivering orders faster than ever. The time from when the customer places the order to when the order is delivered is the best it has been in the previous 24 months. We anticipate this level of service to continue to improve and have long-term implications on customer lifetime value and on P&L.

Moving forward, you should expect to see steady improvements in cash flow compared to the past several quarters. You should also expect to see a refocus on existing markets where there is a strong user base, great brand awareness and still a lot of growth potential.

With that, we would like to open the line for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question today is coming from Nicole Miller from Piper Jaffray.

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Nicole Miller Regan, Piper Jaffray Companies, Research Division - MD & Senior Research Analyst [2]

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Appreciate the update.

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Adam Simowitz-Price, Waitr Holdings Inc. - CEO & Director [3]

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Thanks, Nicole.

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Nicole Miller Regan, Piper Jaffray Companies, Research Division - MD & Senior Research Analyst [4]

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Can you first talk about the department restructuring? Can you talk about which personnel they were just so we can understand? Consumer-facing might not be the right way to ask that question, but like which departments did they come out of? If you maybe want to say core versus noncore? I don't know how you want to define it, but just so we can have a better understanding of that restructuring.

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Adam Simowitz-Price, Waitr Holdings Inc. - CEO & Director [5]

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Yes. Absolutely. So the primary departments would be sales and marketing along with operations. As we mentioned on -- during the script, the sales team was propelled by gains in efficiency by using new tools and sales development representative process, and that allowed us to make the sales velocity much higher with fewer people. So there was a significant reduction in the field sales staff needed.

On the operations side of our business, just the closing of precisely 38 markets allowed us to restructure the field operations and reduce the head count in field operations.

And then the streamlining of the various processes that we talked about allowed a significant amount of consolidation in the back office support for operations. So that affected things like restaurant onboarding as well as customer support and dispatch.

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Nicole Miller Regan, Piper Jaffray Companies, Research Division - MD & Senior Research Analyst [6]

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And then when we talk about the closing of the 38 markets, what did they have in common or maybe not have in common with the core markets? And how did you identify and choose those?

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Adam Simowitz-Price, Waitr Holdings Inc. - CEO & Director [7]

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Yes. That's a great question. So there was one thing that they all had in common, which is there was not a clear path to profitability. Our business, we're very cognizant of the cash flow in our business and the need to chart that path to sustainability. And after looking at these markets and the various metrics that have gone into a lot of analysis now and the overhead costs, we just didn't see a way for those markets to get there with the resources that we have. And so we felt it was a much better strategy to pull back from those markets, concentrate our resources in markets where there is a clear path and go full force into the -- those current markets where we have a lot of great positions.

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Nicole Miller Regan, Piper Jaffray Companies, Research Division - MD & Senior Research Analyst [8]

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And just the last and final question. I remember last quarter, the seasonality played a role. And if you just think about a lot of numbers tonight that are helpful, some went up, some went down, what role did integration of the 2 entities play? What role did seasonality play? What role did just the general marketplace play? And perhaps I'm forgetting main topics.

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Adam Simowitz-Price, Waitr Holdings Inc. - CEO & Director [9]

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Yes. I'll talk about integration and general market. Karl can touch on seasonality. I'll point out that for the most part, the integration efforts are behind us. The core of the business has been integrated all the way over to operations, where we're jointly managing Bite Squad and Waitr markets with the same operations individuals. So I don't really feel like integration was an impact in this business.

Noting on the competitive landscape, I don't think that had a dramatic impact in the sense that we haven't really seen an acceleration or deceleration on that front. All of the trends in our business have shown that our growth or market volumes are very stable. There's been relatively just a 1% to 2% decline since July forward all the way through the end of October. And we don't see anything nonlinear in the behavior of our markets or a change in market share, so there's no real indication that there's an acceleration or distinct tipping point happening in the competitive landscape. I'd say that's fairly constant.

Karl can talk specifically about seasonality, though.

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Karl D. Meche, Waitr Holdings Inc. - CAO [10]

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Yes. From both the Waitr and the Bite Squad perspective, we have a large concentration of operations along the Gulf Coast. And I think if you looked at this summer, you see a few storms came through, Barry and Dorian and Imelda, which affected certain of our markets for a few days each. I think if you compare that to prior year, I think we had a relatively calm and quiet hurricane season in our markets. And so I think you see that combined with what we define typically as our summer seasonality with certain markets that are heavy with college students, and that tends to go away when folks return home or simply tends to slow down when students go home and go on vacation. And so I think we typically see a slowdown beginning in late May through June and into July and August when school resumes.

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Adam Simowitz-Price, Waitr Holdings Inc. - CEO & Director [11]

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Yes. And I'll just close out with the general trend in the industry, I think is common to all of the players right now. We haven't seen a massive change in the size of the industry since March forward. And I'm sure, as you've followed some of the competitors, they saw similar slowdowns during this period. So it really wasn't so much a Waitr-specific item that we can point to. There's obviously things that we wish would have happened in a different pattern in our business, and there's always things we can improve. But I think some of these trends, we're seeing on an industry-wide standard.

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Operator [12]

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Our next question today is coming from Kunal Madhukar from Deutsche Bank.

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Kunal Madhukar, Deutsche Bank AG, Research Division - Research Associate [13]

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A couple, if I may. In terms of the strategic process and how the shares have responded, can you give us a sense of like who's selling? And if -- and why the shares have been precipitously down?

And then with regard to stability in the management ranks, given all the changes that have happened, is the management right now stable and everyone is behind this path to profitability strategy?

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Adam Simowitz-Price, Waitr Holdings Inc. - CEO & Director [14]

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Yes. So I mean quick answer on who's selling is we don't have insights into that side of information. We don't have any significantly large shareholders that are letting go of shares because we would see that released or filed.

But on the management alignment, I can definitively say yes. We spent the quarter really strategizing and outlining sophisticated changes in our operation, which allow for better customer experiences. And that involved bringing in all of our leadership team and scrutinizing the business down in every single department. And I'm happy to say that all of the changes we're making in this business are going to significantly reduce the cost of overhead but also improve the customer experiences. And you just can't do those types of changes without aligning leadership, and so I feel very confident that leadership is fully aligned on the changes and ready to -- and already executing several of those as we move forward.

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Operator [15]

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Our next question today is coming from Alex Fuhrman from Craig-Hallum.

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Alex Joseph Fuhrman, Craig-Hallum Capital Group LLC, Research Division - Senior Research Analyst [16]

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One thing I wanted to ask about is just the 38 markets that you're closing. Can you give us a sense of how much revenue and EBITDA loss was generated by those markets year-to-date and in the third quarter?

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Adam Simowitz-Price, Waitr Holdings Inc. - CEO & Director [17]

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Yes. We're not going to quote specific numbers. I mean I think the broader trend I'll say is, these were markets that were launched relatively recently. I think I've talked, Alex, with you previously about we're using strategies that were successful early on in the business but didn't adapt to competitive presence in markets. And these markets really were a factor of that. And so they were fairly new, recent launches that never gained traction, which means they had very low revenue contribution overall to the business. And what happens in these early-stage markets where they don't get off the ground, in order to maintain service levels, what you end up doing is you're oftentimes heavily subsidizing driver wages and continuing to push promotions to really get that initial velocity. And if it doesn't get that, it can be a very expensive endeavor to sustain those markets. And what we saw was as we look at where we are really well positioned geographically and can realize the best growth in our business, I mean, we look back and with the comment on those 9 out of our top 10 markets, we're #1; 19 out of 20, we're #1 or #2. And we looked at those markets and saw penetration ability and just said, this is somewhat silly to be overextending ourselves on these markets that aren't getting off the ground when we could fully concentrate on places where we can go much deeper and still recognize if not more revenue, just as much.

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Alex Joseph Fuhrman, Craig-Hallum Capital Group LLC, Research Division - Senior Research Analyst [18]

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Okay. That's helpful. That makes a lot of sense. And then one other thing I just wanted to ask about is you guys have obviously done a good job of maintaining that top market share in your core market. We've seen over the past year or so that DoorDash has kind of been creeping in a little bit more in your backyard, so to speak, and often adding restaurants that they don't necessarily have a partnership with, which has certainly enabled them to expand their portfolio pretty quickly. It sounds like Grubhub might be doing a little bit of that as well over the next year, bringing on lots of non-partner restaurants onto the platform. Just curious if that is something you've seen in your markets, if any of the restaurants that you are partnered with have been dual-listed, intentionally or not, on some of your big competitors' platforms and if that has had any impact on your business, positive or negative?

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Adam Simowitz-Price, Waitr Holdings Inc. - CEO & Director [19]

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It's hard to tell. We don't specifically know whether somebody has initiated non-partner versus an agreement. So it's hard to know if that precise strategy is what changes our volumes or does or does not have an impact.

I can tell you, specific to non-partner and that strategy, that's something that Bite Squad actually has used in its history. So we have quite a few -- quite a bit of familiarity with it. And we've really -- we've turned that program off for a number of reasons. But one of the main ones I'll point out is that it's incredibly expensive to maintain with a very questionable ROI. What happens when you have a non-partner restaurant is you don't have a good operations integration into the back of the restaurant. So you end up placing orders over the phone or with that restaurant after your customer uses your app, and there's lots of order accuracy issues and then you end up delivering those orders to customers. And those customer cohorts can be very weak because of the poor experience when you don't have a partnership and a direct integration to the restaurant.

So even though it may lead to some short-term implications of market share or growth or customer acquisition in the markets where it's active where Waitr operates and helps them generate alternative supply, we think that the actual customer cohorts and retention of that strategy is fairly weak.

And one of the things that Waitr has done from the beginning is we've always concentrated on restaurant penetration. So our need for non-partner really isn't there because we have so much restaurant penetration.

Now again, I would agree that non-partner is a very fast way to make restaurant penetration less defensible, but it just means that because we have the restaurant penetration, non-partner isn't a crucial path for our business at this point.

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Operator [20]

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(Operator Instructions) Our next question is coming from Dan Kurnos with The Benchmark Company.

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Daniel Louis Kurnos, The Benchmark Company, LLC, Research Division - MD & Internet, Publishing & Broadcasting Analyst [21]

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Adam, just to kind of follow up on that last train of thought. As Grubhub put it, it sounds like a lot of their newer users are becoming more promiscuous, if you will, with the platforms. And given that, as you just mentioned, DoorDash's effort to kind of knock down your moat on restaurant penetration kind of evens the playing field, what are you seeing from newer diners that you're signing up? What are you seeing from some of your older cohorts in terms of their willingness to try other platforms or order frequency? And what are you seeing in terms of in-marketing your mature markets, the cost of customer acquisition per new diner?

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Adam Simowitz-Price, Waitr Holdings Inc. - CEO & Director [22]

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All right. I'll try and remember all those. The -- we're definitely seeing -- anytime an industry evolves at the pace this one has and matures quickly, you're going to see a change in customer cohorts and their behavior between your older users and your newer users. That happens in any industry. And it's definitely happening in the third-party food delivery space. So our newer cohorts have lower initial retention. They -- however, they still do have a very good stickiness factor, but you have more wanting them compared to the older cohorts.

Now there's -- you talked about the partnership or the non-partner model, using that to knock down the moat. I would say restaurant supply is just one aspect that creates moats in these systems. And the other major one is consistency of experience and really focusing on the customer experience.

And so while restaurant supply may attract and get that person to open the app and then place that first order, what's critical then is the consistency of experience after that order is placed and getting the first order to the customer, having a good experience and repeating that over and over.

So as we mentioned, that's what we wanted to highlight in terms of predicting our path forward. We're delivering our orders faster than ever. We have the best delivery times we've had in the last 2 years. We've increased things like customer support response time by 90% since Q1. And we're investing in very sophisticated tools around customer churn models so we can be very targeted on groups that may have a suboptimal experience or we predict are about to churn and go after those customers as opposed to acquiring an entirely new customer.

And that kind of hits at the last part of your question is what are you seeing in these large, mature markets in terms of customer acquisition. I think what we're seeing is there's a couple of things happening that make me confident. One is in our large, mature markets, we're typically #1. So we sit in a very good position with brand recognition. So the incremental cost of getting customers is low because we get a lot of organic.

And then the second thing is you can see some of the trends recently, our average market share and average gross sales in our larger markets is increasing in the last 3 months. So on that front, because we sit in these good positions relative to our competitors, it doesn't necessarily translate just because there's a competitive landscape. If you're smart about the attack strategy and going after customer retention, creating good customer experiences, you might be -- we anticipate being well rewarded by decreasing our retention costs and not necessarily focusing out and getting the incremental new diner in that environment.

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Daniel Louis Kurnos, The Benchmark Company, LLC, Research Division - MD & Internet, Publishing & Broadcasting Analyst [23]

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Got it. That's super helpful. And then look, if you're not going to frame up kind of the revenue or near-term guide for us, and you've given us some cost savings here, can you at least give us a sense of what you're doing now, all of these efforts, including the market closures and some of the other head count reduction but while including efficiencies? Do we expect a transition period? Or are you still able to kind of -- forgetting the original new market growth plan but take the underlying base, whatever it is, and still have relatively healthy growth? And do you think that growth is at or above market 3P food delivery rates at this point?

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Adam Simowitz-Price, Waitr Holdings Inc. - CEO & Director [24]

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It's a good question. I mean we're doing -- without a doubt, changing the business takes a lot of energy. There are several things that we're moving through that have immediate impacts on the bottom line. We talked about a lot of those earlier on the call. And those are things like market closures that are going to be happening over the next 30 days. We have other impacts that have already been made earlier this week or throughout the previous quarter. We have some that will drift into kind of the beginning of next year. I would say relative to the primary realignment and restructure of our business, we anticipate all that to be happening over the next couple of months.

Relative to the -- what that implies in terms of growth and what we can expect out of the business, we're not neglecting growth during these things. If anything, it's a concentration of those services and experiences in our core markets where we're looking at some decent momentum over the last 3 months with this increase in market share and increase in gross sales in our larger-volume markets.

I think it's hard to comment on growth and what can be expected because, like I said, the management team's primary focus right now is controlling our cash and putting us on a very clear trajectory to a sustainable business. And that's the priority. We -- in my opinion, we have to come back and show people that this is a sustainable business. That is priority #1 before we dig into what then is the growth rate on top of that sustainability.

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Daniel Louis Kurnos, The Benchmark Company, LLC, Research Division - MD & Internet, Publishing & Broadcasting Analyst [25]

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Yes. That's fair. And just one last one, if I could. Just any thoughts on, obviously, there's a lot of noise, unfortunately, unfavorable media coverage around the implementation of the MSA. Just any update on either restaurant churn or just how the MSA is being received now that it's been more broadly rolled out?

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Adam Simowitz-Price, Waitr Holdings Inc. - CEO & Director [26]

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Yes. So the restaurant contract that we rolled out in August, I'll start at the high level. Keep in mind that was a subset of our restaurants. It did not affect any restaurants in Bite Squad markets, and it did not affect any national chains for Waitr markets. So it only affected the remaining restaurants. And out of those restaurants that it affected, I think I -- as recently as last week, 75% had come back or signed that new contract. And coupled with our -- this is why I pointed out in the beginning of the call, coupled with our sales velocity and the efficiency that we've had, we've been signing restaurants -- new restaurants up at a very fast clip. With our new contract, we are at a higher active restaurant count than in the beginning of the year. So any short-term dip in restaurant supply has been recovered, in our opinion, and the majority of those restaurants came back to the platform.

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Operator [27]

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Our next question is a follow-up from Kunal Madhukar from Deutsche Bank.

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Kunal Madhukar, Deutsche Bank AG, Research Division - Research Associate [28]

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One, I wanted to follow up on the MSA question. In terms of the capacity for restaurants to pay, now that has been an issue that has been in the media in New York particularly with regard to seamless. And in terms of the new rate structure, can the restaurants afford to pay the 25%? Or is delivery too -- such a big chunk of their business now that they're finding that their margins are getting impacted? And...

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Adam Simowitz-Price, Waitr Holdings Inc. - CEO & Director [29]

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Yes.

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Kunal Madhukar, Deutsche Bank AG, Research Division - Research Associate [30]

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Okay. And there is a follow-up, and the follow-up, again, follows from what [gov] kind of talked about in terms of having loyalty programs to bring retention, to improve retention and frequency. That's something that DoorDash has, too, in terms of like the subscription plan and what have you. Do you think that you're at a point where you may need a loyalty program or something like that, which will help you with the growth, retention and sustainability?

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Adam Simowitz-Price, Waitr Holdings Inc. - CEO & Director [31]

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Okay. So Kunal, I'll start with the first one there on the take rates. So you have to remember, Waitr still has arguably the industry lowest take rates. Our contracts go from 15% to 25% depending on the volume of the restaurant. If the restaurant has increasing volume, they're down at 15%. So those are very low relative to the competitors. It's very dependent. I've talked with a lot of restaurant CEOs. It's incredibly dependent on the restaurant's operational structure of what economics work to make both a profitable third-party delivery business and a profitable restaurant at the same time.

Without a doubt, there are restaurants that 25% is not a profitable business for them. There are other restaurants where 25% is plenty profitable. So it's incredibly restaurant-specific, and it's hard to group the entire industry based on a certain take rate.

So I think one of the approaches we've used in how we work with restaurants is we're always merchant-first in our approach. And as our sales team is talking to these groups and especially some of the larger chains, there's variability in those approaches to make sure it's a profitable partnership for both groups.

It's -- the second question has to do with loyalty. Loyalty is a tool for retention. And you have to remember, it's a tool being used because newer -- the markets have matured -- or the industry has matured. Newer cohorts are less attractive than older cohorts, so you have more one-and-dones. So everybody is fighting and trying to find a way to increase retention as those cohorts have arguably deteriorated. And we do have loyalty. So Waitr and Bite Squad both have a lightweight, email-driven loyalty campaign. However, I think there are more immediate ways to impact retention that's focused on consistency of customer experience and really creating and hitting out of the park the first, second, third customer experience to lock in that user base.

Once you see the cohort flatline in the retained users, it's very sticky. They don't tend to permanently decay, even though it's a matured industry. They just flatline at a lower level, so -- which indicates your early churn is the problem. So as long as you focus on really good customer experiences in those first several experiences with the platform, you can get that cohort to flatline at a higher level.

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Operator [32]

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Thank you. We've reached the end of our question-and-answer session. And ladies and gentlemen, that does conclude today's teleconference. You may disconnect your lines at this time and have a wonderful day. We thank you for your participation today.