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What We Can Learn From GrubHub’s Earnings
As a pure-play food delivery public company, GrubHub has a lot to provide for investors interested in this field.
When it went IPO in April 2014, GrubHub had an average of 135,000 orders daily in 2013.
In 2019Q4, that number has grown to 502,600 (almost 4x). But the year-over-year growth rate has dropped to single digit.
One slowly growing number is the gross dollar value per order, which was $30.74 in 2017Q1 and $33.56 in 2019Q4.
The per order value could implies that group buying (>1; friends gathering, small corporates/teams, etc.) is probably a major purchasing behavior on GrubHub. It’s also a natural choice when people can “split” the overhead (all sorts of fees).
The average order value increases by ~10% in two years and could continue to grow if more business users order food deliveries.
Of the GMV, GrubHub only takes commission, delivery and others as fees (revenues). That “take-rate” has increased from 17.4% in 2017Q1 to 22% in 2019Q4.
The increase could be due to the increased marketing spending by restaurants. See a brochure for Grubhub pricing. But eventually, the take-rate will be reflected in foods’ prices and split with consumers.
That increase is good for the company but consumers may feel that food delivery has become more expansive while what they are buying is not better.
Cross major marketplace platforms, due to the delivery part of business, those food delivery companies might take a bigger % of the GMV as revenues.
The most concerning part of the costs is called “Operations and Support”, which grew from 38% in 2017Q1 to 56% in 2019Q4.
A large part of that increase is due to the shift from independent contractors to GrubHub employees – on which regulators and other gig economy companies spent a lot of efforts.
Food delivery is still a very competitive space and market share needs to be won city by city. Compared with ride-hailing, which two big players remain in the US, we might see a few more players competing without major consolidation in the near term.
a16z: 100 Marketplaces
Andreessen Horowitz introduced the Marketplace 100, a ranking of the largest and fastest-growing consumer-facing marketplace startups and private companies.
The top 4 companies (Airbnb, Doordash, Instacart, and Postmates) account for 76 percent of the list’s total observed GMV
Fast-growing marketplace startups grow quickly in the early years—often >3-5x year-over-year
Read more a16z’s thoughts on marketplaces.
Non-stopping Cybersecurity Acquisitions: 3 Deals Over One Billion In 2020 So Far
Following up on a previous post of M&As in the cybersecurity space – interests and activities are still strong.
RSA for $2.1bn
Another private equity firm Symphony Technology Group (STG) just announced the acquisition of RSA from Dell for $2.075 billion in cash. STG partnered with Ontario Teachers’ Pension Plan Board and AlpInvest Partners in the deal.
Dell acquired RSA when it bought EMC in 2015. RSA has over 12,500 customers according to the statement.
Forescout for $1.9bn
Earlier this month, Forescout was to be acquired by Apax and its partner Crosspoint Capital for $33 per share in an all-cash transaction valued at $1.9 billion.
The purchase price represents a premium of approximately 30% over Forescout’s closing share price of $25.45 on October 18, 2019, the last full trading day prior to the release of the 13-D filings by Corvex Management L.P. and Jericho Capital Asset Management L.P. on October 21, 2019, which disclosed they had formed a partnership to approach Forescout and accumulated a combined 14.5% ownership in the company.
Forescout recorded fourth quarter revenue of $91.3 million, compared to $84.7 million in the fourth quarter of 2018 (+8% growth); full year revenue of $336.8 million, compared to $297.7 million in the full year 2019 (+13% growth).
Armis Security for $1.1bn
In January, Israeli IoT security firm Armis Security announced that it agreed to be acquired by NY-based Insight Partners at a valuation of $1.1 billion.
Insight will pay cash for the cybersecurity company, with participation from CapitalG for $100 million and rollover from some existing stockholders.
Banking Headcount Cut
HSBC recently surprised the outsiders with a 35,000 job cut plan in three years.
The largest bank by asset in Europe, London-based HSBC does most of its business in Asia.
Financial Times reported last year in October that HSBC has embarked on a cost-cutting drive that threatens up to 10,000 jobs, as its new interim chief executive Noel Quinn seeks to make his mark on the bank.
It will now cut the headcount from 235,000 to about 200,000 in 2022.
It is also not a surprise as fintech companies are becoming more compelling and providing more superior services efficiently.
The long-term trend is inevitable. For example, in retail banking, every major bank is shutting down branches. The previous “comparative advantage” of having more footprint in the last century has become a liability. The bigger they were, the more pain they were feeling.
In a Jan 2017 report, The Guardian said HSBC “will be left with 625 branches by the end of the year [2017], which means it will have more than halved its high street presence since June 2011 when it had 1,301 branches.”
And in today’s report, HSBC US said the bank will close about 80 branches this year in the U.S. alone, a reduction of about 30%.
Other retail banking services such as trading and wealth management are also shifting online + automation. Younger generations just don’t need much face-to-face financial services and digital infrastructure has become more potent than ever. The industry’s reduction in cost structure leads to lowering fees and squeezes every player who couldn’t adapt (fast).
Many Institution services are also digitalized/automated.
Not surprisingly, many parts of the investment banking world such as trading are cutting headcount as well.
Last August, Financial Times reported that
Almost 30,000 lay-offs have been announced since April at banks including HSBC, Barclays, Société Générale, Citigroup and Deutsche Bank. Most of the cuts have come in Europe, with Deutsche accounting for more than half the total, while trading desks have been hit hardest.
「What’s News In China」
On Feb 14, Oaktree Capital Management, a Los Angeles-based distressed debt manager, became the first foreign company to set up a wholly owned unit in China under a trade accord with the U.S. The Beijing-based subsidiary has a registered capital of $4.55 million. // Caixin
On Feb 17, OYO reported a $951 million revenue globally for the financial year ending March 31, 2019, growing 350% yoy. In 16 month, OYO China has grown into an annual revenue of $307 million (~1/3 of total revenue). While facing more pressure, OYO China now has expanded into 3 brands and signed up 19,000 hotels. // TechCrunch | FT
Coronavirus has pushed many industries in China to go digital. In the past few weeks, there are booms in enterprise remote working apps 远程办公 (DingTalk surpasses WeChat to rank first in the App Store in China on Feb 5), online house tours 云看房 (of the top 100 residential real estate developers, 92 have launched the online selling services), online grocery shopping 生鲜电商 (Miss Fresh GMV grew by 321% yoy during the Chinese New Year), etc.
Tesla (NASDAQ: TSLA) is in advanced stages of talks to use batteries from Contemporary Amperex 宁德时代 (SHE: 300750) that contain no cobalt – one of the most expensive metals in electric vehicle (EV) batteries – in cars made at its Gigafactory 3 in China. Tesla started to deliver cars from that factory in December 2019. // reuters
「News of the Week」Zuckerberg Ready For Facebook To Pay More Tax In Europe
Reuters – Zuckerberg ready for Facebook to pay more tax as welcomes rules review
Venturebeat – Zuckerberg ‘accepts’ that Facebook may have to pay more tax in Europe
Reuters – Treat us like something between a telco and a newspaper, says Facebook’s Zuckerberg
Dots to connect: global tax reform for tech companies, tech companies go beyond countries/regions, potential indirect trade war in digital world, tech ultimately benefits as it can balance between nations, the leading companies may make it hard for others to expand globally and follow suit, social medias as media & telecom companies, UK’s digital taxes, etc.
「Video of the Week」Global Warming By 4+ °C
Industries For Reducing Greenhouse Gas
Greenhouse gases trap heat and make the planet warmer.
Several of the major greenhouse gases occur naturally but increases in their atmospheric concentrations over the last 250 years are due largely to human activities. Other greenhouse gases are entirely the result of human activities. [IPCC’s Fourth Assessment Report]
Carbon dioxide (CO2) is the primary greenhouse gas emitted through human activities.
In 2017, CO2 accounted for about 81.6 percent of all U.S. greenhouse gas emissions from human activities.
Emissions of CO2 from fossil fuel use and from the effects of land use change on plant and soil carbon are the primary sources of increased atmospheric CO2.
For total U.S. CO2 emissions, which mainly come from the combustion of fossil fuels (coal, natural gas, and oil), by economic activity types, transportation accounts for about 34.2 percent, electricity accounts for about 32.9 percent, industrial processes accounted for about 15.4 percent.
1. Passenger Vehicles Going Electric
An analysis by the International Council for Clean Transportation (ICCT), shows an estimate of lifecycle emissions for a typical European conventional (internal combustion engine) car, the hybrid conventional car with the best available fuel economy (a 2019 Toyota Prius Eco), and a Nissan Leaf electric vehicle (best-selling EV overall in Europe for 2018) for various countries, as well as the EU average.
An electric car using average European electricity is almost 30% cleaner over its life cycle compared to even the most efficient internal combustion engine vehicle on the market today
In most countries, the majority of emissions over the lifetime of both electric and conventional vehicles come from vehicle operation – tailpipe and fuel cycle – rather than vehicle manufacture. The exception is in countries – Norway or France, for example – where nearly all electricity comes from near-zero carbon sources, such as hydroelectric or nuclear power. Lifecycle emissions for electric vehicles are much smaller in countries such as France (which gets most of its electricity from nuclear) or Norway (from renewables). [carbonbrief]
There is an important variable here – how the batteries of EVs are produced, as the largest part of the emissions, around 50%, is currently from battery (including cell) manufacturing.
Producing batteries in a plant powered by renewable energy – as will be the case for the Tesla factory – substantially reduces lifetime emissions. The IVL researchers estimate that battery manufacturing emissions are between 61 and 106 kg CO2-equivalent per kWh.
With the technology advancements and cleaner energy sources for plants, the marginal and average cost of producing batteries will continue to go down.
Commonwealth of Nations 英联邦
The Commonwealth is one of the world’s oldest political associations of states.
Its roots go back to the British Empire, when countries around the world were ruled by Britain.
Over time different countries of the British Empire gained different levels of freedom from Britain. Semi-independent countries were called Dominions.
The 1926 Imperial Conference was attended by the leaders of Australia, Canada, India, the Irish Free State, Newfoundland, New Zealand and South Africa.
At the 1926 conference Britain and the Dominions agreed that they were all equal members of a community within the British Empire. The United Kingdom did not rule over them.
This community was called the British Commonwealth of Nations or just the Commonwealth.
Birth of the modern version
Originally, the Commonwealth members all owed allegiance to the British king or queen.
When India and Pakistan became independent in 1947, King George VI ceased to be Emperor of India. India wanted to become a republic which didn’t owe allegiance to the British king or queen, but it also wanted to stay a member of the Commonwealth.
At a Commonwealth Prime Ministers meeting (the Prime Ministers of the United Kingdom, Australia, New Zealand, South Africa, India, Pakistan and Ceylon, and the Canadian Secretary of State for External Affairs) in London in 1949, the London Declaration said that republics and other countries could be part of the Commonwealth.
According to the Declaration, India would be a sovereign independent republic, while continue her full membership of the Commonwealth of Nations and accept of The King as the symbol of the free association of its independent member nations and as such the Head of the Commonwealth.
The modern Commonwealth of Nations was born.
King George VI was the first Head of the Commonwealth, and Queen Elizabeth II became Head when he died.
But the British king or queen is not automatically Head of the Commonwealth. Commonwealth member countries choose who becomes Head of the Commonwealth.
Essentially, the Declaration separates the responsibility of Head of the Commonwealth from the King/Queen.
Meanwhile, there are 16 Commonwealth realms. A Commonwealth Realm (英联邦王国) is a country which has The Queen as its Monarch.
Current
The Commonwealth is a voluntary association of 54 independent and equal countries.
The most recently added member is The Gambia, which originally joined on 18 February 1965, withdrew on 3 October 2013, and rejoined on 8 February 2018.
The most recently joined new member is Rwanda in 2009. It is the second country to be admitted without a British colonial past or constitutional link to Britain. Mozambique, which joined in 1995, is the only other Commonwealth member without historic UK ties.
Rwanda will also host the 26th Commonwealth Heads of Government Meeting in 2020.
Her Majesty Queen Elizabeth II is Head of the Commonwealth.
The Commonwealth Heads of Government Meeting 2018 appointed Charles, Prince of Wales to be her designated successor.
Current Charter.