On Thursday, delivery service provider Waitr announced that its CFO, Jeff Yurecko, is leaving the company, as are a pair of board members.
The company is looking for replacements for Yurecko and the two directors, Sue Collyns and Scott Fletcher. Their decisions left the company without a sufficient number of independent directors, and Waitr received a delisting notice from Nasdaq as a result.
The news sent the company’s shares down more than 40% Wednesday on an already steeply discounted valuation.
It’s only the latest in what has been a rather eventful year for Lake Charles, La.-based Waitr, which has experienced both the highs and lows of being a publicly traded growth company in a remarkably short time.
The third-party provider went public, bought another third-party provider, faced a lawsuit from drivers, a boycott from restaurants, burned through cash, lost much of its stock value, changed CEOs and is now up for sale. All of that happened in less than a year.
That kind of year demonstrates the uncertainty in the third-party delivery business as it grows and takes hold at restaurants. The emerging business is changing so quickly it’s difficult to keep pace. But it appears clear that further consolidation among the largest delivery providers is coming quickly, and larger providers are coming to dominate the market.
Waitr was taken public after a reverse merger with a blank check company co-founded by Landry’s owner Tilman Fertitta. A month later, it bought Bite Squad in a deal designed to give the delivery provider a larger overall footprint.
Waitr’s strategy has centered on smaller and midsized cities, and it has footholds in areas that many other providers do not. Its sales this year have soared—they more than tripled to $99 million in the first six months of the year, for instance, thanks to the Bite Squad addition and overall growth in delivery.
But losses have soared, too: The company reported an operating loss of $46.5 million in the first six months of the year, up from a $10.7 million loss in the same period a year ago. Sales and marketing costs to get new customers increased fourfold to $25.7 million. Overhead costs tripled to $31.3 million.
Such costs are nothing new to growing companies in emerging businesses. In the tech world, businesses will spend big on marketing to build customer awareness and on corporate overhead to grow their businesses. Investors subsidize this spending, banking on profitability down the road.
Still, halve both Waitr’s general and administrative spending and its marketing spend, and the company still reports a sizable loss. What’s more, the company burned through cash in the second quarter to fund its operations, which will put further pressure on its ability to cull losses.
After plunging 45% Thursday, Waitr’s stock price has now lost more than 95% of its value since peaking at about $14 per share this past spring.
The company has been working to get to profitability—it developed a “Path to Profitability” initiative to cut costs and improve operating cash by $10 million.
Chris Meaux, the company’s founder and CEO, ceded the latter title to COO Adam Price in August, though Meaux kept the chairman title. Waitr laid off 100 people in a bid to streamline overhead costs.
Price in August acknowledged that the company “became distracted” by the complex integration of Bite Squad that “took our team’s eyes off key growth metrics.”
He also acknowledged that the company “did not catch real-time performance shortfalls in our new marketing strategy.” Spending to get new customers increased, and the company is intent on monitoring its marketing campaigns more effectively.
Waitr also changed to a new performance-based payment structure designed to reward restaurants that generate more deliveries. The new structure led some restaurants to boycott the service, but executives said in August that most restaurants have adopted the new structure and the company generated “positive results.”
Drivers, meanwhile, have sued the company, arguing that it’s paying them below minimum wage rates.
And then in August, Waitr announced that it is exploring strategic alternatives. The company made the decision after “consideration of recent interest expressed in the company” due to its presence in smaller markets, “along with a consolidating landscape in the industry.”
“The reason we’re exploring strategic alternatives has nothing to do with concerns about having a stand-alone business,” Price said. “I think it’s much more of the awareness of what’s going on in the space right now, and we can’t neglect that.”
The experiences of Waitr demonstrate once again that the delivery business in the U.S. is bound to be dominated by a few larger companies. Smaller companies, facing pressure to grow as these larger providers spend big to get to dominance, have a tougher time keeping pace. They certainly don’t have the backing to fund losses required for growth.
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