Food delivery service Grubhub (GRUB) is recovering slightly today after being down more than 12.5% in trading yesterday following its first-quarter 2020 results. Though the pandemic made home delivery soar across the industry, Grubhub posted a net loss of $33.4 million for the quarter, a sharp drop from the $6.9 million in net income it reported in Q1 2019.
According to its earnings results, revenue actually rose 12% year over year, climbing to $362.9 million compared to last year's $323.7 million in Q1. The earnings slightly beat FactSet analyst consensus estimates, which pegged the company's likely revenue at $358.1 million, and exceeded Grubhub's own $360 million forecast.
The source of Grubhub's net loss therefore wasn't a decline in revenue, which actually grew nearly $40 million year over year, but its much higher expenses. Its total costs jolted upward 29.8%, reaching $408.8 million compared to Q1 2019's $314.9 million.
Cascend Securities research indicates the coronavirus outbreak caused a 30% spike in March deliveries. However, delivery growth also escalated the "operations and support" costs representing the single biggest chunk of Grubhub's expenses. As the company noted in its May 6 letter to shareholders, these costs amounted to "$215 million, an increase of 33% year-over-year, driven by the disproportionate increase in Grubhub-delivered orders."
While Grubhub's net loss partly resulted from the costs of delivering considerably more food, the company also noted their "corporate business, which relies almost entirely on food being ordered to offices, was dramatically impacted as virtually all of our clients shifted to work-from-home models." COVID-19's effects, additionally, have been particularly ferocious in New York City, which Grubhub describes as its "largest consumer market."