Shares of Waitr Holdings (WTRH 0.27%) were spiking higher on Monday morning, after the company "pre-announced" partial results for its second quarter. The stock was fluctuating wildly, up as much as 28%. But as of 11 a.m. EDT today, it was "only" up 20%.
The surprise news for Q2 is that Waitr Holdings is profitable, something elusive for many of its food-delivery peers.
Waitr Holdings was only founded in 2013, so this is still a young company trying to profit from the growing trend in food delivery. As restaurants shifted to an entirely to-go operating model because of the coronavirus, third-party technology platforms like Waitr saw surging adoption.
Last year, Waitr Holdings revenue in the second quarter was $51.3 million. This year, revenue in Q2 was $60 million, good for 17% year-over-year growth. That's good, but maybe not as much as one might expect. And it's probably not enough to explain the stock's better than 1,000% return in 2020.
I suspect investors are celebrating Waitr's profitability. The company expects Q2 net income of no less than $8 million. For perspective, it lost $25 million in Q2 last year. That's an impressive turnaround.
Prioritizing bottom-line growth is important for Waitr Holdings. Prior to the pandemic, the company was struggling. First-quarter revenue was down 8% from the previous year, and it posted a loss of $2 million. It still had plenty of cash then with $39 million, but it was also carrying a heavy long-term debt burden of $126 million. That's massive for a small-cap stock like Waitr.
With its upbeat Q2, Waitr Holdings has increased its cash on hand to $66 million, and it managed to address some of its debt. It will need to continue making fiscally prudent moves and hope that consumers continue using its platform even once dine-out restaurant activity returns to normal.