Waitr Holdings Inc. (WTRH): Struggling to Regain Footing Amidst Declining Order Volumes and Mounting Debt

Published on September 24, 2024 | Ticker: WTRH

Waitr Holdings Inc. (WTRH) operates an online ordering technology platform that connects restaurants, merchants, and diners in certain cities across the United States. The company has faced significant challenges in recent years, with declining order volumes, mounting debt, and recurring net losses that have raised substantial doubt about its ability to continue as a going concern.

Financials

Financial Performance Deterioration

Waitr's financial performance has deteriorated significantly in recent years. The company reported annual revenue of $111,801,000 in the most recent fiscal year, down from $258,136,000 just two years prior. This decline was driven primarily by a decrease in the number of orders processed on the company's platform, with Average Daily Orders falling from 18,346 in the first nine months of 2022 to just 6,709 in the same period of 2023.

The company's bottom line has also suffered, with annual net income of -$206,789,000 and annual operating cash flow of -$28,716,000. Free cash flow for the year was -$29,000,000, further exacerbating the company's liquidity challenges.

Quarterly Performance Trends

Waitr's quarterly performance has followed a similar downward trajectory. In the third quarter of 2023, the company reported revenue of $11,480,000, down 54% from the $25,141,000 generated in the same period of 2022. This decline was driven by a 68% decrease in order volumes, with Average Daily Orders falling from 14,156 in Q3 2022 to just 4,557 in Q3 2023.

The company's profitability also deteriorated, with a net loss of $5,206,000 in Q3 2023 compared to a net loss of $73,462,000 in the prior-year quarter. Operating cash flow was -$6,022,000 for the first nine months of 2023, compared to -$21,701,000 in the same period of 2022.

Liquidity

Liquidity Concerns and Debt Obligations

Waitr's declining financial performance has raised substantial doubt about the company's ability to continue as a going concern. As of September 30, 2023, the company had $4,654,000 in cash on hand, down from $12,066,000 at the end of 2022. This cash position is insufficient to meet the company's upcoming debt obligations, which include $57,089,000 in short-term debt maturing in May 2024.

The company has been exploring various options to raise additional capital and reduce costs, including implementing cost-saving initiatives and evaluating the potential sale or issuance of debt or equity securities. However, there can be no assurance that these efforts will be successful, and the company's ability to continue as a going concern remains in doubt.

Business Overview

Segment Performance

Waitr operates through two reportable segments: Online Ordering Services and Third-Party Payment Processing Referral Services. The Online Ordering Services segment, which includes the company's core technology platform for online ordering, has been the primary driver of the company's revenue decline, with segment revenue falling from $83,215,000 in the first nine months of 2022 to $33,916,000 in the same period of 2023.

In contrast, the Third-Party Payment Processing Referral Services segment, which facilitates access to third-party payment processing solutions for restaurants and other merchants, has seen more stable performance, with segment revenue increasing slightly from $8,137,000 in the first nine months of 2022 to $8,219,000 in the same period of 2023.

Competitive Landscape and Industry Trends

Waitr operates in a highly competitive and fragmented industry, facing competition from a variety of online food ordering and delivery platforms, as well as traditional restaurant delivery services. The company's ability to maintain and grow its customer base, both on the restaurant and diner sides, is critical to its long-term success.

The industry has also been impacted by broader macroeconomic trends, such as high inflation, rising interest rates, and changes in consumer spending patterns. These factors have contributed to the decline in order volumes observed across the industry, putting pressure on Waitr and its competitors.

Rebranding and Strategic Initiatives

In an effort to revitalize its brand and improve its competitive positioning, Waitr has undertaken a comprehensive rebranding initiative, changing its visual identity and transitioning to the ASAP.com brand. The company has also sought to expand its ecosystem of restaurants, merchants, and diners, and has entered the business of facilitating access to third-party payment processing services through the acquisition of the Cape Payment Companies in 2021.

However, the success of these initiatives has been limited, as the company continues to struggle with declining order volumes and profitability. The company's ability to effectively execute on its strategic plans and adapt to the evolving competitive landscape will be critical to its long-term viability.

Risks and Challenges

Waitr faces a number of significant risks and uncertainties that threaten its ability to return to profitability and long-term sustainability. These include:

Continued declines in order volumes and revenue

Inability to raise additional capital or refinance existing debt obligations
Failure to effectively execute on strategic initiatives and adapt to industry changes
Exposure to macroeconomic factors, such as inflation and changes in consumer spending
Potential legal and regulatory challenges, including fee caps imposed by local jurisdictions
Reliance on third-party vendors and service providers
Challenges in attracting and retaining key personnel

Outlook

Waitr's future remains uncertain, as the company grapples with declining order volumes, mounting debt, and recurring net losses. The company's ability to secure additional financing, reduce costs, and effectively execute on its strategic initiatives will be critical to its long-term survival.

While the company's Third-Party Payment Processing Referral Services segment has shown some stability, the core Online Ordering Services segment continues to face significant headwinds. Waitr's management will need to demonstrate a clear path to profitability and sustainable growth if the company is to regain the confidence of investors and secure the necessary resources to weather the current challenges.

Conclusion

Overall, Waitr's financial and operational performance has deteriorated significantly in recent years, and the company's future remains highly uncertain. Investors and stakeholders will need to closely monitor the company's progress in addressing its liquidity and strategic challenges in the months and years ahead.

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