The following Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the unaudited condensed consolidated financial statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q (the "Form 10-Q") and with the audited consolidated financial statements included in the Company's 2020 Form 10-K filed with the
SECon March 8, 2021. The following discussion contains forward-looking statements that reflect future plans, estimates, beliefs and expected performance. The forward-looking statements are dependent upon events, risks and uncertainties that may be outside of our control. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences are set forth in the section titled "Cautionary Statement Regarding Forward-Looking Statements". Dollar amounts in this discussion are expressed in thousands, except as otherwise noted.
Waitroperates an online ordering technology platform, providing delivery, carryout and dine-in options, connecting restaurants, drivers and diners in cities across the United States. Our strategy is to bring in the logistics infrastructure to underserved populations of restaurants, grocery stores and other merchants and establish strong market presence or leadership positions in the markets in which we operate. Our business has been built with a restaurant-first philosophy by providing differentiated and brand additive services to the restaurants on the Platforms. Our Platforms allow consumers to browse local restaurants and menus, track order and delivery status, and securely store previous orders for ease of use and convenience. These merchants benefit from the online Platforms through increased exposure to consumers for expanded business in the delivery market and carryout sales. On March 11, 2021, we completed the acquisition of Delivery Dudes, a third-party delivery business primarily serving the South Floridamarket. On August 25, 2021, we completed the acquisition of the Cape Payment Companies, which are in the business of facilitating the entry into merchant agreements by and between merchants and payment processing solution providers. See "Liquidity and Capital Resources" and Part I, Item 1, Note 3 - Business Combinations for additional details on the Company's 2021 acquisitions. We expanded the Company's market presence in the on-demand delivery service sector during the six months ended June 30, 2021through the acquisition of Delivery Dudes and the launch of new markets in numerous cities and towns and added a variety of national brands to the Platforms. While we continue to strengthen our market presence in the on-demand delivery sector, we are also focused on further supplementing our offerings and diversifying the Company beyond third-party food delivery. Our acquisition of the Cape Payment Companiesduring the three months ended September 30, 2021was an important step in pursuing our overall growth strategy, positioning the Company to offer a full suite of payment processing services to its current base of restaurants and other future merchants. Additionally, we are continuing to make progress on our comprehensive rebranding initiative to change our corporate name and visual identity, with the goal of better unifying our current and future service offerings. At September 30, 2021, we had over 25,000 restaurants, in over 1,000 cities, on the Platforms. Average Daily Orders for the three months ended September 30, 2021and 2020 were approximately 30,563 and 39,880, respectively, and revenue was $43,448and $52,734, respectively. For the nine months ended September 30, 2021and 2020, Average Daily Orders were 35,565 and 40,563, respectively, and revenue was $143,545and $157,483, respectively.
Impact of COVID-19 on our business
We have thus far been able to operate effectively during the COVID-19 pandemic. In response to economic hardships experienced during the COVID-19 pandemic, the
U.S.federal government rolled out stimulus payments in the first quarter of 2021 which we believe had a positive impact on order volumes during such period. However, we also believe the stimulus payments resulted in increased driver labor costs as we were faced with challenges in maintaining an appropriate level of driver supply. During the second and third quarters of 2021, we believe the impact of the stimulus payments on our order volumes began to decrease. While the widespread rollout of vaccines is leading to increased confidence that the impacts of the pandemic may be stabilizing, the spread of certain COVID variants and cases rising in areas with low vaccination rates provide continued uncertainty as to the potential short and long-term impacts of the pandemic on the global economy and on the Company's business, in particular. There remains uncertainty as to whether or not the pandemic will continue to impact diner behavior, and if so, in what manner. To the extent that the COVID-19 pandemic adversely impacts the Company's business, results of operations, liquidity or financial condition, it may also have the effect of heightening many of the other risks described in the risk factors in the Company's 2020 Form 10-K and this quarterly report on Form 10-Q for the three months ended September 30, 2021. Management continues to monitor the impact of the COVID-19 outbreak and the possible effects on its financial position, liquidity, operations, industry and workforce. 24
Significant accounting policies and critical accounting estimates
The preparation of financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period, along with related disclosures. We regularly assess these estimates and record changes to estimates in the period in which they become known. We base our estimates on historical experience and various other assumptions believed to be reasonable under the circumstances. Changes in the economic environment, financial markets, and any other parameters used in determining these estimates could cause actual results to differ from estimates. Significant estimates and judgements relied upon in preparing these condensed consolidated financial statements affect the following items:
â¢ estimates of losses incurred under our insurance policies with significant deductibles
or retention levels; â¢ loss exposure related to claims such as the Medical Contingency; â¢ income taxes; â¢ useful lives of tangible and intangible assets; â¢ equity compensation; â¢ contingencies; â¢ goodwill and other intangible assets, including the recoverability of intangible assets with finite lives and other long-lived assets; and â¢ fair value of assets acquired, liabilities assumed and contingent consideration as part of a business combination. Other than the changes disclosed in Part I, Item 1, Note 2 - Basis of Presentation and Summary of Significant Accounting Policies to our unaudited condensed consolidated financial statements in this Form 10-Q, there have been no material changes to our significant accounting policies and estimates described in the 2020 Form 10-K.
New accounting statements and accounting standards pending
See Part I, Item 1, Note 2 - Basis of Presentation and Summary of Significant Accounting Policies for a description of accounting standards adopted during the nine months ended
September 30, 2021. Also described in Note 2 are pending standards and their estimated effect on our unaudited condensed consolidated financial statements. Through year-end 2020, we qualified as an "emerging growth company" pursuant to the provisions of the JOBS Act. As an emerging growth company, we were able to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not "emerging growth companies", including not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act. Effective January 1, 2021, we are no longer an emerging growth company. Accordingly, for fiscal year 2021, we will be required to include an opinion from our independent registered public accounting firm on the effectiveness of our internal controls over financial reporting.
Factors affecting the comparability of our operating results
2021 Acquisitions. The Delivery Dudes Acquisition and
Cape Payment Acquisitionwere considered business combinations in accordance with ASC 805, and have been accounted for using the acquisition method. Under the acquisition method of accounting, total purchase consideration, acquired assets, assumed liabilities and contingent consideration are recorded based on their estimated fair values on the acquisition date. For each of these acquisitions, the excess of the fair value of purchase consideration over the fair value of the assets less liabilities acquired (and contingent consideration when applicable) has been recorded as goodwill on our unaudited condensed consolidated balance sheet as of September 30, 2021. The results of operations of Delivery Dudes and Cape Payment Companiesare included in our unaudited condensed consolidated financial statements beginning on the acquisition dates, March 11, 2021and August 25, 2021, respectively. In connection with the acquisitions, we incurred direct and incremental costs during the three and nine months ended September 30, 2021of approximately $171and $840, respectively, consisting of legal and professional fees, which are included in general and administrative expenses in the unaudited condensed consolidated statement of operations in such periods. Changes in Fee Structure. Our fee structure has changed at various times since our inception. We continue to review and update our current rate structure, as necessary, as we look to offer new and enhanced value-adding services to our restaurant partners. Any changes to our fee structure (whether externally to comply with governmental imposed caps or as a result of internal decision-making) could affect the comparability of our results of operations from period to period. Seasonality and Holidays. Our business tends to follow restaurant closure and diner behavior patterns with respect to demand of our service offering. In many of our markets, we have historically experienced variations in order frequency as a result of weather patterns, university summer breaks and other vacation periods. In addition, a significant number of restaurants tend to close on certain major holidays, including Thanksgiving, Christmas Eveand Christmas Day, among others. Further, diner activity may be impacted by unusually cold, rainy, or warm weather. Cold weather and rain typically drive increases in order volume, while unusually warm or 25
sunny weather typically drives decreases in orders. Furthermore, severe weather-related events such as snowstorms, ice storms, hurricanes and tropical storms have adverse effects on order volume, particularly if they cause property damage or utility interruptions to our restaurant partners. The COVID-19 pandemic, as well as the federal government's responses thereto, have had an impact on our typical seasonality trends and could impact future periods. Acquisition Pipeline. We continue to maintain and evaluate an active pipeline of potential acquisition targets and may pursue acquisitions in the future, both in the restaurant delivery space as well as other verticals, such as payments. These potential business acquisitions may impact the comparability of our results in future periods relative to prior periods.
Key factors affecting our performance
Efficient Market Expansion and Penetration. Revenue growth and any corresponding improved cash flow and profitability is dependent on successful restaurant, diner and driver penetration of our markets and achieving scale in current and future markets. Failure in achieving this scale could adversely affect our working capital, which in turn, could slow our growth plans. We typically target markets that we believe could achieve sustainable positive operating cash flows and profits, improve efficiency, and appropriately leverage the scale of our advertising, marketing, research and development, and other corporate resources. Our financial condition, cash flows, and results of operations depend, in significant part, on our ability to achieve and sustain our target profitability thresholds in our markets.
Waitr's Restaurant, Diner and Driver Network. A significant part of our strategy is our ability to successfully expand our network of restaurants, diners and drivers using the Platforms. If we fail to retain existing or add new restaurants, diners and drivers, our revenue and overall financial results may be adversely affected. Key Business Metrics Defined below are the key business metrics that we use to analyze our business performance, determine financial forecasts, and help develop long-term strategic plans: Active Diners. We count Active Diners as the number of diner accounts from which an order has been successfully completed through the Platforms during the past twelve months (as of the end of the relevant period) and consider Active Diners an important metric because the number of diners using our Platforms is a key revenue driver and a valuable measure of the size of our engaged diner base. Average Daily Orders. We calculate Average Daily Orders as the number of completed orders during the period divided by the number of days in that period, including holidays. Average Daily Orders is an important metric for us because the number of orders processed on our Platforms is a key revenue driver and, in conjunction with the number of Active Diners, a valuable measure of diner activity on our Platforms for a given period. Gross Food Sales. We calculate Gross Food Sales as the total food and beverage sales, sales taxes, gratuities, and diner fees processed through the Platforms during a given period. Gross Food Sales are different than the order value upon which we charge our fee to restaurants, which excludes sales taxes, gratuities and diner fees. Gratuities, which are not included in our net revenue, are determined by diners and may vary from order to order. Gross Food Sales is an important metric for us because the total volume of food sales transacted through our Platforms is a key revenue driver. Average Order Size. We calculate Average Order Size as Gross Food Sales for a given period divided by the number of completed orders during the same period. Average Order Size is an important metric for us because the average value of gross food sales on our Platforms is a key revenue driver. Three Months Ended September 30, Nine Months Ended September 30, Key Business Metrics(1) 2021 2020 2021 2020 Active Diners (as of period end) 1,769,999 2,005,760 1,769,999 2,005,760 Average Daily Orders 30,563 39,880 35,565 40,563
Gross food sales (in thousands of dollars) $ 128,534
Average order size (in dollars)
$ 45.71 $ 41.85 $ 44.65 $ 41.58 (1) The key business metrics include the operations of Delivery Dudes beginning on the acquisition date,
March 11, 2021. 26
TABLE_CONTENTS Basis of Presentation Revenue We generate revenue primarily when diners place an order on one of the Platforms. We recognize revenue from diner orders when orders are delivered. Our revenue consists primarily of net Transaction Fees. Additionally, effective
August 25, 2021, we generate revenue by facilitating the entry into merchant agreements by and between merchants and payment processing solution providers. Cost and Expenses: Operations and Support. Operations and support expense consists primarily of salaries, benefits, stock-based compensation, and bonuses for employees engaged in operations and customer service, as well as market managers, restaurant onboarding, and driver logistics personnel, and payments to independent contractor drivers for delivery services. Operations and support expense also includes payment processing costs incurred on customer orders and the cost of software and related services providing support for diners, restaurants and drivers.
Sales and Marketing. Selling and marketing expenses primarily include salaries, commissions, benefits, stock-based compensation, and bonuses for staff supporting sales and marketing efforts, including those responsible for restaurant business development, marketing employees and contractors; and third party marketing costs such as social media and research. engine marketing, online display, sponsorships and print marketing.
Research and Development. Research and development expense consists primarily of salaries, benefits, stock-based compensation and bonuses for employees and contractors engaged in the design, development, maintenance and testing of the Platforms. This expense also includes such items as software subscriptions that are necessary for the upkeep and maintenance of the Platforms.
General and administrative. General and administrative expenses mainly include salaries, benefits, stock-based compensation and bonuses for executives, finance and accounting, human resources and other administrative employees as well as legal, accounting and other services. other professional third party services, insurance (including indemnities, motor vehicle liability and general liability), travel, rental of facilities and other corporate overhead costs.
Depreciation and Amortization. Depreciation and amortization expense consists primarily of amortization of capitalized costs for software development, trademarks and customer relationships and depreciation of leasehold improvements and equipment, primarily tablets deployed in restaurants. We do not allocate depreciation and amortization expense to other line items. Other Expenses (Income) and Losses (Gains), Net. Other expenses (income) and losses (gains), net, includes interest expense on outstanding debt, as well as any other items not considered to be incurred in the normal operations of the business, including the change in estimate for the Medical Contingency.
Results of operations
The following table presents our operating results for the periods indicated, the items being presented in thousands of dollars and as a percentage of our revenues:
TABLE_CONTENTS Three Months Ended September 30, Nine Months Ended September 30, (in thousands, except % of % of % of % of percentages(1)) 2021 Revenue 2020 Revenue 2021 Revenue 2020 Revenue Revenue
$ 43,448100 % $ 52,734100 % $ 143,545100 % $ 157,483100 % Costs and expenses: Operations and support 25,043 58 % 27,409 52 % 86,654 60 % 84,321 54 % Sales and marketing 4,965 11 % 3,288 6 % 13,481 9 % 8,854 6 % Research and development 1,310 3 % 820 2 % 3,163 2 % 3,457 2 % General and administrative 10,843 25 % 11,380 22 % 33,534 23 % 32,252 20 % Depreciation and amortization 3,070 7 % 2,103 4 % 8,952 6 % 6,242 4 % Intangible and other asset impairments 186 0 % - 0 % 186 0 % 29 0 % Loss on disposal of assets 11 0 % 4 0 % 170 0 % 15 0 % Total costs and expenses 45,428 105 % 45,004 85 % 146,140 102 % 135,170 86 % Income (loss) from operations (1,980 ) (5 %) 7,730 15 % (2,595 ) (2 %) 22,313 14 % Other expenses (income) and losses (gains), net: Interest expense 1,751 4 % 2,117 4 % 5,333 4 % 7,521 5 % Interest income - 0 % (14 ) 0 % - 0 % (95 ) 0 % Other (income) expense (16,006 ) (37 %) 965 2 % (10,907 ) (8 %) 1,640 1 % Net income before income taxes 12,275 28 % 4,662 9 % 2,979 2 % 13,247 8 % Income tax expense 25 0 % 18 0 % 82 0 % 52 0 % Net income $ 12,25028 % $ 4,6449 % $ 2,8972 % $ 13,1958 % ________________
(1) Percentages may not work due to rounding.
The following section includes a discussion of our results of operations for the three and nine months ended
September 30, 2021and the three and nine months ended September 30, 2020. The results of operations of Delivery Dudes and Cape Payment Companiesare included in our unaudited condensed consolidated financial statements beginning on the acquisition dates of March 11, 2021and August 25, 2021, respectively (see Part I, Item 1, Note 3 - Business Combinations). Revenue Three Months Ended Nine Months Ended September 30, Percentage September 30, Percentage 2021 2020 Change 2021 2020 Change (dollars in thousands) (dollars in thousands) Revenue $ 43,448 $ 52,734(18 %) $ 143,545 $ 157,483(9 %) Revenue decreased for the three and nine months ended September 30, 2021compared to the three and nine months ended September 30, 2020, primarily as a result of decreased order volumes. Partially offsetting the impact of decreased order volumes was an increase in the Average Order Size in such periods as well as revenue from the Cape Payment Companiesand Delivery Dudes acquisitions, beginning on their respective acquisition dates. The Average Order Size was $45.71for the three months ended September 30, 2021, compared to $41.85for the three months ended September 30, 2020, an improvement of 9%. The Average Order Size increased to $44.65for the nine months ended September 30, 2021, from $41.58for the nine months ended September 30, 2020, an improvement of 7%. Operations and Support Three Months Ended Nine Months Ended September 30, Percentage September 30, Percentage 2021 2020 Change 2021 2020 Change (dollars in thousands) (dollars in thousands) Operations and support $ 25,043 $ 27,409(9 %) $ 86,654 $ 84,3213 % As a percentage of revenue 58 % 52 % 60 % 54 % Operations and support expenses decreased in dollar terms in the three months ended September 30, 2021compared to the three months ended September 30, 2020, primarily due to lower driver operations costs. During the nine months ended September 30, 2021, operations and support expenses increased slightly from the nine months ended September 30, 2020, primarily due to the Company opening more markets and serving more markets in the 2021 period as compared to 2020 as well as the inclusion of the Delivery Dudes operations in our consolidated results. As a percentage of revenue, operations and support expenses were higher in the three and nine months ended September 30, 2021compared to the 2020 periods as we strategically invested in our customer, driver and restaurant support operations. 28
TABLE_CONTENTS Sales and Marketing Three Months Ended September 30, Percentage Nine Months Ended September 30, Percentage 2021 2020 Change 2021 2020 Change (dollars in thousands) (dollars in thousands) Sales and marketing
$ 4,965 $ 3,28851 % $ 13,481$ 8,854 52 % As a percentage of revenue 11 % 6 % 9 % 6 % Sales and marketing expense increased in dollar terms and as a percentage of revenue in the three and nine months ended September 30, 2021compared to the three and nine months ended September 30, 2020, primarily attributable to increased digital advertising as we further invested in market expansion as well as solidifying our presence in existing territories. Additionally, sales and marketing expense during the three months ended September 30, 2021includes referral agent commission expense related to the Cape Payment Companiesacquisition. Research and Development Three Months Ended Nine Months Ended September 30, Percentage September 30, Percentage 2021 2020 Change 2021 2020 Change (dollars in thousands) (dollars in thousands)
Research and development
$ 1,310 $ 82060 % $ 3,163 $ 3,457(9 %) As a percentage of revenue 3 % 2 % 2 % 2 % Research and development expense increased in dollar terms in the three months ended September 30, 2021, compared to the three months ended September 30, 2020, primarily due to the hiring of product and engineering personnel to further refine our Platforms. During the nine months ended September 30, 2021, research and development expense decreased in dollar terms compared to the nine months ended September 30, 2020, primarily due to the capitalization of increased software development costs as further product features and functionality were incorporated into the Platforms. Research and development expense as a percentage of revenue remained relatively flat for the three and nine months ended September 30, 2021in relation to the comparable 2020 periods. General and Administrative Three Months Ended Nine Months Ended September 30, Percentage September 30, Percentage 2021 2020 Change 2021 2020 Change (dollars in thousands) (dollars in thousands) General and administrative $ 10,843 $ 11,380(5 %) $ 33,534 $ 32,2524 % As a percentage of revenue 25 % 22 % 23 % 20 % General and administrative expense decreased in dollar terms in the three months ended September 30, 2021, compared to the three months ended September 30, 2020, primarily due to decreased insurance expense, partially offset by increased recruiting costs. During the nine months ended September 30, 2021, general and administrative expense increased in dollar terms compared to the nine months ended September 30, 2020, primarily due to increased stock-based compensation expense and recruiting costs, partially offset by decreased insurance expense and payroll processing fees. As a percentage of revenue, general and administrative expenses increased slightly in the 2021 periods compared to the 2020 periods.
Depreciation and amortization
Three Months Ended Nine Months Ended September 30, Percentage September 30, Percentage 2021 2020 Change 2021 2020 Change (dollars in thousands) (dollars in thousands) Depreciation and amortization
$ 3,070 $ 2,10346 % $ 8,952 $ 6,24243 % As a percentage of revenue 7 % 4 % 6 % 4 % Depreciation and amortization expense increased in dollar terms and as a percentage of revenue in the three and nine months ended September 30, 2021compared to the three and nine months ended September 30, 2020, driven by an increase in depreciation expense related to computer tablets for restaurants on the Platforms and amortization expense on intangible assets acquired in the Delivery Dudes Acquisition and Cape Payment Companies Acquisition. 29
Other charges (income) and losses (gains), net
Three Months Ended September 30, Percentage Nine Months Ended September 30, Percentage 2021 2020 Change 2021 2020 Change (dollars in thousands) (dollars in thousands) Other expenses (income) and losses (gains), net
$ (14,255 ) $ 3,068N/A $ (5,574 )$ 9,066 N/A As a percentage of revenue -33 % 6 % -4 % 6 % Other expenses (income) and losses (gains), net for the three months ended September 30, 2021primarily consisted of $16,715of income related to a change in estimate of the Medical Contingency (see Note 9 - Commitments and Contingent Liabilities) and $1,694of interest expense associated with the Term Loan and Notes. For the three months ended September 30, 2020, other expenses (income) and losses (gains), net primarily consisted of $2,088of interest expense associated with the Term Loan and Notes and a $1,023stock-based compensation expense accrual related to a legal contingency. For the nine months ended September 30, 2021, other expenses (income) and losses (gains), net primarily consisted of $16,715of income from the change in estimate of the Medical Contingency, $4,700of other expense for a legal settlement and $5,214of interest expense associated with the Term Loan and Notes. For the nine months ended September 30, 2020, other expenses (income) and losses (gains), net primarily consisted of $7,413of interest expense associated with the Term Loan and Notes. Interest expense decreased in 2021 primarily due to a reduction in outstanding debt, as well as a reduction of the interest rates by 200 basis points on the Term Loan and Notes for a one-year period beginning on August 3, 2020, in connection with amendments to the loan agreements governing the Term Loan and Notes. Effective August 3, 2021, the interest rates reverted back to the rates in effect prior to the amendments.
Income tax expense
Income tax expense for the three months ended
September 30, 2021and 2020 was $25and $18, respectively, and $82and $52for the nine months ended September 30, 2021and 2020, respectively. The Company's income tax expense is entirely related to state taxes in various jurisdictions. We have historically generated net operating losses; therefore, a valuation allowance has been recorded on our net deferred tax assets.
Liquidity and capital resources
September 30, 2021, we had cash on hand of $43,502. Our primary sources of liquidity have recently been cash flow from operations and proceeds from the issuance of stock in fiscal 2021 and 2020. During the nine months ended September 30, 2021, we made investments in our business with numerous new market launches and the Delivery Dudes Acquisition, expanding our scope of delivery in multiple small and medium sized markets. Additionally, in August 2021, we acquired the Cape Payment Companies, a key step in pursuing our overall growth strategy to offer a full suite of payment processing services to our current base of merchants. The Delivery Dudes Acquisition included $11,500in cash, subject to certain purchase price adjustments, and 3,562,577 shares of the Company's common stock. The Cape Payment Acquisitionincluded $12,000in cash, subject to certain purchase price adjustments, 2,564,103 shares of the Company's common stock and an earnout provision valued at $1,686as of the acquisition date. In August 2021, we entered into a second amended and restated open market sale agreement with respect to our ATM Program, pursuant to which the Company may offer and sell shares of its common stock having an aggregate offering price of up to $30,000(see Part I, Item 1, Note 11 - Stockholders' Equity). We sold 6,683,823 shares of common stock during the three months ended September 30, 2021for net proceeds of approximately $7,900. As of November 2, 2021, we have approximately $21,965available under the ATM Program. Pursuant to an amendment to the Credit Agreement in the first quarter of 2021, the Company made a $15,000prepayment on the Term Loan on March 16, 2021. The aggregate principal amount of outstanding long-term debt totaled $84,511as of September 30, 2021, consisting of $35,007for the Term Loan and $49,504of Notes. As of September 30, 2021, the Company had $2,331of outstanding short-term loans for insurance premium financing. We currently expect that our cash on hand and estimated cash flow from operations will be sufficient to meet our working capital needs for at least the next twelve months; however, there can be no assurance that we will generate cash flow at the levels we anticipate. We may use cash on hand to repay additional debt or to acquire or invest in complementary businesses, products, services and technologies. We continually evaluate additional opportunities to strengthen our liquidity position, fund growth initiatives and/or combine with other businesses by issuing equity or equity-linked securities (in both public or private offerings) and/or incurring 30
additional debt. However, market conditions, future financial performance or other factors may make it difficult for us to access sources of capital, on favorable terms or at all, should we determine in the future to raise additional funds. We are continuously reviewing our liquidity and anticipated working capital needs, particularly in light of the uncertainty created by the COVID-19 pandemic. Thus far, we have been able to operate effectively during the pandemic, however, the potential impacts and duration of the COVID-19 pandemic (including those related to variants) on the economy and on our business, in particular, is difficult to predict.
Our main capital expenditures relate to the purchase of tablets for restaurants on the Platforms and investments in the development of the Platforms, which are expected to increase as we continue to grow our business. Our future capital requirements and the adequacy of available funds will depend on many factors, including those set forth under "Risk Factors" in our 2020 Form 10-K and subsequent filings with the
SEC, including this quarterly report on Form 10-Q for the three months ended September 30, 2021.
The following table sets forth our summary cash flow information for the periods indicated: Nine Months Ended September 30, (in thousands) 2021 2020 Net cash (used in) provided by operating activities $ (575 )
$ 29,586Net cash used in investing activities (32,563 ) (3,629 ) Net cash (used in) provided by financing activities (8,066 ) 21,862
Cash flow (used in) provided by operating activities
For the nine months ended
September 30, 2021, net cash used in operating activities was $575, compared to net cash provided by operating activities of $29,586for the nine months ended September 30, 2020. The decrease in cash flows from operating activities in the nine months ended September 30, 2021from the comparable 2020 period was primarily driven by a decrease in revenue and increased sales and marketing expenses, partially offset by changes in operating assets and liabilities. During the nine months ended September 30, 2021, the net change in operating assets and liabilities decreased net cash provided by operating activities by $21,421, primarily consisting of $16,715related to the change in estimate of the Medical Contingency and a decrease in accrued payroll of $3,389. During the nine months ended September 30, 2020, the net change in operating assets and liabilities increased net cash provided by operating activities by $1,505.
Cash flows used in investing activities
For the nine months ended
September 30, 2021, net cash used in investing activities consisted primarily of $25,435for the acquisitions of Delivery Dudes and Cape Payment Companiesand related intangible assets, and $6,432of costs for internally developed software. For the nine months ended September 30, 2020, net cash used in investing activities consisted primarily of $2,387of costs for internally developed software.
Cash flows (used in) provided by financing activities
For the nine months ended
September 30, 2021, net cash used in financing activities consisted primarily of a $14,472principal prepayment on the Term Loan and $5,605of payments on short-term loans for insurance premium financing, partially offset by $5,209of proceeds from a short-term loan for insurance financing and $7,900of net proceeds from the sale of common stock under the Company's ATM Program. For the nine months ended September 30, 2020, net cash provided by financing activities included net proceeds from the issuance of common stock of $47,574and $1,906of proceeds from short-term loans for insurance premium financing, less $4,336of payments on short-term loans for insurance premium financing.
Off-balance sheet provisions
We had no off-balance sheet arrangements at
Caution Regarding Forward-Looking Statements
This Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the âSecurities Actâ), and Section 21E of the Exchange Act. All statements, other than historical or current statements
fact, that reflect future plans, estimates, beliefs or expected performance are forward-looking statements. In some cases, you can identify forward-looking statements because they are preceded by, followed by or include words such as "may," "can," "should," "will," "estimate," "plan," "project," "forecast," "intend," "expect," "anticipate," "believe," "seek," "target" or similar expressions. These forward-looking statements are based on information available as of the date of this Form 10-Q and our management's current expectations, forecasts and assumptions, and involve a number of judgments, risks and uncertainties, including the following factors, in addition to the factors discussed elsewhere in this Form 10-Q, and the factors discussed in our 2020 Form 10-K and subsequent filings with the
SEC(Part I, Item 1A, Risk Factors):
â¢ failure to keep existing guests or to add new guests or our guests
decreasing their number of orders or order sizes on the Platforms; â¢ declines in our delivery service levels or lack of increases in business
â¢ loss of restaurants on the Platforms, in particular due to changes in our
fee structure; â¢ inability to sustain profitability in the future;
â¢ risks related to our relationship with the independent contractor
drivers, including shortage of available drivers, loss of range
sub-contractors, unfavorable conditions affecting independent sub-contractors
drivers, and possible increases in driver compensation; â¢ inability to maintain and enhance our brands, including our comprehensive rebranding initiative to change our corporate name and
visual identity, or the occurrence of events damaging to our reputation and
brands, including adverse media coverage;
â¢ seasonality and the impact of bad weather, including
hurricanes, tropical cyclones, severe snow and / or ice storms in areas not
accustomed to them and other instances of severe weather and other natural phenomena; â¢ inability to manage growth and meet demand; â¢ inability to successfully improve the experience of restaurants and diners in a cost-effective manner;
â¢ changes to our products or operating systems, hardware, networks or
standards that our operations depend on; â¢ dependence of our business on our ability to maintain and scale our technical infrastructure;
â¢ personal data, Internet security breaches or loss of data provided by
dinners or restaurants on our Platforms;
â¢ failure to comply with applicable law or standards if we become a
payment processor at some point in the future; â¢ risks related to the credit card and debit card payments we accept; â¢ reliance on third-party vendors to provide products and services;
â¢ significant competition in technological innovation and distribution and
inability to continue to innovate and provide desirable technology for
diners and restaurants; â¢ failure to pursue and successfully make additional acquisitions; â¢ failure to comply with covenants in the agreements governing our debt; â¢ additional impairments of the carrying amounts of goodwill or other
assets with indefinite lifespan;
â¢ dependence on search engines, display advertising, social networks, emails,
content-based online advertising and other online sources to attract diners to the Platforms;
â¢ loss of senior management or key operating personnel and dependence on
skilled personnel to grow and operate our business; â¢ inability to successfully integrate and maintain acquired businesses; â¢ failure to protect our intellectual property; â¢ patent lawsuits and other intellectual property rights claims; â¢ potential liability and expenses for existing and future legal claims, including claims that may exceed insurance coverage or are not insured against; â¢ our use of open source software; â¢ insufficient capital to pursue business objectives and respond to business opportunities, challenges or unforeseen circumstances;
â¢ the unionization of our employees, the extent of which increases if our
drivers of independent contractors have already been reclassified as employees; and
â¢ failure to maintain an effective system of disclosure controls and internal control over financial reporting.
â¢ the highly competitive and fragmented nature of our industry;
â¢ reliance on discretionary spending models in areas where the
restaurants on our Platforms operate and in the economy at large; â¢ general economic and business risks affecting our industry that are largely beyond our control;
â¢ the COVID-19 pandemic, or a similar threat to public health that could
significantly affect our activities, our financial position and the results of
â¢ the establishment of fee caps by the jurisdictions in the areas where we operate;
â¢ failure of restaurants in our networks to maintain their service levels; â¢ slower than anticipated growth in the use of the Internet via websites,
mobile devices and other platforms; â¢ federal and state laws and regulations regarding privacy, data protection, and other matters affecting our business; â¢ the potential for increased misclassification claims following the change to the
â¢ risks related to our relationship with the independent contractor
drivers, including shortages of available drivers and possible increases
in the remuneration of drivers;
â¢ failure to meet all applicable Nasdaq listing requirements
and the risks associated with the consequent delisting of our ordinary shares from the
Nasdaq, which could adversely affect the market liquidity of our common stock and could decrease the market price of our common stock significantly; and
â¢ risks associated with the cannabis industry in relation to the company
operations of the
These risks and uncertainties may be outside of our control. Forward-looking statements should not be relied upon as representing our views as of any subsequent date. We do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. Our actual results could differ materially from those discussed in these forward-looking statements.
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