Just Eat Takeaway reported a goodwill impairment of about 3 billion euros ($3.04 billion), during the first half of the year related to its 2021 Grubhub acquisition. The impairment was due to the reduction in sector valuation, increased interest rates and equity volatility, rather than the impact of Grubhub’s operational performance JET CFO Brent Wissink told investors Wednesday. The company, however, continues to explore the partial or full sale of Grubhub, which JET acquired for over $7 billion.
In the meantime, the JET entered into a commercial agreement with Amazon in July to provide Prime members with a free year of Grubhub+ in exchange for shares in Grubhub. So far, the third-party delivery platform has seen an increase in orders since the agreement and cash flow will be accretive for Grubhub starting in 2023, JET CEO Jitse Groen told investors.
Despite these gains, orders were down in North America by 10%, however, as ordering returned to pre-pandemic levels, but revenue increased 4%, according to the earnings presentation.
“It would surprise me a lot if you [d]on't see anything over the course of the next year in terms of a better trajectory for this business,” Groen said. “So while [the Amazon partnership] doesn't address all the issues that we face in the U.S., it does address a growth and market share issue. And to what extent that will be — we were only three weeks in. So it’s early days, but it looks pretty good.”
The Amazon deal will replace some of JET’s marketing spend, which will lead to an increase in efficiencies and is one of the reasons why JET expects its U.S. EBITDA to be slightly higher as a “consequence, but not a direct link,” Groen said. According to an earnings release, JET’s marketing expenses, increased 40% to about $420 million (414 million euros) during the first half of the year primarily due to its Grubhub acquisition, for example.
Another positive for JET’s U.S. business is that fee caps also have largely expired or been amended in most places, he said. San Francisco amended its fee cap last week allowing the 15% cap to go up depending on services requested by restaurants. That change will go into effect Jan. 31, 2023. The company will continue to pursue legislative and legal solutions for the remaining fee cap in New York City, Groen said.
”We are very optimistic about the developments around these fee caps in the U.S.,” Groen said.
When JET originally acquired Grubhub, it planned to invest in a rollout of delivery predominately in the suburbs of larger cities, but delivery fee caps ate up much of the revenue needed to grow those markets. Fee caps in the U.S. and Canada JET negatively impacted adjusted EBITDA by $74 million (73 million euros), according to the earnings release. However, its North American business was EBITDA positive in the second quarter, which Groen clarified includes the U.S. business.