GrubHub Inc (NYSE: GRUB) Q4 2019 Earnings Call Transcript

GrubHub Inc  (NYSE: GRUB) Q4 2019 Earnings Conference Call

February 06, 2020

Corporate Participants:

Adam Patnaude — Head of Corporate Development and Investor Relations

Matt Maloney — Chief Executive Officer

Adam DeWitt — President and Chief Financial Officer

Analysts:

Stephen Ju — Credit Suisse — Analyst

Brian Nowak — Morgan Stanley — Analyst

Heath Terry — Goldman Sachs — Analyst

Ron Josey — JMP Securities — Analyst

John Egbert — Stifel Nicolaus — Analyst

Ralph Schackart — William Blair — Analyst

Brad Erickson — Needham & Company — Analyst

Maria Ripps — Canaccord Genuity Inc. — Analyst

Presentation:

Operator

Ladies and gentlemen, thank you for standing by and welcome to the Grubhub Q4 2019 Earnings Conference Call.

[Operator Instructions]

I would now like to hand the conference over to Adam Patnaude, Head of Corporate Development and Investor Relations. You may begin your conference.

Adam Patnaude — Head of Corporate Development and Investor Relations

Good morning, everyone. Welcome to Grubhub’s fourth quarter and full year 2019 earnings question and answer call. I’m Adam Patnaude, Head of Investor Relations. Joining me today to discuss Grubhub’s results are our Founder and CEO, Matt Maloney, and our President and CFO, Adam DeWitt.

This conference call is available via webcast on the Investor Relations section of our website at investors.grubhub.com.

Today, we’ll be answering questions about our fourth quarter and full-year results, which are contained in our press release and also discussed in our shareholder letter. Both the press release and shareholder letter have been attached as exhibits to our current report on Form 8-K filed with the SEC and are posted on the Investor Relations section of our website.

I’d like to take this opportunity to remind you that, during this call, we will make forward-looking statements, including guidance as to our future performance. These forward-looking statements are made in reliance on the Safe Harbor provision of the Securities and Exchange Act of 1934 as amended and are subject to substantial risks and uncertainties that may cause actual results to differ materially from those in these forward-looking statements.

For additional information concerning factors that could affect our financial results or cause actual results to differ materially, please refer to the cautionary statements included in our filings with the SEC, including the Risk Factors section of our annual report on Form 10-K for the fiscal year ended December 31 2018 filed with the SEC on February 20, 2019, our quarterly reports on Form 10-Q and our annual report on Form 10-K for the fiscal year ended December 31 2019 that will be filed with the SEC. Our SEC filings are available electronically on our Investors website at investors.grubhub.com or the EDGAR portion of the SEC’s website at www.sec.gov.

Also, I’d like to remind you that, during the course of this call, we will discuss non-GAAP financial measures in talking about our performance. Reconciliations to the most directly comparable GAAP financial measures are provided in the tables in the press release.

Finally, as a reminder, all of our key business metrics exclude transactions where Grubhub only provides technology or fulfillment services.

And now, I would like to hand the call over to Matt Maloney for a few opening comments. Matt?

Matt Maloney — Chief Executive Officer

Thank you, Adam. And thank you all for joining this morning’s call and we hope everyone had a chance to read the shareholder letter we posted yesterday afternoon, as well as our press release. As discussed in both, we are pleased with the quarter and the progress we’re making on our strategic initiatives, particularly against the backdrop of a continued competitive environment.

Before Adam and I take your questions, we wanted to address the recent rumors regarding a potential sale process for Grubhub upfront, so we can spend the rest of the call discussing our business, our results and our outlook. As previously stated, the rumor that Grubhub was engaged in the sales process was and is not true. While we typically do not comment on speculation, the breadth and conclusions of the media coverage of this particular rumor forced us, in this case, to set the record straight. We remain squarely focused on delivering shareholder value.

We’ve been saying since we’ve been public that industry consolidation could make sense, and like any responsible company, it is something that we are always looking at. But at the same time, we remain confident in our own strategy and will deliver long-term value to all of our shareholders.

As we discussed in the letter, many of our recent initiatives are gaining traction and management and our teams remain laser focused on execution. We do not intend to address questions or provide further comments regarding M&A speculation on this call.

With that out of the way, we’d like to open up the call to your questions. Operator?

Questions and Answers:

Operator

[Operator Instructions]. Your first question comes from Stephen Ju with Credit Suisse. Your line is open.

Stephen Ju — Credit Suisse — Analyst

So, Matt, can you give us a high level view on what you’re seeing now within the broader promotional environment so far this year? We do understand that you guys are laying the groundwork to continue to compete aggressively even if the market does not rationalize near term, but curious to hear your thoughts on how the market has been behaving now?

And I guess, also in the spirit of asking for more information, since we are getting the unit economics for the independents versus partner QSR versus the non-partner, any reason to believe the contribution profit per order will be all that different for the pick-up orders? Thank you.

Matt Maloney — Chief Executive Officer

Yeah. I’d say we read the same articles that everyone else does. And I think there is a clear change in sentiment in the industry. But even if there is a change. I think if you’re a company that’s losing a lot of money, you have a choice. You give up growth or you try to get to profitability or maintain that we are investing for growth story to keep raising money. So, it’s not clear when or even if things are going to change.

But from our vantage point, not much has changed since we last spoke in October. We’re still seeing our peers subsidize all three legs of the marketplace stool — the diners, the restaurants and the drivers. We talked about this in the first page of the letter. Yeah, more investors are focused on profitability, but it will take time to play out.

I’d say, in terms of what we are doing, the Perks program that we launched mid last year has been a huge success for diners and for restaurant partners. Our diners have redeemed millions of dollars using Perks in the fourth quarter. There are hundreds of millions of dollars eligible for redemption out there for our diner base. We’re seeing restaurants seeing a material increase of new diners and orders, which is logical by increasing the economic incentives for their diners. But Perks is clearly making restaurants more competitive on our platform. And as I believe you know, Perks are generally funded by the restaurant. So, there’s limited impact to our revenue per order, if at all.

In addition to the Perks program, which is an aggregation of multiple rewards and offers across our restaurant base, we’ve added 20 QSR loyalty programs to our marketplace, which we outlined in the letter, but these are big brand enterprise restaurants that have migrated their full loyalty program over to our marketplace, so that are our diners can earn and burn rewards through our marketplace, which is further economic incentive. And we recently launched our SMB loyalty tools for independent restaurants that bring the best-of-breed loyalty programs from the big brands down market into the independent mom and pops.

And so, a lot of this work has really been building the foundation to allow restaurants to roll out material economic incentives for consumers. And now, we’re really focused on building that content. How do we aggressively promote and accelerate the rewards and offers that enterprise as well as independent restaurants put on the platform because obviously the more money available to redeem, it directly impacts the overall cost of the items consumers are purchasing. And as we outlined in the last letter, with higher promiscuity, you see diners sampling multiple platforms. So, we want to make sure that we’re as aggressive as possible, stealing and maintaining that share.

Adam DeWitt — President and Chief Financial Officer

And then, Stephen, on the pick-up orders, it’s a good question. So, I think it goes back to what we talked about in terms of how we make money, right? And we’ve always talked about how we create real shareholder value by connecting restaurants and diners and creating demand gen. And the demand gen for a pickup order is really the same as a demand gen for a delivery order. You just have — you have additional revenue and additional costs.

So, if you’re thinking about what the contribution profit looks like on a pickup order, the end number looks a lot like it does on the delivery order for an independent. In fact, it’s exactly the same. You just don’t have the additional revenue from delivery and additional costs.

Operator

Your next question comes from Brian Nowak with Morgan Stanley. Your line is open.

Brian Nowak — Morgan Stanley — Analyst

Thanks for taking my questions. I have a couple. So, in the shareholder letter, you sort of talk about how some of the initiatives that you laid out are going to take some time to have a significant impact on order growth and diner retention. I guess, Matt, so talk to us about sort of which of the initiatives that you’ve rolled out, you’ve really seen some early progress. Where are you optimistic of kind of what you’re seeing?

And then, when you sort of think about taking time, what are sort of some of the key pieces you still have to roll out and how long do you think is going to take to really drive faster DAG growth from the initiatives?

And if you could also, the second one, just sort of talk us through how you’re thinking about DAG growth in 2020 and within the guidance?

Matt Maloney — Chief Executive Officer

Sure. The initiatives — ore the two core ones is the supply initiative and the loyalty. The loyalty initiative, I spoke to a little bit right there. I think one of the key pieces that we haven’t rolled out yet that we mentioned in the letter is a subscription program, which we’re not ready to roll out yet because we haven’t optimized it. We do a lot of work with experimentation. We always have. There is significant efforts in market, piloting different programs in different markets. So, you may see one offering one place, a different offering in a different place. And we’re just measuring the impact to conversion, adoption, frequency impact and then obviously the economics behind it. So, when we are ready to launch that, everyone will be very aware of that.

I think in terms of how long it takes, like I said, we’ve built the infrastructure around loyalty. We’re going to continue building more. We’re going to continue bringing on more enterprise partners. A lot of the cost of the initiative for loyalty was priming the pump. And so, there is a fair amount of enterprise brands that we’re actually funding rewards for right now, but the early signs that we’re seeing is, like I said, a significant positive impact to new diners and orders for those brands.

And what that means is, the brands are just more competitive. If they have a loyalty offering on our platform, they’re stealing share from other restaurants. And so, that is a very positive sign for us that our tools are working as intended.

With the independent restaurant loyalty programs, it’s just going to take more time. We have hundreds of restaurant signed up in a matter of weeks, self sign up to the tool set. We want thousands — tens of thousands and we want to quadruple the amount of rewards and offers available on our platform because we want to make it the place to go to find all the rewards, all the offers possible.

So, in terms of how long is it going to take, I would say next few months to nail down the subscription and roll it out. And then, we’re going to need at least three to six months to continue to build content on the independent restaurant side and we’re aggressively pursuing our enterprise partners, all of whom are very interested in increasing their business.

For the restaurant initiative, we told everyone at our last quarterly call that we wanted to double our restaurants in 2020. Well, we’ve already done that. So, we are extremely more aggressive than we were planning. Obviously, that’s fantastic because the more supply we have, the more likely we are to gain the new diners, the more likely we are to retain the diners. We’ve closed that competitive supply gap really aggressively and Adam can actually walk through some of the details on that and what we’re excited about in terms of economics and also follow-up with your DAG question.

Adam DeWitt — President and Chief Financial Officer

So, Brian, just to follow-up on the restaurant side, so I think there — as you guys see, we’re well on our way. If not, well ahead of the inventory targets that we talked about last quarter in terms of doubling our inventory on the platform by the end of the year. I think we’re already there.

But realizing that a lot of these — a lot of the adds — while we had our best quarter ever on the independent side, a lot of those adds are on the non-partner side and we always talked about how those restaurants are not going to add a lot of volume in and of themselves because the pricing is so high, right?

The objective of adding all that non-partnered inventory is really twofold. One is to capture new diners that we otherwise might not have captured that are looking for those restaurants online. If they’re searching for that restaurant, we want to make sure that they know that they are available on Grubhub.

And then, the second case is, if we have a loyal Grubhub diner who is looking to order from their local favorite that’s not on Grubhub that we have that option for them on Grubhub even if it’s a little bit more expensive.

At the same time, though, we are also investing heavily in the sales force and signing up more independent restaurants than we ever have before. We talked a lot in the letter about the unit economics and how having a balance — the right balance between kind of independent and small chains and regional chains versus kind of very large national QSRs is really important for long-term healthy growth. And so, we are doubling the size of our sales force. And I think we said in the letter, we’re signing up — on a partnered basis, when you look at our partnered restaurants in the quarter, we signed up at least five independent and small chain partners for every QSR location that we let up in the fourth quarter. So, we’re making a lot of progress there.

But in terms of timing, the impacts that the non-partnered restaurants inventory is going to have and the build of the partnered restaurants is just going to take time. It’s blocking and tackling. For many years, Matt and I have talked about how this business, the marketplace network effects take time to build. And in this case, you’re talking about new diners and attrition changes that will take time to build. So, we expect the restaurant supply initiatives to build — the impact from those initiatives to build throughout the year, just like the loyalty.

So, what does that mean for DAGs? Well, last quarter, we talked about an objective of 2020 of having DAG growth higher than DAG growth in the fourth quarter. When we think about growth in the fourth quarter, we typically don’t talk about weather, but we thought it made sense to highlight just because we thought the fourth quarter number was a little bit high. So, we’re really anchoring off of more like a 6% DAG growth for 2020 and think that our prospective hasn’t really changed. We still think we’re on track to have a full-year DAG growth number that is higher than that.

The first quarter does imply a little bit of deceleration of DAG growth kind of in the low-single digits, but that’s always been our expectation, given the time that the initiatives will take to build. And then also, some of the difficult comp issues that we have with the really large Taco Bell campaign that we did last year, launch plus free delivery for a couple of months that added 150 basis points or so to growth.

So, long-winded way of saying, we’re still very much on track for a higher DAG growth rate in 2020 than the fourth quarter, but you’re likely to see that start building in the second quarter and more in the back half of the year as the initiatives take effect.

Operator

Your next question comes from Heath Terry with Goldman Sachs. Your line is open.

Heath Terry — Goldman Sachs — Analyst

Couple of questions. As we look at the accelerating DAG growth through 2020 relative to revenue, how should we think about the impact of both the supply initiatives on take rate and particularly the relationship with non-partner restaurants?

And as we think about the life cycle of those non-partner restaurants that have been added, at what pace and what rate do you see some of them converting to partnered restaurants? What does that process look like? And realizing it’s still incredibly early, what level of attrition, if any, have you seen from restaurants who want to stay and have asked to stay off of the platform?

Adam DeWitt — President and Chief Financial Officer

Yeah. So, Heath, I’ll try to tackle both those. In terms of take rate, there is puts and takes. Let me answer the really micro question about non-partnered versus partnered and then I’ll talk more broadly about take rates. But if you look at — even if you look at the examples that we laid out in the letter, the capture rate is actually pretty similar between a non-partnered and a partnered, but the diners bearing all of the cost. So, from a revenue perspective, they’re actually fairly close.

I think what’s more going to drive the take rate up and down throughout the year, I think you’ll continue to see a mix shift towards delivery in general, which will have kind of a tailwind on capture rate and I think you’ll have a counterbalance or additional tailwind depending on how we’re are scaling up some of the things that Matt is talking about on the loyalty side, right, because all of that flows through contra revenue, whether it’s free delivery or some other promotion or some other pricing. And that’s kind of why we’re not giving — frankly, why we have such a big range on the revenue guide for 2020 is because we know we’re going to be investing in things that are contra revenue, but we don’t know how much. And it depends on what’s working. And things that are working, we’re probably going to invest more behind. And things that aren’t, we’ll probably pull back. But I think — you have it.

So, in summary, you’ll have a natural kind of tailwind from a mix shift towards delivery. But we’re going to be doing a lot of things on the contra revenue side that might balance that out.

Second question was on — sorry about that. Second question was on the non-partnered and kind of how that’s impacting our partnered universe. I think we’ve been very — I’m going to answer your question a little bit differently. So, we’ve been very sensitive to the idea that you put a non-partnered restaurant on the platform and maybe either the restaurant says, well, this is a good relationship as it is and we don’t want to partner or it frustrates them and they don’t want to partner. And so, we’ve been spending a lot of time in our sales group, figuring out how adding at this point 150,000 non-partnered restaurants to the platform is impacting it.

And what we’ve seen — and we think it’s for a whole bunch of reasons, which I’ll go through, but the summary is that it’s having zero impact on our ability to sell, meaning we are just as productive in markets where we have virtually all of the restaurant inventory on our platform, either partnered or non-partnered, and all we’re selling into is the non-partnered. And so, our reps are having just as much success signing those non-partnered restaurants into partnered.

And I think it’s for a bunch of reasons, but the primary one is that, while non-partnered is a way for restaurants to get some volume, they’re getting a lot less volume than they would as a partnered restaurant. And the experience for the restaurant and for the diner is not as good as a partnered experience. And so, we’ve seen a lot of cases or even some cases where a restaurant will say, hey, we want to be a partner because we want to see what the volume is like and we want to work with you to have better service for our diners, et cetera.

So, so far, it hasn’t impacted us at all. And that’s why we’re kind of full throttle on the sales force growth plans.

Operator

Your next question comes from Ron Josey with JMP Securities. Your line is open.

Ron Josey — JMP Securities — Analyst

Maybe, Adam, I wanted to drill a little bit more further around the contribution profit per order that you laid out across the three different restaurants with partners, QSRs, independents. And just maybe longer term, after this investment period, 12 to 18 months, do you think that contribution profit for all orders can turn positive? In other words, can delivery efficiency help improve these contribution profits? Or is, over time, it’s exactly what you’re just talking about, working with non-partners to become partners, given the benefits around volume and experience? Thank you.

Adam DeWitt — President and Chief Financial Officer

Yeah. Look, I think we laid it out like this in the letter because we believe that there is absolutely a structural difference that will be there for a very long time in terms of the economics between these types of orders. I think to your point, though, on the margin, I think we’ll be able to pull some levers overall to move the profitability of all orders up a little, but there is such a difference between those three types of orders that that’s going to create a — I don’t want to say — create a very — there is kind of a permanent difference between them, right? And so, business mix has a real impact on your long-term profitability.

We used to get a lot of questions around, hey, you know, as you do more and more delivery versus restaurants doing the delivery, is it not going to hurt your profitability or how do we think about profitability. As we’ve been saying lately, that’s not really a determinant, right? We’re generating just as much contribution profit on independent and small chain orders that we deliver as we are on small chain independent restaurants that deliver for themselves. And we’re doing it in markets where we have significantly less scale than like a Chicago or a Boston or an LA or a New York, right? We have markets where we’re doing a couple of hundred orders a day that are actually more profitable on a contribution profit basis for those independent and small chain restaurants than Chicago, Boston, LA, New York.

And so, we wanted to tell the story because we think that this actually does have a long-term structural impact on your business. Now, you may be able to move it up — I think, a fair fair way to think about it is, in terms of order of magnitude, in the third quarter, we had an EBITDA per order of $1.28 and our QSR mix didn’t really change that much in the fourth quarter. And we think there is opportunity to move that up, but it’s more to historical levels, kind of $1.50, $1.60 than it is to kind of $2 and $2.50.

And so, I know its long-winded, but the answer to your question is there’s a little bit of room to move all this stuff up as you get scale. But at the end of the day, the variable costs of getting getting a driver to drive to the restaurant, pick up the food and drive to a home are really tough to manage down over time.

Matt Maloney — Chief Executive Officer

Just wanted to just tag in for a quick second. Everything Adam said is exactly right. I just wanted to focus on how you might be able to increase the average profit per order in each. I think you mentioned delivery. And I think that’s the least likely to impact. Everyone’s kind of at the same plateau of efficiency. And so, even if we quadrupled our delivery scale, it’s not going to have a dramatic or even material change to that expense.

I think there’s a lot more flexibility in the independent contracted scenario. And that’s why we focus so heavily there. Restaurants are willing to pay more than their competition in order to get more orders. So, whatever we can do to help restaurants to be more competitive on our platform will drive our take rate. And you’ve seen that year after year after year.

But on the QSR, they’re just not going to pay for the demand gen. But what they will pay for, and it’s not going to be huge, but they’re going to pay for extra features and extra abilities to market themselves in the platform. For example, all the loyalty programs that we’ve been rolling out lately. That’s brand new. That’s new feature functionality, they want it, they are willing to pay a little bit more, but it’s not going to be, yeah, 5% 10% of the order volume. It’s more going to be kind of a — either a SaaS basis or some much smaller percentage. And this is why we invest heavily on the loyalty programs, on the white label branded work, on the integration work, on anything that we can do to support their technology infrastructure because we’re clearly going to do that much, much better than any restaurant group themselves.

Operator

Your next question comes from John Egbert with Stifel. Your line is open.

John Egbert — Stifel Nicolaus — Analyst

We’ve seen the Grubhub Ultimate kiosks in action in Columbus Circle and we are very impressed with the user experience. Just a few questions on that product. Can you compare and contrast the product with offerings from companies like OLO? Where do you think Ultimate is most differentiated based on your feedback so far? And is there any difference in your business model or go-to-market strategy versus how your teams operated the LevelUp and Tapingo services?

And then just lastly, do you allow these terminals to accept pickup or delivery orders from your competitors? Because it seems like that independents carry some value for restaurants.

Matt Maloney — Chief Executive Officer

You tossed the basket at me there. Of course. The Ultimate, I’m really excited about the Ultimate. It is a first-of-its-kind platform that integrates not only our digital back end, but with the front of the house technology. And there are other platforms and services that are different elements of that ecosystem, but none have put it all together and then exposed it online to consumers.

Even in the the homegrown QSR platforms for pre-order, you don’t have transparency into who is line in front of you. You kind of have to go to the mosh pit in front of the pickup area and wait around till they call your name. So, what we’ve done is we took all of the pain points of the process, resolved them and it’s significantly differentiated from anyone else in the platform.

And you mentioned OLO. OLO effectively duct-tapes platforms to POS systems. This is entirely different. We can integrate the Ultimate platform to a POS system, but right now it’s running on its own as a standalone POS lite. I don’t want to compare it head to head with some of the more robust POS offerings because it doesn’t have all that feature functionality because we don’t believe restaurant tours need all of that feature functionality. We have clock in for employees. We have cash drawer. We have ours. We have obviously menu management and a modest amount of inventory, but we don’t have the full suite of POS. So, it’s not a head-to-head comparison with POS.

But as we highlighted with Art Bird, it is exactly what the independent restaurant tour, the high velocity independent restaurant tour wants because we can make their restaurant significantly more efficient. And in his case, Joe saw a 10% increase in orders because people were pre-ordering more frequently. They are in Grand Central and they would — their customers would get off the train and if there was a line, they wouldn’t get something, they’d walk on by the next shop. Well, here now, they can pre-order on the train, they can see that there is 15 people ahead of them, they know exactly that their food will be ready in 9 minutes and 45 seconds because the back of the house preparation is hitting the bump bar, giving Grubhub real time insight into their velocity of preparation. It’s a degree of data fidelity nobody has in the entire industry. So, we see increase in demand.

And then, because he could repurpose the front of the house employees from order takers to either prep individuals or just let them go, he decreased his employee cost by 15% since he put it in. It’s a slam dunk for these individuals. And we did this because, as we’ve said many times before, we see a tremendous amount of opportunity in pickup.

And the funny thing about about our industry is everyone crows about $300 billion TAM, but, of course, nobody acknowledges that half of that is in pickup, in which case we have the only valid pickup offering in the whole industry.

So, everyone’s fighting over the $150 billion in delivery, which it’s a big addressable market, but here we have full greenfields on the pickup opportunity, which I have said multiple times, I think, is the next supply side innovation. So, we’re really transitioning the way that consumers are interacting with the restaurants. We’re facilitating that transition. We’re providing the technology for restaurants. And it always comes back down to demand generation. So, that’s what we do and that’s what we’re paid for. So, we’re helping these restaurants be more efficient, drive more orders with technology, which is exactly our business model.

So, I think for the other things, you said — is the go-to-market different for the other teams? This work came out of the Tapingo operation. It was piloted and executed across the campuses first. We have hundreds of these in campuses across the country and we are installing hundreds, if not thousands, over the next year. This is custom-made for the the university campus application.

Will we let our competitors execute orders across our Ultimate devices? Absolutely. We’ve already been talking to various groups. And you brought up independent restaurants. I think it’s more important for the larger restaurants that are going to have a larger footprint on competitive platforms. I think it’s fine to take orders from our competitors since these restaurants are — they are migrating their entire ordering infrastructure on to our platform. Each Ultimate gets a 100% of that restaurant’s orders. And so, being the glue that ultimately brings all the orders together in a more efficient way, I think, makes a lot of sense and is a very competitive differentiating position for us to be in.

Operator

Your next question comes from Ralph Schackart with William Blair. Your line is open.

Ralph Schackart — William Blair — Analyst

Talked today about adding a record number of diners outside of the Taco Bell quarter. Could you perhaps give us a sense of how the new supply of restaurants impacted or drove the sort of — maybe just what are the factors contributing to this strong diner adds?

And then, just maybe get a sense of how many of these diners have come back to the platform versus brand new?

And then, maybe just kind of taking a step back, you obviously have several key initiatives for 2020 to retain and add new diners. I know it’s still early, but just any sense of maybe what’s playing out better than expected versus maybe taking more time or effort than anticipated? Thanks.

Adam DeWitt — President and Chief Financial Officer

So, Ralph, I’ll talk about the — it’s Adam. I’ll talk about the diners. I think it was a number of things that helped us in the quarter, to your point, but just having more restaurant inventory is better. We talked about — there is two strong benefits for the non-partnered. One is the retention and the other is the new diner impact. And if you look at those restaurants, even though conversion is a lot lower in general just because the diner fee is so high, a large — a much larger percentage of the diners that are ordering from those non-partnered restaurants are new diners to Grubhub when you compare that to partnered restaurants. So, if you just look at the percentages on both, you’ll see a much higher percentage of the total diners that are ordering. Our total orders on non-partnered is being new diners.

I think adding the record adds of independent or partnered restaurants as well also helped us during the quarter. The more restaurants you have, the more diners you get. And I think we continue to be executing well on the ad spend in marketing side.

We talked about CPA. I think we talked about CPA in the letter. If we didn’t, in general, it was very consistent with other quarters. And so, even though we have this kind of hyper competitive environment, we’ve still been very effective on the spend side.

We did lay out in the letter also the quality of new diners, from our perspective, what we are expecting, they were very much in line. I think in general, there is some headwinds, but we expected all those headwinds. We’re continuing to move away — I say move away, but we continue to generate less new diners in New York, less new diners in corporate and more away from those two markets and even to Chicago, LA, Boston Philly, et cetera. So, you’re seeing diners that have a natural ordering behavior that’s slightly lower than existing diners. But we also leaned into some tactics that historically haven’t had as strong a repeat rate, especially when we’re playing around with pricing or priming the pump on loyalty or things like that on the contra revenue side. But what I will say is, we still see a diner LTV that’s much higher than our average CPA. So, we feel good about the long-term value of those diners.

Do you want to talk about the initiatives or…?

Matt Maloney — Chief Executive Officer

Early indications, I feel like they’re already starting to pay off, but they are all just going to compound over time. So, what Adam was saying about new diners on non-partnered is exactly right. We accelerated the non-partner adds. So, we’re seeing a greater lift from that, but that’s going to get bigger over time and you’re going to start to see, we believe, less attrition or less diner churn because we have all the restaurants they want, the loyalty stuff. Again, we’ve built the infrastructure. Now, it’s about content collection. So, the millions of dollars, like I said, are being redeemed right now, were redeemed in the fourth quarter. And as we add more content and more rewards and offers, that’s only going to increase.

In addition to that, I think we haven’t quite come out as aggressively as we’re going to on the rewards element of our brand proposition. So, as people are more aware and realize that they can get the same food for significantly cheaper with rewards and other offers, I think that that’s going to be more motivating and that’s going to have to amplify through the population.

So I think — think of it like a compounding function and it’s already starting to pay off, but we expect a much larger benefit later in the year.

Operator

Your next question comes from Brad Erickson with Needham & Company. Your line is open.

Brad Erickson — Needham & Company — Analyst

I guess, Matt, historically, you’ve maintained that your philosophy on customer acquisition costs is that you probably weren’t willing to pay more to acquire a diner than they were worth, which obviously made sense. It’s obviously changed here a little bit in the near term, given competitive challenges. So, I guess, the question is, longer term, is that something we should expect you to maybe look the other way on, meaning you’re willing to invest and forgo profit for kind of a multi-year period as you work through? Or is it something where you could kind of work through things more quickly, say, in 2020 and get back to kind of your old philosophical views on LTV higher than CAC, et cetera? Just any comment there would be great.

Matt Maloney — Chief Executive Officer

Yeah, I don’t actually think that that’s a fair characterization. I think the diners that we’re acquiring now still have an LTV that’s higher than the CPA. I think we’ve been more aggressive on the — think about what our initiatives are. These aren’t advertising initiatives, right? These are restaurant supply and diner loyalty. So, their investments to round the diner base to drive long-term value, but we haven’t changed our framework really for CPA versus LTV or whatever you want to call it.

What we’ve said is — and I think we said it in the letter. And if not, while the LTV on the newer diners is not as high as it has been in the past, it’s still higher than the CPA. One of the things that we thought about and we talked about quite a bit before last quarter’s earnings call, earnings cycle with the team was, what we didn’t want to do was just kind of prime our diner base with diners who were low quality, right? That wasn’t a long-term strategy that’s viable, right? Just buying a bunch of orders doesn’t help us in the long run. And so, that’s not what these initiatives are about. These initiatives are about long-term value of our existing diner base and potentially driving more new diners.

So, I know that’s not exactly what you asked, but kind of that’s the philosophy and that’s kind of why we are still thinking about — hey, how much are you going to spend on TV this quarter? Or what kind of return are we getting? And thinking about that type of framework with every channel and every marketing initiative.

Operator

Your last question comes from Maria Ripps with Canaccord. Your line is open.

Maria Ripps — Canaccord Genuity Inc. — Analyst

So, just a follow-up on Grub Ultimate. How many partners did you launch it with? And is it available to everyone on the platform at this point? And are there any benefits from this launch that are baked into your full-year outlook?

Matt Maloney — Chief Executive Officer

For the Ultimate, we launched with hundreds — actually, not sure about the exact number because we’ve put more out there since. We are on, I want to say, over 20 campuses with multiple devices in each. Multiple meaning like over 10 in each. And then, in New York, we are focused around Grand Central and Columbus Circle. You can find them there. And then Chicago, there is a couple installations including a brand new food hall that just launched a week or two ago. So, I’d say hundreds of devices are out there. We feel very confident talking about it. It’s definitely ready for prime time. It is available to all of our restaurants. Part of the push in the press was to get the word out, so we could build the queue and the waiting list for restaurants that wanted it.

We’re now segmenting those groups based on geography because, obviously, with tactical hardware rollouts, you want to aggregate the execution. And so, we are being thoughtful about how we do that. There is also a few pilot Chick-fil-A locations that we have across universities that are doing really well and we’re going to be expanding those additionally. So, it’s available to everyone. There’s a lot of them out there.

And then, Adam can talk about the impact to any forecast.

Adam DeWitt — President and Chief Financial Officer

So, it’s a good question. So, Ultimate, Matt talked about it at length earlier in terms of how great it is strategically in terms of capturing a large percentage of the or all the restaurants volume through the platform. He also talked about how it’s borne out of Tapingo.

And so, if you think about Ultimate, it serves two functions, right? One is more like a SaaS function where it’s high volume transaction and that’s — the economics on those types of orders are going to be really thin. But what it does do is it opens up a new demand gen opportunity for us. And so, if we’re able to bring new diners to those restaurants through the Ultimate platform via Grubhub marketplace, the orders look a lot like traditional partnered independent orders in terms of economics.

The the assumption or what’s baked into the numbers for the rest of the year, there is obviously a bunch of SaaS volume that’s not going to have a meaningful economic impact and won’t be in our DAG number. And there is probably a much lower number — a smaller number of DAGs that are baked into the forecast and do have similar economics. I wouldn’t characterize it as a significant driver of our ability to meet the accelerated DAG targets for this year, but I would characterize it as an upside opportunity to the current forecast over time.

Operator

Okay, I’ll turn the call back over to the presenters for closing remarks.

Adam DeWitt — President and Chief Financial Officer

Thank you.

Matt Maloney — Chief Executive Officer

Thanks for everyone’s time today. We’ll talk to you guys next quarter.

Operator

[Operator Closing Remarks]