Earnings by Earnest: 3Q 2019


Earnings by Earnest highlights recent examples of how Earnest tools tracked business health per management’s commentary on earnings results.

For 3Q 2019, we looked at Grubhub, Netflix, Square, and Party City.

Grubhub Q3 2019
Shareholder Letter October 29th, 2019

“We believe online diners are becoming more promiscuous. For years, we saw in our data that a Grubhub diner was extremely loyal to our platform. However, our newer diners are increasingly coming to us already having ordered on a competing online platform, and our existing diners are increasingly ordering from multiple platforms.”

*Uber Eats overlap is likely understated due to structural limitations in the data from May to August 2019.

Earnest data shows that Grubhub diners have been increasingly using competitor platforms. In the middle of 2017, just 2-5% of Grubhub diners transacted at competitors. However, in the most recent three months, close to 30% have transacted at DoorDash, 16% at Uber Eats*, and 11% at Postmates.

Netflix Q3 2019
Earnings Call October 16th, 2019

“Q: And on that elevated churn, just to kind of wrap on this, what type of subscribers are you seeing churn more often? Does it tend to be really that hit-driven nature around particular programming? Does it happen to be sort of the last subscriber in is less sticky? What are you seeing there?

A: Think of it much more big picture, which is it’s always a question of how much value do we have, how do the consumers feel it. In moving up ASP in the U.S. from about $12 to about $13, we see a little bit of it [churn].”-Reed Hastings – Co-Founder, Chairman, President & CEO

Earnest data has tracked a slight uptick in churn for subscribers acquired in 2Q18 relative to prior cohorts; with each cohort seeing a bit more churn in the months corresponding to Netflix’s price increases.

Square Q3 2019
Investor Presentation November 6th, 2019

“With Cash App, we have built an increasingly engaging product set and a strong business model with diverse revenue streams. Cash App has efficiently acquired new customers with a low and stable cost of acquisition, retained the majority of its monthly active customers.”

We plotted the monthly retention of first time Cash App users in the first six months of each of the last three years. Cohorts in 1H18 show fairly healthy trends relative to 1H17, though cohorts in 1H19 appear to be trending lower than 1H18. Additionally, retention for all cohorts appears to stabilize at ~30% to 45%; constituting close to a majority.

Party City Q3 2019
Earnings Call November 7th, 2019

“With respect to our Halloween City operations, on average our stores declined 19% in revenues reflecting a softness in adult category.”-James M. Harrison – CEO & Director

Earnest data shows a dramatic YoY sales decline into October for both Halloween City and Party City. Sales decelerated most significantly in the weeks leading up to Halloween.

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