DoorDash, Inc. (DASH) on Q2 2021 Results - Earnings Call Transcript
Operator: Ladies and gentlemen, thank you for standing by, and welcome to the DoorDash Q2 2021 Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. As a reminder this conference call is being recorded. I would now like to turn the conference over to your host, Mr. Andy Hargreaves. Please go ahead. Andy Hargreaves: Thank you very much, Grace. Hello, everyone, and thanks for joining us for our second quarter 2021 earnings call. I'm pleased to be joined today by our Co-Founder, Chair and CEO, Tony Xu; and our CFO, Prabir Adarkar. I would like to remind everyone that we'll be making forward-looking statements during this call, including statements regarding our expectations of our business, future financial results and guidance and strategy. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those described in our forward-looking statements, and some such risks are described in our risk factors included in our SEC filings, including Form 10-K. You should not rely on our forward-looking statements as predictions of future events. We disclaim any obligation to update any forward-looking statements, except as required by law. During this call, we will focus or we will discuss certain non-GAAP financial measures. Information regarding our non-GAAP financial results, including a reconciliation of such non-GAAP results to the most directly comparable GAAP financial measures, may be found in our investor letter, which is available on our Investor Relations website. These non-GAAP measures should be considered in addition to our GAAP results and are not intended to be a substitute for our GAAP results. Finally, this call in its entirety is being audio webcast on our Investor Relations website. An audio replay of the call will be available on our website shortly after the call ends. Grace, we’ll go straight into questions today. So please go ahead and take the first question. Operator: Your first question comes from the line of Ross Sandler from Barclays. Your line is open. Ross Sandler: Hey, guys. Good afternoon. Two questions. Tony, your non-restaurant delivery business has several strategies in place both in marketplace and in drive. What are you most excited about thus far? What's adding the most to your financial performance? And second question is, in the letter, you mentioned that same-store sales for your merchants is up about 35%. I assume that's dramatically higher than anybody in the peer set. But if overall GOV starts to decelerate and normalize next year, how does that work as far as continuing to add merchants while growing same-store sales and any thought on how you balanced out that and what that might mean for merchant retention? Thanks a lot guys. Nice quarter. Tony Xu: Great. Hey Ross. I'll take the first question and I'll let Prabir start the second. So on the first question with respect to new categories, I mean, you're right. We're super excited about our progress. In Q1, we announced that, about 70% of our business was coming from orders outside of restaurants, and that has grown sequentially and it's grown certainly faster than our restaurants business. And it does touch upon the strategy of creating both in marketplace where we're generating incremental demand and really building best-in-class point solutions category-by-category or bringing everything inside the neighborhood to consumers in minutes, not hours or days. And then on the other side, we are also building a first-party capability on behalf of retailers and merchants so that they can create their own digital businesses. The goal of DoorDash has always been to create the largest local commerce marketplace as well as the largest local commerce platform. And we think that this strategy is certainly playing out, not just in our core and original category of restaurants, but now also heading into other categories. Prabir Adarkar: And Ross, just to add-on to Tony’s point. The reason we are excited about these new categories, both in our marketplace and primarily in the marketplace in addition to drive is – what the early data suggests is that when consumers buy from other categories in our marketplace in addition to the food category, they subsequently now then increase their retention and engagement with the marketplace as a whole compared to customers who do not buy across categories. And so we're seeing this behavior, it's super exciting, it's improving the value proposition of DashPass, which is why we're investing behind it both on the marketplace as well as for drive. Now for drive, it’s a slightly different strategy because we don't own the customer into the drive. But as we add more orders from other categories to the ecosystem, we're just creating node density and order density that I think it lowers our cost structure, and then the rest of the flywheel. So that's the first part of your question. On the second question, I think, I understand what you're getting at. But the way I view it is first, if you think of it from a merchant standpoint, the marketplace GOV is just one portion of the sales that we generate. It doesn't capture the value of drive orders, right. So remember that. So the true sales from a merchant perspective is very different than the – than what's implied by the GOV growth. The second is if you look at what's happened to our order frequency over time, we're currently at all time highs. And the order frequency is high both for our DashPass subscribers as well as for non-DashPass users. And so both sets of – both cohorts of users had actually achieved not just year-on-year, but lifetime high order frequency. And that will continue to increase over time as our selection improves, as the affordability improves and as quality improves, and that will then continue to have GOV growth for our merchants. Operator: Your next question comes from the line of Brian Fitzgerald from Wells Fargo. Your line is open, sir. Brian Fitzgerald: Thanks, guys. I had two questions. One was around the beat and the guidance. How much of that was driven by international versus new categories? If you could parse that out or give us some color on that? And then could you talk to the kind of different take rates or pricing points you rolled out last quarter. Can you talk to us about the adoption rates? Is there a tendency to move up or down versus cohorts of somebody who started at a certain percentage and then started moving up to 25% to 35%? Thanks. Prabir Adarkar: Sure. So Brian on the first question, we basically saw strength across the Board and just core consumer metrics, right. So it wasn't that one part of our business beat and other did. But across the Board, we started to see, as I alluded to earlier, strong order frequency development, you saw pick up on DashPass subs not just in the U.S., but also growth in our international region. As a matter of fact, our international business actually grew faster both quarter-on-quarter and year-on-year compared to our U.S. business. We have continued to see strength on retention and order frequency for our consumer cohorts, both those cohorts that were acquired this year compared to during COVID and pre-COVID and retention and order frequency benefits our existing cohorts that were acquired prior to the pandemic. So across both new cohorts and existing cohorts, retention and order frequency continues to be above pre-COVID levels. So long way of saying, we are seeing strength across all these fundamental consumer metrics that then ultimately led to order volume beat that then translated to GOV in the rest of P&L. On your question around the buy-side packages, what I would say is the majority of restaurants have chosen either the premium or the plus package and the premium mix actually is outperforming our expectations. And so on the whole, it's performing in line with a slightly better than expectations. If it's a take rate question, I don't think the impact on our take rate will be noticeable because there's other factors like DashPass mix and fundamental efficiency improvements that usually are much larger in magnitude than the shifts that are created by the pricing packages. Brian Fitzgerald: Got it. Very clear. Thanks guys. Operator: Thank you. Next up, we have Youssef Squali from Truist Securities. Your line is open, sir. Youssef Squali: Yes. Two questions for me. When I read the letter, I noticed that it's really peppered by language mostly about the need for a higher level of investment. So can you maybe quantify the higher level of investment in Dashers supply and new categories and international kind of that you qualified? How long do you think or do you anticipate this investment cycle to last some kind of – just kind of the – what's the primary driver? You've obviously been aggressively investing to date, but it seems like this is a step up from what you've been doing so far. Thank you. Prabir Adarkar: Hi, Youssef. So maybe just a bigger step back, I just want to reiterate and remind people of how we manage the business and the philosophy, which is we’re super early in terms of the opportunity, not just in food, but also in the ad and these other categories that were what now recently entered into such as convenience, grocery, packed food, icon and others. So we're a tiny, tiny fraction of the potential of these categories. And that's why we're investing. So if you take a look at where we're investing, it's largely driven by new categories and to build our international business. We're not going to break out the quantum of the investment, but I will say that we are fortunate and that we've got in U.S. business that is firstly, large; second, growing; and third, has improving margins, which then creates a larger profit pool that we can then use to invest in these other opportunities that are ahead of us. Operator: Thank you. Next up, we have Douglas Anmuth from JPMorgan. Your line is open, sir. Douglas Anmuth: Thanks for taking the questions. I was hoping you just talk a little bit more about the Japan market launch. I know it's fairly new, but just curious what some of the nuances are in that market relative to the U.S., and then if you could also talk about how you're thinking about Europe as well? Thank you. Prabir Adarkar: Yes. I mean, Japan we launched the market. I don’t even think it's been two months, so it's too early to draw any conclusions, but whenever we launched these markets in the beginning, we're super focused on, I'm going to call it product market parameters more so than actual financial parameters. So let me describe what I mean. We are looking for retention improvements. We are looking for order frequency improvement. We are looking to ensure that customers aren't retaining simply for discounts versus creating a habit with us. And so even it's been two months, I don't want to – it's too early to declare victory or anything like that, but we're encouraged by what we see. We are currently in one market, which is largely – which is Sendai. And what we're noticing is that the opportunity is available because these markets are relatively under-penetrated compared to core urban city centers. And so lot more work to do, and we'll keep you posted on the progress. And in terms of just other geographies, I mean, I'll just remind you of our authorities, one of which is to become an international company and we exist in – we operate in Canada and Australia and Japan today. And over time as these other markets get bigger and start generating profit pools and we can afford to do so, we will expand obviously in an economically efficient manner in other geographies. Douglas Anmuth: Thank you. Operator: Thank you. Next up, we have Brad Erickson from RBC Capital Markets. Your line is open, sir. Bradley Erickson: Hey, thanks. I guess two for me. One, just within the guidance, it seems like you're looking for Q4, maybe a little bit less than seasonally normal. Is that just a reflection of your comments on the letter around uncertainty? Or is there something else instructing that view? And feel free to recharacterize that view if you want. And then second, follow-up from an earlier question. You've had a ton of gross profit upside here over the past few quarters, and I guess, in the letter, obviously, talking towards reinvestment in a few areas. Can you just remind investors as to how the team views those choices philosophically as you trade off growth versus profitability? Thanks. Prabir Adarkar: Sure. So Brad, on the first question with respect to the guidance, let me start by saying, so Q1 was elevated a little bit because of a couple of things. These markets have just begun to reopen, vaccination rates were lower, and then to compound all of that, you had the – let's call it the inorganic impact of stimulus checks there was driving consumer demand. And so that will add to an elevated Q1. As we look into the second half of the year and what’s embedded in our guidance is really two things. The first is, where I call, ordinary course of summer seasonality. So in general, in Q3, we see the pace of consumer acquisition slows a little bit and you have lower order rates simply because consumers are going out during the summer because the weather improves. So that's one aspect. The second is we are baking in a level of conservatism because there is uncertainty in terms of what the world looks like in second half of the year as markets continue reopening. It's unclear whether we're even out of the pandemic at this point and so what the long-term effects are. And so there's plenty of unknowns here as a result of which we wanted to make sure we embed that uncertainty into our second half outlook. On your gross profit upside question, the way to think about it is we invest flexibility across the P&L. One of the reasons we do not provide revenue guidance but instead provide GOV guidance and EBITDA guidance because depending on the opportunities that are available to us, we can take one of several actions in order to drive growth. We can invest through sales and marketing in terms of customer acquisition or Dasher acquisition. We can invest in pricing through lower prices that will then impact take rate or we can invest in incentives to drive up quality. We should then have further downstream impacts on the take rate as well as on our cost of sales. So we retained that flexibility because depending on the environment we're in, and depending on the exact challenges, we want to be able to deploy the right strategy without having to worry about revenue guide. Now as you look to the future, the factors that will continue to improve take rate, and I'll go through those just as a reminder for people is first as we improve the efficiency of the logistics network that'll have a positive impact on take rate. As we improve the quality of the consumer experience, that will lower our refunds and credits and have a positive impact on take rate. As we do more – as we drive more drive orders, no pun intended. As we do more drive orders, that'll have a positive impact in take rate. In terms of headwinds to take rate, it's really three things. As we drive increased mix of DashPass orders, I'll remind folks that the DashPass orders, we have lower unit revenue, but significantly higher engagement as a result of which that's a trade off we're happy to make. Second, as we increase our investment in new categories, and third, as we increase our investment in the international. Because of the early stages of the evolution of these investments, usually they come with a lower take rate, and so you're seeing the blending effect in our take rate as a result of these investments. Bradley Erickson: That's great. Thanks. Operator: Thank you. Next up, we have Steven Fox from Fox Advisors LLC. Your line is open, sir. Steven Fox: Hi. Good afternoon. Just two questions from the letter. I was curious if you could expand on. You mentioned three points of category share in the quarter, and then you also mentioned gaining more DashPass subscribers. Can you give us a little bit of color around what you're seeing that's driving that? What's behind the numbers basically? Thanks. Prabir Adarkar: Yes. I think it comes down to a superior product, which is – the thing we aim to deliver is the best combination of selection, affordability and quality and what those three things translate into is category-leading spend retention. So our category-leading spend retention, I believe that translates some of these market share gains that you're seeing. DashPass is one component of that because DashPass is how we solve the affordability lever and we continue to increase DashPass subscribers who have higher order frequency compared to non-DashPass subscribers and that's then now leading to increasing order frequency over time as well as improve retention which then drives market share growth. Steven Fox: Great. Thank you. Operator: Thank you. Next one, we have Ron Josey from JMP Securities. Your line is open. Ronald Josey: Great. Thanks for taking the question. I wanted to maybe, Tony, ask a little bit more about some additional – the more of the demand you're seeing for newer categories and also just the power of convenience. And so can you just talk about these dynamics of newer category orders? We know they're growing faster, but most of these orders come from restaurant orders to begin with as an add-on. How are you marketing down? How are people being aware that you offer pets goods and alcohol and everything else? So just maybe some insights on strategy and awareness of these new categories would be helpful. Thank you. Tony Xu: Sure. I would say that we're still pretty early in that process. I mean, if you think about it, the greatest privilege we have is that our consumers eat 20 to 25 times a week. And so in terms of shot on goal or their willingness to come back to the app daily, we have the luxury to have a wide surface area and a large number of opportunities to actually engage with them. And most of what we're trying to do is we're trying to offer a best-in-class solution for them, whether that's shopping across multiple categories or whether that's shopping in within one category. And so for us it's not coming from one type of use case or one type of occasion. We're still in that learning process. I think there is a long ways to go. I think the industry has a long ways to go. I mean even within our core category, I want to remind folks that of restaurants, we are single-digit percentages of the restaurant industry. And when you add in some of these other categories, we’re at a much, much smaller fraction. And so I think there's a long ways to go before we can start truly inventing technologies that will continue to change consumer preferences. The one thing that we do know is that consumers always lean towards the direction of greater and greater convenience and so that you should expect from future products to come. Prabir Adarkar: Tony, I’d add to that . Tony, just to remind you, in Q1, we had said that less than 10% of our MAUs actually use other categories. So Tony's point about the surface area and short-term goal, there's a lot of opportunity just to increase awareness and drive conversion just within our existing MAUs itself without having to actually acquire customers’ specific to these new categories. Does that make sense? Ronald Josey: That does. Thank you. That's super helpful. And maybe you talked in a letter as well, just along this there is a complexity across these categories and you are up for the challenge. But maybe help us understand what are the complexities? And that's all I got. Thank you. Prabir Adarkar: Yes. I think I know what you're – Ron, I know what you're referring to is really meant to be, let’s say a rallying cry into our team and we’ve enjoyed and benefited from tailwinds these past 18 months, we cannot let those make us complacent. So the environment is competitive and each change is going to be hard part. And so we need to stay vigilant and laser focused on building the best products for our merchants, casualty and consumers. Ronald Josey: Got it. Thank you, guys. Operator: Thank you. Our next question comes from the line of Deepak Mathivanan from Wolfe. Your line is open. Deepak Mathivanan: Hey, guys. Thanks for taking the question. So two quick one from us. First, your sales and marketing was up nicely in 2Q. Can you give some color on where these incremental spend was going? Is this related to new category efforts as we thought those were primarily driven through auto discounts? And then on the – the second question on the non-food categories, there’s a number of different models that we have seen out there between marketplace, drive, warehouses and even more hands-on model using in-store shoppers. With all the new partnerships you’ve announced, can you talk about what’s your preferred strategy to attack these categories? Thanks a lot. Prabir Adarkar: Yes. Maybe I’ll take the first one, Deepak, on your sales and marketing question, and Tony can take your second. On the first – the first question, the short answer is the uptick in sales and marketing from a q-on-q perspective was driven primarily by our Dasher acquisition costs. Remember we spoke last at Q1, we were talking about being under supplied and so we made significant investments in acquiring Dashers in fact, acquire more Dashers this quarter than we have ever in the history of DoorDash. And we also experienced high advertising rates slightly because the rideshare industry and others were competing for the Dashers in our pool. So those two things led to higher Dasher costs this quarter that we had planned for if you think about our guidance. Now as for the future, remember, I will say I expect those elevated advertising rates to come down maybe not over the balance of this year would be somewhat conservative. But in the long-term, simply because it's a different pool of people, we’ve discussed this in the past, the different pool of people that act as Dashers versus those that are interested in rideshare. Over 75% of our Dashers are students or have other sort of part-time or full-time job. I think, I mentioned to you over 90% do less than 10 active hours per week. And then the nature of the job is fundamentally different because you don't need a car or have to have a car frankly and order a Dash. And so given the size of this TAM opportunity for Dashers, we do believe those advertising rates will normalize over the long-term. Tony Xu: Yes. With respect to your second question, what I would say is that, at the end of the day, we take a look at this from that consumer’s perspective of what's going to offer the best product experience in terms of selection, quality and price. And we do that in concert and partnership with all of our retail partners because much of this actually requires invention. And if you think about fundamentally what we're trying to do regardless of the model in which we operate, we're trying to take the physical world or physical businesses and all of the activities that they're doing and being able to give those merchant partners a digital way or frankly, a new way to build their own digital businesses. So every activity has to be re-imagined and there isn't one point solution, I would say, that's going to ultimately work for every single merchant nor is there one that's going to ultimately be consistent enough to actually solve all of the unique challenges within each respective category. We both aspire to build the best-in-class category-specific solution as well as the best-in-class experience across categories. And so we will continuously work with our merchant partners to invent these technologies that will continuously help change consumer preferences. Deepak Mathivanan: Got it. That's very helpful. Thanks, guys. Operator: Thank you. Our next question comes from the line of Spencer Tan from Evercore ISI. Your line is open. Spencer Tan: Hey. Thank you. Just have two questions. So around the commission caps that could be potentially permanent in New York City and San Francisco. I guess, if you could provide us just an update on where those stand today and how you kind of view the overall impact to your business? And then secondly, in kind of Grubhub and Just Eat Takeaway strongholds like in New York City or Chicago, how are you seeing the competitive environment in Q2 and kind of maybe quarter-to-date? Thanks. Tony Xu: Yes. I'll start with the first question. I'll let Prabir take the second question. With respect to these commission caps, we're actually largely seeing city officials and allow capitalism to take its course as most of these commission caps are actually being lifted, especially as more and more of the country is reopening and getting back into the sense of normalcy. I think with respect to the limited situations in San Francisco and New York City, our point of view is that any approach or ordinance towards a permanent cap is, frankly a) unnecessary because if you actually read some of these commission caps platforms like DoorDash’s, already offer plans well below the commission cap that is proposed. Second, they're very harmful in the sense that they're hurting the audience that they're trying to help, which are these restaurants because commission caps what they do is, they will ultimately result in increased prices for consumers, lowered sales for these restaurants and reduced work opportunities for Dashers. And finally, because of the arbitrary nature of these commission caps, they're violently unconstitutional. I think, the best, I guess, synthesis of the situation might actually come from Mayor London Breed from San Francisco who believe that this ordinance really unnecessarily outweighs any public good. And so that's our take and that's why you see us take litigation action in San Francisco. Prabir Adarkar: And Spencer on your question, I mean, really the two markets you mentioned, Chicago and New York City were I guess competitive strongholds for one of our competitors. We are number one in Chicago. We've gained share not just in the second quarter, but also in the first quarter of this year. In New York City, we are not number one, but it’s a clear priority for us. To be clear, we have continued to gain share including in the second quarter. Most of the other competitive share shifts we’ve seen have occurred between the other two peers in that market. Spencer Tan: Got it. Thank you both, and congrats on the quarter. Operator: Thank you. Andy Hargreaves: Grace, it looks like we don't have any more questions in the queue. So if that’s the case, can you pass it to Tony for quick closing remark and wrap it up. Tony Xu: Great. Thanks, Andy. Was there another question, Grace? Operator: No. You may proceed presenter. Tony Xu: Great. Thanks, everyone. I just wanted to take a moment and celebrate the fact that we fulfilled our 2 billionth order in the second quarter. And as someone who has seen this journey from the very beginning, I can tell you that it took us over seven years to achieve our first billionth order, and only nine months later, we’re able to see our second billionth order. So just want to take a moment to reflect on that milestone and thank all of our audiences, the team at DoorDash and all of our shareholders and what is a great achievement. Thank you very much, and we'll see you soon. Operator: Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you all for joining. You may now disconnect.DASH Ratings Summary
DASH Quant Ranking
Related Analysis
DoorDash Stock Gains 2% on Upgrade
DoorDash (NYSE:DASH) shares rose more than 2% intra-day today following an upgrade by Mizuho Securities analysts. The analysts upgraded the stock from Neutral to Buy and raised the price target to $105 from $90.
The upgrade is based on a deep analysis of key metrics, suggesting that Gross-Order-Value (GOV) growth is likely to surpass guidance and Street expectations in the second half of 2023. The analysts cited factors such as continued market share gains in the US, rational competition in Europe, moderated food inflation, and resilient consumer spending as drivers supporting this outlook.
DoorDash Stock Gains on Q2 Beat & Better Than Expected Outlook
DoorDash (NYSE:DASH) shares rose more than 3% intra-day today following the company's release of a full-year forecast that surpassed expectations.
The company reported a loss per share of $0.44 on revenue of $2.13 billion for Q2. The expected loss per share was $0.41, and revenue was projected to be $2.06 billion. The number of orders rose by 25% year-over-year, reaching 532 million. Moreover, the marketplace gross order value witnessed a significant 26% increase, reaching $16.47 billion.
For the current quarter, DoorDash anticipates a marketplace gross order value of $16 billion, surpassing the Street estimate of $15.4 billion. Additionally, the full-year forecast for the marketplace gross order value is now projected to be $64.7 billion, up from the previous forecast of $63.75 billion, and exceeding the Street estimate of $62.66 billion.
DoorDash Reports Q2 Revenue Beat, While EPS Miss Estimates
DoorDash, Inc. (NYSE:DASH) reported its Q2 results, with EPS of ($0.72) coming in worse than the Street estimate of ($0.21). Revenue increased 30% year-over-year to $1.61 billion, beating the Street estimate of $1.52 billion.
The company anticipates Q3 Marketplace GOV of $13.0-$13.5 billion and adjusted EBITDA of $25-$75 million. For the full 2022 year, the company anticipates Marketplace GOV of $51.0-$53.0 billion and adjusted EBITDA of $200-$500 million.
According to the analysts at RBC Capital, the company’s quarterly results were somewhat mixed, with a modest downside to GOV but upside to EBITDA, and GOV guidance relatively in line with expectations.
Positively, the company isn’t letting the public market’s newfound appetite for profitability alter its strategy to fund growth initiatives with its core, which highlights high confidence that the machine is working well.
DoorDash Reports Q1 EPS Miss, Better Than Expected Revenues
DoorDash, Inc. (NYSE:DASH) reported its Q1 results, with revenue of $1.46 billion coming in better than the consensus estimate of $1.37 billion, while EPS of ($0.48) missing the consensus estimate of ($0.41).
US restaurant marketplace orders grew over 250% from Q1/20 to Q1/22. The number of orders during the quarter was 404 million, up 23% year-over-year.
Economies of scale are showing through lower Dasher costs quarter-over-quarter and year-over-year. The company anticipates more efficient capital redeployment at Wolt post-acquisition (expected to close in Q2/22), keeping the EBITDA outlook unchanged.
The company expects Q2 adjusted EBITDA of $0-$100 million, compared to the consensus estimate of $82.5 million, and marketplace gross order value of $12.1-$12.5 billion, compared to the consensus estimates of $12.11 billion.
