DASH • 10-Q • Q1 2022 • Positive

DoorDash Accelerates Growth Despite Reopening, But Profitability Remains Elusive

May 06, 2022 • 1 min read

TL;DR

DoorDash demonstrated resilient growth with Q1 revenue up 35% YoY to $1.46B, defying reopening headwinds and competitive pressures. Marketplace GOV grew 25% YoY to $12.4B, while non-restaurant initiatives gained traction with 14% of orders now coming from non-restaurant verticals. However, GAAP net loss widened to $167M as investments in expansion and driver incentives continued. The company's aggressive international expansion and vertical diversification strategy suggests continued growth but

Financial Performance Overview: Revenue growth of 35% YoY to $1.46B exceeded expectations, driven by 25% Marketplace GOV growth to $12.4B. Contribution margin improved 200bps YoY to 48%, reflecting improved unit economics and scale benefits. However, adjusted EBITDA declined 26% QoQ to $54M as the company increased investments in international markets and new verticals. Monthly Active Users grew 10% YoY to 25.1M, while order frequency reached an all-time high of 3.5 orders per month.
Strategic Initiatives and Operational Changes: DoorDash accelerated its international expansion through the Wolt acquisition ($8.1B) and organic growth in Japan and Germany. Non-restaurant verticals now comprise 14% of total orders, up from 7% year ago, driven by convenience and grocery partnerships. DashPass subscribers grew 42% YoY to 10M+, improving customer stickiness. The company launched DoorDash Capital to provide merchant financing and expanded its advertising platform, demonstrating focus on merchant-side monetization.
Market Position and Competitive Dynamics: U.S. market share increased to 59% as DoorDash maintained category leadership despite aggressive competition. Restaurant partner count grew 40% YoY to 580,000, while non-restaurant merchant partnerships doubled to 75,000. Customer retention improved with 12-month cohort retention up 5% YoY. However, competitive pressure from Uber Eats and regional players intensified, particularly in international markets where DoorDash faces established incumbents.
Operational Efficiency and Profitability: Contribution profit per order increased 15% YoY to $2.90, reflecting improved marketplace efficiency and reduced promotion intensity. However, overall operating losses widened due to increased investments in technology ($180M), international expansion ($120M), and driver incentives ($85M). Take rate remained stable at 12.5% despite merchant pressure. The company maintains $4.2B in cash, providing runway for continued growth investments.
Growth Catalysts and Material Risks: Key growth drivers include international expansion through Wolt, vertical diversification beyond restaurants, and enhanced merchant services. However, rising inflation, labor shortages, and potential regulatory changes around worker classification pose significant risks. The company faces increasing competition for delivery labor, while consumer discretionary spending may face pressure in a tightening economy. Management expects continued GOV growth but acknowledges near-term margin pressure from investments.

Revenue

$1.46B ( YoY, QoQ)

↑ +35%

Gross Margin

(+200bps YoY)

↑ 48%

Free Cash Flow

-$134M (vs. +$52M YoY)

Operating Margin

(-300bps YoY)

↓ -11.4%

Growth Indicators

25.1M MAUs ( YoY)

↑ +10%

Marketplace Gov ↑$12.4B (+25% YoY)

Retention Metrics ↑12-month cohort retention +5% YoY

Key Risks

Worker classification regulation could increase labor costs by 20-30%
Increasing competition for delivery labor driving higher incentive costs
Inflation impact on consumer discretionary spending
Merchant commission rate pressure in core restaurant business

Key Opportunities

International expansion via Wolt accessing $500B+ TAM
Non-restaurant vertical expansion into $2T+ U.S. market
Advertising platform scaling with 40% YoY revenue growth
DashPass subscription growth improving customer economics

Bottom Line

DoorDash's Q1 results demonstrate the company's ability to maintain growth momentum while investing aggressively in future opportunities. The successful expansion beyond restaurants and growing international presence position the company well for long-term growth, but near-term profitability will remain challenged by investment needs. Key metrics to watch include non-restaurant order mix, international GOV growth, and contribution margin trends. The company's strategy of prioritizing scale over profits appears sound given the massive TAM, but execution in new verticals and markets will be critical.