DASH • 10-Q • Q2 2022 • Positive

DoorDash Accelerates Growth Despite Macro Headwinds, But Profitability Remains Elusive

August 05, 2022 • 1 min read

TL;DR

DoorDash demonstrated resilient growth with Total Orders increasing 23% YoY to 426 million and revenue growing 30% YoY to $1.6B in Q2 2022. Marketplace GOV reached $13.1B, reflecting continued market share gains despite reopening headwinds. However, adjusted EBITDA margins remained thin at 1.3% as investments in international expansion and non-restaurant verticals offset efficiency gains. The company's diversification strategy into convenience, grocery, and retail shows early traction but increa

Financial Performance Overview: Revenue grew 30% YoY to $1.6B, driven by 23% order growth and higher take rates. Marketplace GOV expanded 25% YoY to $13.1B while contribution margin improved 120bps to 10.3%. International revenue doubled YoY but remains under 5% of total revenue. Monthly Active Users grew 10% YoY to 25 million, though acquisition costs increased. Operating losses widened to $263M as investments in new verticals and markets outpaced top-line growth.
Strategic Initiatives and Operational Changes: Management accelerated investments in convenience and grocery delivery, with non-restaurant orders now representing 14% of total orders. DashPass subscribers grew 25% YoY to over 10 million as the company focuses on membership economics. The Wolt acquisition closed in Q2, providing immediate scale across 23 international markets. New partnerships with major retailers like Dollar General and Albertsons expand TAM but require significant near-term investment in logistics and marketing.
Market Position and Competitive Dynamics: U.S. delivery market share increased 400bps YoY to 59% as DoorDash continues to gain ground versus Uber Eats and Grubhub. Restaurant partnerships expanded 40% YoY to over 550,000 merchants. However, competition in grocery and convenience intensifies with Instacart, Gopuff, and Amazon investing heavily. International markets face established local players and require sustained investment to achieve scale.
Operational Efficiency and Profitability: Contribution profit per order improved 8% YoY to $2.90 through delivery efficiency gains and higher merchant fees. However, marketing spend increased 40% YoY and R&D investments grew 85% YoY as the company pursues new verticals. Fixed cost leverage remains limited with G&A growing faster than revenue. Management expects continued margin pressure through 2022 as international expansion and new vertical investments take priority over near-term profitability.
Growth Catalysts and Material Risks: Key growth drivers include international expansion via Wolt, convenience/grocery penetration, and DashPass subscription growth. However, reopening headwinds, rising inflation, and labor cost pressures create near-term uncertainty. Regulatory risks around worker classification remain material, with potential for significant cost increases. The shift beyond restaurants increases TAM but introduces execution complexity and new competitors.

Revenue

$1.6B ( YoY, QoQ)

↑ +30%

Gross Margin

(-200bps YoY)

↑ 48.3%

Free Cash Flow

-$200M (vs. +$100M YoY)

Operating Margin

(-500bps YoY)

↓ -16.4%

Growth Indicators

25M Monthly Active Users ( YoY)

↑ +10%

Marketplace Gov ↑$13.1B (+25% YoY)

Retention Metrics ↑Monthly retention stable at 80% for mature cohorts

Key Risks

Worker classification regulation could increase labor costs by 20-30%
Intense competition in convenience/grocery from well-funded players
International expansion execution risks and margin dilution
Inflationary pressures on consumer spending and labor costs

Key Opportunities

$100B+ convenience delivery TAM with <5% current penetration
International expansion via Wolt across 23 markets
DashPass subscription growth driving cross-vertical adoption
Logistics automation and vertical integration margin potential

Bottom Line

DoorDash's Q2 results demonstrate strong execution in core markets while laying groundwork for ambitious expansion. The company faces near-term margin pressure from investments but maintains clear market leadership and improving unit economics in mature segments. Success in new verticals and international markets will determine long-term value creation. Key metrics to watch include non-restaurant order penetration, international revenue growth, and contribution margin trends across segments.