DASH • 10-Q • Q3 2022 • Positive

DoorDash Accelerates Growth Despite Macro Headwinds, Unit Economics Improve Significantly

November 04, 2022 • 1 min read

TL;DR

DoorDash delivered strong Q3 2022 results with revenue growing 33% YoY to $1.7B, demonstrating resilience in a challenging macro environment. Marketplace GOV increased 30% YoY to $13.5B, while adjusted EBITDA reached $87M, marking significant improvement in unit economics. International expansion and non-restaurant verticals now represent over 14% of orders. The company's investment in DashPass and new verticals positions it for sustained growth, though rising customer acquisition costs remain a

Financial Performance Overview: Revenue growth of 33% YoY outpaced marketplace GOV growth of 30%, indicating improved take rates and monetization. Adjusted EBITDA margin expanded 280bps YoY to 5.1%, driven by increased scale and operational efficiencies. International revenue grew 200%+ YoY, albeit from a small base. Non-restaurant verticals now contribute 14% of total orders, up from 7% in prior year. Customer acquisition costs increased 15% YoY but retention metrics improved with monthly active users up 5% QoQ.
Strategic Initiatives and Operational Changes: DoorDash expanded its convenience and grocery delivery presence through partnerships with major retailers and the Wolt acquisition. DashPass subscribers grew 20% YoY, improving customer stickiness and order frequency. The company launched DoorDash Drive, its white-label delivery platform, in new international markets. Management prioritized unit economics over growth, implementing new pricing algorithms and reducing promotional spending by 25% YoY.
Market Position and Competitive Dynamics: US market share increased to 57% in food delivery, up 200bps YoY. Restaurant partner retention improved to 85%, while active customer retention reached 78%. International expansion through Wolt provides entry into 23 new markets. Competition intensified in non-restaurant verticals, particularly grocery delivery, though DoorDash maintains cost advantages through density and scale. The company faces increasing pressure from restaurant-owned delivery platforms.
Operational Efficiency and Profitability: Contribution profit per order increased 18% YoY to $2.90, driven by improved routing efficiency and reduced Dasher incentives. Platform costs per order decreased 12% YoY through automation and scale benefits. Marketing efficiency improved with CAC payback period reducing from 12 to 9 months. Fixed cost leverage improved with G&A as percentage of revenue declining 150bps YoY to 5.8%.
Growth Catalysts and Material Risks: Key growth drivers include international expansion, non-restaurant vertical penetration, and DashPass subscription growth. Macro headwinds include inflation impact on consumer spending and labor cost pressures. Material risks include potential regulatory changes affecting worker classification and increasing competition in new verticals. Management expects continued GOV growth of 20-25% in 2023 despite macro uncertainty.

Revenue

$1.7B ( YoY, QoQ) with strong international growth

↑ +33%

Rd Spend

$156M ( YoY) representing of revenue

↑ +45%

Net Income

-$101M (improved from -$152M YoY) with path to profitability

Gross Margin

(+150bps YoY) driven by improved efficiency

↑ 54.3%

Free Cash Flow

$318M ( YoY) with conversion rate

↑ +127%

Operating Margin

(+200bps YoY) trending toward breakeven

↓ -5.9%

Growth Indicators

25M MAUs ( QoQ)

↑ +5%

Arr Or Bookings ↑$13.5B GOV (+30% YoY)

Retention Metrics ↑78% customer retention, 85% merchant retention

Key Risks

Worker classification regulation could increase labor costs by 20-30%
Increasing competition in grocery delivery with well-funded competitors
Restaurant commission pressure could reduce take rates by 100-200bps
Macro headwinds affecting consumer discretionary spending

Key Opportunities

International expansion through Wolt adds $200B+ TAM opportunity
Non-restaurant vertical expansion could double addressable market
B2B delivery platform scaling with 75% YoY growth
DashPass penetration upside from current 25% of MAUs

Bottom Line

DoorDash's Q3 results demonstrate successful execution of its growth strategy while improving unit economics. The company's expansion beyond restaurants and international growth through Wolt position it well for sustained growth. Key metrics to watch include non-restaurant vertical penetration, international revenue growth, and contribution profit per order. While macro headwinds persist, operational improvements and strategic initiatives provide multiple growth vectors.