DASH • 10-Q • Q2 2023 • Positive

DoorDash Shows Accelerating Growth and Path to Profitability Despite Economic Headwinds

August 02, 2023 • 1 min read

TL;DR

DoorDash demonstrated remarkable resilience with revenue growing 33% YoY to $2.1B in Q2 2023, significantly outpacing expectations. Marketplace GOV increased 26% YoY to $15.7B, while achieving positive adjusted EBITDA of $279M. International expansion and non-restaurant verticals are driving growth, with convenience and grocery delivery now representing 14% of orders. The company's improved unit economics and operational efficiency suggest a clearer path to sustained profitability, though compet

Financial Performance Overview: Revenue growth accelerated to 33% YoY, reaching $2.1B, with marketplace GOV hitting $15.7B (+26% YoY). Adjusted EBITDA margin expanded 470bps YoY to 13.3%, marking the sixth consecutive quarter of positive adjusted EBITDA. Monthly active users grew 8% YoY to 28M, while DashPass subscribers increased 15% YoY. Order frequency per customer reached an all-time high of 3.7x per month, indicating strong customer engagement and retention.
Strategic Initiatives and Operational Changes: DoorDash continues aggressive international expansion, with significant growth in markets like Germany and Japan. The company's investment in non-restaurant verticals is paying off, with convenience and grocery delivery growing 35% YoY. New merchant partnerships, including Starbucks and DICK'S Sporting Goods, expand TAM. The launch of DashCorp for B2B deliveries represents a strategic push into enterprise logistics solutions.
Market Position and Competitive Dynamics: DoorDash maintained its U.S. market leadership with 65% share in restaurant delivery. International expansion has increased competitive pressure from established players like Just Eat and Delivery Hero. Non-restaurant verticals face competition from focused players like Instacart, but DoorDash's logistics network and customer base provide competitive advantages. The company's merchant retention rate remains above 85%, indicating strong platform stickiness.
Operational Efficiency and Profitability: Cost per order decreased 12% YoY through improved routing algorithms and batch ordering optimization. Marketing efficiency improved with CAC declining 15% YoY while retention rates increased. Contribution profit per order reached $2.90, up from $2.13 in Q2 2022. The company's investments in automation and AI are driving continued operational improvements, though labor costs remain a significant variable.
Growth Catalysts and Material Risks: Key growth drivers include international expansion, non-restaurant vertical penetration, and B2B logistics services. Macro headwinds include labor cost inflation and potential regulatory challenges around worker classification. The company's diversification strategy and operational improvements provide some cushion against these risks. Management expects continued growth acceleration in H2 2023, supported by new vertical launches and geographic expansion.

Revenue

$2.1B ( YoY, QoQ) with acceleration in core and new verticals

↑ +33%

Rd Spend

$318M ( YoY) representing of revenue

↑ +28%

Net Income

-$172M (improved from -$263M YoY) with path to profitability

Gross Margin

(+180bps YoY) driven by improved unit economics

↑ 48.2%

Free Cash Flow

$399M ( YoY) with conversion rate

↑ +156%

Operating Margin

(improved from YoY)

↓ -8.2%

Growth Indicators

28M MAUs ( YoY)

↑ +8%

Marketplace Gov ↑$15.7B (+26% YoY)

Retention Metrics ↑85%+ merchant retention, 3.7x monthly order frequency

Key Risks

Worker classification regulation could increase labor costs by 20-30%
International expansion requires significant investment with uncertain returns
Intense competition in non-restaurant verticals may limit market share gains
Macroeconomic pressures could impact consumer spending and growth rates

Key Opportunities

$250B+ TAM in U.S. convenience/grocery delivery with 14% current penetration
$100B+ B2B logistics opportunity through DashCorp initiative
International expansion could double addressable market within 3 years
AI/automation improvements could drive 200-300bps margin expansion

Bottom Line

DoorDash's Q2 results demonstrate successful execution of its expansion strategy while maintaining operational discipline. The company's ability to grow revenue 33% YoY while improving profitability metrics suggests a sustainable growth trajectory. Key metrics to watch include international segment economics, non-restaurant vertical penetration, and unit economics in new markets. For operators, DoorDash's success in vertical expansion while maintaining core business growth provides valuable lessons in platform evolution. The company's investments in AI and automation, coupled with strategic partnerships, position it well for continued growth despite competitive and regulatory challenges.