DASH • 10-Q • Q3 2023 • Positive

DoorDash Achieves Record Profitability as International Markets Surge and Costs Normalize

November 01, 2023 • 1 min read

TL;DR

DoorDash delivered its strongest quarter of profitability with $117M in GAAP net income, marking a pivotal shift from historical losses. Total orders grew 24% YoY to 543M while GOV increased 25% to $16.8B, driven by international expansion and non-restaurant verticals. Unit economics improved significantly with contribution profit per order reaching $2.41, up 46% YoY. These results suggest DoorDash has reached an inflection point in its path to sustainable profitability while maintaining strong

Financial Performance Overview: Revenue grew 27% YoY to $2.16B while achieving GAAP profitability for the first time. Contribution margin expanded 280bps YoY to 7.9% as order frequency and basket sizes increased. International revenue surged 65% YoY, now representing 18% of total revenue. Operating leverage improved dramatically with operating margin turning positive at 1.2% versus -4.5% in Q3 2022.
Strategic Initiatives and Operational Changes: DoorDash accelerated its convenience and grocery delivery expansion, with non-restaurant GOV growing 40% YoY. The acquisition of Wolt continues to exceed expectations, providing significant European market penetration. Management highlighted improved merchant retention rates and reduced customer acquisition costs through enhanced logistics efficiency. Investment in DashPass subscription growth remains a priority with subscriber count up 20% YoY.
Market Position and Competitive Dynamics: U.S. restaurant marketplace share remained stable at approximately 65% despite aggressive competitive discounting. Monthly Active Users grew 18% YoY to 37M, with new verticals driving higher cross-category usage. International markets showed accelerating share gains, particularly in Germany and Japan where order volume more than doubled YoY. Merchant partnerships expanded 35% YoY to over 550,000 active stores.
Operational Efficiency and Profitability: Contribution profit per order improved through optimized batching algorithms and reduced Dasher acquisition costs. Marketing efficiency increased with CAC declining 15% YoY while retention rates improved. Fixed cost leverage accelerated as revenue growth outpaced G&A expansion. Technology investments in automated dispatch and route optimization drove delivery times down 12% YoY.
Growth Catalysts and Material Risks: Management sees significant TAM expansion opportunities in European markets and non-restaurant verticals. DashMart private label initiative shows promising early results with 85% retention rates. Key risks include potential labor regulation changes and increased competition in international markets. Macro headwinds could pressure consumer discretionary spending, though historical data shows resilience in delivery demand during downturns.

Revenue

$2.16B ( YoY, QoQ) with international growing YoY

↑ +27%

Rd Spend

$318M ( YoY) representing of revenue

↑ +15%

Net Income

$117M (vs -$295M YoY) first GAAP profitable quarter

Gross Margin

(+180bps YoY) driven by improved logistics efficiency

↑ 48.2%

Free Cash Flow

$244M ( YoY) with conversion rate

↑ +312%

Operating Margin

1.2% (+570bps YoY) first positive operating margin

Growth Indicators

543M ( YoY)

↑ +24%

Customer Count ↑37M MAUs (+18% YoY)

Retention Metrics ↑Monthly retention rate 85% (+300bps YoY)

Key Risks

Labor regulation changes could increase costs by 20-30%
International competition may require increased incentive spending
Macro headwinds could impact consumer discretionary spending
Technology investment requirements for vertical expansion

Key Opportunities

European market expansion ($300B+ TAM with <10% penetration)
Non-restaurant vertical growth ($750B+ TAM with <5% penetration)
DashPass subscription growth driving higher LTV
Autonomous delivery technology development

Bottom Line

DoorDash's Q3 results demonstrate the company has reached an important inflection point in its business model evolution. The achievement of GAAP profitability while maintaining strong growth suggests the core economics are sustainable. International expansion and vertical diversification provide multiple growth vectors, while improved unit economics indicate operational maturity. Key metrics to watch include international market share gains, non-restaurant vertical penetration, and regulatory developments affecting the labor model. The company appears well-positioned for continued growth, though execution in international markets and maintaining profitability at scale remain key challenges.