Q4 2020 DoorDash Inc Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the door Dash Q4, 2020 earnings call.
At this time all participants are in listen only mode. After the speaker's presentation, there will be a.
Question and answer session to ask a question. During this time you will need to press star one on your telephone keypad.
Please be advised that today's conference is being recorded and if you require any further assistance. Please press star zero I would now like to hand, the conference over to your speaker today, Mr. Andy Hargreaves. Please go ahead Sir.
Thanks, Duane Hello, everyone and welcome to our fourth quarter 2020 earnings call.
Andy Hargreaves from VP of industrial relations pleasure to be joined today by door Dash, CEO and cofounder, Tony Schuh and CFO per Bureau, Darko, we'd like to remind everyone that we'll be making forward looking statements. During this call including statements relating to the expected performance of our business future financial results and guidance strategy long term growth.
And overall future prospects as well as statements regarding litigation and regulatory matters.
Forward looking statements depend on assumptions data or methods that may be incorrect or imprecise.
Subject to risks and uncertainties.
Events that could cause our actual results and future actions of the company to differ materially from those described in forward looking statements are set forth under the captions forward looking statements in today's Investor letter and are described in our risk factors, including in our SEC filings.
Including our final prospectus for our initial public offering filed with the SEC on December eight 2020.
You should not rely on our forward looking statements as predictions of future events.
Also note that the forward looking statements we make on this call are based on information available to us and assumptions and beliefs as of today's date, we disclaim any obligation to update any forward looking statements, except as required by law.
During this call we will be discussing certain non-GAAP financial measures and information regarding our non-GAAP financial results, including a reconciliation of such non-GAAP results to the most directly comparable GAAP financial measures may be found in our investor letter, which was furnished with our form 8-K filed today with the SEC and on our Investor Relations website.
These non-GAAP measures should be considered in addition to our GAAP results and are not intended to be a substitute for our GAAP results.
Finally, this call in its entirety is being audio webcast on our Investor Relations website and an audio replay of this call will be available on our website shortly after the call.
With that out of the way I'd like to turn it over to Tony.
Thanks, Andy and thanks to everyone for joining our very first earnings call.
Thousand 20 really put into focus the mission of our company and why we started this journey seven and a half years ago.
We exist to grow and to empower local economies.
This is our first earnings call I thought I'd give you a snapshot into how our team has executed this submission during the most critical times and I'll followed by sharing a few thoughts from where we are going as we hopefully soon emerge out of this pandemic.
2020 was a difficult year for all of our audiences and our operations by great challenges and faced enormous uncertainty.
While exhausting at times I am proud that our team chose optimism build plan prepared for all scenarios and executed to $24 7 million to ensure that we did our part and seen the best of our local communities.
While much of the work began in March 2020, a lot of the impact was carried into Q4.
We prioritize safety by shipping no contact delivery distributed more than 10 million units of PPE in the form of hand, Sanitizers gloves and masks to dashboards and we collaborated with merchants on tamper proof packaging.
We prioritize dashes health by offering affordable telehealth visits with doctors insured financial assistance for those impacted by COVID-19, and just last week hosted our first webinar to provide doctors with information about the vaccine.
Equally important we became a lifeline for millions of people, who saw flexible earnings opportunities, especially after furloughs and other forms of job loss in Q4 alone over $1 million <unk> earned over $2 billion in supplemental income on our platform.
We reduced our commissions by half to local merchants and investment totaling over $100 million.
While funding national marketing campaigns to drive growth and add instant liquidity.
We provided grants to more than nearly 2000 local restaurants to help them adapt to the COVID-19 winter and by the end of Q4 2020, our analysis showed that the odds of survival during the pandemic for eight times better for merchants on door dash versus all U S restaurants.
For consumers, we accelerated our entry into the convenience and grocery categories from September to December last year, we observed 95% growth in consumers, who order from these new categories on the door dash marketplace.
Finally, we supported our community by donating three dash past subscriptions to health care workers across the country and partnered with organizations like the New York City Department of public schools, United Way and feeding America to deliver food groceries and supplies to those most in need powering the delivery of $6 5 million meals to those.
<unk> made during 2020.
I want to thank all of our teams worldwide and the millions of consumers dashes and merchants, who each stepped up in their own ways to navigate this pandemic as.
As we progress out of the pandemic I thought I'd remind everyone of our long term vision, which will take decades to build.
In order to grow and empower local economies, we plan to build a marketplace a platform to enable every brick and mortar business to compete in today's convenience economy.
The job of our marketplaces to grow a merchant sales and we aspire to bring all of your city to you in minutes not hours or days.
Today, most of our business is in the restaurants category, where we still see massive runway.
We are investing to extend our category leading position in the U S. While doubling down on the momentum we are seeing overseas in Canada and in Australia.
Outside of restaurants, we're excited about the early progress, we're making after launching into the convenience and grocery categories. According to third party data door Dash Jordache became the largest online convenience delivery platform in the U S and less than a year demonstrating the extensibility of our platform.
And this is just the beginning as we have a long way to go in building our marketplace to serve these and many other categories in the future.
The job of our platform is to empower a brick and mortar merchant to build their own digital channel a task necessary to adapted to evolving consumer preferences before the pandemic and a task certainly necessary to survive COVID-19.
This business is even more critical as we come out of the pandemic as consumers have only become more habituated to a convenience economy aided by a possible longer term trend towards working from home.
Today merchants can use duress drive to offer on demand and same day delivery from their own digital channels in cases, where merchants don't have an online ordering solution. They can use the rash storefront, which enables them to participate in e-commerce and it gives them a product that seamlessly ties to their back of house systems.
Over time, we will have to build even more products and services to enable merchants to run their digital business as effectively as we operate our marketplace.
Underpinning our marketplaces platform as our maniacal focus on operating efficiency.
We believe best in class execution will result in an in an improving cost structure that unlocks further investment capital as we grow our scale.
With that let me hand, it over to Premier.
Thanks, Tony and good afternoon, everyone.
At our history, we've been laser focused on our four core constituents.
<unk> consumers that shows in our employees.
And today, we are excited to welcome our fifth considering our shareholders.
I wanted to take this opportunity to share how we manage the business and allocate capital.
We are still early in our lifecycle and believe we have substantial growth opportunities ahead of us.
We intend to invest aggressively to pursue these opportunities.
We're navigating capital, we start small and experiment with the refined product market fit.
If we see strong demand with a faster unit economics that meet our thresholds, we invest incremental capital.
Each project, we invest in must continuously on capital into a minutes.
The bulk of our investments have been made through our income statement rather than through our balance sheet and we expect this to remain the case for the foreseeable future.
We are the category leader in the U S. Despite our scale, we see significant room for growth.
Currently we are managing the business to maximize scale and long term profit dollars rather than take rate or margin percentages.
Impact is this means we intend to invest aggressively into the business in order to further our growth initiatives and expand our competitive advantages.
As you likely saw we intend to provide guidance for <unk> <unk> and adjusted EBITDA going forward.
We do not plan on guiding to revenue as we do not directly manage the business for this metric and our model revenues in outback, reflecting in part dynamic decisions, we make around consumer pricing the ideal mix of advertising to promotions.
Relative success with dash price and the mix of drive volume.
We focus intently on input to each of these areas, but we'll manage the business to market <unk> and adjusted EBITDA.
We provided our guidance for Q1 in 2021 Investor letter, but I'd like to provide a little more detail behind that.
Underlying a 2021 guidance is an assumption of accelerated market reopening and the return to in store dining.
While we have seen many positive signals from consumers and markets that are temporarily reopened during the pandemic.
Understood vaccination and full reopening per drive shopper changes in consumer behavior from current data.
Terrific.
Consequently, our 2021 full year guidance reflects this uncertainty.
We are deeply hopefully the markets will reopen soon and we manage our business to provide exceptional experiences to merchants consumers and bachelors in any scenario.
With that I'll open it up for questions.
And as a reminder, if you would like to ask a question from Star one on your telephone keypad.
And your first question comes from the line.
Doug Anmuth from JP Morgan.
Go ahead, thanks Richard.
Thanks for taking the questions.
I have two first just on cash.
Trends a little bit in <unk>, we've seen some signs of accelerating growth in the quarter from from some of your peers can you just talk about kind of what youre seeing in the first quarter and now that ties into your guidance for <unk> in terms of <unk> and then secondly can you just talk more broadly about how.
Youre thinking about the <unk>.
Marketing.
And competition in the category in the U S. Now that we've seen a degree of consolidation over the last year and reopening happening and how you view kind of rationality in the space going forward. Thanks.
Maybe I'll take those questions. So first in terms of the first quarter. We are seeing acceleration in January relative to our order growth in December as well as in Q4. So so that answers that question. So our findings are consistent with what others have communicated with respect to marketing in competition around that we continue to occur.
While more of the new customers joined the industry in any given period and part of what's driving that is the consistent gains we drive in our unit economics, and the retention and engagement of our consumer base, which then allows us to do to compete.
Could be higher and higher amounts in terms of CPA to acquire customers and so we believe it's a competitive advantage.
Increasing unit economics helped drive an LTV increase that then translates into an ability to acquire.
More customers than others.
Thank you.
Yes.
Sure.
And your next question comes from the line of Ross Sandler from Barclays.
Hey, guys.
Thanks for the share in a letter about the.
Marketplace versus the drive partner store growth rate.
One of the ladder.
On drive I think order growth it was growing around 700%.
In mid 2020.
And we will be able to take rate in the fourth quarter, a modest slow down a little bit.
So just.
Is that is that true.
What percent of orders are coming from drive at this point and just any thoughts from the long term outlook for that business.
Thanks, a lot.
So let me take the second part of your question first which is I think you were talking about the take rate changes going from the third quarter into the fourth quarter third quarter, it'd be greater strength from 1%, which reduced to 11, 9% from the fourth quarter and really the two things driving that was it.
What's been incremental profit going into costs number profit going to passed in November and so we have a portion of the quarter.
During which we have incurred those costs.
As well as the impact of commission gaps for price controls in certain jurisdictions in Q4, so those price controls I believe we disclosed in the latter day.
Net impact of revenue from the price control was $36 million or 44 basis points. So if you add that back.
You get a cleaner picture of what the actual underlying improvement in the take rate was.
Inclusive of the drop going to cost on drive.
We continue to be excited by that business day.
<unk> continues to grow strongly faster than the core marketplace and drive orders grew both quarter on quarter as weather from Europe.
He says that.
Thing Thats interesting about driver has been about a year ago, we were largely concentrated in the restaurant vertical but since then we've diversified beyond restaurants and have now brought onto the drive back from merchants and local businesses and other verticals such as retail refined Michaels and Macy's and <unk>.
Suppliers, we signed Petsmart and Petco.
From our delivery for Sam's club as well as flowers. So we continue to be excited about the growth here, we haven't we haven't disclosed exactly what percentage of value borders.
Particularly from this past quarter, but suffice to say it continues to grow strong EBIT quarter over quarter and year on year and faster than the core business.
We can go to the next question operator.
Your next question comes from the line of Ron Josey from JMP.
Great. Thanks for taking the question guys and I wanted to ask a little bit more about usage in the letter I think you talked about improved retention from dash pass subs and invest that sounds grew I think a bigger a larger part of the mix of orders. So can you talk about retention a little bit more particularly as we think about January and trends going forward.
In terms of consumer behavior trends, and then any sort of insights on dash past usage and just frequency of use would be helpful. Thank you.
Iran. Yes in terms of <unk>, we havent disclosed the number of subs, but I will say that.
They have grown sequentially since our disclosure in the S. One we continued to invest behind those because.
As we explained in our Swan.
Dash prowess to drive improve engagement amongst the subscribers due to the video delivery season. So it's certainly an avenue for growth that's exciting to us.
In terms of retention as well as engagement, we continue to see retention.
And engagement through Humana.
Covid how is it that engagement continues to improve both within the <unk> product.
As well as amongst non desktop users of the platform. So we're seeing positive trends there.
In terms of the long term.
We have not experienced consumer behavior.
To be sticky and so once the consumers discovered door dash and ordered from their favorite restaurants and.
The benefits of on demand convenience, new habits get formed and we believe those dishabituate Sharon will persist over over the long run and so even when you look at markets, like Texas, and Georgia, and Florida that reopened.
Partially open even through the pandemic in the U S against that backdrop, we continue to see.
Weekly order volumes in these markets continue to grow so let's say that's it.
Two promising sign.
Yeah.
The second question was sort of heading into a guidance question from media and address that right now which is.
In our guidance, we're assuming that as the vaccine gets fully rolled down in consumer and consumer behavior, when Scott reverting back to pre COVID-19 levels and so that's what's embedded in the guidance along with <unk>.
Standard Q2, Q3 summer seasonality.
When people generally tend to go out versus ordering them and so you've seen that embedded in that guidance.
Certain amount of uncertainty with respect to what consumer behavior does post pandemic and where we're trying to reflect that in the guidance we provided.
Super helpful. When you read my mind. Thank you.
And your next question comes from Heath, Terry from Goldman Sachs.
Great I was wondering if you could give us a bit of an update on your experiments.
Probably more than experiment, but the work that you're doing in general merchandise.
The relationship with <unk>.
Moving to ALS and others.
What kind of progress youre seeing so far and to the extent that we just came out of the holiday season, where companies like Nike were being told by third party delivery network that they could.
Shipped through the <unk>.
How you see the size of that opportunity at the pace that you are going to.
Trying to address it.
Hey, this is Tony I'll take that question.
If you can think of any silver lining of this pandemic I think it is that every brick and mortar store, whether they are a restaurant or a retailer is participating in e-commerce.
Times exclusively in ecommerce given some of the restrictions that we saw during the past year and for US we really we're seeing that on both sides of our business as a marketplace as well as other platform on the marketplace front, we launched.
Our second category of comedians item deliveries about a year ago, when we announced partnerships with 711, Cvs Walgreens and many others and.
You know already that has picked up.
Quite a lot of momentum and the early progress again very early but.
According to third party estimates to rash already has the largest delivery platform for comedians goods in the U S and I think youre seeing some of the extensibility of starting with the highest frequency category of restaurants building the biggest audience, there and covering the most number of stores there just given the nature of how many restaurants there.
Relative to NAV and the other types of stores there are not.
And that has made us.
Be able to accelerate very quickly and with some of these other categories on the platform from we've actually been delivering from a lot of these partners for a while Doris drive launched in 2017 Q1, So it's about four year old now and.
<unk> mentioned some of the categories that are.
It really came to fruition in the past year, whether that'd be in retail as we partner with the likes of Macy's and Michaels pet supplies Petsmart and petco.
Pharmacy with Sam's club and so I think what Youre seeing is.
Every business recognizes that omni channel is a great thing every business is trying to figure out how to redo their supply chain to really meet a post pandemic.
Omni channel channel presence, which they expect to grow.
And we will be there with them, both with our marketplace as well as our platform.
Great. Thank you very much.
And your next question is from Eric Sheridan from UBS.
Thank you so much for taking the question I wanted to come back to the customer and investments against the longer term opportunities you know you've talked before about <unk>.
Geographic expansion can you just give us a bigger sense of the way Youre thinking now post the IPO about the process of either building business units globally or acquiring businesses globally, it sort of puts and takes.
Both organic and inorganic growth outside your core markets. Thank you.
Yes, Eric I'll take that one.
The gone.
If you think about it.
Our portfolio of investments today, we're growing in our core category of restaurants that we believe have massive runway ahead, we're adding categories to becoming a multi marketplace at multi category marketplace, we're adding products on our platform. In addition to drive and storefront and the fourth area is international so.
Our perspective on the international.
<unk> is really taking a very long term view and becoming a global company over the long run and <unk>.
And given where we've seen even with our current footprint in Australia, and Canada, where we believe we gained share in 2020 and saw improvements in our unit economics, we're really liking what we're seeing with our playbook and we also like what we see in terms of some of.
The geographic opportunities outside of the ones, we operating in terms of just how underpenetrated and how large some of these opportunities are especially as we bring a multi product portfolio into those geographies.
With respect to how we enter.
Obviously, we will look at any opportunities and weigh them against our own organic efforts. So far we like our playbook and we will always seek to enter markets in a differentiated way for all of the automakers.
And just to add to Tony's point, I mean, I want to make sure we don't lose sight that even within the core food delivery business.
The runway for growth is massive.
Compared to <unk> <unk> compared to the overall restaurant spend we are a tiny fraction of that so there's a lot of revenue from <unk>.
For growth.
Just in food delivery of low no youre back onto that.
New verticals, such as convenience and grocery and it further adds to our addressable market.
Tiny tiny fraction of that so.
National is definitely an important priority and it is an area, where we certainly aspire to grow into but even in the core U S.
Business has many avenues for growth and with them to be.
Those opportunities.
Thanks, so much.
And our next question is from Alex Potter from Piper Sandler.
Thanks, guys.
Question, maybe follow on that.
Previous discussion we were just having there, but if you were to maybe.
I guess divide management bandwidth like the amount of brainpower youre spending on these different growth opportunities right now.
Now there are various different verticals within dive.
International.
I know, it's easy to just say, they're all important but you go to bed at night, what are the things that youre thinking of more versus less.
Yeah, I'll take that look certainly we have a full plate and its a broad surface area and the goal was always over many decades to build both a marketplace and a platform in which we can transform every brick and mortar business. So that aperture is.
Why even 75 years ago, when we started the company.
The way I tend to think about this is less about <unk>.
<unk> income was up against most often in my dreams. It's more do we have the right leader and are we setting up that leader with the right cross functional team for success.
And Premier mentioned in some of the opening remarks.
Yeah.
A lot of these projects that we're talking about they're in very different stages of progression and we tend to invest can measure. It. So what we see both in terms of achieving product market fit as well, it's just where we are in the maturation and development of that market opportunity.
It's.
It's not like I guess, it's making sure that we always have that portfolio of investments and making sure that so long as.
We have the right team and the right single threaded focus on that area that.
The focus is really just on that execution and nothing else.
Okay, and then maybe another question kind of on I guess from a regulatory per outlet per.
That is some rumors I guess from the press.
Potentially talking to the unions nationally in order to prevent sort of a state by state profit 22 type.
Fight legal fight.
If you deal with unions onetime nationally then maybe you can come to some sort of a labor agreement and that's kind of a one and done setup is that accurate or are you guys, having discussions like that what are the.
Something like that actually happens.
Well I think it's important to start with them what it is that we want to achieve.
With respect to anything policy when it comes to doctors and for US. It always starts with what is what it is that bachelors wants and.
What you saw in proposition 22 was that.
Both politics and policies sided with the dasher.
Both sides of the aisle in California came together to support doctors desire to keep the flexibility that frankly doesn't exist in any other type of.
Work opportunity and per that flexibility with greater security.
And wherever there are opportunities to have discussions about.
How can we maintain the flexibility and really create a set of standards around it that gives portable and proportional benefits tied to.
Tied to this flexibility we're happy to have those conversations I mean, if you just look at some of the outcomes that have been achieved with top 22, I mean, you see a 50% increase in net promoter scores for doctors because profit 22 in the state of California. So I think this is an instance, where business and policy actually achieved.
Outcomes.
Or are the outcomes actually achieved the objectives that I set out to accomplish.
Thanks very much.
And our next question comes from Mike <unk> from Deutsche Bank.
Thanks, two questions. If I can first can you just give us an update on how you're approaching the incremental profit 22 costs.
How are they coming in versus your estimates how are you passing along or not passing those along to consumers and what.
What are you seeing in the competitive environment that may inform what you do and then I guess the second would just be on kind of active efficiency talked about in the letter it continuing to improve.
Is there.
Opportunity do you feel like Theres multiple multiple years left or are there are there regions, where you have strong density or other factors that might serve as a leading indicator where you could give us a sense of more mature contribution margins or regional EBITDA margins anything you could share there would be great. Thanks.
Maybe I'll take that so close in terms of the 22 costs. We are absorbing the vast majority of the profit going to cost we are passing them along in certain instances, but from the vast majority of the costs from California, we're absorbing it in our P&L and if you think about why we're doing it.
It is first and foremost a in order to benefit merchants, because if we keep prices low to consumers consumers tend to order more those those orders ultimately benefits our benefit our merchants and so to the extent we can continue doing so.
We win at OXXO is consistent with our overall philosophy to manage the business to maximize scale in top line growth, while maintaining discipline in EBITDA. So.
What's embedded in our guidance for Q1 in 2021 of them as a whole is an assumption that we're going to continue.
Absorbing popcorn to costs to the degree that we currently have.
On your second question around active efficiency.
Remember, we had those discussions moving them of the IPO.
A lot of efficiencies continue to grow obviously irremeable also on a quarter on quarter basis, and the reason for that if you go back to the efficiency once from day product of the traffic that's on the streets or the weighting down at restaurants.
There's a ton of product work that goes into.
Dispatching your dash appropriately ensuring batches prepared web ensuring we stood by them in the restaurant is eliminated and so on and so we've we've not we've not found the ceiling yet.
I feel good about the fact that this continued improvements in active efficient to that possible.
But we don't have at least a view in terms of where it was saturated at this point.
Alright, thank you.
And your next question comes from Jason How Stein from Oppenheimer.
Thanks, I'll ask two does maybe how are you thinking about driving more DOCSIS storefront.
We think theres a lot of.
Suites out there for SMB, but yours integrate into your whole back end.
Maybe just talk about how do you drive that adoption is.
Is there a certain pricing mechanisms either or other ways to get that out of that and then secondly, just maybe talk a bit more about.
<unk>.
The cash and some of the pushback from the number one.
Any information you could share about how non chain restaurants are kind of increasing prices.
Online prices offset skis and just in general that behavior.
Wariness that debt.
Kind of a pretty healthy way to kind of manage and then can you see any way that permanent jurisdictional price catheter legal.
Thanks.
Yeah, So Jason maybe I'll take the first part of the question.
So I think the first question was on storefront look short line is it's very early.
A little over six months old as the product and that has grown extremely extremely quickly.
Since launch and Youre right.
In some sense per merchants, it's a bit of a no brainer because it's already integrates with all of their back of house systems that we've had to do on our marketplace on the flip side, there's a lot of work to be done.
Making sure that it works with.
A wide variety of merchants.
We serve.
We're very privileged and proud to serve hundreds of thousands of businesses, but that also comes with lots of complexity in terms of their operations their protocols, they're reporting requirements and things that zone, and so forth and so.
That's really where we are and were in back.
Back to how we think about investment.
Horizons and how we manage.
Capital allocation right now storefront it is really in the.
Product market fit phase and so we're just trying to create more and more features such that it can deliver more and more of the benefits that we see in our own marketplace to a merchant's own digital channel.
And Jason just on your question regarding volume.
The price gaps.
As of the end of Q4, we were subject to price controls and 73 jurisdictions, which is up from 32 at the end of the third quarter now based on all the conversations we've had with city officials.
These price gaps are.
From a in nature and they are all tied to the emergency orders that are related to in store dining and so its our expectation that when in store dining resumes. These these price gaps when we felt the weighted in the interim we've begun implementing incremental consumer fees in order to recoup some of the costs related to the price controls as you remember.
In the long term are not stars to continue to do some consumer fees and so we will do this as long as price gaps are temporary.
People will go away.
For price cash drop away from <unk>.
Q4, those price gaps with an impact of $36 million in terms of revenue or about 44 basis points on our take rate and we were planning to manage through the deck similar dollar impact over time in terms of any relative from an price gaps.
Want to comment on hypothetical, but because based on all the conversations about so far.
Our city editions interest would be temporary in nature.
Hedges, if theres any anything you want to share that.
A proportion of restaurants that are using separate pricing per online versus in store to try to recoup fees.
Yes, some restaurants are using using menu inflation when you price inflation in order to recoup fees. So far again this might be a function of the fact that in store dining shutdown and.
Could you share price elasticity impact from price elasticity relatively mid.
Minimal, but we're hopeful that as in store dining resumes merchants, who recognize that keeping prices consistent with that in store is actually right path forwards because it.
You boost the amount of demand as possible to book delivery channel.
Thank you.
And your next question comes from Ralph <unk> from William Blair.
Good afternoon, and thanks for taking my question first just on the annual EBITDA guidance per bear that contemplates fairly wide range change zone $200 million or so I know you talked about price controls as well as crop 'twenty two but just can you give us a sense what would drive either outcome on the low end or the high end, especially after coming off.
Obviously, some strong tailwind with COVID-19, but up a strong 2020, and then just maybe a follow up on the competitive side, you talked about cash being a little bit more expensive, but within your normal range, maybe just give a sense of.
The supply side looks for drivers and your ability to continue to add merchants, particularly on the restaurant side. Thank you.
Sure relative.
And your first question regarding the guidance really.
And really the objective and the guidance is to ensure.
Some level of discipline on the EBITDA line.
To the extent that we're outperforming on the top line either due to the core food business or outperformance and in products such as value of our new verticals such as convenience, we would be towards the high end on the other hand, we've got some leasing opportunities ahead of us, particularly with pertains to come.
<unk> as.
As you likely saw third party data shows us as being the leader in the online convenience space and this is after having launched that particular vertical.
About of your new less than a year ago, and so if we start seeing incremental progress and positive signals from some of these new projects and fueling storefront and drive and other things.
We're inclined to invest as long as it meets our return thresholds in which case, we will likely end up towards the low end of that range again.
Managing the business day.
As a reminder to maximize scale in top line growth with an intent to guidance and insight.
Inside the range in EBITDA as opposed to try to beat them.
And then on your second question with respect to the supply side.
Let me talk with merchants force.
With Covid.
And the recent pandemic became clear.
The merchants that they need a delivery channel for merchants that werent participating in delivery prior to the pandemic.
We needed to get it back from quickly and so we saw a massive influx in terms of merchants, which led to the selection growth and you can see that in the chart that we include in the shareholder letter where the selections available. The platform has continued to grow.
Terms of cash.
Cost to acquire merchants have been relatively stable the singles on the dasher side, where you've had sort of a day look through cities on the one hand, you would've expected.
The influx of bachelors.
As a result of heightened unemployment, but that was offset to some degree by by stimulus checks.
Regardless of all of that cash.
Cost to acquire that shows have been sort of stable until it within the realm of what we expected.
Alright, Thanks Robert.
And our next question comes from the line of James Lee from Mizuho.
Great. Thanks for taking my questions on the shareholder letter you guys mentioned that consumer acquisition cost increase in <unk>. So is that the trend, we're expecting or youre expecting going forward.
And second thing how should we think about maybe contra revenue going forward into FY 'twenty, one is that on a rising trend as well.
And specifically on advertising can you talk about maybe what channels are working very well for you what channel that you'd like to improve any particular regions that you want to go after a little bit more aggressive.
Maybe I'll start with your first question on.
On the customer acquisition costs to be clear, we manage our business through to payback thresholds and so the customer acquisition cost in the CPA that we pay in order to acquire customers simply an output, resulting from a payback period that we're going to hit and so to the extent that we continue increasing the LTV of our customer base through.
To improve profitability through improved engagement two levers such as dashboards. It gives us more flexibility to increase our CPU. So I view, our increasing GAAP because of feature where we're able to fund.
Higher than high amounts of customer acquisition in order to acquire a larger and larger share of new customers joining the industry, which then when you couple that with our industry, leading retention needs to continued market share gains in the future. So the increase in customer acquisition costs of choice that we are making to reinvest the profitability in our business.
Yes.
On the question around Contra revenue, just looking at 2020 versus 2021.
Again, we don't guide revenue, but what I would point you to the fact that we have.
Hey, Michael cost, resulting from top 22 that didn't exist in 2020 for the most part and so you will see a.
Decrement to our take rate in 2021, as a result of that incremental profit going to cost the vast majority of which we are choosing to absorb that.
Our standard advertising front again.
We don't Catherine one channel over another necessarily we're managing the business with payback periods and so we will re flexibility to deploy capital across across the regions across channels.
As long as it fits our payback thresholds.
Great. Thanks, so much.
And our next question comes from the line of Michael Mcgovern from Bank of America.
Hey, Thanks for taking my question.
I was just wondering if you could provide a little bit more color on maybe the trajectory of ARV versus total orders for the 2021 guidance.
<unk>.
Down five points in the fourth quarter do you expect <unk> to stay in the negative territory throughout 2021.
Maybe if you could also talk a little bit about the cadence for.
On a quarterly basis do you kind of just expect seasonality to return it to maybe like a pre COVID-19.
Level in 2021.
With a normal bump in Q4.
Thanks.
Sure.
So on the first question with respect to that.
Personally I should clarify is if you take our jewelry and divided by the total orders.
Remember that <unk> compression in part is driven by the fact that our.
Total orders includes drive orders, but the value associated with the drive that auto is not contained in our G O b.
So when you see deceleration in it will be some portion of that deceleration is being caused by an increasing mix of gave others I want to make sure I clarify that second having said that if I just look at our marketplace orders alone. It will be remain above pre COVID-19 levels, but not massively above pre COVID-19 levels. The continued sort of <unk>.
Normalizing over the course of a 2000.
22 at a higher in Q2 and sort of continued normalizing. Since then but is still modestly above above pre COVID-19 levels and we expect continued moderation over the course of 2021.
On your question on seasonality.
What I'd say is what was embedded into our guidance is an assumption that the vaccine will be broadly available soon and that in store dining will resume relatively soon and as a result, starting from Q2 onwards, we're going to see.
Erosion towards pre COVID-19 behavior within the customer base that includes erosion in terms of the lease as well as the order frequency and that's compounded bye bye.
Traditional seasonality you see around the summer time were artificially impacted as consumers get out more and go to restaurants about more.
To the extent to the extent B G.
Jim a behavior remains propped up as a result of the delay in the vaccine or other factors obviously.
We perform to the upside.
Got it thanks.
And our next question is from Youssef Squali from Kenneth.
Great. Thank you very much two quick questions from me. Please starting with just your I know you're not guiding to revenues per se, but since you are guiding to.
So I was wondering as you look out not just for 2021, but beyond say the next five plus years, how do you see your take rate over time evolving is there a point at which you kind of preferred not to have it go above certain thresholds because of they just create so much friction.
With client with the consumers with the with what.
Restaurants, and potentially even bring some jurisdictions.
He even harder.
Took a harder look at.
The net accounts.
And then.
Maybe just.
Looking at the business.
Internationally as you I know the focus is primarily on.
The U S Australia.
Canada, but as you look beyond that and there are some.
Press articles about your interest in Japan et cetera can you just flesh out what you look at in terms of.
And attractiveness from a market I think your main competitor talks about wanting to be number one number two and otherwise they are not in that market.
Not seeing that many markets where people can still be a number one and number two so maybe if you can just flesh that out for us a little bit your strategy around international expansion beyond this.
Other two markets Youre in that would be great. Thank you.
Great.
<unk> me take the question on Patriot first and then Tony can talk about international.
When you think it would leave.
While our strategy long term the idea is to lower commissions and fees from motions to lower.
And consumers and to increase that share earnings.
That's the simple equation, but we're trying to solve for and the way we do that is by the <unk>.
<unk> insight as we unlock greater efficiency in the P&L, whether it's through active efficiency is through eliminating wasted or it's through reducing defect rates had been help our customer support costs and so on.
We had both in on the merchant side as well as the consumer side.
As an example.
On the consumer side as we keep increasing the adoption of cash piles that has a natural deflationary impact on take rate and although a unit decrease decline more than made up for by the increase in engagement amongst dashboards and Jim was and so if you look at.
Total revenue growth.
Can you sort of dashboard you can deal with somebody that doesn't use dashboards with total dollars of revenue or total dollars of gross profit per dashboards consumer tend to be higher than they do from non dashboards continuum and so we're actively choosing to make that trade off and so overtime as we unlock these efficiencies in the P&L as we as you provided.
Merchant with additional products and services. The idea is to continuously invest those those dollars into reducing motion commissions.
Net fees are increasing that.
Sure earnings because it's our belief that as we continue doing so it will enable.
More adoption and access to more of the down that allowed them to translate into growth over the long run longer growth, but sustained growth.
And Hey, Youssef on your second.
Question around international I touched upon.
Upon this a little bit earlier, but for us, it's really taking a very long term view.
And.
Otherwise candidly, we would not have launched from the United States either.
As we were not the first player in 2013, when we founded the company and so I think for us.
It's really looking for areas of opportunity, where we can bring something of a unique difference and taking a pretty long term view on what it is that we can do.
For all of the audiences consumers merchants and bathrooms and.
I mean, if you look at some of the markets well frankly, even in the U S.
It's still pretty early days the penetration levels are.
There are quite low in these very large geographies, including those that have.
Players already existing there so for us it's.
Always just obsessing over the consumer merchant and dash or and I think if we do that.
Products will speak for themselves.
Great. Thank you both.
And our last question comes from the line of Samuel <unk> from Iraq.
Yeah.
Hi, Thank you for taking the question Keith.
So firstly could you maybe talk a little bit about your testing in <unk>.
How you are thinking about the business model and if it can bring and trying to respond to.
In excess of your thresholds.
And then separately could you talk a little bit about your progression with order pace.
As you add new guys schools, how do you envision this becoming more material in the longer term. Thanks.
Yeah I'll take the first question on that.
Pattern I think since premier talked earlier about active efficiency I'll, let him take the second question on batching with respected dashboards, we're super excited about the <unk> business.
Again very early days.
We're turning into an experiments at the end of.
2019 has been something that we've invested into 2020 and so we're certainly seen the right input metrics to cross our investment thresholds and stage gate for further capital allocation and really if you think about the thesis behind dashed line, its really bringing selection to where it has not existed before whether that means getting merged.
<unk>, it's really a win win for merchants and consumers from merchants that give them the opportunity to bridge into certain geographies that they may.
Want to be in but aren't currently in the depth of a magnitude that they wish for consumers. It's getting selection that they've never had before I mean for example, I mean, if you think about.
Restaurant tours. They also sell a lot of retail items as an example, where in places like Chicago, we carry the sources of chefs like Stephanie iser than many others in which we're serving the restaurants onboard ash and caviar. We're also now serving some of their other products through dashboards.
Equivalent only that's also happening in other categories as well where again from merchants. This is an extension to drain them beyond their four walls wherever they are.
And for consumers it is giving them selection that they've never had access to before.
Yes.
Your question on batching batteries have been relatively consistent from.
Since Q2, and so I want to make sure that we don't assume that bad share to the new dry later or active <unk>.
<unk> pushing to the logistics network.
Total other sources from a product perspective.
We made progress on which is what led to the consistent and sequential increases of connective efficiency over the course of the past year, it's things like eliminating wasted thing.
<unk> spend in our restaurants.
But their predictions of kitchen peptide and to ensure that actually doesn't show up in the restaurant.
Earlier than the food might be ready and so on so that should set and obviously an important source of their own deal new source.
And there are no further.
Question from Kim.
Great. Thanks for everything.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
No.