Q2 2021 DoorDash Inc Earnings Call
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Your first question comes from the line of Ross Sandler from Barclays. Your line is open.
Hey, guys what's happening.
Two questions Tony.
Restaurant delivery business has several strategies in place both in the marketplace and then drive what are you most excited about thus far what's adding the most to your financial performance.
Second question is in the letter you mentioned that same store sales for your merchants is up about 35%.
I assume that's dramatically higher than anybody in the peer set but if overall <unk> starts to decelerate normalize next year.
How does that work as far as continuing to add merchants, while growing same store sales and any thought on how you balance out that and what that might mean for merchant retention. Thanks, a lot guys nice quarter.
Great Hey, Ross.
I'll take the first question I'll, let premier start the second so on the first question with respect to new categories. I mean, you're right. We're super excited about our progress in <unk>.
Q1, we announced that about 70% of our business coming from.
Orders outside of restaurants, and that has grown sequentially and it's grown certainly faster than our restaurants business and it does touch upon this strategy of creating both a marketplace, where we're generating incremental demand and really building best in class point solutions category by category or bring ever.
Inside the neighborhood to consumers in minutes not hours or days and then on the other side. We are also building.
Building, a first party capability on behalf of retailers and merchants so that they can create their own digital businesses. The goal of door Dasher has always been to create the largest local commerce marketplace as well as the largest local commerce platform and we think that this strategy is certainly playing out not just in our core.
And original category of restaurants, but now also heading into other categories.
And Ross just to add onto it.
Earnings point.
The reason, we're excited about the new categories within a marketplace, but primarily in the marketplace. In addition to drive us.
The early data suggests is that when consumers.
Buy from other categories in our marketplace. In addition to the food category did subsequently now then increase the retention and engagement would be with the marketplace as a whole compared to customers, who did not buy across categories and so we're seeing that behavior. It's super exciting, it's improving the value proposition of <unk> parts, which is why we're investing.
Behind it both on the marketplace as well as for drive day with a slightly different strategy, because we don't own the customer into the guidance, but as we add more orders from other categories to the ecosystem. We're just creating node density and order density that think ignores our cost structure and then the.
That sort of flywheel so.
That's the first part of your question on the second question.
I see.
Think I understand what youre getting that but the way I view it as first.
You can think of it from a merchant standpoint, the marketplace. <unk> is just one portion of the sales that they generate it doesn't capture the value of drive O&M.
A number of that so the the true sales from a merchant perspective, as they can be and whats implied by the jewelry growth. The second is if you look at what's happened to our order frequency over time, we're currently at all time highs and lows.
The drop of the old efficiency is higher both for our dashboard subscribers as well as for non dashboards using both sets of both cohorts of users have actually achieved.
I'll just year on year, but lifetime high order frequency and that will continue to increase over time as our selection improved as affordability bouguenais quality improvement that will then continue to drive jewelry growth for merchant.
Okay. Your next question comes from the line of Brian Fitzgerald from Wells Fargo. Your line is open Sir.
Thanks, guys I had two questions.
One was around the.
The b and the guidance how much revenue is driven by international versus new categories. If you could parse that out or give us some color on that and then.
Could you talk to the.
<unk> kind of different.
Take rates of our pricing points you rolled out.
Last quarter can you talk to us about the adoption rates is there is there a tendency to move up or down versus cohorts of somebody who started at.
Certain percentage and then started moving up to 25% to 35%. Thanks.
Sure.
So on the first question, we basically saw strength across the board and just core consumer metrics right. So it wasn't that one part of our business be then another gate, but across the board we started to see.
As I alluded to earlier strong order frequency development you saw pickup on basketball stubs not just in the U S. But also growth in our international region as a matter of fact on the international business actually grew faster both quarter on quarter to get a new competitor in the U S business will continue to see strength.
On retention and order frequency for our consumer cohorts, both those cohorts have learned that were required.
This year compared to the new Columbia, even pre Covid and redemption order frequency benefits of existing cohorts they were acquired.
Prior to the pandemic, so across both Newport and existing cohorts attention motor frequency continues to be about equal.
Covid level so.
Long way of saying, we're seeing strength across all of these fundamental consumer metrics that then ultimately lead to.
Order volume beach, they've been translated that you'll be at the BMO.
On your question around the pricing packages, what I will say is the majority of our restaurants have chosen either the premium or the plus package.
The premium mix actually has outperformed our expectations and so on the whole it's.
Performing in line with or slightly better than expectation. If it's a great question I don't think the impact on I think it will be noticeable because there's other factors like dash box mix and.
Fundamentally efficiency improvements that usually are much larger in magnitude than the shifts that are created by the banking packages.
Got it very clear thanks, guys.
Thank you next second half Youssef Squali from Jewish Securities. Your line is open.
Two questions for me when I read the letter I noticed that it.
Really peppered by language.
Mostly about higher at the need for higher levels of investment. So can you maybe quantify the higher level of investment in.
Dasher supply in your categories in international kind of debt you are qualified how long do you think or do you anticipate this investment cycle to last and kind of just kind of.
What's the primary driver and you've obviously been aggressively investing to date, but it seems like this is a step up from that what you've been doing so far thank you.
I use it so maybe just the biggest step back just wanted to reiterate and remind people of how we manage the business and the philosophy, which is we're super early in terms of the opportunity not just in food, but also when you add in these other categories.
Now recently entered into such as convenience grocery pet food is going to help us.
Tiny tiny fraction of the potential of this category and that's why we're investing so if you. If you take a look at where we're investing is largely driven by new categories and to beta international business with <unk>.
Not going to breakout the quantum of the investment, but I wouldn't say that we're fortunate in that we've got in the U S business that is firstly large.
Growing and third is improving margins we've increased the larger profit pool that we can then use to invest in these other opportunities that are ahead of us.
Well go next up we have Douglas Anmuth from Jpmorgan. Your line is open Sir.
Thanks for taking the questions.
I was hoping you could just talk a little bit more about the Japan market launch I know, it's fairly new.
But just curious with some of the nuances or in that market relative to the U S. And then if you could also talk about how you're thinking about Europe as well. Thank you.
Yeah, I mean, like Japan, we relaunched the market.
I don't even think it's been two months. So it's too early to draw any conclusions, but whenever we launch these markets in the beginning I mean, we're super focused on.
I'm gonna called product market fit parameters more so than actual financial parameter. So let me let me describe what I mean, we're looking for retention improvements. We're looking for order frequency improvements, we're looking to ensure that customers aren't retaining some deeper discounts versus creating a habit with us and so again, it's been two months I don't want to it's too earlier.
Victory or anything like that but we're encouraged by what we see with currently in one market, which is largely which is sendai and what we're noticing is that the opportunity.
It is available because these markets are relatively underpenetrated compared to core urban city centers and so on.
Lots more work to do and we'll keep you posted on the progress and in terms of just other geographies I mean, I'll just remind you of our.
If our priorities one of which is to become an international company and existing you operate in Canada, and Australia, and Japan today and over time as you know.
As these other markets get bigger and start generating profit pools, and we can afford to do so we will we will expand obviously in an economically efficient manner.
Other geographies.
Thank you.
Thank you next we have Brad Erickson from RBC capital markets. Your line is open Sir.
Hey, thanks.
I guess two for me one just within the guidance. It seems like Youre looking for Q4, maybe maybe a little bit less than seasonally normal is that just a reflection of your comments in the letter around uncertainty or is there something else.
Constructing that view and feel free to re characterize that if you want.
And then second.
Follow up from an earlier question you know you've got a ton of gross profit upside here over the past few quarters and I guess in the letter obviously talking towards reinvestment in a few areas can.
Can you just remind investors as to how the team views those choices philosophically as you trade off growth versus profitability.
Sure.
So Brian on the first question with respect to the guidance.
Let me type of thing so Q1 was elevated a little bit because there are a couple of things that these markets have just begun to reopen vaccination rates were lower and then to compound all of that you had the inorganic impact of stimulus checks that was driving the human being consumer demand and so that led to an ela.
Weighted Q1, as we look into the second half of the and what's embedded in our guidance because you need two things. The first is what I call ordinary course summer seasonality. So in general in Q3, you see the pace of consumer acquisition. So there was a little bit and you have your order rate simply because consumers are going out during the summer.
Because the weather improves so that's one aspect. The second is we are baking in a level of conservatism because there is uncertainty in terms of what the world looks like in the second half of the of the Europe as markets continue to Europe number one.
It's unclear whether it will even out of the pandemic at this point.
And if so what the long term effects and so there's plenty of unknowns here as a result of which we wanted to make sure we embed that uncertainty SEC.
Outlook.
<unk>.
On your gross profit upside question.
The way to think about it.
We invest flexibility across the P&L one of the reasons, we do not provide revenue guidance, but instead provide yearly guidance and EBITDA guidance is because depending on the opportunities that are available to us. We can be one of several actions in order to drive growth, we can invest through sales and marketing in terms of customer acquisition of Astra acquisition, we can <unk>.
Best in pricing through lower prices that will then impact the grid or we can invest and incentives to drive up quality issue.
Further downstream impacts on the take rate as well as on our cost of sales. So we retain the flexibility because depends.
Depending on the environment, we're in and depending on the exact challenges we want to be able to.
To deploy the right strategy without having to worry about is revenue base now as you look to the future.
The factors that will continue to improve the agreements that go to those just as a reminder to people.
First as we improve the efficiency of the logistics network that will have a positive impact on take rate as we improve the quality of the consumer experience that will lower our refunds and credits and have a positive impact on take rate as we do more as we drive more drive orders no pun intended.
You do more <unk> orders that have a positive impact in terms of headwinds to take rate. It's really three things as we drive increased mix of Dash bus orders I would remind folks that do that.
Dash bus orders, we have lower unit revenue, but significantly higher engagement as a result of which that's a tradeoff we're happy to make second as we increase our investment in new categories and third as we increase our investment in international because of the early stages of the evolution of these.
These investments usually they come with a lower take rate and so you've seen the blending effect.
And I think are the result of these investments.
That's great. Thanks.
So next up we have Steven Fox from Fox Advisors LLC. Your line is open.
Hi, Good afternoon, just two questions from the letter I was curious if you could expand on you mentioned three points of category share in the quarter and then you also mentioned.
Gaining more dash past subscribers can you give us a little bit of color around what.
You're seeing that's driving that you know what's behind the numbers basically.
Yes, I think it comes down to a superior product, which is the thing we aim to deliver is the best combination of selection affordability and quality and what those three things translate into category meeting spend retention. So.
Our category, leading spend retention ultimately that translates into market share gains that you've seen <unk> as one component of that because dash both with how we.
We solve the affordability lever and we've continued to improve <unk> plus subscribers, who have higher order frequency compared to non dashboard subscribers and that's been now leading to increasing order frequency over time.
One is improve retention we can drive.
Market share growth.
Great. Thank you.
Thank you next one we have Ron Josey from JMP Securities. Your line is open.
Great. Thanks for taking the question I wanted to maybe Tony asked a little bit more about some.
Additional.
The more the demand youre seeing for newer categories and also just the power of convenience and so can you just talk about these dynamics a newer category orders I mean, we know theyre growing faster, but the most of these orders come from restaurant orders to begin with as an add on how are you marketing down how are people being aware that you offer pets goods and alcohol and everything else. So just.
Some of them.
Insights on strategy and awareness of these new categories are would be helpful. Thank you.
Sure.
I would say that we're still pretty early in that process. I mean, if you think about it.
The greatest privilege, we have is that our consumers E 20 to 25 times, a week and so in terms of shots on goal or their willingness to come back to the App daily.
We have the luxury to have a wide surface area and a large number of opportunities to actually engage with them.
And most of what we're trying to do is we're trying to offer a best in class solution for them, whether that shopping across multiple categories or whether thats shopping within one category and so.
For us it's not coming from one type of use case or one type of occasion, we're still in that learning process I think with a long ways to go I think the industry has a long ways to go.
I mean, even within our core category I want to remind folks that of restaurants, we are single digit percentages of.
The restaurant industry and when you add in some of these other categories were.
Much much smaller fraction and so I think there's a long ways to go before we can start.
Truly inventing technologies that will continue to change consumer preferences, but one thing that we do know is that consumers always lean towards the direction of greater and greater convenience and so that you should expect from future products to come.
The answer is that.
If you're a much bigger.
Just to remind you in Q1, we had said the less than 10% of product news actually use other categories. So Tony's point about the sofa and shots on goal. There is a lot of opportunity just to increase awareness and drive conversion just within our existing I mean use itself without having to actually acquire customers.
Specific to these new categories does that make sense.
That does thank you that's super helpful and maybe we talked in the letter as well just a long list of complexities across these categories.
And the up for the challenge, but maybe help us understand what are the complexities.
That's all I got thank you.
Yeah, I think I know Roger.
Ron.
You're referring to is really meant to be necessarily a rallying cry aimed at our theme and we've enjoyed and benefited from tailwind. These past 18 months I mean, we cannot let those make us and place them into the environment competitive in each into is going to be hard problems. So we need to stay vigilant and laser focused on building the best products frameworks and fashion consumers.
Got it thank you guys.
Thank you. Your next question comes from the line of Deepak Matthew Bannan from Walter Your line is open.
Hey, guys. Thanks for taking the question. So two quick ones from Us first.
Sales and marketing was up nicely in <unk> can you give some color on where these incremental spend was going is it related to new categories.
Those are primarily driven through auto discounts and then on the second question on the non food categories. There's a number of different models that we have seen out there between marketplace drive warehouses that even more hands on modern using in store shoppers with all the new partnerships.
Can you talk about what kept preferred strategy to attack. These categories. Thanks a lot.
So maybe I'll take the first one deepak on your sales and marketing question and Tony can take your second.
On the first.
The first question and the short answer is the uptick.
Sales and marketing from Q on Q perspective was driven primarily by our Bachelor acquisition costs remember we.
Spoke classic Q1, we were talking about being under supplied and so we.
<unk> made significant investments in acquiring dasher or in fact acquired more of that shows this quarter than we have ever in the history of door dash.
And we also experienced higher advertising rates likely because the rideshare industry and others, where we're competing for that shows in our food. So those two things led to higher dasher cost this quarter than we had planned for it.
If you think about on guidance now.
As for the future remember I would say I expect those elevated advertising rates to come down maybe not over the balance of the Seo, we're being somewhat conservative but in the long term simply because its a different pool of people who will discuss this in the past a different pool of people.
After the dasher versus those that are interested in rideshare.
Over 75% of our dasher or students or other PARP and a full time job I think.
Mentioned to Europe.
Over 90%.
Do.
<unk> been active hours per week and in the nature of the job is fundamentally different because you don't need a car or have to have a guard frankly in order at ash and so given the size of this.
Sam opportunity for Dasher, we do believe those advertising rates will normalize over the long term.
Okay.
Yeah, and with respect to your second question, what I would say is that.
At the end of the day, we take a look at.
That's from the consumer's perspective of whats going to offer the best product experience in terms of selection quality and price and we do that in concert and partnership with all of our retail partners because much of this actually requires invention.
Think about fundamentally what we're trying to do regardless of the model in which we operate were trying to take them.
<unk>.
The physical world physical businesses and all of the activities that they are doing and it and being able to give those merchant partners digital away or frankly, a new way to build their own digital businesses. So every activity has to be re imagined and there isn't one point solution I would say that's going to.
Ultimately work for every single merchant nor is there one that's going to ultimately be consistent enough to actually solve all of their unique challenges.
Within each respective category, we both have both aspire to build the best in class category specific solution as well as the best in class experience across categories and so we.
We will continuously work with our merchant partners to advance the technologies that will continuously help change consumer preferences.
Got it that's very helpful. Thanks, guys.
Yes.
Thank you. Our next question comes from the line of Spencer Kurn from Evercore ISI. Your line is open.
Hey, Thank you just two questions surrounding the commission cap.
It could be potentially permanent in New York City, and San Francisco I guess.
You can provide us just an update on where those stand today and how you kind of view on the overall impact to your business and then secondly.
And kind of Grubhub interesting takeaway strongholds like in New York City area of Chicago.
Are you seeing the competitive environment.
In Q2 and kind of maybe.
Quarter to date.
Yes.
Start with the first question I'll, let <unk> take the second question with respect to these connections caps are actually largely seen city officials and allow capitalism to take its course as most of these.
<unk> Commission costs are actually being lifted, especially as more and more of the country is reopening and getting back into a sense of normalcy I think with respect to the limited situations in San Francisco and.
New York City, our point of view is that.
Any approach for ordinance towards a permanent cap is.
Thankfully a unnecessary because.
If you actually read some of these kind of emission caps and platforms like door to ashes already offer plans well below the commission cap that is proposed second.
Theyre very harmful.
<unk>.
In the sense that there are hurting the audience that they are trying to help drive these restaurants because commission caps what they do is they will ultimately result in increased prices for consumers lowered sales for these restaurants and reduced work opportunities for bachelors and finally because of the arbitrary nature of these commission cabs.
There.
Violently unconstitutional by I think the best.
I guess synthesis of the situation.
Might actually come from Amir London breed from San Francisco, who believe that this ordinance really.
Unnecessarily.
Way as any public debt.
And so that's our take and that's why you see us take litigation action.
In San Francisco.
Especially on your question.
The two markets you mentioned, Chicago, New York City, where I guess competitive strongholds for one of our one of our competitors.
We are number one in Chicago, we would gain share.
Not just in the second quarter, but also in the first quarter of this year in New York City, when knock number one, but we do a priority for us but to be clear. We have continued to gain share in beauty in the second quarter. Most of the other competitive share shifts with the call between the other two players in that market.
Got it thank you and congrats on a quarter.
Thank you once again in order to ask a question. Please press Star then the number one on your telephone keypad.
Because it looks like we don't have any more questions in the queue. So okay.
For closing remarks, and wrap it up.
Okay, great. Thanks, Shao Lee Thanks, Andy.
Was there another question Chris.
Now you May proceed per center.
Great.
Well, thanks, everyone I just wanted to take a moment and celebrate the fact that we are.
We fulfilled our two billionth order in the second quarter.
And as someone who has seen this journey from the VAT.
Beginning in I can tell you that it took us over seven years to achieve our first billions order and only nine months later, we were able to see our second billion or so I just want to take a moment to.
Reflect on that milestone and thank all of our audiences the team at door Dasher and all of our shareholders.
And what is a great.
<unk>. Thank you very much and we will see you soon.
Thank you ladies and gentlemen. This concludes today's conference call. Thank you all for joining him at Argus connect.
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