Q3 2022 DoorDash Inc Earnings Call
Questions So with that Heather Please open the lines for the first question.
At this time I would like to remind everyone that in order to ask a question. Please press Star then the number one on your telephone keypad well pause for just a moment to compile the Q&A roster.
Okay and your first question comes from the line of Ross Sandler with Barclays.
Hey, guys. Congrats on the quarter, maybe just starting with macro any color on what youre seeing across either the U S or international markets, thus far in <unk>.
Our trends holding up pretty well versus possibly slowing down a bit and then the second question is thanks for the chart on contribution margin for the U S restaurant, that's very helpful.
In the letter you mentioned that.
Last few quarters, you've been above that 7% level.
A level. So could you just talk about what are the biggest drivers of that is that.
Higher percent of repeats and getting some marketing efficiency out of that or is that.
Driver efficiencies any color on what's taking that north of seven and are there markets that are in the double digits or is there like a natural limit to how high that could get thanks a lot.
Hey, Ross, it's Tony I'll start with the first one and answered briefly the second lien and hand, it off to premiere.
On the first question obviously.
We've seen tremendous resilience in the business in the U S business <unk> seen continued growth north of 25% GOP.
Marketplace revenues.
North of 30% growth each for each of the last five quarters now.
And on the flip side.
As in the face of.
And energy crisis pretty sticky inflation.
And a war in Europe , and and so.
It's sometimes hard to try to.
Square, the two but but I think the way.
That we've been thinking about things is really looking at it from a historical current day and future perspective, historically in the last 60 years.
In that timeframe only two of the last 60 years have we seen a decline in food spend in the U S.
And thats, specifically in the restaurant and grocery industry and so.
I think.
Even though all of US are wondering how to quantify the macro headwinds food is the most resilient category I think historically, that's shown to be true.
Current day, what we see in our own business is something that largely the same we also disclosed in the results that we saw our monthly active consumers grow all time highs in our Dash pass membership program and so what are you seeing as order rates of those who joined after the pandemic have largely resembled those who joined during the pandemic certainly you see.
Softness in impact on the non desktops cohorts on a relative basis, but by and large we're talking about extraordinarily similar types of ordering behavior. So thats why we see kind of currently so on a go forward basis, when I kind of square everything I mean, even as the market leader, sometimes it's hard to remember, but we're still less than 10.
Percent of the U S restaurant industry sales.
You look overseas, where a much lower percentage than that and so when I square I think the fundamentals both in terms of the leading industry retention and order frequency in the U S business the industry, leading retention order frequency in the European business, particularly with bolt who grew at 60% on a euro basis.
Significantly faster than its peers.
And then I square that strong fundamentals with the future potential and runway in these categories I think thats why youre seeing.
<unk>.
The resilience as well as what was reflected in our guidance.
On the second question I think one of the things that and I'll, let <unk> talk about some of the details and specifics with respect to the to the contribution margin disclosure, but.
I think when I take a step back of what has happened in the last two and a half years. Obviously there was the pandemic there was.
<unk>.
A lot of.
Changes in the macro climate is as we've seen particularly 22 versus <unk> 21, and we've seen regulatory pressures.
The likes of <unk> 22, and in spite of I think all of those ups downs sideways twists and turns in our business has.
Grown fourfold the U S marketplace business.
Again, an extra 14 points of category share even as the market leader heading into the pandemic and we've kind of extended that.
That lead and so I think I'm really proud of the team for being able to operate in such volatility and so how did that happen well.
I wish there was a silver bullet, but there really isn't.
This is a business where you really have to be in the details every line item counts every line item of matters every line item compounds their interaction effects and dynamics in between the line items and it's really measuring and managing all of these inches that I see.
<unk> has given us the compound interest an advantage that you have seen that accrue over the last two and a half years.
Hey, Ross just to add onto it could all these points.
Look in comparison to other areas of e-commerce.
And frankly other consumer tech companies, we have been fairly resilient and I think thats a function of a couple of things.
The stickiness of the category, we operate in as one of the best in class retention with our product logically there is some impact from macro but that impact seems to be much more.
Limited to less habituated more occasional customers dashboard on the other hand as higher Retentions, we've talked about in the past and the user behavior for dashboards continues to remain strong and so all that to say that when you look at our consumer metrics in Q3 is what it is now.
In October consumer metrics continue to remain strong Tony pointed to our monthly active users that are growing both year on year and quarter on quarter order frequency has grown year on year base of customer acquisition continues to remain strong and all of that basically establishes a foundation for solid growth.
Not just in Q4, but into 2023.
And Thats, what you really see.
And the results.
So thats.
That's the color that a macro.
On your question on the contribution margin.
I think your specific question was why are going to incrementally higher than than the average of 7%.
2021 was impacted by higher natural costs due to a more expensive labor market and today. The labor market has normalized but in addition, we've actually made some product improvements that have enhanced the retention of our existing fleet of bachelors and also being incremental.
Supply hours from each dash or in a combination of these two things has actually led to a benefit in terms of dash or all in costs includes cost per order as well as dash.
That's your acquisition costs and so so this benefit of <unk> cost in 2022 has led to higher Incrementals. This year compared to the general average those product improvements will continue.
Benefiting our cost structure, and so to see impact of that by the way in our Q4 EBITDA guidance.
And then on your question about.
Other markets above 7% and so on and so forth I just wanted to remind everyone.
And what we've said historically, which is.
We don't operate our business to a target margin, but rather we aim to maximize total profit dollars and the objective being providing the incremental percentages as well as the progression and contribution profit.
Through our third quarter, two global reopening through profit 'twenty two through inflation and all of these factors was really due to provide proof points on our execution and to provide visibility into our margin trajectory going going forward and so effectively what that means is we will flex margins that increases total profit dollars.
Your next question comes from the line of Bernie Mcternan. Your line is now open.
Great. Thank you for taking the question on the non restaurant piece and the drag on profitability can you rank order maybe put some percentages around the largest drags on total company profitability, whether it's grocery convenience or international and then just thinking through.
Maybe what needs to happen to unlock those to be profitable, whether it's scale or.
Technology advancements.
Yes, maybe I can start Tony and then I'll hand, it to premiere on I think some of the numbers.
I think it starts it's important to understand.
Why we're investing in some of these categories are going to the goal of door Dash was always to build the largest local commerce marketplace and the largest local commerce platform an effort to make sure that every physical business can be successful as they move into the digital economy and our investments into both our non restaurants category.
As well as our non U S operations I think are really bearing fruit.
If you've looked at what has transpired. The last couple of years I mean, we effectively have grown a business that was largely zero in the non restaurants category and to several built businesses. The billions of dollars of G. O V run rates with improving margin economics, and the third party convenience business as the category leader as well.
As you know at variable profit breakeven as one example for instance of the earliest business that we started outside the restaurants category today, we have over 75000 partners.
Outside of <unk>.
Restaurants, which is more than any other platform in North America again from from almost a standing start a couple of years ago and so.
The way, we think about investing again is.
Similar to what Premier said to the last question around maximizing total long term cash flow.
And as we see projects.
We invest according to what stage, they're at and so as long as we're seeing product market fit signals will continue to invest and if we don't we'll back.
And just to just to add to Tony's comments there Bernie.
Let me share a couple of data points that give us.
Cycling and conviction around these investments.
The first one which was made in the past as these markets that were attempting to expand into whether the new categories or international is a large trillion dollars markets and even a few points of penetration in these large markets could add massive scale.
Broad business.
Second we're seeing very strong signs of progress and in some cases.
Operating and do that for less than a couple of years are our new verticals, a convenient grocery business is growing over 80% year on year. Our U S. Third party grocery business is growing over 100% year on year next significantly faster than other companies that operate in this space.
<unk> business is growing over 50% year on year on a constant currency basis, and you compare that to other European food delivery players.
They're showing single digit year on year growth rates and so.
Performance was a function of the fact that we built a product that people like you can keep coming back to I E better retention and growing order frequency and so we like what we see in terms of product market fit. This is exactly the thesis that we had laid out when we made these investments related to investments in both our investments and our new categories and they are playing out.
Just as we had originally thought they would now in terms of profitability.
Wouldn't do any of these things unless we believe there is a path to attractive unit economics and as Tony alluded to earlier, we measure these things regularly to ensure that steady progress being made towards steady state economics.
We're beginning to see early proof points some of which we cited in the letter.
And third party convenience, we expect to get to a better profit breakeven by the end of this year, we had committed to this earlier on in the year and where we are on track to deliver on that commitment and our third party grocery business will continue to improve margins Q3 margins are better than Q2, and so these are exciting proof points.
Along the way and if you look at what we've done in the U S restaurant business, which we've laid out in great detail.
The shareholder letter.
It's about your beating those playbooks in these other areas, it's not there's no single silver bullet.
<unk> seen factors around improving the efficiency of deliveries optimizing defect rates that ultimately will help these areas get to get the profitability just like the U S business data and so we have a long way to go.
But if we continue to improve products and we continue to get more efficient. We believe we can drive outsized growth along with margin improvement.
Great. Thank you and thanks for all the data in the release, it's really helpful.
Okay.
Your next question comes from the line of Deepak Metavante and.
Your line is now open.
Great. Thanks for taking the question Tony.
Tony a question on investing for the long term philosophy is very clear and it makes a lot of sense, but interest rates have gone up a lot in the last like three to six months clearly that's made the cost of capital for many businesses higher but as you kind of think about internally for.
Prioritizing projects far higher Rois are maybe faster payback period kind of this new capital or capital environment. How are you approaching this in the context of your investing philosophy and then second question maybe for Premier.
On U S restaurant contribution margin is very helpful, but maybe given that it's one of your oldest business how should we think about the growth of it right now there's a lot of concern that core U S restaurant marketplaces maturing maybe you can help address that at least qualitatively that'd be great. Thanks, so much.
Sure Hey, Deepak ill take the first one.
With respect to investing frankly in any environment, whether we're talking about a low interest rate environment, a high interest rate environment. We're obviously, taking that as one input into how we make investments, but the primary input is always going to be are we investing appropriate to the stage of the project I think it's just that.
It's easy to Overinvest wing quote unquote times are good even though you're not seeing the signal that you want to see.
And we've been very disciplined about that whether it's been our entry into other countries or our foray into other categories beyond the restaurant category, our buildout of the advertising business.
And then on the flip side I think.
Sometimes you can not take enough risk.
Especially when you have a strong robust resilient business that gives you.
The cash.
Cash flows to invest in some of these other categories. So.
From where I sit certainly we're taking that into account in terms of the cost of capital and making sure. They are operating with.
Discipline, and making sure that as we have grown tremendously.
The company over the last couple of years that that we're as efficient as we were heading into the last couple of years and that takes a lot of them.
A disciplined but it also takes a lot of intentional focus to make sure that you're in.
We're not just investing in people, we're investing in the systems to allow us to see operating leverage into the future and so those are the things that we're doing to make sure that we're investing with discipline, but I would still say the primary input, especially as we look into some of these investments into newer areas, whether it's overseas or into other categories or into new business areas. It is.
Really are we investing appropriate to the stage of the project.
And just to add one more comment to that.
Which is.
And go back to my comment about the size of these markets, where these large trillion dollar market where money can be made given the small amount of penetration in these markets. There's a lot of GMP that can convert our commodity to free cash flow and so if you just pencil out the math given the scale of these opportunities and our success with execution historically.
The math will work so it could be done.
Makes the math work because essentially the scale of these opportunities combined with our with our execution.
We look forward in order to continue increasing the size of the scale of the business is for us to make progress on the fundamentals, which is a selection quality and affordability, we talked about new categories, but is part of the reason, we're bringing on new categories. Just because it's a new use case for those people that perhaps don't want to use <unk> for restaurants. They can now use it to get there.
The flowers or get their convenience items.
Grocery items, so get the liquor delivery, so a growing number of our new customers now are actually coming to door dasher try these new categories and this is going to unlock the next leg of growth as we continue increasing our penetration.
The U S population. So hopefully that provides some perspective on how I think about growth.
On a go forward basis.
No very helpful. Thank you so much.
Yeah.
Your next question comes from the line of Eric Sheridan.
Your line is now very much for taking the question maybe two if I can first maybe taking a step back in a bigger picture question.
Understood the changed consumer behavior, you're seeing in the long runway on penetration what impact has lower competitive intensity played in the industry over the last six months to eight months and how do you think that potentially informs elements of some of the more mature markets seeing only two or three players in some instances.
Going after some of the market opportunities, where it was just a couple of quarters ago that there was a lot of private capital in the sector looking at all different aspects of delivery and some of that has been more rationalized over the last couple of quarters that'd be number one and then in markets, where you're more of a challenger brand and a market leader.
As a result of some of the markets you acquired through the <unk> acquisition can you help us better understand how you see moving the needle from where your market share position is today to more of a market leading position in the next couple of years what are some of the levers you're most focused on executing against thanks.
Yes, maybe I can start Eric and ill, let premier chime in here.
I think the answer to both of those questions.
A very competitive industry out there and I'm not sure that there's ever been a quote unquote, let down in terms of competitive intensity and that's because at least from where I sit I believe the highest form of competition is always growing and that's really consumer expectations.
I think to me, whether we are the market leader are where we are.
Not yet the market leader.
It's really about an investment in product quality consumers are always going to expect more.
Our selection of stores, they can order from greater affordability better quality of service.
And superior customer support and to me that really at the end of the day is one is whats going to rates limits, our ability to penetrate the large runways that both career and I have discussed with whether it's the restaurant in the industry the grocery industry retail categories, and Thats really what we see but but I wouldn't.
No.
Say that.
There has been lower competitive the competitive intensity.
Another I still think that the.
Biggest challenge is making sure that we can get consumers to actually try the product I also would say that.
With respect to maybe the premise and the second question.
I think there is a common.
Miss out there at that volt is not a market leader in the majority of its markets. When it actually is and so I do think that some of this might just be where there is.
Got some unreliable third party reporting.
What I would say is.
Both the instruction I give to our U S teams or our team's overseas, it's making sure that we continue making sure to invest in the product quality. So that we see gains in our retention and order frequency, which only leaves us to compound that advantage over time, whether that's as the market leader or whether that's someone just entering the market.
Yes, and just add one data point to that Eric I mean, if you just look at voice performance, we're super proud of the team and what they've got in Q3 grew 60% year on year in Euro terms.
No.
I can't think of an example of another European food delivery company, that's growing in a disease and from what I've seen there growing single digits year on year. So it's hard to sit here and say that boards not gaining share just given the disparity.
And growth rates.
Versus relying on third party data and issues with the that approaches and so on so I rely on the on the absolute growth.
Growth rate, which is in my mind it produce reliable proof point around the fact that the board has created a product and an experience that has higher retention and neighborhoods growing order frequency and thats whats allowed them to produce the growth rates that they're posting.
Great. Thanks for the color.
Your next question comes from the line of James Lee Your line is now open.
Great. Thanks for taking my questions. Two please first of all SaaS Paas.
Wondering is it is there.
Any flexibility or room to increase your fees, given your expanded offering and value proposition to customers and also on dash. Martin can you guys talk about the pace of investment.
In there in terms of new stores and geographic expansion any change in consumer behavior or unit economics to help you to kind of your firm you're long term thinking there. Thanks.
Thanks for the question James I'll take the first one and Tony can talk with the second.
Yes.
Just as a general philosophy.
We're trying to improve selection quality and affordability and particularly in the third dimension of affordability means to us means.
Reducing friction that's caused by consumer fees, whether it's through <unk> or the non <unk> product, it's trying to reduce fees or commissions on merchants and increased actually owning so.
In our case, we don't need to increase dash dash close.
Great as a way of making the unit economics work because even at the current rates dashboards to unit economics, we will explain even without taking into account the subscription fee. So.
I view, an increase in subscription via dashboards as being something that would actually slow down the pace of <unk> adoption, which we've been very happy with so far it continues to remain the.
The largest bead membership program in the food category.
Hit record highs in terms of our dashboard subscribers and the pace of growth in this program is frankly.
Ben been consistent despite some of the partnerships that other competitors may have entered into or despite the bundled offerings that other competitors, maybe maybe providing I mean, despite all of those things. We're seeing dashboards go. So we like the way it's set up we like the way, it's positioning us for group and at least right now there's no intent to change anything in terms of the C store.
Sure.
Yes, James and if I could I'll, just add a bit to this before.
Before heading into the dashboard question, which is I think one of the things I'm. Most proud of the team for accomplishing is that.
In the last two and a half years, even though.
We stated in the shareholder letter all of the growth that we've seen both top and bottom line.
In our business whats, what I'm really proud of is that in.
In achieving all of that for the platform, we've been able to incur.
Increase earnings for <unk> increased sales for merchants and reduce fees on a continued basis over the last two and a half years for consumers and so and that certainly has been a big part of that on the consumer front, but we've really done this while improving the offerings for each of the audiences that we're lucky to serve.
On the on the Dash My question I think.
Yeah.
It's important to start with what we're doing why we're doing it.
With dash smarts.
One of the things that we've been studying very closely.
Why.
Do certain industries get penetrated or why do they move from offline to online obviously the restaurant delivery industry, even though again it has a large runway for growth.
Has reached a certain level of penetration that.
Something say grocery delivery or retail delivery are delivered from other types of stores.
Has only reached a fraction of and one of the things that we see.
<unk> seen so far is that the setup for third party delivery and a lot of these non restaurant categories isn't really optimized for delivery. It's.
They're really optimized for going inside the store for browsing.
As a result, some of these stores don't even know exactly what's on the shelf and as a result, what you see and sometimes third party.
Delivery is a product that is more expensive than what someone would pay inside the store. They don't always get exactly what they want when they actually buy it and it doesn't always show up.
Faster than a consumer can shop on their own.
As a result of you haven't seen that penetration and so our belief is in addition to working with all of these fantastic partners, who were really really privileged to work with whether it's sprouts farmers markets are giant eagle were logged laws are and retail categories people like Dick's sporting goods or Sephora is that we want to start by working with them to really understand.
And how can we bring incremental demand right out of the gate, but we also want to invent the future of the industry and we believe the future and the industry has to offer a product that is.
Going to be give.
Give customers exactly what they expect when they order at around the same prices of what they pay in store and certainly with greater convenience and they could do it on their own and so dashboard is really a part of that and we're doing that in concert with all of these partners that we've been lucky to team up with and we're doing that here in the United States, we're doing that overseas.
Thats really what <unk> is it's going to be a very important infrastructural components.
For the future now that said just like with all investments at door Dash. It's not just about the long term strategy of how can we maximize long term profit dollars. It's about how can we also invest with discipline. According to the stage of the projects and so that's that's what we're doing with dashboards too. It's not just what we're doing with the third party business with <unk>.
That with <unk> as well as making sure that we can achieve product market fit once we see that we continue investing and if we keep.
<unk> seen that grow we will continue to make those investments and so far we like what we see.
But there's a there's a long road ahead right. We've just started the dashboard business really a couple of years ago. So we're learning very very quickly.
We have to keep improving our product quality.
Alright, thank you.
Your next question comes from the line of Youssef Squali. Your line is now open.
Great. Thank you very much two questions. Please first maybe just looking at the P&L your marketing efficiency has gone.
Up tremendously I think in the last year I think yours.
Sales and marketing as a percentage of revenue dropped by something like 1000 basis points, it's down not only on a percentage basis, but even on an absolute basis. I was wondering if you can kind of unpack that a little bit for us in terms of where is the efficiency coming from is it better AD rates or is it maybe less spend on.
Do you as a restaurant category, where you obviously dominate maybe just kind of help us understand the drivers of that and is that the primary driver for the higher EBITDA expectation for Q4 and second.
On the world.
<unk>.
Maybe just help us understand the acceleration and geographies there.
Thank you in the letter you talked about customer acquisition customer acquisition at an all time high.
Really impressive all things considered.
So maybe just help us understand against sustainability, if that as we go forward and maybe specific countries, where you're seeing such a huge.
Performance. Thank you.
Hey, maybe.
I think both of those questions and Tony Chairman and sort of anything else to that so first on the marketing efficiency point I just wanted to go back to.
Some of the comments that we had shared when we went public back in the S. One which is.
Once you've acquired a cohort and the cohorts sort of gets into its second third fourth year of life.
The marketing spend associated with that cohort declines and declines materially right because there is no.
Good marketing.
Maintenance spend that's required and so what that means is as our as our business gets larger and our base of existing consumers gets larger that provides leverage in sales and marketing.
Now more specifically if you were to tear apart the sales and marketing line and look at CAC versus.
The <unk> acquisition cost was in the marketing acquisition merchant acquisition cost that is leverage on.
Jack.
Particularly in 'twenty, two compared with 21, there's been a lot of leverage with those of our Bachelor acquisition costs and that's been driven by product improvements that we've made we're making it easier to dash.
That shows a putting more hours into our platform.
The retention of our fleet has gone up and as a result that means we need to acquire fewer dashboards.
To perform.
To fulfill the deliveries that are happening on the platform and so thats provided leverage in addition to the point I made about an increase in the existing base of consumers. So.
So that's the response to your marketing efficiency question.
On the boot question. It comes down to a couple of factors I mean world operates in markets that are 200 million people in these markets have low levels of penetration in fact, even the oldest markets broad adoption levels of less than 10%. So there is a lot of room for growth just to expand customer acquisition in the markets in which they are.
Operators willing to expand to new cities in those countries and most of those in which they operate so that coupled with the fact that the retention and the work that the Super High and order frequency continues to increase is because the macro point that people like eating people like the convenience.
Food delivery and therefore, the only end up increasing the utilization of the product. The combination of these two things that help them drive the results that youre seeing.
Super helpful. Thank you.
Your next question comes from the line of Doug Anmuth. Your line is now open.
Thanks for taking the questions I just wanted to ask if you have any update to your commentary from last quarter, just suggesting a modest increase in <unk> and 'twenty three EBITDA.
And then secondly, two things that come up a lot with investors.
Higher insurance costs, and then also the regulatory environment, just given the Dol ruling and prop 22 status still outstanding. So if you could comment on those.
Okay.
Sure, maybe I'll start, bringing German whatever you want so on the on the EBITDA point.
So I think we said in our letter.
We expected the U S restaurant business, we continue to grow in 2023 and increase its contribution profit bottom dollar and margin dose, but historically, what's happened is we've taken the majority of those prospects and reinvested them in these investment areas.
We're at a point, where these investment areas.
Getting exhibiting margin improvement.
So the investment dollars doing perfectly offset the increase in the contribution from the restaurant business and that's that's going to create some flow through impact to EBITDA. So the combination of these two things which is increasingly a strong profits coupled with margin improvement in the investment areas will help us increase annual EBITDA, both in dollar and margin terms.
In 2023.
The only caveat I'll make is we can do to remain in investment mode and so change my could change. This this approach if we identify attractive growth opportunities, but today at current trajectory on our current course and speed, we expect to increase annual EBITDA.
On your question on on insurance.
Actually when you look at.
And insurance cost in Q3 versus Q2 as a percentage of our <unk> insurance costs were were flat so good.
Good progress in Q3, I wont declared a windows yet we've got to watch this closely but there's been no increase at least as a percentage in Q3 relative to Q2.
Yes, Doug.
On the question regarding our regulatory and what we're seeing you know, we're largely seeing pretty much.
Yeah.
Exactly what we would expect.
I think just to make sure. We're on the same fact basis with respect to say the Dol announcement that was made recently.
It doesn't change our business model, our reclassify drivers and in many ways just is.
An affirmation of.
President Obama administrations determination that there are independent car.
Contractor workers out there and that.
More broadly there are largely quite supportive of this line of work and so what we've seen is outside of a handful of cities and it's been the same count of cities that have.
I would say.
Frankly.
Perhaps.
Abuse their power and are trying to overregulate the industry by and large I think lawmakers and regulators.
Anyone in policy that we've spoken to has been very productive in terms of.
Making sure that we can serve doctors together I mean again, let's remind everyone that what doctors want.
In terms of their activity the average stature and we're talking about $3 million <unk> every quarter.
<unk> are working fewer than four hours a week on average 90% of dashes work fewer than 10 hours a week. This is in the United States and so.
What they're saying with their feet as the number one thing they value about the door ash platform is really the flexibility that our offers and then when you look at what they say and we look at.
It take proposition 22, as an example.
Dash or is preferred.
87% of <unk> preferred staying as independent contractors. The vast majority of voters in California supported proposition to hold me to them, So I'm optimistic that.
Regulators and policymakers will take this into account and actually.
Reflect $1, one which is that they'd like to see labor laws catch up candidly.
Two they are modern day realities.
What the future of work really is which is people ought to be able to control where they work when they work and and that's really what we see so.
We don't really expect any.
Any new changes.
Versus what we've said before.
And Doug just.
Just to add to Tony's comments there.
Obviously.
In some cases dysregulation introduces new costs into the system.
Rules in such situations is try to execute as efficiently as we can and try to optimize the way that the cost but in some situations the cost might be onerous and cannot be entirely optimized way and so we are a REIT and an expectation that will generate a profit in the markets. We operate in and if those costs are overly onerous we will.
Will act.
Protect our EBITDA guidance, and so I want to make sure.
Sure.
Thank you.
Yeah.
Your next question comes from the line of Brian Nowak. Your line is now open.
Great. Thanks for taking my taking my question.
I have one for Tony just on.
Business philosophy, and sort of risk management through different macro scenarios. The business is holding on great. So far, but if we sort of walk into a scenario where in 'twenty. Three you potentially have a weaker consumer in the U S or Europe , and maybe you're more cash flow generative U S business decelerates or has some impact from macro.
Can you just sort of put us in that world and talk to us about sort of your investment philosophy and bolster more developed businesses as well as the earlier more developing products just to ensure you're best positioned to drive isn't this just post recovery. While also doing the best you can to sort of maintain and improve employee morale, which in part probably matters around the <unk>.
Doc.
Hey, Brian .
I think the investment philosophy has been largely consistent with what we have.
What we've done and I think even when I think about.
Last 10 quarters basically from one we'd become public to where we are now what we outlined in the S. One.
We've kind of just continued marching towards that drumbeat of Tel.
Telling the narrative of how we want to BD local commerce company, both building the largest local commerce marketplace. The largest local commerce platform and how we're making investments in towards doing that I mean, I think it's.
It's important to take note of.
What has happened in the last two and a half years I mean, we we went from a one one.
Business line company into now five businesses with investments into.
Operations overseas outside of the restaurants category and adds business a platform business with products like the rest strive in storefronts and.
And so when I think about.
What we are today.
The biggest thing that I've been thinking a lot about is how do we actually make sure. We continue to stay disciplined about investing.
Ah.
<unk> to the stage of those projects now obviously theres a lot of macro headwinds as you mentioned then that have changed in the past year.
But but for me all of that suggests it's just it's going to put pressure on our execution, but.
But obviously, if we're not if it puts pressure on the consumer which is I think the point that you are going towards.
We're not seeing signal when some of these investment areas. Then we certainly would pull back and invest accordingly, and so for me, it's really again about keeping that discipline, even though we've gone from one business now to five businesses and just just to also put things in perspective, just for everyone everyone on the line.
A lot of the investment dollars are going into our non U S and our non restaurants category.
And the size of those.
Investments now have built a business that is larger than olive door to ask just a few years ago and so we certainly like what we see but obviously, if we're seeing behavior.
<unk> come down because of macro pressures.
We will invest accordingly.
And just to add to Tony's comments, Brian I mean remember our core.
For U S restaurant business is growing and generates significant cash flow rate and historically, we've invested the vast majority of this to grow scale and.
And these other areas in terms of new categories International but these investments are discretionary and.
And that means that if for one reason or another we're better served by pulling back on the investment because we are not seeing that I signaled in terms of consumer demand because we're not seeing the right improvement in terms of unit economics of whatever we can alter the pace of investment.
So far we've been pretty disciplined with capital allocation as you can see that and how the results in terms of the U S restaurant business and the plan is to continue being equally disciplined going forward.
Great. Thank you both.
Okay.
Yes.
Your final question comes from the line of Mark Mahaney.
Hey, Ron with Merrill Lynch.
Okay. Thanks, two questions. Please I know somebody already asked you about macro impact on the demand side anything you'd call out on the supply side anything about the need for extra side Hustle Thats, maybe led you to bring in more dashes and then secondly premier your comments about 'twenty three we always parse your words very carefully that last quarter, you had said increased.
Annual EBITDA by modest amount in this time when finishing your answer to the question. Just said you would increase annual EBITDA, but you didn't use the modest word is there anything to read into that sorry to ask you such a precise question, but just want to make sure we're not missing any nuances. Thank you.
Yes, maybe I'll take both so.
Mark on the Bachelor supply question. This is the point that I made.
Sure.
So through today's.
Conversation around the labor market being more normalized this year than it was last year and so that's having an impact on.
Obviously, some degree advertising rates, but also in terms of supply that's available to become bachelors and thats that benefit has been double charge by product improvements.
Now improve the retention of the fleet and there is actually generating incremental supply hours from existing dashboards and so both of those things means you. Just don't have you don't need to acquire as many new doctors. So the labor environment. So long story short labor environment.
Altered in.
In all industrial costs being better today.
And thats been.
Because of the product improvement that will.
I mean, we expect that to continue benefiting our cost structure.
In Q4 as when in 2023 provided there is no.
Shocks to the labor environment.
On the on the question around 2023.
I would urge you not to over extrapolate on award or two really we're not providing quantitative guidance, but what I am trying to share with you is when you think about the underlying dynamics of the business. The reason you didn't see a lot of EBITDA expansion going from from.
From 'twenty one into 'twenty two was because the pick up in terms of contribution profit from the U S restaurant business was largely soaked up by the investments.
We're at a point right now where the investments are getting better from a margin perspective, while the U S business continues to grow and therefore throws off more dollars and is continuing improvements in the margins and it's not a perfect offset anymore. It used to be not anymore, and thats going to generate incremental EBITDA. Both in dollar terms.
Margin terms, we'll come back to you with specific guidance on 2023 in Q4, which was in line with our normal cadence.
Okay. Thank you <unk>.
There are no further questions at this time, Mr. Andy Hargreaves I'll now turn the call back over to you.
Yeah.
Great. Thank you everybody for joining us today, we appreciate both your time and support and look forward to talking with many of you soon.
Good evening.
This does conclude today's conference call you may now disconnect.
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Okay.
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