Q3 2023 DoorDash Inc Earnings Call

Thank you for standing by and welcome to the door Dash Q3, 2023 earnings call I would now like to welcome Andy Hargreaves VP of Investor Relations to begin the call Andy over to you.

Thank you very much good afternoon, everybody and thanks for joining us for our Q3 2023 earnings call I'm very pleased to be joined today by <unk> co founder Chairman and CEO, Tony Schuh, and CFO, Rob <unk> to conduct will be making forward looking statements during today's call, including our expectations for our business financial position.

<unk> performance, our guidance strategies, our investment approach and the consumer spending environment forward looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those described many of these uncertainties and risks are described in our SEC filings, including form 10, Ks and 10-Qs you should not rely on our forward.

Looking statements as predictions of future events, we disclaim any obligation to update any forward looking statements, except as required by law.

During this call we will discuss certain non-GAAP financial measures information regarding our non-GAAP financial measures, including a reconciliation of such non-GAAP measures to the most directly comparable GAAP financial measures may be found in our earnings release, which is available 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 is being audio webcast on our Investor Relations website, and an audio replay of the call will be available on our website. Shortly after the call ends.

Operator: Thank you for standing by and welcome to the DoorDash Q3 2023 earnings call.

Operator, I will pass it back to you and we will begin taking questions.

Andrew Hargreaves: I would now like to welcome Andy Hargreaves, VP of Investor Relations to begin the call. Andy, over to you. Thank you very much. Good afternoon everybody and thanks for joining us for our Q3 2023 earnings call.

Okay.

At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad well pause for just a moment to compile any questions.

Again, if you'd like to ask a question. Please press star one on your telephone keypad now.

Andrew Hargreaves: I'm very pleased to be joined today by co-founder, chair and CEO, Tony Xu and CFO Ravi Inukonda. We'll be making forward-looking statements during today's call including our expectations for our business, financial position, operating performance, our guidance, strategies, our investment approach and the consumer spending environment, forward-looking statements are subject to risks and uncertainties that could cause actual results to different material, at least in those described. Many of these uncertainties and risks are described in our SEC filings including form 10Ks and 10Qs.

Our first question comes from the line of Nikhil Dev Nani with Bernstein. Please go ahead.

Hey, guys. Thank you for taking my question I added to partner on the U S marketplace. So everyone's obviously worried about a variety of headwinds in a softening consumer you're business is accelerating in the U S. Can you comment on one what drove that acceleration and then as a follow on I think the perception is your marketplace.

Andrew Hargreaves: You should not rely on our forward-looking statements as predictions of future earnings. During this call, we will discuss certain non-gap financial measures, information regarding our non-gap financial measures, including a reconciliation of such non-gap measures to the most directly comparable gap financial measures, maybe found in our earnings release, which is available on our investor relations website. These non-gap measures should be considered in addition to our gap results and are not intended to be a substitute for our gap results.

It is highly discretionary but given all the data you see in how consumers actually use your service.

Would you agree with that assessment and how do you think about the sensitivity of demand.

Hey, Nicole its Tony maybe I'll start and Ravi feel free to chime in.

On the first part of the question I mean, you're absolutely right I think we saw.

Phenomenal quarter, where frankly every line of business has accelerated in growth and improved and its unit economics.

Operator: Finally, this call is being audio webcasted on our investor relations website and an audio replay of the call will be available on our website shortly after the call ends. Operator, I will pass it back to you and we will begin taking questions. At this time, I would like to remind everyone in order to ask a question, press star than the number one on your telephone keypad. We will pause for just a moment to compile any questions. Again, if you would like to ask a question, please press star one on your telephone keypad now.

It's impressive, especially given the fact that we're a lot larger today than we were a quarter ago and its certainly a year ago.

In terms of the U S restaurants business or the marketplace in general I mean, a few phenomenon going on but really it's the result of product improvements we've made.

Whether you look a quarter ago, a year ago, we've added selection to the platform on the restaurant side and we've added a lot of selection on the non restaurants front.

Literally going from zero nearly three years ago to a multibillion dollar business.

At scale now growing fast and contributing quite significantly and we have over 100000 stores on the platform that are outside of restaurants, and when you look at.

Nikhil Devnani: Our first question comes from a line of Nikhil Devnani with Bernstein. Please go ahead. Thank you for taking my question.

Outside of restaurants and into the convenience or grocery or alcohol segments, almost half of new customers that come into the industry in the U S come to door Dash first and so.

Nikhil Devnani: I had a two-parter on the US marketplace, so everyone is obviously worried about a variety of headwinds and a softening consumer yet your business is accelerating in the US. Can you comment on what drove that acceleration? And then as a follow-on, I think the perception as your marketplace is highly discretionary, but given all the data you see and how consumers actually use your service, would you agree with that assessment? And how do you think about the sensitivity of demand?

That's certainly adding in terms of our selection second we continue to improve the quality of service, whether it's our timeliness or speed or accuracy.

Third we've improved the affordability of the programs both for our non Dash pass members as well as for dash past cohorts.

Fourth we've improved customer support all along the way and so it's really the result of many years of work on the fundamentals and mastery of that and continuing to see opportunities to continue improving the product those in terms of efficiencies and just products quality to the customer that's leading to the growth of <unk>.

Tony Xu: Hey, Nikhil. It's Tony. Maybe I'll start and Robbie, feel free to chime in. You know, on the first part of the question, I mean, you're absolutely right. I think we saw a phenomenal quarter where frankly, you know, every line of business has accelerated in growth and improved in its unit economics. And that's impressive, especially given the fact that we're a lot larger today than we were a quarter ago and certainly a year ago.

All of the lines of business in the U S and Thats why you kind of saw culminate in some of the numbers that we reported in Q3 I think with respect to the second question.

Tony Xu: In terms of the US restaurants business or the marketplace in general, I mean, a few phenomena are going on, but really it's the result of product improvements we've made. Whether you look a quarter ago, a year ago, we've added selection to the platform on the restaurant side and we've added a lot of selection on the non restaurants front, you know, literally going from zero nearly three years ago to a multi-billion dollar business that's, you know, at scale now growing fast.

I think we've our business has always been very dynamic in terms of all of the headwinds and tailwind its faced in the 10 years that we've been building door at Ash and that's certainly been true in the last three years. Obviously, we lived through a global pandemic. We lived through peak pandemic. We lived through peak inflation, we've lived through lots of other macro factors.

Tony Xu: And contributing quite significantly and we have over a hundred thousand, you know, stores on the platform that are outside of restaurants and when you look, you know, outside of restaurants and into the convenience or grocery or alcohol segments. Almost half of the new customers that come into the industry in the US come to DoorDash first. And so that's certainly adding in terms of the selection. You know, second, we've continued to improve the quality of service, whether it's our time limits, our speed, our accuracy.

<unk>, including with some of the ones impacting us today.

I think it's important to remind ourselves there's a few things while it's virtually impossible to estimate or isolate the quantum impact of any one of these macro factors I think it's a lot easier to think about things that we do control and as mentioned in the answer to the previous question we've.

To improve our product.

It's certainly within our control and as dynamic if not more dynamic than some of the macro changes that we face.

Tony Xu: Third, we've improved the affordability of the programs, both for our non-dash pass members as well as for our dash pass cohorts, and, you know, fourth, we've improved customer support all along the way, and so it's really the result of, you know, many years of work on the fundamentals and mastery of that and continuing to see opportunities to continue improving the product, both in terms of efficiencies and just products quality to the customer.

Second we benefit from the fact that our first category the restaurants category stems in the sense that while sure maybe not every meal has to be eating.

When it comes to delivery or takeout, but when you think about every category that lends itself towards convenience and we all know that convenience only lends itself towards the direction of greater convenience.

Food is the most resilient and highest frequency category I mean this is true in every.

Every line of E. Commerce in fact, if you looked at our cohort performance, which we talked a little bit about.

Tony Xu: That's leading to the growth of all of the lines of business in the U.S., and that's what you kind of saw culminate in some of the numbers that were reported in Q3.

In our shareholder letter this quarter, you'll see that virtually every single cohort, including those that just joined our platform.

Tony Xu: I think with respect to the second question, it's, you know, I think we've, our business has always been very dynamic in terms of all of the headwinds and tailwinds, it's faced in the 10 years that we've been building DoorDash, and, you know, that's certainly been true in the last three years, obviously we lived through a global pandemic, we lived through peak pandemic, we lived through peak inflation, we've lived through lots of other macro factors, including with some of the ones impacting, you know, us today. And I think, you know, it's important to remind ourselves of a few things.

A couple of months ago are doing way better than any of the cohorts even during the pandemic and so I think as you see that behavior across every line of.

Every segment of customers every cohort across time, I think you start to gain a different picture of just the fact of.

The product improvements as well as the number of shots on goal that we get to take relative to others and capturing that customer and the final comment I'd make is in spite of our performance and our market leadership, we are still a tiny fraction of what's addressable I mean in the U S restaurants category. As one example, we're left in double digit percentage sales.

Tony Xu: While it's virtually impossible, you know, to estimate or isolate the quantum impact of any one of these macro factors, I think it's a lot easier to think about, you know, things that we do control. And, as mentioned, and, you know, the answer to the previous question, we've continued to improve our product. And, you know, that's certainly within our control and add dynamic. If not more dynamic than some of the macro changes that we face, I think second, you know, we benefit from the fact that our first category, the restaurant's category stems in the sense that while sure, maybe not every meal has to be eaten when it comes to delivery or takeout, but when you think about every category that lends itself towards convenience, and we all know that convenience only lends itself towards the direction of greater convenience food is the most resilient and highest frequency category.

Of the industry I think if you looked globally within restaurants were a much tinier single digit percentage and if we included all the other categories that we've now entered we're barely noticeable and so I think we have a long runway left we have a lot more work to do to get our product to where we would like it to be but I think the product improvements that we've made in the years leading.

These moments have certainly helped us build a product that endures.

Thanks, Tony.

Our next question comes from the line of Ross Sandler with Barclays. Please go ahead.

Tony Xu: I mean, this is true. In every, you know, every line of e-commerce. In fact, if you looked at our cohort performance, which we talked a little bit about in our shareholder letter, this quarter, you see that virtually every single cohort, including those, you know, that just joined our platform, you know, a couple months ago, are doing way better than any of the cohorts even during the pandemic. And so I think as you see, you know, that behavior across every line of, you know, every segment of customers every cohort across time.

Hey, guys. If I can ask three quick ones that would be great first Tony on the international footprint, we're now into well past a year into default.

Tony Xu: I think you start to, you know, gain a different picture of just the fact of, you know, the product improvements as well as the number of shots on goal that we get to take relative to others in capturing that customer.

Integration, how you feel about that.

Are there any geographies that you think might be.

Interesting from a M&A perspective in the future for international second.

Second question is are we keep getting this one a lot from the investment community. Maybe you guys can clear the air on the <unk>.

P. One diet drugs.

Or any way to think about how that might impact your business in the future, but obviously not impacting it now and then lastly.

Since the cars now there was a public company just curious to get any milestones on grocery <unk>.

Tony Xu: And the final comment I'd make is, you know, in spite of our performance in our market leadership, we're still a tiny fraction of what's addressable. I mean, in the U.S, restaurants category, as one example, we're left in double digit percentage sales of the industry. I think he looked globally within restaurants, we're a much tinier single digit percentage. And if we included all the other categories that we've now entered, we're barely noticeable.

As we sit here at the inventory three from you guys.

Thanks, a lot.

Great Hey, Ross I'll do my best to take them. The first two and order and maybe I'll, let Ravi take the third one so I think the first question was around international.

You're absolutely right, we're very excited about our execution on the international front.

Tony Xu: And so I think we have a long runway left. We have a lot more work to do to get our product to where we would like it to be. But I think the product improvements that we've made in the years leading up to, you know, these moments have certainly helped us build a product that endures.

We continue to grow at multiples of what we see around the world virtually across any geography that doesn't mean that we're pleased yet with where our product is we still have a lot of room left to go but I think it does stemmed from why our outperformance has occurred which is.

Tony Xu: Thanks, Tony.

I think the hallmarks of any great marketplace have.

Ross Sandler: Our next question comes from a line of Ross Sandler with Parklays. Please go ahead.

The fundamental characteristics of great retention order frequency and unit economics, and I think when you look at our international business or our.

Ross Sandler: Hey guys, if I can ask three quick ones, that'd be great. First Tony on the international footprint, we're now into well past the year, into the vault integration. How you feel about that? And are there any geographies that you think might be interesting from a M&A perspective in the future for international?

Categories business or in our restaurants business you see all of these characteristics present, and that's why we've been very interested in leaning in and making the investments that we have at size at scale because of what we see.

And in the international business continues to see.

Ross Sandler: Second question is, we keep getting this one a lot from the investment community. Maybe you guys can clear the air on the GLP one diet drug. Is there any way to think about how that might impact your business in the future? It's obviously not impacting it now.

Those points of execution I think if we remind ourselves even a couple of years ago of the investment thesis behind our partnership with bolt it really centered on two big pieces, one of which was here.

Here is a business that has leading world class retention and order frequency.

Ross Sandler: And then lastly, Instacars now there's a public company just curious to get any milestones on grocery GOV as we sit here at the end of 23 from you guys. Thank you. Great.

And the question is can we invest behind that in a concentrated way and hopefully add to the.

Excellent execution that they've already seen and it's and so far the answer is yes to that in fact, Micky and the team now runs our entire portfolio certainly the volt portfolio as well as the door dash portfolio outside of the United States and.

Tony Xu: Hey, Ross, I'll do my best to take them, you know, the first two in order and maybe I'll let Robby take the third one. So I think the first question was around international, I mean, you're absolutely right. We're very excited about our execution on the international front. We continue to grow at multiples of what we see around the world virtually across any geography. That doesn't mean that, you know, we're pleased yet with where our product is, we still have a lot of room left to go, but I think it does stem from, you know, why are our performance has occurred, which is.

In the second.

And part of the thesis was that there is a long runway for growth and a lot of these countries and we continue to see that too.

In the 27 countries outside of the U S that we operate in we are in.

In some ways behind where the US is from a penetration perspective, and also product adoption perspective.

There just is a lot more population we have to address their more merchant partners.

Tony Xu: I think the hallmarks and any great marketplace have the fundamental characteristics of great retention order frequency and unity comics and I think when you look at our international business or our new categories business or restaurants business, you see all of these characteristics present. And that's why we've been very interested in leaning in and making the investments that we have at side that scale because of what we see. And in the international business, you know, continues to see that, you know, those points of execution.

We have yet to partner with.

There's a lot more customer problems given the fact that some of these places are a little bit behind from a technology footprint and so theres a lot of work to do but it also means that there is a lot of runway ahead and I think that's why you've seen continued momentum in it adding now to the overall growth of the company.

I think your second question was around.

Some of the recent discussions extra.

Externally around a certain class of drugs.

Tony Xu: I think if we remind ourselves, even a couple of years ago, of the investment pieces behind our partnership with Gold, it really centered on two big pieces, one of which was, you know, here is a business that has leading world class retention and order frequency. And the question is, you know, can we invest behind that in a concentrated way and hopefully, you know, add to the excellent execution that they've already seen and so far, the answer has been, you know, yes to that.

First and foremost I hope that they actually work.

Right.

As a former scientist I'm, a big believer whenever a great science can actually meet the challenges of its time and I do think that they're solving a worthy problems. So first and foremost for the patients I hope that they work for the long term.

Second we don't see any immediate.

Or noticeable impacts in the business.

Relative to I guess, what commentary may be out there about this class of drugs and I think this kind of goes a little bit to the first question that was asked which is it's been really hard to size any one macro.

Tony Xu: In fact, you know, Mickey and the team now runs our entire portfolio, certainly the bulk portfolio as well as the door of portfolio outside of the United States. And the second part of the thesis was that there is a long runway for growth in a lot of these countries and we continue to see that too. In the 27 countries outside of the US that we operate in, we are, you know, in some ways behind where the US is from a penetration perspective and also product adoption perspective.

Economic factor whether it's.

A headwind the tailwind side wind.

I think instead, what we focused on is just continued improvement on our product velocity product quality and execution and I think that the dynamic changes we make in our products can outweigh many of the macro factors that may be at play.

Tony Xu: There just is a lot more population. We have to address the more merchant partners. We've yet to partner with. There's a lot more customer problems given the fact that, you know, some of these places are a little bit behind from a technology, you know, for print. And so there's a lot of work to do. But it also means that there's a lot of one way ahead and I think that's why you've seen, you know, continuing momentum and adding now to the overall growth of the company.

Yeah.

I was on your third question around grocery I mean look we're really pleased with the performance of the grocery business our focus over the last couple of years have been how do we increase the usage how do we increase the adoption of not just our grocery business, but really in fact, the entire new verticals all of the categories that we operate in where do you think in the business. Today is a couple of things one is more.

Our number of users are ordering from both the restaurants as well as new verticals and that is driving two things. We are seeing the new verticals business overall accelerated from the prior quarter as well as when you look at the grocery business itself on the jewelry to the specific question you asked <unk> doubled year on year. If you look at that paired with the efficiency that we've seen in the business.

Tony Xu: I think her second question was around, you know, some of the recent discussions externally around a certain cloth of drugs. You know, first and foremost, I hope that they actually work. These rights as a former scientist. I'm a big believer, whenever great science can actually meet the challenges of its time. And I do think that they're solving a worthy problem. So, first and foremost, for the patients, I hope that they work for the long term.

We are doing a ton of efficiency across the business in fact, when I look at the unit economics Theres been a dramatic improvement in unit economics.

We have a strategic advantage because we have a network of consumers. We have a network of dashes already built out and thats, allowing us to improve unit economics, such a much faster pace.

Tony Xu: Second, we don't see any immediate or noticeable impacts, you know, in the business relatives, I guess, what commentary may be out there about this cloth of drugs. And I think this kind of goes a little bit to the first question that was asked, which is it's been really hard to size any one macro, you know, economic factor, whether it's, you know, a headwind, a tailwind, a sidewind. I think instead, what we focused on is just continued improvement on our product velocity, product quality and execution. And I think that, you know, the dynamic changes we make in our products can outweigh many of the macro factors that maybe I play.

The way we operate the business as we look at signals around retention. We look at signals that are on order frequency. We look at signals around unit economics, we're continuing to be very pleased with improvement across all three our goal is to continue to invest behind improving selection improving the product quantity because our strong belief is that this is going to be a strong long term Ottawa agenda.

And as for Us.

Yeah.

Our next question comes from the line of Deepak math spend on.

With Wolfe Research. Please go ahead.

Ravi Inukonda: Ross, on your third question around grocery, I mean, look, we're really pleased with the performance of the grocery business. Our focus over the last couple years has been, how do we increase the usage, how do we increase the adoption of not just our grocery business, but really, in fact, the entire new verticals all of the categories that we operate in. What we're seeing in the business today is a couple things, right?

Hey, guys. Thanks for taking the question just wanted to ask a couple of months. So first wanted to ask about the product initiatives for 2024, you entered into a lot of categories in new markets in 2022, and 2023 was more of a year of execution of it sounded like a refinement that helped profitability, obviously as an incremental driver what are the.

Ravi Inukonda: One is more number of users are ordering from both restaurants as well as new verticals. And that's driving two things. We're seeing the new verticals business overall accelerate from the prior quarter, as well as when you look at the grocery business itself on the GOV to the specific question you asked are GOV has doubled year on here. If you look at that paired with the efficiency that we've seen the business, we've driven a ton of efficiency across the business.

The big business opportunities for 'twenty, four or should we view it as another year of execution on refinement of existing businesses.

That's the first question and then the second one the acceleration in the order frequency at this scale in the core restaurant business is pretty impressive are you seeing some of the maybe less common use cases, I don't know, maybe breakfast autos or corporate orders or anything thats, helping incrementally in the recent quarters can you help unpack the trends and.

Ravi Inukonda: In fact, when I look at the unit economics, there's been a dramatic improvement in unit economics. We have a strategic advantage because we have a network of consumers, we have a network of dashes already built out and that's allowing us to improve unit economics such a much faster pace. For us, the way we operate the business is we look at signals around retention, we look at signals around order frequency, we look at signals around your economics.

Use cases, a little bit thanks, so much.

Sure if I can maybe I can start and take the questions and then Ravi feel free to chime in.

The first question, which stems on 'twenty four and some of the initiatives that we're thinking about.

First our goal is to grow and to empower local economies. So we're always looking for problems to solve and jobs to be done and obviously, we want to make sure that we have a strong point of view, where we can do it at least 10 times better than <unk>.

Ravi Inukonda: We're continuing to be very pleased with the improvement across all three. Our goal is to continue to invest behind improving selection, improving the product quality because our strong belief is that this is going to be a strong long term ROI generating business for us.

However, the problem is currently being solved and and so when we looked at if we rewind the clock for instance to 2019.

Deepak Mathivanan: Our next question comes from a line of de-packed math banan with wolf research. Please go ahead. Thanks for taking the question, I just wanted to ask a couple of months. First, I wanted to ask about the product initiatives for 2024. You entered into a lot of categories and new markets in 2022. 2023 was more of a year of execution and start-up like a refinement that helped profitability as an incremental driver. What are the big business opportunities for 2024?

We were thinking quite a lot about what other problems, we could solve many of the problems that we actually heard came from our customers directly.

I'll give a few examples when it came to consumers a lot of the challenges that we had heard.

We're really making sure that we can help solve their other problems again, because we started in the restaurants category, which has the highest frequency of activity and the fact that we would show up to many consumers doors. Many times a week I think consumers started asking the question well what else can you do for me.

Deepak Mathivanan: Or should we view it as another year of execution and refinement of existing businesses? That's the first question. And then second one, the acceleration in the order frequency at this scale, the core restaurant business is pretty impressive. Are you seeing some of the less common use cases, I don't know, maybe breakfast orders or corporate orders or anything that's helping incrementally in the recent quarters? Can you help unpack the trends in use cases a little bit? Thanks so much. Sure.

And similarly for merchants I think there are many questions that they wanted our help with this is even well before the pandemic of how can they become an omnichannel business and Thats why we certainly made further investments into products like jordache strive, but also started accretion of jordache storefront.

Which has continued to serve various merchant cohorts and segments and we continue to build further services as we think about how can we help a merchant build their first party channel as much as we help build their third party channel door dash.

Tony Xu: Deepak, maybe I can start and take the questions, and then, you know, Robbie Fulfur to chime in. You know, the first question which stems on 24 and some of the initiatives that we're thinking about, you know, first start, our goal is to grow into Empower Local Economy. So we're always looking for problems to solve and jobs to be done. And obviously we want to make sure that we have a strong point of view where we can do it at least 10 times better than, you know, however the problem is currently being solved.

And then and.

As I kind of keep thinking along the years I mean advertising came in that way as well many merchants as well as advertisers that are new to our ecosystem kind of approached us and said hey, it looks like you have a high frequency.

Setup with the largest number of local commerce business, where you can measure everything very very closely and directly.

Tony Xu: And so when we looked at, you know, if we were allowing the clock, for instance, to 2019, we were thinking quite a lot about, you know, what other problems we could solve. And many of the problems that we actually heard came from our customers directly. I'll give a few examples, you know, when it came to consumers, a lot of the challenges that we had heard, we're really making sure that we can help solve their other problems.

Is there a way in which you can be more useful I think to all of the audiences and that's kind of how we've thought about all of the different problems. When I think about 24 or 25 or 26. That's generally how we think about things to where we start with certainly our core set of businesses, which today is five businesses. We're in.

Tony Xu: Again, because we started in the restaurants category, we had the highest frequency of activity. And the fact that we would, you know, show up to many consumers doors many times a week. I think consumers started asking the question, well, what else can you do for me? And similarly for merchants, I think there were many questions that they wanted our help with. This is even well before the pandemic of how can they become an omnichannel business.

19, it was it was closer to one business and so it's a little bit more very now and complicated in terms of thinking about all the different opportunities because we believe each one of these five businesses are still actually in the earliest innings, even the U S restaurants business.

But we're also looking at opportunities to always solve more problems and a N a.

Hope that as we listen to our audiences more deeply and can get and operate at a lower level of detail, we'll actually be able to pick up new problems to solve.

Tony Xu: And that's why we certainly made further investments into products like DoorDash Drive, but also started the creation of DoorDash Storefront, which has continued to serve various merchant cohorts and segments. And we continue to, you know, build further services as we think about, how can we help the merchant build their first party channel as much as we help build their third party channel, DoorDash. And then, you know, as they kind of keep thinking along the years, I mean, advertising came in that way as well, you know, many merchants, as well as advertisers that are new to our ecosystem, kind of approached us and said, you know, hey, it looks like you have a high frequency setup with the largest number of local commerce business, where you can measure everything very, very closely and directly.

Now we always do this in a fairly disciplined way again I think at door Dash, we really believe in investing appropriately towards.

The stage of the project and so usually when the when we're solving these problems and with many of these experiments going on we.

We tend to take fairly small bets and it's only until we believe that we've nailed product market fit as well as finding an efficient way to grow do we actually concentrates behind that bet and go all in for it and so that's how we're thinking about 24 and in that way to I think your second question was around the continued growth.

And engagement and frequency of our customer base.

Tony Xu: Is there a way in which, you know, you can be more useful, I think, to all of the audiences. And that's kind of how we've thought about all of the different problems. When I think about 24 or 25 or 26, that's generally how we think about things too, where we start with, certainly our core set of businesses, which today is five businesses, where in 2019 it was closer to one business. And so it's a little bit more very now and complicated in terms of thinking about all the different opportunities because we believe each one of these five businesses are still actually in their earliest earnings, even the US restaurants business.

In restaurants, even at our current scale.

Well I think theres a lot of things that drive this I think sometimes.

When we think about businesses like our oldest business. The U S restaurants business, we tend to think that perhaps it's closer to the ninth inning progress versus the third inning of progress and I tend to think at least when I talk to our customers that we are way closer towards the third inning.

Then the ninth inning, and we just have a lot more work to do in terms of making improvements to the product. There isn't one single thing that we're doing that's yielding I think some of the improvements that youre seeing in the results, but really its years of working on the selection quality of service. The affordability of the program the added value to our dash class members.

Tony Xu: But we're also, you know, looking at opportunities to always solve more problems. And I hope that as we listen to our audiences more deeply and can get and operate at a lower level of detail, will actually be able to pick up new problems to solve. Now, we always do this in a fairly disciplined way. Again, I think at DoorDash, we really believe in investing appropriately towards the stage of the project. And so usually when we're solving these problems, and we have many of these experiments going on, we tend to take fairly small bets.

Yeah.

As well as improved customer support that's producing some of the results today. It would be really hard candidly to look backwards and say hey in which year did the product work actually lead to the results by less at this quarter's efforts but.

I think instead, what we do is we're always just trying to make continued improvement and I think whenever we've taken that focus.

Surprised ourselves to the upside of how much more there is to go as well as the compounding effects that can happen over time.

Tony Xu: And it's only until we believe that we've mailed product market fit, as well as finding an efficient way to grow, do we actually concentrate, you know, behind that bet and go all in for it. And so that's how we're thinking about 24 and in that way too. I think your second question was around, you know, the continued growth in engagement and frequency of our customer base in restaurants, even at our current scale.

And maybe just to add a couple of thoughts to what Tony talked about earlier it looked at it we've had to phenomenal year. So far what we're seeing both on the topline is out of the bottom line part of that is in fact being driven by all the investments we've made whether it's on the product side or investments in new verticals as well as the investments we've made in international over the last couple of years in order to.

Tony Xu: Well, I think there's a lot of things that drive us. I think sometimes, you know, when we think about businesses like our oldest, the US restaurants. Business. We tend to think that perhaps it's closer to the ninth inning of progress versus the third inning of progress. And I tend to think at least when I talk to our customers that we're way closer towards the third inning than the ninth inning. And we just have a lot more work to do in terms of making improvements to the product.

Seeing is we're seeing really strong growth across all lines of business that we operate in these categories of yogurt and our large there's really lots of customer problems as Tony talked about that we need to continue to work on and improve our GUL and philosophy is we will continue to invest as long as we see good signal on both volume as well as unit economics, because this is the blueprint for us.

To drive really strong free cash flow in the many years to come.

This.

Tony Xu: There isn't one single thing that we're doing that's yielding, adding some of the improvements that you're seeing in the results. But really it's years of working on the selection, the quality of service, the affordability of the program, the added value to our dash pass members, as well as improved customer support that's producing some of the results today. It would be really hard, candidly, to look backwards and say, hey, in which year did, you know, the product work actually be to the results that let's add this quarter's efforts.

Got it thank you so much.

Our next question comes from the line of Ron Josey with Citi. Please go ahead.

Great. Thanks for taking the question Tony I wanted to ask a little bit more about just take rates on a year over year basis.

Continue to expand and while down a little bit sequentially, just talk to us a little bit more on the progress, we're making to keep <unk> drive take rates higher so.

Wait times incentive spend.

Tony Xu: But I think instead what we do is we're always just trying to make continued improvement. I think whenever we've taken that focus, we've surprised ourselves to the upside of how much more there is to go, as well as the compounding effects that can happen over time.

How you see advertising fit in there or any insights on where take rates might go and then we're now a quarter into dashes, new new App and lay out and we heard some of the comments around grocery prior but any change in behavior that you've seen from the new App now that we're a quarter in thank you.

Ravi Inukonda: Yeah, Dupa, maybe just to add a couple of thoughts to what Tony talked about, right? Look, we've had a phenomenal year so far. What we're seeing both on the top line as well as the bottom line. Part of that is, in fact, being driven by all the investments we've made, whether it's on the product side or investments in new verticals, as well as the investments we've made in international over the last couple years.

But let me let me take the first one on take rate and then I'll, let Tony chime in on the second one.

Look I mean, we are not managing the business rather than to a specific margin target let alone our margin across any line of the P&L.

Are you seeing on the take rate side is if you actually look at the underlying drivers of the business across the various lines of business. The net revenue margin has actually increased sequentially as well as year on year, what youre seeing on the output is really the mix shift of various lines of business. If you recall the comment that we made earlier new verticals.

Ravi Inukonda: You know, what you're seeing is, you know, we've seen really strong growth across all types of business that we operate in. These categories that we operate in our large, there's really lots of customer problems. There's Tony talked about that we need to continue to work on and improve. Our goal and philosophy is we will continue to invest as long as we see good signal on both volume as well as unit economics.

So the business is actually growing faster than our restaurant business and you're really seeing the mix shift of those two businesses, which are still early in terms of their journey starting to take impact from an overall take rate perspective.

Deepak Mathivanan: So this is the blueprint for us to drive really strong free cash flow in the many years to come in our business. Got it. Thank you so much.

That said our goal is always how do we find efficiencies across every line of the P&L and using that efficiency to continue to reinvest back in the business to drive growth and we did that exactly the same in this quarter I think we found a lot of efficiencies as was a good contributor to the revenue upside that you are seeing in the business, we use that to continue to drive efficient growth, which.

Ron Josie: Our next question comes from a line of Ron Josie with city. Please go ahead. Great. Thanks for taking the question. Tony, I want to ask a little bit more about this take rates and on a year of your basis, you know, that they continue to expand and well down a little bit sequentially. Just talk just a little bit more on the progress you're making to keep and or drive take rates higher.

Ron Josie: The progress around wait times incentive spend how you see advertising fit in there any insights on where take rates might go. And then we're now a quarter in the dashes new new app and layout and we heard some of the comments around grocery prior, but any change in behavior that you've seen from the new app now that we're a quarter in. Thank you. And let me take the first one on take rate and I'll let Tony chime in on the second one.

<unk> result of some of the accelerated growth that youre seeing in the business.

And in terms of your second question about consumer behavior, given some of the.

Changes that we announced.

Earlier this summer I mean, we continue to see.

I guess more confer for inventory evidence that consumers really like the changes and I think it's usually pretty rare to see this because whenever you make a pretty sizable change like the one that we made to our consumer App you tend to get a who moved my cheese reaction.

Ravi Inukonda: Look, I mean, we are not managing the business wrong to a specific margin target, let alone a margin across, you know, any line of the PNL. Now what you're seeing on the take rate side is if you actually look at the underlying drivers of the business across the various lines of business, the net revenue margin is actually increased sequentially as well as year on year. What you're seeing on the output is really the mix shift of various lines of business.

And I think instead, we actually saw.

No.

Behavior that suggested that the opposite where customers are naturally shopping across different categories and I think.

One of the drivers of this was that we actually made sure that.

Our progress within each vertical.

Was fairly robust in terms of the level of product market fit that we wanted to achieve before we actually redesigning the entire app experience such that we werent reorienting consumers to something that we were pushing upon them, but rather it was meeting them, where they want it to be given that they were pulling us.

Ravi Inukonda: If you recall the comments that we made earlier, new verticals are a national business is actually growing faster than our restaurant business. And you're really seeing the mix shift of those two businesses which are still early in terms of their journey trying to take impact from an overall take rate perspective. You know, that said, you know, our goal is always how do we find efficiency across every line of the PNL and using that efficiency to continue to reinvest back in the business to drive growth.

In terms of the demand that they naturally suggested and showed across each line of business. So we are seeing.

Ravi Inukonda: And we did that exactly the same in this quarter, right? We found a lot of efficiencies as was a good contributor to the revenue upside that you're seeing in the business. We used that to continue to drive efficient growth which gave result to some of the accelerated growth that you're seeing in the business. Business.

As mentioned before customers continuing to cross shop across different categories quite naturally and those numbers continue to increase we're seeing many for many consumers the first.

Our action with door dash actually tends to be sometimes outside of the restaurant category and I think these are some of the factors that have contributed to the fact that when you look outside of restaurants, and you look at the convenience grocery alcohol segments customers that are adopting E. Commerce in these categories for the first time.

Ravi Inukonda: And in terms of your second question about consumer behavior given some of the app changes that we announced earlier this summer, I mean, we continue to see, I guess, more confirmatory evidence that consumers really like the changes and I think it's usually pretty rare to see this because whenever you make a pretty sizable change like the one that we made to our consumer app, you tend to get a who move my cheese reaction. And I think instead we actually saw, you know, behavior that suggested the opposite, where customers were naturally shopping across different categories.

About half of them are coming to door Ashford.

Yeah.

Thank you Tony.

Our next question comes from the line of Eric Sheridan with Goldman Sachs. Please go ahead.

Thanks, so much for taking the question maybe just one on the broader topic, we've seen a ruling in New York City on compensation and investors continue to ask a lot about how the department of labor might play out any updated thoughts on the regulatory environment overall, and how youre thinking about aligning investments against that potential for nuance in the regulatory.

Ravi Inukonda: And I think, you know, one of the drivers of this was that we actually made sure that our progress within each vertical was fairly robust in terms of the level of product market fit that we've seen. We wanted to achieve before we actually redesigned the entire app experience such that we weren't reorienting consumers to something that we were pushing upon them, but rather it was meeting them where they wanted to be given that they were pulling us in terms of the demand that they naturally suggested and showed, you know, across each line of business.

The environment in the quarters ahead. Thanks, so much.

Yeah, Hey, Eric It's Tony I'll start and feel free to chime in I think in general we.

We have the same point of view on the regulatory landscape today adds we had.

Shockingly, even 10 years ago, which is that by and large.

Governments lawmakers regulators, they actually want to work productively with companies like ourselves to really co create I think what the future of work and future of labor will be and if you think about it.

Ravi Inukonda: So we are seeing, as mentioned before, customers continuing to cross shop across different categories quite naturally. And those numbers continue to increase. We're seeing many for many consumers, you know, the first interaction with door dash actually tends to be sometimes outside of the restaurant category. And I think these are some of the factors that have contributed to the fact that when you look outside of restaurants and you look at the convenience grocery alcohol segments, you know, customers that are adopting e-commerce in these categories for the first time. About half of them are coming to door ash first. Thank you.

The reason why tens of millions of doctors have come to the door dash platform.

Overtime or millions come to our platform every single month or the fact that the door Dasher App is actually one of the most downloaded consumer apps on the Apple.

<unk>.

Itunes store is because.

It is because they simply don't earn enough income from the full time jobs and they do have 90% of <unk>.

Dash fewer than 10 hours a week the average dasher does three to four hours a week over 80 plus percent of them have full time jobs, and so theyre really seen duressor as a bridge between.

Tony Xu: Our next question comes from the line of Eric Sheridan with Goldman Sachs. Please go ahead. Thanks so much for taking the question. Maybe just one on a broader topic. We've seen a ruling in New York City on compensation and investors continue to ask a lot about how the Department of Labor might play out. Any update that thoughts on the regulatory environment overall and how you're thinking about aligning investments against that potential for nuance in the regulatory environment in the quarters ahead.

What income they earn today and the income that they hope to earn to meet the cost of living and so I think that most regulators actually understand this point, but we are our hypothesis 10 years ago and kind of our us updating.

To this day has always been that there might be a handful of jurisdictions, who perhaps don't want to work productively with businesses and support this new paradigm and instead candidly create policy Thats just bad policy that will achieve unintended consequences that go counter to that goal.

Tony Xu: Thanks so much. Yeah. Hey, Eric. It's Johnny. I'll start and, you know, feel free. Robby to chime in. You know, I think in general, we have the same point of view on the regulatory landscape today as we had. You know, shockingly even 10 years ago, which is that, you know, by and large governments, lawmakers, regulators, they actually want to work productively with, you know, companies like ourselves to really co create, I think, with the future of work and future of labor will be.

And when we think the New York City.

Sure.

Legislation or proposed legislation is one of those.

Uh huh.

As we see similar activities in Seattle, but when you again count up all of the regulatory discussions I think it's still favors kind of our original hypothesis, which is outside of a handful of jurisdictions.

Tony Xu: And if you think about it, you know, the reason why tens of millions of dashers have come to the door dash platform, you know, over time, or millions come to our platform every single month, or the fact that the door dash dash or app is actually one of the most downloaded consumer apps on the apple. You know, I can store is because. It's because they simply don't earn enough income from the full-time jobs that they do have.

Jurisdictions, most governments lawmakers and regulators want to work productively with our company.

Companies like door dash to do the right thing for doctors.

I think just to add to what Tony said I think on the New York City, when we got into a couple of questions about this as well.

Tony Xu: You know, 90% of our dashers, the dash fewer than 10 hours a week, the average dasher does three to four hours a week over 80 plus percent of them have full-time jobs. And so they're really seeing DoorDashers the bridge between, you know, what income they earn today and the income that they hope to earn to meet the cost of living. And so, and I think that most regulators actually understand this point, but we, you know, our hypothesis 10 years ago and kind of our views updating, you know, to this day has always been that there might be a handful of jurisdictions who, you know, perhaps don't want to work productively with businesses and support this new paradigm.

That is not live yet we do expect to hear back from the judge at any point, just like everybody else our goal in philosophy and how do we respond to some of these changes has always been the first and foremost priority is to drive efficiency in every market that we operate in because our goal is to ensure we are sustainable unit economics to the extent, we are not able to.

Meet our goals around unit economics, we do realize there's going to be increased costs in the system like Tony talked about we don't think is great because that just reduces the transaction activity across the ecosystem, which means it's going to lower sales for merchants as well as enduring lower earnings for doctors and from the financial impact perspective itself any impact from New York City ruling in <unk>.

Tony Xu: And instead, you know, candidly create policy that's just bad policy that will achieve unintended consequences that go counter to their goals. And when we think the New York City, you know, legislation or proposed legislation is one of those, you know, bodies we see similar activities in Seattle. But when you, again, count up all of, you know, the regulatory discussions, I think it's still favors kind of our original hypothesis, which is outside of a handful of jurisdictions, most governments, lawmakers and regulars want to work productively with companies like DoorDash to do the right thing for dashers.

Four we've included that in our EBITDA guidance that we've given our goal is to manage the business to be within that range that we've talked about.

Great. Thank you for the color.

Our next question comes from the line of Doug Anmuth with Jpmorgan. Please go ahead.

Thanks for taking my questions.

Recognize the product improvement factors are outweighing macro, but we have heard a number of companies call out some early <unk> volatility from either macro or geopolitical just curious if you think anything has changed there at all into <unk> and then Ravi can you talk a little bit more about your improvements to GAAP profitability and just how we should think about.

That path in upcoming quarters.

Tony Xu: And just to add to what Tony said, really going to New York City one, we've got no public questions about this as well. That is not live yet. We do expect to hear back from the judge at any point, just like everybody else. Our goal and philosophy and you know, how do we respond to some of these changes has always been the first and foremost priorities to drive efficiency in every market that we operate in.

Sure I can start on the first question Ravi feel free to chime in and also take the second question with respect.

To the macro dynamics.

Again, I think it's just really really hard to size any one of these things and I think when you sum it all up and as you mentioned, there's lots of things going on in the world today.

Tony Xu: Because our goal is to ensure we have sustainable unit economics. To the extent we are not able to meet our goals around the economics, we do realize there's going to be increased cost in the system. Like Tony talked about we don't think it's great because that just reduces the transaction activity across the ecosystem, which means, you know, lower sales for merchants as well as internal lower earnings for dashers. And from the financial impact perspective itself, any impact from New York City ruling in Q4. We've included that in our EBITDA guidance that we've given our goal is to manage the business to be within that range that we've talked about.

With the economy with other events across the globe.

Tony Xu: Great. Thank you for the color.

And there are certainly puts and takes I think to each one of these things and I think that when it's not just the fact that we are a product of improvements that I think that has.

Helped out way and helped to execute very iffy.

Efficiently and continue to grow at high rates, even at our increased scale. It's also the fact that.

When you look at <unk>.

Every category of spend.

Food is one that everyone has to spending.

Doug Anmuth: Our next question comes from the line of Doug and move with JP Morgan. Please go ahead. Thanks for taking the questions.

Sure.

One may argue that you don't have to spend it on delivery, but what we tend to see is that there is also the macro trend of convenience increasing in the direction of greater convenience and so if someone has.

Tony Xu: Recognize that product improvement factors are outweighing macro, but we have heard a number of companies call out some early 4Q volatility from either macro or geopolitical just curious if you think anything has changed there at all into 4Q. And then Robbie, can you talk a little bit more about your improvements to get profitability and just how we should think about that path in upcoming quarters. Thanks. Sure. I can start on the first question and Robbie feel free to chime in and also take the second question with respect to the macro dynamics.

<unk>.

Some dollars to spend it tends to start with the category of the highest frequency where they also seek the convenience and there's just more opportunities to do that given that someone.

It consumes food 20 to 25 times a week.

So we're not seeing any of the the activity perhaps.

I think some other categories and commerce are seeing but I think it's really multifaceted theres the product improvements there is the fact that people.

<unk> have to spend on food and it tends to therefore lend itself towards the category where for ecommerce its the most resilience in the highest frequency.

Tony Xu: Again, I think it's just really, really hard to decide any one of these things. And I think when you sum it all up, and as you mentioned, there's a lot of things going on in the world today, you know, with the economy with other events across the globe. And there's certainly puts in takes, I think, to each one of these things. And I think that when it's not just the fact that we have product improvements that I think that has, and helped out way and helped execute very efficiently and continue to grow at high rates even at our increased scale.

You can study this for the past 60 years, which obviously has a lot of macro dynamics as well and you see that in only two out of the 60 years I think to the restaurant industry in the U S at least ever.

Decline and and so I think it gives you a sense of the robustness of this category and then I think the final point is we're still a lot earlier than people think in the category than perhaps our scale suggests and that means that we are not where we need to be at in terms of where our selection.

Tony Xu: It's also the fact that when you look at every category of spend, food is one that everyone has to spend and sure one may argue that you don't have to spend it on delivery. But what we tend to see is that there's also the macro trend of convenience increasing in the direction of greater convenience. And so if someone has some dollars to spend, it tends to start with the category of the highest frequency where they also seek convenience.

Merchant or whether its restaurants or new categories.

The affordability of the program the quality of the service and our customer support we have to make improvements in all areas.

Doug just a few more points or Tony touched on and then I'll talk about the second question that you asked we obviously have a lot of signals in the business I mean, we watch this very closely and when I look at the underlying cohorts I mean, they're really strong if you look at the performance of not just Q3, but actually in the first nine months of the year cohorts continue to improve and I look at <unk>.

Tony Xu: And there's just more opportunities to do that given that someone consumes food 20 to 25 times a week. So we're not seeing any of the activity perhaps that, you know, I think some other categories and commerce are seeing. But I think, you know, it's really multifaceted. There's the product improvements. There's the fact that people, you know, have to spend on food and it tends to, therefore, lend itself towards the category where three commerce.

<unk>, it's a very stable our users in fact that our scalar growing double digits order frequency like we talked about earlier continues to grow.

Very pleased with the performance of the business and a lot of strength that youre seeing in the business.

D R.

<unk> point around.

GAAP profitability itself as we've mentioned before GAAP net income in and of itself is not an explicit targets that you're managing the business towards financial North Star has always been how do we maximize the long term free cash flow in the business and what you are truly seeing in the business. Today is every single line of business is becoming more efficient we are dramatic.

Tony Xu: It's the most resilient and the highest frequency. I mean, you can study this for the past 60 years, which obviously has a lot of macro dynamics as well. And you see that in only two out of the 60 years, I think, did the restaurant industry in the US, at least ever declined. And so I think it gives you a sense of the robustness of this category. And then I think, you know, the final point is, we're still a lot earlier than people think in the category than perhaps our scale suggests.

Improve the unit economics across the restaurants business, new verticals as well as our international business I do expect every business to be profitable overtime and as and when that happens. The overall business is going to get to be GAAP net income positive as well, but thats not an explicit target that are driving the business towards.

Yeah.

Thank you Bob.

Yeah.

Tony Xu: And that means that we, we're not where we need to be at in terms of where our selection of merchants are, whether it's restaurants or new categories. The affordability of the program, the quality of service and our customer support, we have to make improvements in all areas.

Yeah.

Our next question comes from the line of Brian Norwalk with Morgan Stanley. Please go ahead.

Great. Thanks for taking my questions guys.

Tony I wanted to go back to one of the comments you made earlier, where you talked about investing appropriately towards the stage of the product.

Ravi Inukonda: Just a few more points to, you know, what Tony touched on and I'll talk about the second question that we asked. We obviously have a lot of signal in the business. I mean, we watch this, you know, very closely. When I look at the underlying cohorts, I mean, they're really strong. If you look at the performance of not just Q3, but actually the first nine months of the year, cohorts continue to improve.

Can we talk a little bit about groceries through that lens. So give us. Some examples of areas of investment that you made this year based on the stage of the products that maybe you would say okay. One year later, we can do more of this in 24 I'm just trying to get an understanding for what are the areas you.

Ravi Inukonda: When I look at retention, it's very stable. Our users, in fact, at our scale are growing double digits order frequency like we talked about earlier continues to grow. So we very pleased with the performance of the business and, you know, a lot of strength that you're seeing in the business. Do your, you know, second point around, you know, gap profitability itself. As we mentioned before, you know, gap net income in and of itself is not an explicit target that you're managing the business towards.

Pressed on hardest and investment in grocery and what are the areas, where you think that there could be more investment to come to really drive that business faster for longer in 'twenty four and beyond.

Sure I mean, okay, we can take many flavors of it.

This question because this is probably something that I spend the majority of my time on which is.

Ravi Inukonda: Our financial not start always been, how do we maximize the long term free cash flow in the business. And what you're truly seeing in the business today is, you know, every single line of business is becoming more efficient. You dramatically improve the economics that cross the restaurant's business, new verticals as well as our international business. I do expect every business to be profitable over time. And as and when that happens, the overall business is going to get to be gap net income positive as well. But that's not an explicit target that we're driving the business towards.

Initiatives and product reviews.

Because I do think it's really hard to deploy the correct judgment.

Ravi Inukonda: Thank you both.

Certainly correctly every time depend.

Depending on the phase of the project and but take take a few instances right.

For instance, we really didnt.

One of the first choices, we made on grocery was what's the right product to build.

And.

I think there were.

Many external beliefs of perhaps what you have to build in order to create a sustainable grocery business, but we took the view of what is the actual problems left to be solved.

Brian Nowak: Our next question comes from a line of Brian Noah with Morgan Stanley. Please go ahead. Good. Great. Thanks for taking my questions, guys. Tony, I wanted to go back to one of the comments you made earlier where you talked about investing appropriately toward the stage of the product. So can we talk a little bit about grocery through that lens? So give us some examples of areas of investment that you made this year based on the stage of the product that maybe you now would say, okay, one year later we can do more of this in 24.

First and foremost coming from our customers and one of the things that we heard for example was that.

Brian Nowak: I'm just trying to get an understanding for what are the areas you pressed on hardest in investment in grocery, and what are the areas where you think that there could be more investment to come to really drive that business faster for longer in 24 and beyond. Thanks.

What's.

What's really frustrating about grocery delivery is that.

The items that either parish, the fastest or that we consume as consumers. The most frequently so think about your berries or your milk or your eggs are your cereals are your coffees.

It's really annoying in the middle of the week to have to go back into the store and somehow go and get it whereas for other types of shopping behavior, if I'm already out on the weekend anyways and I'm buying other things for the week, maybe it's less of a big deal and so the first product we built was actually.

To solve a smaller basket type of use case, which really introduced ourselves to consumers and helping address a problem. We heard and then I think.

Tony Xu: Sure. I mean, okay, we can take many flavors of this question because I mean, this is probably something that I spend the majority of my time on, which is initiative and product reviews. Because I do think it's really hard to apply the correct judgment, certainly correctly every time, depending on the phase of the project. But take a few instances, right? For instance, we really didn't, you know, one of the first choices we made on grocery was, well, what's the right product to build?

Sure.

It had a byproduct of introducing ourselves to grocers to because this was a use case that they hadn't been investing.

Much into and then I think it surprised everyone. How large that opportunity occurred. So that's like one version of this which is before we kind of just look at.

What everyone else is doing that is first and foremost start by building the correct product and I think building the correct product has a lot of.

Tony Xu: And, you know, I think there were, you know, many external beliefs of perhaps what you have to build in order to create a sustainable grocery business, but we took the view of, well, what is the actual problems left to be solved? Well, you know, first and foremost, coming from our customers, and one of the things that we heard, for example, was that, well, you know, what's really frustrating about grocery delivery is that, you know, the items that either perish the fastest or that we consume as consumers the most frequently, so think about your berries or your milk or your eggs or your cereals or your coffees.

Implications on did we use engineers and.

Business people and other functions.

Correctly, and therefore get the most out of the team's potential I think there is a version of that that that shows up I think number two another example would be.

While we.

We didn't really spend much on marketing.

When it came to building the grocery business now Ravi Echo some of the kind of reasons why because one we do have the largest audience of local commerce customers coming to our app shopping as well as just coming to the app, including those that don't shop.

Tony Xu: You know, it's really annoying in the middle of the week to have to go back into the store and somehow go and get it. Whereas, you know, for other types of, you know, shopping behavior, if I'm already out on the weekends anyway, then I'm buying other things for the week. Maybe it's less of a big deal. And so the first product we built was actually to solve a smaller basket top up use case, which really introduced ourselves to consumers and helping address the problem we heard.

And so we had a bit of a benefit there but at the same instance, we also didn't want to invest in marketing because the product wasn't good enough yet and so.

So I think those are two I guess examples I would call out where you.

Tony Xu: And then I think it had a byproduct of introducing ourselves to grocers too, because this was a use case that, you know, they hadn't been investing that much into. And then I think it surprised everyone, you know, how large that opportunity occurred. So that's like one version of this, which is, you know, before we kind of just look at, you know, what everyone else is doing that's first and foremost start by building the correct product.

You have to make the right call on how to make the most efficient use of your resources.

And first and foremost for us it starts with solving the right customer problem correctly and whenever we see something that's not being solved correctly and we think theres an opportunity to build something 10 times better we're going to go for it.

And then the question becomes well is there an efficient way to grow then we're going to think about that and if we have an advantage. There and then finally whats the path towards building a very large cash flow generating business that will maximize total profit dollars in the long run and I think that's kind of the sequencing of how we thought about things I think so far we've made good decisions.

Tony Xu: And I think building the correct product has a lot of, you know, implications on, you know, did we use engineers and business people and other functions, you know, correctly. And therefore, you know, you know, get the most out of, you know, the team's potential. I think, you know, there's a version of that that that shows up. I think number two, another example would be while we, we didn't really spend much on marketing.

<unk> in grocery and a lot of these bets I think youre seeing some the combination or the middle of a impact of the results in this quarter, but we've got a long ways to go and we have to keep making good decisions.

Great. Thanks, Tony.

Our next question comes from the line of Michael Morton with Moffett Nathan. Please go ahead.

Tony Xu: When it came to building the grocery business. Now, Robbie echoed some of the kind of reasons why because, well, one, we do have the largest audience of local commerce, you know, customers coming to our app, shopping, as well as just coming to the app, including that don't shop. And so we had a bit of a benefit there. But at the same instance, we also didn't want to invest in marketing because the product wasn't good enough.

Thank you.

Two questions if I can one start with for Tony and then the second for Ravi.

On the advertising business kind of following up to the prior question.

How do you feel about your product ability to serve some of the larger enterprises that goes for the <unk> kind of demand sophisticated solutions, but also now moving into the grocery business.

Tony Xu: And so I think those are two, I guess, examples I would call out where you have to make the right call on how to make the most efficient use of your resources, and first and foremost for us it starts with solving the rights customer problem correctly. And whenever we see something that's not being solved correctly, and we think there's an opportunity to build something 10 times better, we're going to go for it.

Our conversations with CPG.

There is a concern about incrementally in advertising for grocery retail marketplaces recently data networks, because the fact that theres not a lot of unit growth. There. So whoever can win increment Audi measurement kind of like wins the market for advertising. So curious how you think about your product.

Tony Xu: And then the question becomes well, is there an efficient way to grow? Then we're going to think about that. And if we have an advantage there, and then finally, you know, what's the path towards building a very large cash flow generating business that will maximize total, you know, profit dollars in the long run. And I think that's kind of the sequencing of how we thought about things. I think so far we've made good decisions in grocery and, you know, a lot of these bet I think you're seeing some big culmination or the middle of the impact of the results in this quarter. But we've got a long ways to go and we have to keep making good decisions. Great.

Fair and then just second for Ravi.

Really impressive levels of operating leverage.

Just curious if maybe some details of the drivers behind it like as a dash smart hitting some type of maturity natural attrition in the employee base.

If this is.

Kind of a level, we should think about going forward and how operating expenses.

Philosophy could maybe change there. Thank you so much.

So to your first question I think I really agree with the premise of the customer research that you did which is that incrementally obviously.

Michael Morton: Thanks, Tony. Our next question comes from a line of Michael Morton with Moffit, Nathanson. Please go ahead. Thank you. Two questions. If I can, one start with Fertone and then the second for Robbie on the advertising business, kind of falling up to the part question. How do you feel about your product's ability to search some of the larger? Enterprises that goes for the QSRs who kind of demand a located solutions, but also now moving into the grocery business in our conversations with DPG.

<unk> is a huge driver of return on AD spend and I think.

That's why at least my view and our company's view on advertising is the most important thing about building a highly incremental advertising business is to build it.

Michael Morton: There's a concern about incrementality in advertising for grocery retail marketplace, retail media networks because the fact that there's not a lot of unit growth there. So whoever can win the incrementality measurement kind of like wins the market for advertising. So curious to how you think about your product there. And then just second for Robbie really impressive levels of operating leverage just curious of maybe some details of the drivers behind it. I guess it's like Dashmart hitting some type of maturity natural like attrition in the employee base and like if this is kind of a level we should think about going forward and how operating expenses philosophy could maybe change there. Thank you so much. [inaudible] most robust marketplace and not to confuse the sequence or the order of operation there.

The biggest and most robust marketplace and not to confuse the sequence or the order of operations there.

And so when our grocery businesses.

Growing.

More than doubling year on year, I think thats, a good start, especially relative to other choices in the marketplace from an advertiser's perspective, but look I mean, there's a lot of work to be done I think we have a long ways to go in building out our advertising product. We're super excited about I think the growth we've seen or even.

More excited about I think the amount of demand that is coming into the ecosystem for a product like ours, where I think they recognized in addition to our growth and.

Especially at our scale.

They also see the opportunity across different categories.

And so theres a lot of excitement both from enterprise merchants, whether it's in the restaurant category or in the non restaurant categories as well as from advertisers and so we've got a lot of work to do.

But certainly pleased with where we are with the product thats, usually how we feel about all of our products but.

I think we've got a lot more to go certainly in advertising, it's been two and a half year effort I think it's already.

Amongst I think some of the most desired online advertising platforms, yet I think we have a very very long road ahead.

Mike on your second point on the efficiency and leverage that Youre seeing in the business I mean, you're right I mean.

Really pleased with the performance really proud of the team's execution here I think what Youre seeing is a combination of a couple of things. One I mean look in Q3 was a really strong quarter for us not just to grow the topline, but also across unit economics. Every single line of business has continued to outperform our expectations both on volume as well as unit economics, a lot of EBITDA.

Tony Xu: And so when our grocery businesses growing more than doubling year on year, I think that's a good start, especially relatives to other choices in the marketplace from an advertiser's percent. Collective. But look, I mean, there's a lot of work to be done. I think, you know, we have a long ways to go and building our outer advertising product. We're super excited about, I think, the growth we've seen, we're even more excited about.

<unk> that youre seeing in the business is being driven by that too.

To your point.

<unk> done a lot of things around operating expenses operating expenses as you can see have been relatively flat for the last four quarters in a row.

Tony Xu: I think the amount of demand that is coming into the ecosystem for product-wide cars, where I think they recognize, you know, in addition to our growth and, you know, especially at our scale. They also see, you know, the opportunity across different categories. And so there's a lot of excitement, both from enterprise merchants, whether it's in the restaurant category or in the non restaurant categories, as well as from advertisers. And so we got a lot of work to do.

It's expressed a lot of discipline around the cost structure in general while we are continuing to grow revenue north of 325% to 30% over the same timeframe.

There are also a couple of things that helped us in Q3, there was a onetime sales tax benefit that helped us in Q3 as well as.

Yes.

The continuity on leverage that youre seeing across the board.

I look ahead, our goal is to continue to drive further leverage in the business, whether it's improvement in unit economics or the fixed cost leverage that youre seeing in the business and you can see that in the strong Q4 guide that we've given as well.

Tony Xu: We're not certainly pleased with, you know, where we are with the product. That's usually how we feel about all our products. But I think we've got a lot more to go. Certainly an advertising. It's been at two and a half year effort. I think it's already a lot of work to do. A month, I think, through the most desired online advertising platforms. Yeah, I think we have a very, very long road ahead.

Yeah.

Our next question comes from the line of Michael Mcgovern with Bank of America. Please go ahead.

Hey, guys. Thanks for taking my question.

Just a couple on the cohort chart.

You look at some of these post COVID-19 cohorts it seems as though the slope in <unk>.

Tony Xu: Mike, on your second point on the efficiency and leverage that you're seeing in the business. I mean, you're right. I mean, really pleased with the performance, really proud of the team's execution here. I think what you're seeing is the combination of a couple of things. One, I mean, look, I mean, Q3 was a really strong quarter for us, you know, not just across the top line, but also across the economics. Every single line of business has continued to perform our expectations, both on volume as well as your economics.

Trajectory for marketplace G O V. It's a little bit lower than the steeper slope for pre COVID-19 cohorts, even after the Covid spike. So I'm curious what gives you confidence that you can.

Get the post COVID-19 cohorts to that same slope in growth and then also curious what kind of contribution you're seeing from non restaurant in the newer cohorts versus older cohorts do you see newer users ordering more frequently from non restaurant. Thank you.

Tony Xu: A lot of EBITDA upside that you're seeing in the business is being driven by that. To to your point, we've done a lot of things around operating expenses, you know, operating expenses. As you could see, I've been relatively flat for the last, you know, four quarters in a row. The team will express a lot of discipline around the cost structure in general, while we continue to grow revenue, you know, north of 25, 30% over the same time frame.

Yes, let me take both of those are sort of the cohort chart right.

The two big takeaways.

Net.

At least on the floor chart is one when I actually look at the annual cohorts going back seven years I mean every single cohort still continues to grow.

Tony Xu: That said, there are also a couple things that help doesn't Q3. There was a one time sales tax benefit that help doesn't Q3, as well as, you know, the continued levels that we're seeing across the board. But when I look ahead, our goal is to continue to drive further leverage in the business, whether it's improvement in unit economics or the fixed cost leverage that you're seeing in the business.

And the second one is if you actually look at the 2023 cohorts in fact, it's the second best cohort that we've ever had second only to the Gen <unk> cohort, which obviously had some impact from Covid, what youre seeing in the underlying cohort as we are continuing to improve the selection as we're making the quality of the product better as the service levels continue to increase we are seeing some.

Ravi Inukonda: And you can see that in the strong, you know, Q4 guide that we've given as well.

Across all the cohorts that would be operated.

When I look at the newer cohorts from an order frequency perspective in fact, the newer cohorts are starting out at a higher level than many of the order growth that they are starting out and do a second point around what is the contribution from both the restaurants as well as new verticals. The behavior that we've seen from user base as the number of users that use both restaurants as well as new vertical.

Michael Mcgovern: Our next question comes from a line of Michael McGovern with Bank of America. Please go ahead. Hey guys, thanks for taking my question.

Ravi Inukonda: Just a couple on the cohort chart. If you look at some of these post-COVID cohorts, it seems though the slope in trajectory for marketplace, GOV, a little bit lower than the steeper slope for pre-COVID cohorts even after the COVID spike. So I'm curious what gives you confidence that you can get the post-COVID cohorts to that same slope and growth. And then also curious what kind of contribution you're seeing from non-restron in the newer cohorts versus older cohorts DC newer users ordering more frequently from non-restron. Thank you.

That number continues to increase every single quarter the impact that's having on the business is thats lifting overall engagement of the cohorts up youre starting to see that in the order frequency for the entire board I want to be very clear, we're not trying to drive the order frequency of just restaurants for new vehicles. The way we think about it is how do we bring more users back.

Which is helping us drive overall users at a double digit rate how do we get them to use the product more which is whats being reflected in the overall order frequency going up in front of me the rate pleased with the progress and this is contributing to the strong growth that you've seen over the last couple of years.

Ravi Inukonda: Yeah, let me take both of those. I'll start with the cohort chart, right? Like the two big takeaways, you know, that, you know, at least on the core chart is one. But actually look at the annual cohorts going as back as, you know, seven years. I mean, every single cohort still continues to grow. And the second one is, it's actually look at the 2023 cohorts. In fact, it's the second best cohort that we've ever had.

Yeah.

Got it thank you.

Our next question comes from the line of Andrew <unk> with JMP Securities. Please go ahead.

Thanks, So much for taking my questions I wanted to go back to operating expenses, specifically sales and marketing. It continues to be very efficient understood you guys called out <unk> acquisition costs in the letter, but is there anything you can share on customer acquisition costs, just as door dash as awareness continues to be higher and then for my second question I wanted to ask about the <unk>.

Ravi Inukonda: Second only to the Jan 2020 cohort, which obviously had some impact from COVID. Which you've seen in the underlying cohorts is as we continue to improve the selection as we're making the quality of the product better as the service levels continue to increase. We're seeing strength across all the cohorts that we operated. When I look at the newer cohorts from an order frequency perspective, in fact, the newer cohorts are starting out at a higher level than many of the older cohorts are starting out.

Last Tuesday of grocery delivery costs.

Tony you've mentioned the customer cost out a couple of times in your past responses. What are the largest levers you have to pull to make grocery delivery cheaper for the consumer thanks. So much.

Ravi Inukonda: And your second point around, what is the contribution from both restaurants as well as new verticals the behavior that we've seen from user basis, the number of users that use both restaurants, as well as new verticals that number continues to increase every single quarter. The impact that's having on the business is that's lifting overall engagement of the cohorts up. You're starting to see that in the order frequency for the entire cohorts.

Andrew Let me take the first one on sales and marketing and Tony If you were to take the second one yes, you're right I mean, you've seen a ton of leverage on the sales and marketing in general one of the biggest areas, where we've driven a ton of Leverages dashboard.

We think about efficiency in the business it always starts with product.

We've done a ton on the logistics side over the last couple of years, we redesigned the dasher App, we are given the opportunity to both owned by time as well as on by effort.

Ravi Inukonda: Again, to be very clear, we're not trying to drive the order frequency of just restaurants or new verticals. The way we think about it is, how do we bring more users back, which is helping us drive overall users at a double digit rate. How do we get them to use the product more, which is what's being reflected in the overall order frequency going up. In fact, I mean, these were the progress and this is contributing to the strong growth that you've seen over the last few couple of years. Thank you.

The combination of both of those things what that does is it improves retention and goose order frequency on the industrial side, we're seeing retention on doctors go up Youre seeing engagement levels go up the effect that's having on the P&L is they're seeing leverage on both dosher b as well as industrial acquisition cost.

<unk> do you have specific point around consumer acquisition I mean, we operate the business to a payback period, we're seeing healthy unit economics, we are seeing the unit economics continue to grow as long as we are comfortable with the payback period. Our goal is to continue to drive new user adoption in fact auto what's driving the overall growth in <unk> is it continuing to see still at healthy levels of user acquisition.

Andrew Boone: Our next question comes from a line of Andrew Boone with JMP Securities. Please go ahead. Thanks very much for taking my questions.

Ravi Inukonda: I wanted to go back to operating expenses and specifically sales and marketing. It continues to be very efficient. Understood you guys pulled out dash acquisition costs in the letter. But is there anything you can share on customer acquisition costs just as door dash is awareness continues to be higher.

<unk>.

Hey, Andrew.

With respect to your second question about lowering the cost of grocery delivery I mean, I think there is there are quite a few dimensions I probably won't be able to share in much detail about all of the initiatives we're working on.

Ravi Inukonda: And then for my second question, I wanted to ask about the elasticity of grocery delivery costs. Tony, you've mentioned the customer costs that a couple times in your past responses. What are the largest levers you have to pull to make grocery delivery cheaper for the consumer? Thanks so much. Let me take the first one on sales and marketing and Tony, a few to take the second one. Yeah, you're right. I mean, you've seen a ton of leverage on the sales and marketing in general.

But it starts with obviously, how do you create the lowest possible cost structure for everybody involved.

If you can do that I think we can all agree that we all have been the choice of to what degree we actually want to lower them.

The cost of the program and obviously, we always want to continuously lower the costs of the program. So that we can drive greater and greater adoption and engagement in a way that still makes sense for the business, especially when it comes to maximizing total profit dollars in the long run.

Ravi Inukonda: You know, one of the biggest areas where we've driven a ton of leverage is dash. For us, whenever we think about efficiency in the business, it always starts with product. We've done a ton on the logistics side over the last couple years. We redesigned the dash or app. We've given dashes the opportunity to both own by time as well as you know on by effort. And the combination of, you know, both of those things what that does is it improves retention.

But I think there's other things too and so.

You should expect to see us continue to work on co creating interesting products that.

Haven't yet been built.

Ravi Inukonda: It improves order frequency on the dasher side. We're seeing retention on dashers go up. We're seeing engagement levels go up. The effect that's having on the piano is you're seeing leverage on both dash or pay as well as the dash or acquisition cost. Second, to your specific point around consumer acquisition. I mean, we operate the business to a payback period. We're seeing healthy unit economics. We're seeing the unit economics continue to grow.

Together with grocers.

And really just continue to solve all of the different challenges that they have and hopefully it won't just lower the cost of delivery for groceries on door dash, but also for grocers through their first party channels and their in store business with as well.

Ravi Inukonda: As long as we're comfortable with the payback period, our goal is to continue to drive new user adoption. In fact, part of what's driving the overall growth in MEU is a continuing to see still healthy levels of user acquisition.

There are no further questions at this time I'd like to thank our speakers for today's presentation and thank you all for joining US. This now concludes today's call you may now disconnect.

Tony Xu: Hey, and with respect to your second question about lowering the cost of grocery delivery, I mean, I think there's there quite a few dimensions. You know, I probably won't be able to share in much detail about all of the initiatives we're working on. But you know, it starts with obviously how do you create the lowest possible cost structure for everybody involved. If you can do that, I think we can all agree that, you know, we all have been the choice of, you know, to what degree we actually want to lower the cost of the program.

Goodbye.

Tony Xu: And obviously we always want to continuously lower the cost of the program so that we can drive greater and greater adoption and engagement in a way that still makes sense for the business, especially when it comes to maximizing total profit dollars in the long run. But I think there's other things too. And so, you know, you should expect to see us continue to work on co creating interesting products that haven't yet been built together with grocers and really just continue to solve all of the different challenges that they have. And hopefully it won't just lower the cost of delivery for, you know, grocers on DoorDash, but also for grocers through their first party channels and their in sort of business as well.

Operator: There are no further questions at this time. I'd like to thank our speakers for today's presentation and thank you all for joining us. This now concludes today's call.

Operator: You may now disconnect.

Operator: Good-bye.