Q1 2024 DoorDash Inc Earnings Call

Eric: Thank you for standing by. My name is Eric, and I will be your conference operator today. At this time, I would like to welcome everyone to the DoorDash Q1 2024 Earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone key. If you would like to withdraw your question, press star 1 again. Thank you. I would now like to turn the call over to Andy Hargreades. Please go ahead.

Thank you for standing by my name is Eric and that'll be a conference operator today.

Eric: At this time I would like to welcome everyone to the door Gaza Q1, 2024 earnings call.

Eric: All lines have been placed on mute to prevent any background noise.

Eric: After the Speakers' remarks, there will be a question and answer session.

Eric: I'd like to ask a question. During this time simply press star followed by the number one on your telephone keypad.

Eric: She would like to withdraw your question Press Star one again.

Speaker Change: I would now.

Speaker Change: I'd like to turn the call over to Andy Hargreaves. Please go ahead.

Andrew Rex Hargreaves: Thanks, Eric. Good afternoon, everyone, and thanks for joining us for our Q1 2024 earnings call. I'm very pleased to be joined today by co-founder, chairperson, and CEO Tony Xu and CFO Ravi Inukonda.

Andrew Rex Hargreaves: Thanks, Eric and good afternoon, everyone and thanks for joining us for our Q1 2024 earnings call I'm very pleased to be joined today by our co founder Chairman and CEO, Tony Schuh and CFO Ravi unit count that we will be making forward looking statements during today's call, including our expectations for our business financial position operating.

Andrew Rex Hargreaves: We'll be making forward-looking statements during today's call, including our expectations for our business, financial position, operating performance, our guidance, strategies, capital allocation approach, and the broader economic environment. Such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those described. Many of these uncertainties are described in our SEC filings, including our Forms 10-K and 10-Q. You should not rely on forward-looking statements as predictions of future events.

Andrew Rex Hargreaves: Since our guidance strategy capital allocation approach and the broader economic environment.

Andrew Rex Hargreaves: We're looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those described many of these uncertainties are described in our SEC filings, including our forms 10-K N. Thank you you should not rely on a forward looking statements as predictions of future events, we disclaim any obligation to update any forward looking statements except.

Andrew Rex Hargreaves: As required by law.

Andrew Rex Hargreaves: 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 the non-GAAP measures to the most directly comparable GAAP financial measures, can 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.

Andrew Rex Hargreaves: During this call we will discuss certain non-GAAP financial measures information regarding our non-GAAP financial measures, including a reconciliation of the non-GAAP measures. The most directly comparable GAAP financial measures may be found in our earnings release, which is available on our Investor Relations website.

Andrew Rex Hargreaves: non-GAAP measures should be considered in addition to our GAAP results and are not and can be a substitute for our GAAP results.

Andrew Rex Hargreaves: As a reminder, we're no longer providing full-year financial outlooks, and we disclaim any obligation to update our previous full-year financial outlooks. Finally, this call is being webcast on our investor relations website, and an audio replay will be available on our website shortly after the call ends. Eric, I'll pass it back to you, and we can take our first question.

Andrew Rex Hargreaves: As a reminder, we're no longer providing full year financial outlooks, and we disclaim any obligation to update our previous full year financial outlook.

Andrew Rex Hargreaves: Finally, this call is being audio webcast on our Investor Relations website.

Andrew Rex Hargreaves: A replay will be available on our website. Shortly after the call ends Eric I'll pass it back to you and we can take our first question.

Andrew Rex Hargreaves: Yeah.

Eric: Your first question comes from the line of Nikhil Devnani with Bernstein. Please go ahead.

Eric: Your first question comes from the line of.

Eric: Nikhil <unk> with Bernstein.

Eric: Please go ahead.

Nikhil Vijay Devnani: Hi there, thanks for taking the question. Tony, I wanted to ask about your logistics model versus some of the incumbents in the new verticals. As you build out bigger baskets within grocery and other categories of local commerce, it feels like you're competing more directly with the likes of Walmart and Amazon, which have some integrated models and significant fixed cost leverage and scale. So it seems that there's a chance the 3P model might always be at somewhat of a disadvantage on a cost-to-serve basis here, and consumers are left paying higher prices for it.

Nikhil: Hi, there. Thanks for taking the question Tony I wanted to ask about your logistics model versus some of the incumbents in the new verticals.

Nikhil: You build out a bigger baskets within grocery other categories local Congress it feels like you're competing more directly with the likes of Walmart and Amazon, which has some integrated models and significant fixed cost leverage at scale. So it seems that there's a chance to three P model might always be at a somewhat at a disadvantage on our cost to serve basis here and consumers are.

Nikhil Vijay Devnani: So we'd love to just get your perspective first, whether you agree with that or not, and what leverage you kind of have at your disposal to make the model more cost-effective over time. Or should we think about your opportunity set as just being a smaller segment of the market that's willing to pay more, perhaps for quicker deliveries or broader selection, you know, within the context of a category like groceries, for example?

Nikhil: Paying higher prices for it so I'd love to just get your perspective on first whether you agree with that or not and what levers you have at your disposal to make the model more cost effective over time or should we think about your opportunity set is just being a smaller segment of the market that's willing to pay up perhaps for quicker deliveries or broader selection within.

Nikhil: The context of a category like grocery for example.

Tony Xu: Yeah, hey, Nikhil, that's a good question. So, you know, I guess this is kind of how we've always thought about it. I mean, I think first and foremost we think about it from the perspective of the customer and how they're going to judge us, right? And if you think about that, while there are several factors, they're going to judge us based on what selection of retail offerings we give, certainly the cost of getting fast delivery, as well as the quality of that delivery, both in terms of the timeliness, the accuracy, and especially with regard to something like groceries, whether or not we got exactly all of the items that they had specifically ordered in the condition that they would.

Speaker Change: Yeah, that's a good question so.

Speaker Change: I guess this is kind of how we've always thought about it I mean, I think first and foremost we think about it from the perspective of the customer and how they're gonna judges right and if you think about that.

Speaker Change: While there are several factors theyre going to judge us based on what selection of retail offerings, we give them certainly the cost of getting them fast delivery as well as the quality of that delivery. Both in terms of the timeliness, the accuracy and especially with regards to something like grocery whether or not we got exactly all.

Speaker Change: The items that they had specifically ordered in the condition that they would expect.

Tony Xu: And so, if you think about DoorDash's journey or evolution in that process, We started by really introducing a new use case, both to consumers as well as to grocers alike, which was this top-up use case, right, where we solved for the middle-of-the-week run, where, you know, the items in your pantry that you consume the most often, or the items that perhaps may have perished the earliest, such as fruits or berries or milks or yogurts or coffees, things like this, we really started with that category, and that not only solved the consumer problem that wasn't being addressed in the market at the time, it was also an incremental occasion for retailers, and that's why we're seeing quite a lot of pull. You know, we announced a lot of additions to the platform in Q1, whether it was with Ahold, as well as, you know, more recently in Q2 with Wakefern, and, you know, we added several dozen, you know, retailers in the quarter, and so I think certainly we're seeing increasing pull from consumers and from retailers, and so on the selection front, I think we're making the mark. On the logistics question specifically, you know, I think a few things.

Speaker Change: And so if you think about door dashes journey, our evolution in that process.

Speaker Change: It started by really introducing a new use case, both to consumers as well as to.

Speaker Change: Groceries are like which was this top up use case, right, where we solved.

Speaker Change: For the middle of the week run where you know the items in your pantry that you consumed the most often or the items that perhaps may have perished. The earliest such as fruits are berries or milks are where yogurts or coffee is things like this.

Speaker Change: We really started with that category and that not only solve that consumer problem that wasn't being addressed in the market at the time. It was also an incremental occasion or retailers and that's why we're seeing quite a lot of Paul you know, we announced a lot of additions to the platform in Q1, whether it was with all hold.

Speaker Change: As well as you know more recently in Q2 with wake firm and we added several dozen.

Speaker Change: Our retailers in the quarter and so I think certainly we're seeing increasing pull from consumers and from our retailers and so on the selection front I think we're making a mark on the logistics question specifically.

Tony Xu: You know, one, we always thought that we had an advantage given just our dasher density and the network that we've built up, where the thesis would go, if you could build the largest network in the highest-frequency category in the category that has the most nodes for last-mile delivery, i.e. There are more restaurants than there are any other category of local retail, so you would have a cost advantage, and that's certainly something that we've seen.

Speaker Change: I think a few things one we always thought that we had an advantage given just our dash of density in the network that we've built up where the thesis would go if you can build the largest network.

Speaker Change: And the highest frequency category in the category that has the most nodes for last mile delivery I E. There are more restaurants than there are any other category of breach of local retail than you would have a cost advantage and that certainly is something that we've seen I mean in fact, I think the positive surprise.

Tony Xu: I mean, in fact, I think the positive surprise in our grocery business has been that even with smaller baskets and without, you know, a meaningful contribution from CPGI dollars, we're actually seeing positive unit economics in our new verticals business, and so I think that's certainly proven out.

Speaker Change: In our grocery business has been that even with smaller baskets and with and without.

Speaker Change: A meaningful contribution from CPG ad dollars.

Speaker Change: Seeing positive unit economics in our new verticals business and so I think that's certainly proven out now in terms of and certainly there is an advantage of the speed and flexibility in which we can make this offering to consumers, but to your point there is a tradeoff.

Tony Xu: Now, in terms of, and certainly there's an advantage of the speed and the flexibility in which we can make this offering to consumers, but to your point, there is a trade-off, you know, sometimes with cost. Now, we believe that we'll make quite a lot of progress in terms of equalizing, you know, what we can do versus what else is out there. But there's also this other dimension, right? Which is selection.

Tony Xu: So, on the one hand, you know, third-party is more expensive on a point-to-point basis versus first-party. But, on the other hand, it's faster and offers more selection. You can certainly get offerings from more stores, for example, than just one single store. And so I think it's going to come down to what consumers prefer. We are obviously going to work on a model in which we can increase the amount of selection that we offer, reduce the cost at which that selection is made available, and improve the quality of the process.

Speaker Change:

Speaker Change: Sometimes with cost now we believe that we will make quite a lot of progress in terms of equalizing, what we can do versus what else is out there, but there's also this other dimension right, which is the selection so.

Speaker Change: On the one hand third party yeah. It is.

Speaker Change: More expensive on a point to point basis versus first party, but then on the other hand, it's faster and offers more selection you can certainly get offerings for more stores for example than just one single store.

Speaker Change: And so I think it's going to come down to what consumers prefer we obviously are going to work on a model in which we can increase the amount of selection that we offer reduce the costs in which that selection is made available and improve the quality of the process and I think on.

Tony Xu: And I think on these dimensions, we've certainly done that. And I think that's why you see the results that we've outlined, where I think it's the third straight quarter now where grocery has seen north of triple digit growth year on year. And so certainly, I think we're seeing retention and usage and high engagement from consumers. We believe that we're making quite a lot of progress on our fulfillment quality, and we're also making progress on the cost to serve. All things are pointing in the right direction, so we're pretty excited about where things are headed.

Speaker Change: These dimensions, we've certainly done that and I think that that's why you see the results that we've outlined where you know I think its third straight quarter in our grocery has seen north of triple digits growth year on year, and so certainly I think we're seeing that our retention and usage and high engagement from consumers, we believe that we're making.

Speaker Change: Quite a lot of progress on our fulfillment quality and we're also making progress on the cost to serve so all things are pointing in the right direction.

Speaker Change: So we're pretty excited about where things are headed.

Speaker Change: Thanks, Tony.

Eric: Your next question comes from the line of Mark Mahaney with Evercore ISI. Please go ahead.

Speaker Change: Your next question comes from the line of Mark Mahaney with Evercore ISI. Please go ahead.

Mark Stephen F. Mahaney: Thanks. If I could throw in two questions, please? First on ad revenue, so it looks like you're a little over, I'd say over 100 million run rate, just looking at some of your disclosures here. Any color on how that's progressing? Are there any areas of strength for you? Things you want to do, verticals you want to fill out? Just talk about the traction you're seeing so far, and then just a question on whether we are close to peak losses when it comes to other verticals and international markets. Thank you very much.

Mark Stephen F. Mahaney: Thanks, if I could throw in two questions. Please first on the AD revenue. So it looks like you're a little over a nicely over $100 million run rate just looking at some of your disclosures in here any color on how thats progressing are there any areas of strength for you things you want to.

Mark Stephen F. Mahaney: Verticals do you want to fill out just just talk about the traction you're seeing so far and then just a question on the are we close to peak losses when it comes to other verticals and international markets. Thank you very much.

Tony Xu: Sure, I can start on the advertising question. Ravi, maybe you can take the question on investment.

Speaker Change: Sure I can start on the AD question Robin maybe you can take the question on investment capacity, so mark on as I I don't know, how maybe you're making the estimates, but our our our ads business is substantially larger than I think.

Tony Xu: So, Mark, on ads, I don't know how you're making the estimates, but our ads business is substantially larger than I think what you were quoting in the question. But I think the broader point about ads is that it's going really well. I think that it started by certainly serving the restaurants category, and we've seen extreme adoption from all cohorts, whether it's small businesses to large enterprises. We're now working on building that product, both in terms of just more self-serve capabilities, as well as adding more reporting capabilities, so that everyone can see exactly what's going on with their dollar spend.

Speaker Change: What you are quoting and in India.

Robin: And the question, but but I think the broader points on ads is that it's going really well you know I think that.

Robin: It started by certainly serving the restaurants category and we've seen I mean extreme adoption from all cohorts, whether it's small businesses to large enterprises.

Robin: We're now working on building.

Robin: That product both in terms of just more self serve capabilities as well as serving more reporting capabilities. So that everyone can see exactly what's going on with their dollar spend.

Tony Xu: I think what's been encouraging is that we are offering leading and best-in-class return on ad spend while also seeing good engagement from the consumer. We're also turning our attention to the CPG ad side. Obviously, that's something that came after. Our advertising effort is about, you know, about two and a half years old, something like that. The first year and a half was really, you know, setting ourselves up for the pull from the market, which probably not surprisingly came from the restaurant side. But especially as our grocery and retail sectors have been growing in the marketplace, we're seeing increasing pull from CPG advertising.

Robin: I think what's been encouraging is that we are offering leading and best in class return on AD spend while also seen good engagement on the consumer front.

Robin: We're also turning our attention to the CPG outside obviously, that's something that came after our ads effort is about you know about two and a half years old something like that the first year and a half was really.

Robin: Setting ourselves up for the the pull from the market, which probably not surprisingly came from the restaurant side, but especially as our.

Robin: Grocery and.

Robin: Retail.

Robin: Sectors have been growing on the marketplace, we're seeing increasing pull up from CPG advertisers and so we do work with all of the large CPG advertisers. We're now just building out the products to serve them to meet their demand.

Ravi Inukonda: Yeah, Mark, I'll take the second one, but just try to understand what Tony talked about in the first one, right? We've not disclosed the ad revenue, but it is growing. It's growing fast. It's contributing to both revenue as well as EBITDA. Our goal has always been, how do we think about merchant ROAS as well as consumer conversion? And we believe we are best in class for both of those.

Speaker Change: Yeah, Mark I'll take the second one, but just trying to or Tony you talked about on the first one that we have not disclosed the AD revenue, but it is growing is growing fast it's contributing to both revenue as well as EBITDA that youre seeing in the business. Our goal has always been how do we think about more general ads as well as consumer conversion and we believe we are best in class for both of those.

Ravi Inukonda: Those are the constraints we're using to measure the quality of our ad business. Mark, as it comes to your second question around the quantum of investment, whether it's new verticals or a national business... When we operate and manage the business, we are not thinking about the quantum of dollars.

Speaker Change: Those are the constraints, we are using to measure the quality of our rack business.

Speaker Change: Mark as it comes to your second question around you know quantum of your investment.

Speaker Change: Whether it's new verticals, where our international business when we operate and manage the business we are not thinking about quantum of dollars.

Ravi Inukonda: Our focus has always been, are we growing order frequency, are we growing retention, are we growing unit economics across any investment that we make, whether it's a restaurant business or grocery or, you know, international business. Just to give you a sense of performance for our new vertical business, I mean, grocery. Tony touched on this earlier, that business is growing at 100% year-on-year with the fastest growing, and we're gaining share. Our focus has been to continue to drive more selection, improve the quality, as well as make the product more affordable.

Speaker Change: Our focus has always been a regrowing order frequency are we growing retention are we growing unit economics across any investment that we make whether it's a restaurant business our grocery our international business just to give you a sense of performance for our new verticals business I mean grocery Tony touched on this earlier that business is growing at a 100% year on year.

Speaker Change: With the fastest growing regaining share our focus has been to continue to drive more selection improve the quality as well as make the product more affordable when I look at the unit economics last call I made the comment that the unit economics have increased step function change compared to last year. We have continued to improve the unit economics on that point when I look.

Ravi Inukonda: When I looked at the unit economics last call, I made the comment that the unit economics had an increased step function change compared to last year. We've continued to improve the unit economics from that point. When I look at the third party component of our new verticals portfolio, that business has been unit economic positive for several quarters. You have a business that's growing very fast, and the unit economics are continuing to improve.

Speaker Change: The third party component of our new verticals portfolio that business has been unit economic positive for several quarters.

Speaker Change: Do you have a business that is growing very fast and the unit economics are continuing do we like what we're seeing and we're continuing to invest behind that strength.

Ravi Inukonda: We like what we're seeing, and we're continuing to invest in, very similar dynamics in international business where, if I look at the growth rate for our business compared to peers, we're growing substantially faster. In some cases, we're growing five to six times faster, which is causing us to gain share in the majority of the markets that we operate in. Very similarly, on unit economics, very good improvement year on year, where unit economics for the international business as a whole has been positive for a few quarters now.

Speaker Change: Very similar dynamics on the international business, where if I look at the growth rate for our business compared to peers and are growing substantially faster in some cases, we're growing 5% to six times faster, which is causing us to gain share in majority of the markets that we operate very similarly on the unit economics very good improvement year on year, where the unit economics for the international.

Speaker Change: <unk> business as a whole has been positive for a few quarters now at the same time the restaurant portion of our international business. There are several countries, which are contribution margin profitable. So you put that together both the investment areas are growing nicely. They are improving in terms of unit economics, we like what we're seeing in both of those businesses, that's causing us.

Ravi Inukonda: At the same time, the restaurant portion of our international business, there are several countries which are contribution margin profit. So you put that together, right, like both the investment areas are growing nicely, they're improving in terms of unit economics, we like what we're seeing in both of those businesses, and that's causing us to continue to invest. And I do expect the growth, as well as unit economic improvement, to continue through the rest of the year.

Speaker Change: We continue to invest and I do expect the growth as well as unit economic improvement to continue through the rest of the year.

Eric: Thank you, Ravi. Thank you, Tony.

Speaker Change: Thank you Ravi Thank you Tony.

Eric: Your next question comes from the line of Michael Morton with Moffitt & Nathanson.

Speaker Change: Your next question comes from the line of Michael Martin with Moffett Nathanson. Please.

Michael Martin: Please go ahead.

Michael Morton: Hey, thanks for the question. First one, maybe for Tony, just a follow up on Nikhil.

Michael Martin: Alright. Thanks for the question first one maybe for Tony just to follow up on the skills and then the second question for Ravi Tony.

Tony Xu: Tony, just to follow up on Nikhil's and then the second question for Ravi, Tony, you've spoken a lot about the importance of selection and improving selection in the grocery business, and you've added several new grocers recently. We'd love to know if there are any restricting factors in bringing all the nation's grocers onto the platform. And then What's the timeframe for having your selection at parity with the largest competitors?

Michael Martin: Tony you've spoken a lot about the importance of selection and improving selection in the grocery business and you've added several new grocers recently.

Ravi: We'd love to know if theres any restricting factors.

Ravi: All of the nation's grocers onto the platform and then whats the timeframe for having your selection at parity with the largest competitors.

Ravi Inukonda: And then for Ravi, we get a lot of investor inquiries looking into better understanding where the incremental investment dollars are going, especially as DashPass for restaurants has hit the scale it has. Is there any way that you could kind of bucket for us to help us think about the different segments of investments within restaurant, new verticals, and international and whether you still feel the same level of confidence about the inflection in the second half of 24? Thanks. Sure, I mean, I can take the first one.

Speaker Change: And then for Ravi.

Ravi: We get a lot of investor inquiries looking into better understanding where the incremental investment dollars are going, especially with like SaaS Paas for restaurant has hit the scale of that.

Ravi: Is there any way that you could kind of bucket for us or help us think about the different segments of investments within restaurants, new verticals in international and if you still feel the same level of confidence about the inflection in the second half 'twenty four.

Ravi: Yeah.

Tony Xu: I mean, I think, Michael, I guess, as an add-on, or maybe in part a rep, a repeated message from the first question, we're seeing increasing, I guess, inbound interest in the retail segment. That's true in grocery. That's also true in other retail. You know, we added, for example, Lowe's, which is our first retailer in the home improvement category. You know, we're now quite active in terms of what we offer to consumers in the health and beauty category, the apparel category, and the electronics category.

Speaker Change: Sure I mean, I can take the first one I mean, I think Michael I guess as an add on or maybe in part a are a rep repeated message from from the first question.

Ravi: We're seeing increasing I guess inbound interest on the retail segment. That's true in grocery that's also true in other retail SEC.

Ravi: We added for example, Lowe's, which is our first retailer in the home improvement category.

Ravi: We're now quite active in terms of what we offer to consumers in the health and beauty category. The apparel category. The electronics category. So I think this goes much beyond grocery I guess would be the way I think about this I mean I think the stop just at grocery would be certainly not what our customers would.

Tony Xu: So I think, you know, this goes much beyond grocery shopping. I guess that's the way I think about this. I mean, I think to stop just at grocery would certainly not be what our customers would expect or what they would demand. And it's also not what retailers want either. And so, I think increasingly, retailers and consumers alike are seeing DoorDash as a one-stop shop for buying everything inside the city. So we're actually seeing the opposite of resistance in terms of joining the platform. I think the question is just like, you know, how do we prioritize the roadmap? How do we make sure that the sequencing is right so that we can get all of these things to work?

Ravi: Factor or what they would demand.

Ravi: And it's also not what retailers want either and so I think increasingly retailers and consumers alike are seeing door dash is the one stop shop for buying everything inside the city.

Ravi: So we're actually seeing the opposite of of resistance in terms of joining the platform. I think the question is just like how do we prioritize the roadmap how do we make sure that the sequencing is right. So that we can get all of these things to work because a lot of times, how we work with these retailers, it's not just adding them to the marketplace, which obviously serves one.

Ravi Inukonda: Because a lot of times, when we work with these retailers, it's not just adding them to the marketplace, which obviously serves one job of bringing them incremental demand, but we also work with them by helping them with their own platforms, right? Like their own e-commerce capabilities and selling first party to their own consumers in an increasingly digital way. And there are a lot of products there, too, which we integrate. And so there's a lot of work in both first party and third party. It's more a matter of sequencing than it is anything else. Yeah, Michael, I'll take it.

Ravi: Job of bringing them incremental demand, but we also work with them by helping them with their own platforms right like their own e-commerce capabilities and selling first party to their own consumers in an increasingly digital way and Theres a lot of products, there too and which we integrate and so there's a lot of work in both first party and third party.

Ravi: It's more a matter of sequencing them than it is anything.

Ravi Inukonda: Yeah, Mike, I'll take the second one, right? Or, maybe I'll broaden out the question a little bit. Look, I mean, I feel really good about the progress we've made in the business, not just in Q1, but the last several quarters. The business is growing quite nicely across, you know, all major lines of business, whether it's restaurant, grocery, new verticals, or international. And like I said before, in Mark's, you know, question, we're seeing improvement in unit economics across. I do expect the second half of EBITDA to be higher than the first. What's driving that is the same thing that we saw in 23 as well as 22.

Speaker Change: Yeah, Mike I'll take the second one and maybe I'll broaden the question a little bit look I mean, I feel really good about the progress we've made in the business or just in Q1, but for the last several quarters.

Mike: The business is growing quite nicely across all major lines of business, whether it's restaurant grocery in your verticals are international and like I said before.

Speaker Change: Mark's question, we're seeing improvement in unit economics across the board.

Ravi: I do expect the second half EBITDA to be higher than the first half what's driving that is the same thing that we saw in 2003 as one of 22.

Eric: I expect the volume to be higher in the second half across all lines of business. Unit Economics is continuing to progress quite nicely. I do expect further improvement in Unit Economics. The investments we are making in each one will drive both scale as well as leverage in the second half. The scale plus the leverage, that's going to lead to increasing EBITDA in the second half compared to the first half. So overall, when I look at Q1 as well as the Q2 guide, I'm very pleased with the performance, and I expect the full year to be pretty strong as well.

Ravi: The volume to be higher in the second half across all lines of business.

Ravi: Unit economics are continuing to progress quite nicely I do expect further improvement in unit economics, the investments, we're making in each one that will drive broad scale as well as leverage in the second half.

Ravi: The scale less deleverage, that's going to lead to increasing EBITDA in the second half compared to the first half. So overall when I look at Q1 as well as the Q2 guide I'm very pleased with the performance and I expect the full year to be pretty strong as well.

Speaker Change: Thank you so much.

Eric: Your next question comes from the line of James Lee with Mizzou Hope. Please go ahead.

Speaker Change: The next question comes from the line of James Lee.

James Lee: With Mizuho.

James Lee: Great. Thanks for taking my questions.

James Lee: Please go ahead.

James Lee: I was wondering, my question is really relating to regulations. Obviously, you guys saw a little bit of impact in Seattle and also in New York. And how should we think about maybe other cities potentially moving to a similar wage policy? And also, how should we think about the EBITDA impact? You've mentioned a 1% impact on orders, and I just wondered what the impact on EBITDA would be.

James Lee: Great. Thanks for taking my questions I was wondering.

James Lee: My questions.

James Lee: Leaning to regulations, obviously, you guys saw a little bit impact in Seattle and also in New York and how should we think about maybe other cities potentially moving towards similar wage policy and OS. So how should we think about the EBITDA impact you've mentioned, 1% impact on the orders and just wondering what is the impact on EBITDA.

James Lee: Thanks.

Tony Xu: Sure, maybe I can take the first part. And then, Ravi, you can take the part around the financial impact. I mean, I think, you know, it's pretty clear in both Seattle and New York City, as maybe you have read, James, in our, in our press release that these regulations clearly are having the opposite impact of what they intend to do. Right? I think they certainly purport to help driver earnings, but instead, what's happening is it's making the service a lot less accessible and a lot less affordable.

Speaker Change: Sure maybe I can take the first part.

Speaker Change: And then Brian you can take the part of our around the financial impact I mean, I think it's pretty clear in both Seattle and New York City as maybe you have read James and are in our press release that I mean.

Brian: <unk> clearly are having the opposite impact of what they intend to do right I think they certainly report to help drive earnings, but instead of what's happening is it's making the service a lot less accessible and a lot less affordable rates, increasing costs, which makes it such that consumers have to pay more.

Tony Xu: It's increasing costs, which makes it such that consumers have to pay more. Merchants are making less as a result, and drivers are getting fewer work opportunities. I mean, that's what you see in both Seattle and New York. I mean, to the extent that even, I think, dashers, merchants, and consumers in Seattle are lobbying their lawmakers and regulators and elected officials to overturn the regulations. So, you know, I think that's the unfortunate part of what's actually happening, which is that it's literally having the opposite impact.

Brian: Merchants are making less as a result and drivers are getting fewer work opportunities I mean, that's what you see in both Seattle and New York, I mean to the effect, where even I think dashes merchants and consumers in Seattle are lobbying their lawmakers and regulators and elected officials to overturn the regulation.

Brian: So I think that's the unfortunate part of what's actually happening, which is it's literally having the opposite impact although there's probably could've been predicted as you know I think we've been telling lawmakers and regulators alike, but I think to the broad question that you're asking you know this is kind of what we've been saying since.

Tony Xu: Although this probably could have been predicted as, you know, I think we've been telling lawmakers and regulators alike. But I think, you know, to the broad question that you're asking, this is kind of what we've been saying since, I guess, going public. And honestly, what we predicted even 10 years ago when we started the company is that most governments and lawmakers want to be productive participants in working with businesses to provide a service that, you know, deserves to exist in cities.

Brian: I guess going public and honestly, what we predicted even 10 years ago. When we started the company that most governments and lawmakers wanna be productive participants in working with businesses to provide a service that.

Brian: Deserves to existing cities I mean, why wouldn't you think about the billions of dollars or tens of billions of dollars that you're adding to the local economic GDP.

Tony Xu: I mean, why wouldn't you? Think about the billions of dollars or tens of billions of dollars that you're adding to the local economic GDP or the fact that you're offering a service that consumers love and a place where, you know, anyone can really earn extra income on their own time. I mean, who wouldn't want that?

Brian: Or the fact that you're offering a service that consumers love and a place for <unk>.

Brian: Anyone can really earn extra income on their own time, I mean, who wouldn't want that and so I think most governments.

Tony Xu: And so I think most governments think like that, and that's true across the world, not just here in the US. But there are a handful of cities where, you know, you listed a couple of them where they're antagonists, you know, to this perspective. And in some ways, they would prefer the opposite of creating positive GDP inside their cities. But I think that's still limited to the handful of cities on the one hand that we've kind of forecasted both, you know, 10 years ago when we started the company, as well as what we've been saying ever since going public. Yeah, James is in the second one.

Brian: Like that and that that is true across the world not just here in the U S. But there are a handful of cities, where you listed a couple of them where theyre antagonist to this perspective.

Brian: In some ways they would prefer the opposite of creating positive GDP inside their cities, but I think that is still limited to a handful of cities I'm on one hand that we've kind of forecasted both 10 years ago. When we started the company as well as what.

Brian: What we've been saying ever since going public.

Ravi Inukonda: Yeah, James, on the second point, right? So we're not disclosing the exact impact from both New York and Seattle in Q1. That said, we did absorb a meaningful amount of cost in the quarter. Look, I mean, our approach to regulatory markets has not changed. First and foremost, our priority is to ensure that we're making the business more efficient, which we did in Q1. We did pass on some fees to consumers.

Speaker Change: Yeah, just on the second point I'd say, we're not disclosing the exact EBITDA impact from both New York and Seattle in Q1.

Speaker Change: That said, we did absorb a meaningful amount of cost in the quarter.

Speaker Change: We got them in our approach to regulatory markets has not changed first and foremost our priority is to ensure that we're making the business more efficient, which we did in Q1, we did pass on some fees to consumers.

Ravi Inukonda: I do expect that every market that we operate in will have sustainable unit economics over time. I do expect the cost that we're taking in Q1 to go down over the course of the rest of the year. It's not going to be a step function change. It will be gradual over time. But we expect both markets to be sustainable from a unit economic perspective going forward.

Speaker Change: Expect that every market that we operate in overtime will have sustainable unit economics.

Speaker Change: I do expect us to reduce the cost that we're taking in Q1 could go down over the course of the rest of the year.

Speaker Change: It's not going to be a step function change and it'll be gradual overtime, but do expect both markets to be sustainable from a unit economic perspective going forward.

Speaker Change: Great. Thanks.

Eric: Your next question comes from the line of Brian Nowak with Morgan Stanley. Please go ahead. Great.

Speaker Change: Your next question comes from the line of Brian Nowak with Morgan Stanley. Please go ahead.

Brian Thomas Nowak: Thanks, guys. Let me go back to that last comment you just made about every market they're in; you're looking to have sustainable unit economics. Can you help us understand a little bit more on the international side? You have all these countries that you're investing in on the international side. I know a lot of times scale is important to driving durable profitability and food delivery. Sometimes, competitive dynamics are an advantage. Just walk us through, how should we think about the different countries and how you're managing the international portfolio just to make sure that all the markets that you're in can actually get to profitability over time?

Speaker Change: Great.

Brian Thomas Nowak: Thanks, guys.

Brian Thomas Nowak: Maybe let me let me go back to that last comment you just made about.

Brian Thomas Nowak: Every market there and Youre looking to have a sustainable unit economics can you help us understand a little bit more on the international side. You have you have all of these countries that you're investing in and in the international side I know a lot of time scale is important to driving durable profitability and food delivery, sometimes competitive dynamics.

Speaker Change: Our advantage just walk us through like how should we think about sort of the different countries and how you're managing the international portfolio just to make sure that all of the markets that you're in can actually get to profitability over time.

Speaker Change: Okay.

Tony Xu: Yeah, hey, Brian, I can, I can start, and, you know, feel free to call Ravi to chime in. We're, I mean, we're very pleased with our international portfolio. I mean, now it's in about 29 countries outside of the U.S. So to your point, it's certainly an expanding portfolio, which makes it more complex to manage. But at the same time, you know, the business is a minimum efficient scale business where, in each, you know, zip code or collection of zip codes or locale, if you can achieve minimum efficient scale, every dollar or every order that comes after that point, you know, kind of becomes dollars that you can use to, you know, eat up all the investments that you've made in the market.

Speaker Change: Yeah, Hey, Brian I can.

Speaker Change: I can start and feel free Ravi to chime in.

Speaker Change: Well I mean, we're very pleased with our international portfolio I mean now it's.

Speaker Change: About 29 countries outside of the U S. So to your point, it's certainly an expanding portfolio, which makes it more complex to manage but at the same time. The business is at a minimum efficient scale business. We're in in each ZIP code or collection of ZIP codes are a locale. If you can achieve minimum Fisher.

Speaker Change: <unk> scale every dollar or every every order that comes after the that point kind of becomes.

Speaker Change: Dollar that you can use to eat up all the investments that you've made in the market. So we feel pretty good about where things are heading I mean, we are continuing to expand I mean, I think that's really the story of international right now in the sense that we're not even in the geographies that we are in in the 100% or even close to a 100% of the population and so we have a long ways to go.

Tony Xu: So we feel pretty good about where things are heading. I mean, we are continuing to expand. I mean, I think that's really the story of international right now in the sense that we're not even in the geographies that we are in, with 100% or even close to 100% of the populations. And so we have a long ways to go in terms of getting to the cities that we want to reach.

Speaker Change: In terms of getting to the cities that we want to reach we certainly have a long ways to go and adding merchants selection and restaurants outside of restaurants.

Tony Xu: We certainly have a long way to go in adding merchant selection in restaurants and outside of restaurants. We have a lot of work to do to bring the product portfolio that we've kind of built over the years equally or evenly across, you know, every country. But we like what we see, right?

Speaker Change: We have a lot of work to do to bring the product portfolio that we've kind of built over the years and equally or evenly across every country, but we like what we see right I mean like you said.

Tony Xu: I mean, like, if you think back to the investment thesis we had when we teamed up with Volt, for example, which certainly added very quickly to our international portfolio, it was really just two things, right? One was, if we were to team up with the product and the company that had built, you know, the leading product when it came to retention and order frequency, and number two, we could find the best operating team to be singularly focused on running the international business, that would be the most capital efficient way to grow outside of the US.

Speaker Change: Think back to the investment thesis, we had when we teamed up with volt for example.

Speaker Change: Which certainly added very quickly our international portfolio. It was really just two things right one was.

Speaker Change: If we were to team up with the product.

Speaker Change: And the company that had built the leading product when it came to retention order frequency and.

Speaker Change: And number two that we can find the best operating team to be singularly focused on running the international business that that would be the most capital efficient way to grow outside of the U S and certainly in both of those dimensions have been true I mean, I think on the business side I think Rob you may have mentioned this but we're growing many times faster than our peer.

Tony Xu: And, you know, certainly both of those dimensions have been true. I mean, on the business side, I think Ravi may have mentioned this, but we're growing many times faster than our peers, and that's been sustained over the last, you know, two to three years. And that continues to be the case.

Speaker Change: And that's been sustained over the last two to three years and that continues to be the case and then on the second point around that the management team Micky and the team have done a phenomenal job of it.

Tony Xu: And then on the second point around, you know, the management team. Mickey and the team have done a phenomenal job of running, obviously, the Volt portfolio, but then also adding countries in the DoorDash portfolio outside of the US. And so they've done a really good job, you know, across all of those dimensions, which frees up management bandwidth to focus on, obviously, the core US restaurants business, but then also adding other legs of growth, whether it's the platform business, the new verticals business, the ads business, and obviously other initiatives we're investing in for the future.

Speaker Change: But running obviously the volt portfolio, but then also adding on countries and the door ash portfolio outside of the U S and so they've done a really good job across all of those dimensions, which frees up management bandwidth to focus on obviously the core U S restaurants business, but then also adding other legs of growth whether it's the platform business the new verticals business.

Speaker Change: The ads business and obviously other initiatives, we're investing in for the future. So I think all of that is teaming up really nicely. You've also had this now.

Tony Xu: So I think all of that is tying up really nicely. You've also had this nice cross-team learning dynamic where, you know, we're certainly introducing things to the Volt team and those markets for the first time, which is adding both top and bottom line impact and, conversely, you know, the other direction. So I think when I look at, you know, how things are going internationally, they're going pretty well. Yeah, look, I mean, Brian, I'll just add a couple of points to, you know...

Speaker Change: Nice cross team learning dynamic, where you know, we're certainly introducing things to the volt team and those markets for the first time, which is adding both top and bottom line impact and Conversely, the other direction. So I think when I look at you know how things are going internationally, they're going pretty well.

Ravi Inukonda: Yeah, look, Brian, I'll just add a couple of points to, you know, what Tony talked about, right? Like, what we're managing the business towards, each and every individual market, retention, you know, order frequency, and unit expense. When I look at the dashboard where we look at this by city, we've made a major improvement across all three metrics. We've seen material progress on all three metrics, you know, over the course of the last couple of years. And the proof is in the pudding, right?

Speaker Change: Yeah look I mean, Brian I'll, just add a couple of points to what Tony talked about.

Speaker Change: Good of managing the business towards each and every individual market is retention and order frequency and unit economics.

Ravi Inukonda: Like I talked about the fact that there are several countries within the world portfolio as well as our international portfolio, but the core restaurant business is actually contribution margin, you know, profit. And the unit economics across the international portfolio have actually been profitable for the last several quarters in a row. As we continue to add more selection, as we continue to make the product more affordable, we are starting to see that response, right?

Speaker Change: Look at their dashboard, where we look at this by city, we've done a major improvement across all the metrics we've seen a material progress on all three metrics. The course of the last couple of years and the proof is in the pudding right like I talked about the fact that there are several countries within the word portfolio as well as our initial portfolio for the quarter restaurant business is actually contribution margin.

Speaker Change: And the unit economics across the international portfolio is actually profitable for the last several quarters in a row as we continue to add more selection as we continue to make the product more affordable.

Speaker Change: Starting to see the response rate like <unk> are growing at a double digit rate order frequency continues to be at an all time high. This is what gives us confidence that the business is doing really well as well as we are gaining share compared to peers.

Ravi Inukonda: Like MAUs are growing at a double-digit rate, order frequency continues to be at an all-time high. This is what gives us confidence that the business is doing really well, as well as that we are gaining share compared to

Speaker Change: Great. Thank you both.

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

Speaker Change: Your next question comes from the line of.

Speaker Change: Eric Sheridan with Goldman Sachs.

Eric James Sheridan: Please go ahead.

Eric James Sheridan: Thank you so much. Maybe one big picture one, if I can. When you think about the skew of an incremental investment dollar in the business, how do you measure where the better dollar might be spent between either end demand generation and driving further GOV growth and penetration of new verticals compared to a dollar investment in platform innovation, product innovation, and how that maybe sets the platform up over the medium to long term? Would love to get some broader thoughts on the evolution of that skew and relative ROI. Thanks so much.

Eric James Sheridan: Thank you so much maybe one big picture one if I can when you think about the skew of an incremental investment dollar in the business. How do you measure where the better dollar might be spent between either and demand generation and driving further.

Eric James Sheridan: Growth and penetration of new verticals compared to one dollar investments in platform innovation product innovation and how that maybe set the platform up over the medium to long term would love to get some broader thoughts on the evolution of that SKU and relative ROI. Thanks, so much.

Tony Xu: Sure, um, Eric, I mean, I can maybe start. I guess, in some ways, it hasn't changed in the sense that it almost always starts with what new products we are going to build to solve problems for customers better, right? The difference is that the surface area on which we apply that thinking has grown pretty tremendously. Obviously, four years ago or four and a half years ago, it was really applied to one kind of line of thinking, the U.S. restaurant business, which was large, but it was still just more of a singular business unit.

Speaker Change: Sure Eric I mean, I can maybe start of it.

Speaker Change: I guess in some ways it it hasn't changed in the sense that it almost always starts with <unk>.

Speaker Change: What new products are we going to build to solve problems for our customers better rate. The the difference is that the surface area in which we apply that thinking has grown pretty tremendously obviously four years ago or five years, four and a half years ago. It was really applied towards one kind of line of thinking the U S restaurants.

Speaker Change: Which was upsized, but but it was still just.

Speaker Change: More of a singular business unit, but then when I think about kind of the legs of the stool. Today, you obviously have the U S restaurants business, which has been several fold bigger, but then you kind of have like.

Tony Xu: But then when I think about the legs of the stool today, you obviously have the U.S. restaurants business, which has been several fold bigger, but then you kind of have three more that we've added that are now at scale. You have the platform business, the new verticals business, the international business, and then you kind of have a small thing that's just getting started. It's like two and a half years old, which is the advertising business.

Speaker Change: Three more that we've added that are now at scale you have the platform business, the new verticals business. The international business and then you kind of have a small thing that's just getting started as like two and a half years old which is the ads business. So, but it's still the same idea where we've found that the most capital efficient way to.

Tony Xu: So, but it's still the same idea where we found that the most capital efficient way to think about the next dollar invested tends to be, what product can we build to solve some problem better? Either it's the same problem, but we solve it better and find basically the next level of product market fit for the next cohort of customers who obviously have higher expectations than the previous cohort, or it's solving a problem for the first time. When we entered, for example, the grocery segment three and a half years ago, where it met customers for the first time in that category,

Speaker Change: Think about the next dollar invested tends to be what product can we build to.

Speaker Change: Solve some problems better either it's the same problem, but we're solving and better than finding basically the next level of product market fit for the next cohort of customers, who obviously have higher expectations and the previous cohort or it's solving a problem for the first time. When we entered you know for example, the grocery segment's three and a half years ago.

Speaker Change: Where that was solving customers' or meeting customers for the first time in that category and so.

Tony Xu: That's, in general, kind of how we think about it. And then there are other types of capital allocation decisions when you start thinking about whether it's M&A or possible buybacks and things like this. But those tend to be slightly different computations and calculations. But with respect to generally how we've done things, it tends to be, how do you spend the incremental dollar by best solving the next job to be done for the customer? Yeah, maybe I, you know, I'll just add to what Tony talked about.

Speaker Change: That's in general kind of how we think about it.

Speaker Change: And then there is like other types of capital allocation decisions right. When you start thinking about whether it's.

Speaker Change: M&A or possible buybacks and things like this but those tend to be slightly different computations and calculations, but with respect to like generally how we've done things it tends to be how do you spend the incremental dollar.

Speaker Change: By best solving the next job to be done for the customer.

Ravi Inukonda: Yeah, maybe Eric, you know, I'll just add to what Tony talked about, right? Like, for us, our business ultimately depends on making the product better for consumers, merchants, and assessors. So when we think about where to invest dollars, the first dollar is always going to go to making the product better. Whether it's adding selection, whether it's improving the quality, or continuing to make the product more affordable. We are very scientific; we're very disciplined when it comes to measuring ROI.

Speaker Change: Yes, maybe I'll just add to what you were doing you talked about it for us.

Speaker Change: Our business ultimately depends on making the product better for our consumers merchants and measures. So when we think about where to invest dollars. The first dollar is always going to go to making the product better and that's adding selection, whether it's improving the quality, while continuing to make the product more affordable.

Speaker Change: Any scientific the very disciplined when it comes to measuring all the way, we obviously look at all aspects of that and we measure that.

Ravi Inukonda: We obviously look at, you know, all aspects of that. We measure that both on a short term as well as on a long term basis. But sometimes, you know, we just set ambitious goals and, you know, give the teams the flexibility to continue to innovate, with the goal being, if we build the best product, consumers are going to come back, they're going to order more with us, which builds scale, and ultimately, that drives, you know, long-term pre-cash flow generation in the company.

Speaker Change: On a short term as well as a long term basis, but sometimes we just set ambitious goals and give the team some flexibility to continue to innovate with the goal of being if you build the best product consumers are going to come back they're going to order more with us, which build scale and ultimately that drives long term free cash flow generation in the business.

Eric: Your next question comes from the line of Andrew Boone with JMP Securities. Please go ahead.

Speaker Change: Your next question comes from the line of Andrew Boone with JMP Securities.

Andrew M. Boone: Go ahead.

Andrew M. Boone: Thanks so much for taking my question. Tony, can you talk about the drivers of platform services and acceleration that you've seen over the last year?

Andrew M. Boone: Thanks, So much for taking my question Tony.

Andrew M. Boone: Tony can you talk about the drivers of the platform services or acceleration that you've seen over the last year.

Tony Xu: Sure, I mean, I think there were many things there, but I would say it's really probably like two thematic things where, one, we're continuing to offer fulfillment services through DoorDash Drive, which is the first product we launched as part of the platform services portfolio, just in more places, right? Whether that's more countries, more verticals, I think it's really encouraging to see that, you know, every retailer out there, whether they sell food or sell other items, recognizes the importance of delivery and how it's also net beneficial to their companies because the omni-channel customer is more valuable than any other customer who shops exclusively in one channel.

Andrew M. Boone: Sure I mean I think.

There has been met.

Tony Schuh: Many things there, but I would say, it's really a probably like two thematic things where one.

Tony Schuh: We're continuing to offer fulfillment services through duress drive which is the.

Tony Xu: First product, we launched as part of the.

Tony Xu: The platform services portfolio just into more places right, whether that's on more countries more verticals.

Tony Xu: I think it's really encouraging to see that.

Tony Xu: Every retailer out there whether they sell food or sell other items recognizes the importance of delivery and how also how thats net beneficial to their companies because of the omnichannel customer is more valuable with any other customer who shops exclusively in one channel.

Tony Xu: And second, it's really just new products, right? We're always building new things. If you think about platform services or the vision of the business is, it's to effectively enable any retailer to do what DoorDash does on its marketplace for their own customers, right? And so that goes much beyond fulfillment. You're going to have to do everything from online ordering all the way to, you know, customer support, right? And there are a lot of activities in between that you kind of have to get right.

Andrew M. Boone: And second it's really just new products right. We're always building new things. If you think about what platform services or the vision of the business is its too.

Tony Xu: Effectively enable any retailer to do what <unk> does on its marketplace for their own customers right and so that goes much beyond fulfillment youre going to have to do everything from online ordering all the way to customer support right and Theres a lot of activities in between that you kind of have to get right. So the second is just always bill.

Tony Xu: So the second is just always building new products. So, you know, I think this is a nice example of, you know, the answer to the first question around or a previous question around, you know, capital allocation, which is, how do we make sure that we solve this job and how big is that job for the customer and how much is it worth solving it as deeply as we can and then move on to the next job, right? But that's really what we've seen in platform services. And it's just really great to see, I think, for every retailer, a physical retailer, that's just increasingly becoming more and more aggressive in investing in digital.

Tony Xu: <unk> new products. So you know I think this is a nice example of I think the.

Tony Xu: The answer to the first question around her previous question around capital allocation, which is how do we make sure that we solve this job and how big is that job for the customer and how much is it worth and solve it as deeply as we can and then move on to the next job right, but that's really what we've seen and platform services and.

Tony Xu: And it's just really great to see I think for every retailer physical retailer. That's that's just increasingly becoming more and more aggressive in investing in digital.

Speaker Change: Thank you.

Eric: Your next question comes from the line of Ron Josey with Citi. Please go ahead.

Tony Xu: Your next question comes from the line of Ron Josey with Citi.

Ronald Victor Josey: Great. Thanks for taking the time to answer the question. You know, I wanted to maybe, Tony, take it back to take rates and sort of where we stand. I think in the press release, you talked about reduced average delivery time, defect rates, and net consumer fees per order being lower. So I was curious if you could talk just about the contributions of these changes or these improvements to overall take rates. And on a scale of where we are on the continuum of how things are going, sort of, you know, how much more is there that can just improve? And I'm sure the answer is infinite.

Ronald Victor Josey: Please go ahead.

Ronald Victor Josey: Great. Thanks for taking the question I wanted to maybe tell me to take it back to take rates and sort of where we stand I think.

Ronald Victor Josey: In the press release, you talked about reduced average delivery time defect rates net consumer fees per order lower.

Ronald Victor Josey: So I was curious if you could talk just about the contributions of these changes or these improvements to overall take rates and on a scale of call. It where we are in the continuum of how things are going sort of how much more is there that can just improve and I'm sure. The answer is infinite, but when we think about defect rates coming down I think that was a pretty material.

Ronald Victor Josey: <unk> impact on take rates. So any insights there would be helpful. Just on delivery time defect rate, just overall efficiencies and as a follow up to Andrew's question on platform services.

Tony Xu: But, you know, when we think about defect rates coming down, I think that's a pretty material rate impact on take rates. So any insights there would be helpful just on delivery time, defect rates, just overall efficiencies. And as a follow-up to Andrew's question on platform services, you know, just curious. We've been highlighting that for the past couple of quarters. I would love to hear just how much are we seeing more adoption amongst restaurants today versus a few years ago?

Tony Xu: Just curious you've been highlighting for the past couple of quarters would love to hear just a.

Tony Xu: Are we seeing more adoption amongst amongst restaurants today versus a few years ago. Thank you.

Tony Xu: Sure, I can take both of them. I think the first question was around just, you know, how do we see, like, I guess, benefits, you know, to the consumer product, improving over time? And, I mean, look, I mean, this is one of those things where it's really a game of inches, and then you're just following the laws of compound interest, which tend to get underestimated, right? And so you're totally right.

Speaker Change: Sure I can take both of them I think the first question was around just how do we see like I guess benefits.

Tony Xu: So the consumer product.

Tony Xu: Improving over time, and I mean look I mean this is one of those things where it's really a game of inches and then you're just following the laws of compound interest, which tend to get underestimated right and so you're totally right I mean like consumers demand improvements across the board they always want lower prices faster deliveries higher accuracy.

Tony Xu: I mean, like, consumers demand improvements across the board. They always want lower prices, faster deliveries, higher accuracy, more selection, and better customer support. That is always going to be true. And I think the thing that, at least for me, like that's been just a lesson learned over, you know, over almost 11 years, but over 10 years of doing this, is that we always underestimate, I think, how far these things can go. And I think that's kind of just fighting human nature, right? I mean, because I think human nature wants to know that there's some marginal return that becomes a concave function.

Tony Xu: More selection better customer support that is always going to be true and I think the thing that just at least for me like that that's been just a lesson learned over.

Tony Xu: And I think what ends up happening is you get surprised either by the next technology platform, or you just get surprised by how compounding it is. And so that's at least been my experience, you know, so far. And so we're always going to keep pushing the envelope. And so far, we keep seeing, you know, more ways to, you know, make improvements to the product, in part because that's what customers expect. And that's actually why I've always believed that customer expectations have always been, you know, candidly the highest or the most difficult form of competition. I think your second question was about platforms, and our restaurants may be adopting them more now than before. I think it's a few things.

Tony Xu: Over almost now 11 years, but over 10 years of doing this is that you.

Tony Xu: We always underestimate I think how far these things can go.

Tony Xu: And I think that's that's kind of just fighting human nature right I mean, because I think human nature of wants to know that there's some marginal return that becomes a concave function and I think what ends up happening is you get surprised either by the next technology platform or you just get surprised by how compounding works and so.

Tony Xu: Definitely it's been my experience, so far and so we're always going to keep pushing the envelope and so far we keep seeing more ways to.

Tony Xu: Make improvements to the product in part because that's what customers expect.

Tony Xu: And that's actually why I've always believed that customer expectations have always been candidly the highest or the most difficult you know form of competition.

Tony Xu: I think your second question was around platforms, and our restaurants, maybe adopting more now than before.

Tony Xu: So I think when it comes to, you know, adopting products to help retailers, physical retailers become more digital, it's one of these things where it's a journey. And sometimes the journey takes nonlinear steps, if that makes any sense. Because if you think about it from the perspective of the merchant, I mean, they have so many years of running a physical business, and it's such a big part of their business still today, that they kind of just have to get right, right.

Tony Xu: I think it's a few things so I think when it comes to adopting.

Tony Xu: <unk> products.

Tony Xu: Products to help retailers physical retailers become more digital it. It's one of these things where it's a journey and sometimes the journey takes non linear steps if that makes any sense because if you think about it from the perspective of the merchant I.

Tony Xu: And if that goes wrong, that or any, you know, shock to that system, then it's a really big impact to the overall company and, and the people who work there. And so sometimes these things just kind of have like a natural rhythm that may take a little bit longer than you would expect. But I think what's encouraging is just that the appetite is moving in one direction. And, and so, you know, a lot of times, the timing of these kinds of changes, whether it's rolling out new products, or doing more with us on, you know, fulfillment, or, or, or whether it's in restaurants or other categories, that that's like maybe less predictable, but but what is known is that the direction of travel is always, you know, in the direction of greater digital, greater convenience.

Tony Xu: I mean, they they have so many years of running a physical business and it's such a big part of their business still a business is still today that they kind of just have to get right right and if that goes wrong or any shock to that system.

Tony Xu: And then it's a really big impact to the overall company and the people who work there and so sometimes these things just kind of have like a natural rhythm that may take a little bit longer than you would expect but I think what's encouraging is just that the appetite is moving in one direction and so you know a lot of time.

Tony Xu: The timing of these kinds of changes whether it's rolling out new products are doing more with us on fulfillment.

Tony Xu: Fulfillment or or or whether it's in restaurants or other categories that that's like maybe less predictable, but but what is known is that the direction of travel is always in the direction of greater digital greater convenience.

Eric: Got it. Thank you, Tony. I appreciate it. Your next question comes from the line of Bernie McTernan with Needham and Company. Please go ahead.

Speaker Change: Got it. Thank you gentlemen, appreciate it.

Eric: Your next question comes from the line of Bernie McTernan with Needham and Company. Please go ahead. Great. Thank you for taking the question.

Bernard Jerome McTernan: Your next question comes from the line of Bernie Mcternan with Needham and company.

Bernard Jerome McTernan: Please go ahead.

Eric: Great.

Bernard Jerome McTernan: Thank you for taking the question just wanted to ask on the core U S restaurant business decelerated slightly in the quarter on a pro forma ex leap year basis. Most of the major driver of that I know, we have a law of large numbers can be playing a factor here and if you'd be willing to share. If it was still a double digit grower ex leap year in the first quarter.

Bernard Jerome McTernan: Yeah, Bernie, I mean, I'll take this one, right? Like, I looked at the performance of the business in Q1. I was really pleased with the overall progress and performance of the business. I mean, the US restaurant business is big at this point, it's growing, it's gained share, you know, in the quarter, not just in Q1, but I looked at over the course of the last year.

Bernard Jerome McTernan: Yeah, but any I mean I'll take this one really I mean I look at the components of the business in Q1, I mean, I was really pleased with the overall progress and performance of the business I mean, the U S restaurant businesses large at this point, it's growing it's gained share in the quarter not just in Q1, but I look at over the course of the last year when I look at users and order frequency.

Bernard Jerome McTernan: We have continued to grow quite nicely users last quarter, we talked about the fact that we have more than 37 million consumers on the platform that number has continued to grow since that point. The growing users are double digit rates order frequency continues to be at an all time high when I look at the underlying cohort performance I mean, it's a very strong cash vessels drivers continue to be a record high for a while.

Bernard Jerome McTernan: When I look at, you know, users and order frequency, both have continued to grow quite nicely. Users, you know; last quarter, we talked about the fact that we had more than 37 million consumers on the platform. That number has continued to grow since that point. The growing number of users are double digit rates. Order frequency continues to be at an all-time high. When I look at the underlying cohort performance, I mean, it's very strong. Cash Pass subscribers continue to be at record highs as well.

Bernard Jerome McTernan: But look I mean, you'll be investing to continue to expand the size and scope of the platform and the opportunity in front of us when we look at new verticals that business is growing grocery we talked about that business as you know doubling for three straight quarters in a row international business is growing quite nicely.

Bernard Jerome McTernan: Did you have having multiple categories and multiple countries is going to allow us to really drive strong growth for many years to come.

Ravi Inukonda: But look, I mean, we've invested to continue to expand the size and scope of the platform and the opportunity in front of us. When I look at new verticals, that business is growing. Grocery, we talked about that business is, you know, doubling for three straight quarters in a row. And international business is growing quite nicely. Our strategy of having, you know, multiple categories in multiple countries is going to allow us to really drive strong growth for many years to come.

Ravi Inukonda: Okay.

Eric: Your next question comes from the line of Lee Horowitz with Deutsche Bank. Please go ahead.

Ravi Inukonda: Your next question comes from the line of Lee Horowitz with Deutsche Bank.

Lee Horowitz: Please go ahead.

Lee Horowitz: Great. Thanks for taking the time to answer the question. I just wanted to ask you about the macro environment a little bit. You've heard from a number of restaurants about changes this quarter indicating an incrementally weak consumer demand environment, with inflation perhaps being higher for longer, finally catching up to the consumer. Can you comment at all maybe on the overall macro environment in terms of overall demand for the restaurant business and how that may be impacting your outlook for the 2Q and the rest of the year? Thanks so much.

Lee Horowitz: Great. Thanks.

Lee Horowitz: Thanks for taking my question I, just wanted to ask on the macro environment, a little bit you've heard from a number of restaurants.

Lee Horowitz: I changed this quarter, indicating incrementally weak consumer demand environment.

Lee Horowitz: With inflation and perhaps being in place higher for longer finally, catching up to the consumer can you comment at all maybe what youre seeing in the overall macro environment in terms of overall demand into the restaurant business and how that maybe impacting sort of your outlook for for the <unk> and the rest of the year. Thanks, so much.

Tony Xu: Yeah, I can take that. I mean, in general, we're not seeing, I think, signs of strain on the consumer. But I think it perhaps has something to do with the segment that we operate in, which is, you know, digital and delivery. I do understand that there are some headwinds that certain merchants face when it comes to in-store traffic. But when it comes to all things digital, we're actually not seeing, you know, I think, those same signs of strain.

Speaker Change: Yeah, I can take that I mean in general we're not seeing I think the signs of strain on the consumer but I think it perhaps has something to do with the segment that we.

Tony Xu: We operate in which as you know digital and delivery I do understand that there are some headwinds that certain merchants face when it comes to in store traffic, but when it comes to all things digital were actually not seen I think those same signs of strength I mean, even for example in the U S restaurants business I mean, the growth is pretty consist.

Tony Xu: I mean, even, for example, in the U.S. restaurant business, I mean, the growth has been pretty consistent over the last six quarters. So it's, you know, that's, you know, whatever, 18 months or something that that roughly has been true for. And so we tend to see that to be true there. We even see it true in other categories, even categories like groceries, where you're still seeing very sticky inflation in terms of input prices, which has led to high prices on grocery items. But I think on the digital side, we tend to see pretty strong demand, and that's why you see relatively stable growth. Yeah, but just to add to that, right, like demand could use some.

Tony Xu: And over the last six quarters. So it's you know that's that's.

Tony Xu: <unk>.

Tony Xu: Whatever 18 months or something that that that that roughly has has been true for and so we tend to see that to be true. There, we even see a true in other categories, even categories like grocery where you're still seeing very sticky.

Tony Xu: Very high inflation in terms of input prices, which has led to high.

Tony Xu: Prices on grocery items, but I think on the digital side, we tend to see pretty strong demand and that's why you see a relatively stable growth.

Ravi Inukonda: Demand continues to be very strong. You can see that in the cohorts as well. When I look at the 2023 cohorts, they're as strong as any of the other cohorts. I talked about that earlier in the previous question.

Speaker Change: Yeah, but just to add to that and they like demand continues to be very strong you can see that in the cohorts as well when I look at the 2023 cohorts there as strong as any of the other cohorts we've seen.

Ravi Inukonda: Earlier on the previous question order frequency has continued to set an all time record in Q1, and when you look at the newer cohorts that actually joining the platform our tire auto frequency compared to many of the vertical wells that also had a very good quarter last year. We entered dash method over 18 million subscribers that number has continued to grow so when I look at the growth.

Ravi Inukonda: Order frequency has continued to set an all-time record in Q1. And when we look at the newer cohorts, they're actually joining the platform at higher order frequencies compared to many of the older cohorts. DashPass also had a very good quarter. Last year, we entered the quarter with over 18 million subscribers. That number has continued to grow. So when I look at the growth across all three lines of business, we are really pleased. All three lines of business are growing double digits, very strong, as well as gaining share across the board.

Ravi Inukonda: Across all three lines of business. We are really pleased all three lines of business growing double digits very strong as well as gaining share you know across the board.

Speaker Change: Very helpful. Thank you.

Eric: Your next question comes from the line of Ken Gawrelski with Wells Fargo. Please go ahead.

Ravi Inukonda: Your next question comes from the line of Ken <unk> with Wells Fargo. Please.

Kenneth James Gawrelski: Please go ahead.

Kenneth James Gawrelski: Hey, this is Alec Brandolo. I'm for Ken.

Eric: Hey, this is Alex <unk> on for Ken I. Appreciate the question. You know you noted earlier in the call that the investment that you were going to make in New York City and Seattle around the minimum wage is going to decrease through the year I am sure Theres any fee consumer fee component of that but it also sounds like there's probably operational changes that youre, making in those markets to improve profitability.

Alec Brandolo: So could you maybe speak to those to that level of specificity you can and then maybe secondly, you know I think.

Alec Brandolo: Thinking about gas your supply since COVID-19. It seems like it's been a little cyclical in 'twenty, one when people weren't getting supply chain.

Alec Brandolo: Stimulus checks dash.

Alec Brandolo: Dasher supply was tight and it seems like it's been very favorable over the last 12 to 18 months could you maybe just speak to your outlook for natural supply you know should it should it remain healthy over the next year or two and any potential changes to.

Alec Brandolo: The supply environment would be helpful too. Thanks.

Eric: I appreciate the question. You know, you noted earlier in the call that the investment that you were going to make in New York City and Seattle around the minimum wage was going to decrease through the year. I'm sure there's a fee, consumer fee component of that, but it also sounds like there's probably operational changes that you're making in those markets to improve profitability. So could you maybe speak to those, to the level of specificity, you know, you can.

Alec Brandolo: Sure I mean I can start maybe on the question I think in general when it comes to regulatory it's honestly just making the best with what you have right and so it's I mean, we know what customers expect they want the the widest selection they want the lowest.

Eric: Prices, the best quality and the best levels of support so that's what you should expect us to do in any market and then also at the same time I think work with regulators to show them I think the impact of some of the work that they've contributed whether it's and especially when it's gone opposite of what they hoped to achieve we certainly want to show them desert.

Eric: It's too.

Speaker Change: Yeah, just to add to what Tony talked about it on Seattle, New York, You're right. I mean, we did absorb costs in Q1, I do expect the amount of cost that will absorb to reduce as we go through the rest of the year, that's largely being driven by further improvements in efficiency, whether it's logistics quality credits and refunds are going to take a look at the entire P&L and see where we are.

Eric: Are going to continue to drive efficiency, which will ultimately drive improvement in unit economics and at the same time. Our goal is to ensure that all of the markets that we operate in have sustainable unit economics, and again, there is going to be gradual but that's the goal for us in general.

Eric: And then maybe secondly, you know, I think that thinking about Dasher supply since COVID, it seems like it's been a little cyclical, you know, in 21, when people are getting supply checks, stimulus checks, Dasher supply was tight, and it seems like it's been very favorable over the last 12 to 18 months. Could you maybe just speak to your outlook for Dasher supply? You know, should it remain healthy over the next year or two? Any potential changes to the supply environment would be helpful.

Eric: I think the second point, then on Bachelor supply supply States continues to be very healthy when I look at natural cost, we've driven leverage and efficiency. Despite absorbing some of the regulatory costs on a year over year basis. As I look ahead for us efficiency largely comes from improvements that we are going to make on the product side. If you look at over the course of the last year.

Tony Xu: Sure, I mean, I can start maybe on the question, you know, I think in general, when it comes to, you know, regulatory, it's honestly, just doing the best with what you have, right? And so, I mean, we know what customers expect. They want the widest selection, they want the lowest prices, the best quality, and the best levels of support. So that's what you should expect us to do in any market.

Tony Xu: And then also, at the same time, I think, work with regulators to show them, I think, the impact of some of the work that they've, you know, contributed, whether it's, and especially when it's, you know, gone opposite of what they hope to achieve, we certainly want to show them those results too. Yeah, just got to, you know, Tony talked.

Tony Xu: We've made a number of improvements whether it's redesigning the backdrop or updating the way doctors earn on the platform. All of that is driving increase in dash of retention, which is making dashboard acquisition more efficient and at the same time, we are seeing more hours from existing doctors, which is making dash or being also more efficient.

Tony Xu: I have a long list of improvements that we continue to plan to make which will make natural costs overall more efficient across the board.

Speaker Change: Thank you so much.

Tony Xu: Your next question comes from the line of Douglas Anmuth with Jpmorgan.

Speaker Change: Please go ahead.

Speaker Change: Thanks for taking my questions.

Tony Xu: Lee you talked about higher EBITDA in the back half relative to one to the first half I was just hoping you could help us understand what drives the confidence and better unit economics, and then the returns on those first half investments and.

Tony Xu: Also can you just shed a little more light on the step up in R&D spending in <unk> and <unk> and how we should think about that through 2004. Thanks.

Ravi Inukonda: Yeah, just to add to what Tony talked about, right in Seattle, New York; we did absorb costs in Q1. I do expect the amount of costs that we'll absorb to reduce as we go through the rest of the year. That's largely being driven by further improvements in efficiency, whether it's logistics, quality, credits, and refunds. We're going to take a look at the entire P&L and see where we're going to continue to drive efficiency, which will ultimately drive improvement in unit economics. And at the same time, our goal is to ensure that all markets that we operate in have sustainable unit economics. We're going to get there.

Speaker Change: Yeah, Doug I'll take the second half question first and then talk about the R&D spend and the outlook for the rest of the year.

Speaker Change: As you know relatively simple what we've used historically, we've seen that in 'twenty three as well as 22.

Ravi Inukonda: It's going to be gradual, but that's the goal for us in general. And I think the second point around Dasher supply, the supply state continues to be very healthy. When I look at Dasher costs, we've driven leverage and efficiency despite absorbing some of the regulatory costs on a year-over-year basis. As I look ahead for us, efficiency largely comes from improvements that we are going to make on the product side. If you look at the course of the last year, we've made a number of improvements, whether it's redesigning the Dasher app or updating the way Dashers earn on the platform.

Ravi Inukonda: What youre seeing in the business today is the core restaurants business continues to grow quite nicely double digits as well as continuing to improve in terms of overall profitability.

Ravi Inukonda: At the same time, you're seeing the growth in new vertical whether it's grocery or other parts of the portfolio as well as the international business, where we're continuing to improve the unit economics growth and third party component of the new vertical portfolio as unit economic profitable for a few quarters now same is true with international where the entire international portfolio unit economic profitability grocery board.

Ravi Inukonda: All of that is driving an increase in Dasher retention, which is making Dasher acquisition more efficient. And at the same time, we are seeing more hours from existing Dashers, which is making Dasher pay also more efficient. We have a long list of improvements that we continue to plan to make, which will make Dasher costs overall more efficient across the board. Thank you so much. Your next question comes from the line of Douglas Anmuth with J.P. Morgan. Please go ahead.

Eric: Your next question comes from the line of Douglas Anmuth with J.P. Morgan. Please go ahead. Thanks for taking the time.

Douglas Till Anmuth: So we do expect to drive further efficiencies, whether it's industrial cost.

Douglas Till Anmuth: The regulatory costs, where we absorbed the cost that's going to continue to reduce over the course of the year quality has been a key area of focus for us credits and refunds are going to get more efficient our ads business is growing if you combine that with the investments we're making in each one which will drive not only scale, but also leverage I do expect volume to increase as we go through the rest of the year.

Douglas Till Anmuth: As well as unit economics to improve as we go through the rest of the year. The combination of both of those is going to have second half EBITDA be higher than the first half driven I'm wondering as you've done. This before 2023 is exactly the same pattern as well as in 'twenty, two and when I am looking at the business with its Q1 or Q2 guide or the rest of the year I feel very good about both the top line as well as the bottom line.

Douglas Till Anmuth: Yeah, Doug, I'll take the second half question first and then talk about the R&D spend and the outlook for the rest of the year. But I mean, you know, the formula is relatively simple, what we've used historically, we've seen that in 23 as well as 22.

Ravi Inukonda: What you're seeing in the business today is the core restaurants business continues to grow quite nicely, double digits, as well as continue to improve in terms of overall profitability. At the same time, you're seeing growth in new verticals, whether it's grocery or other parts of the portfolio, as well as the international business, where we're continuing to improve the United Kingdom. A third-party component of the new vertical portfolio is unit economic profitable for a few quarters now. The same is true with international, where the entire international portfolio is unit economic profitable for a few quarters.

Ravi Inukonda: We do expect to drive further efficiency, whether it's Dasher cost, A, you know, the regulatory cost where we absorb the cost, that's going to continue to reduce over the course of the year. Quality has been a key area of focus for us. Credits and refunds are going to get more efficient.

Ravi Inukonda: And on the second point on R&D, I mean look I mean, our goal is not just to drive strong growth in 'twenty for them, but for many years to come.

Ravi Inukonda: We are fortunate that we are operating in large segments, where we still find great opportunities to invest the key investment, we're making is continuing to improve the product as we improve the product youre seeing that impact both retention going up as well as order frequency going up.

Ravi Inukonda: For us we are adding had come to see only gonna be parked fleet, adding engineers to help us improve the product when I look at the rest of the year I would expect opex levels to be similar to what youre seeing in Q1 with longer term. Our goal is to continue to drive leverage on Opex as we continue to grow the business.

Ravi Inukonda: Our ads business is growing. If you combine that with the investments we're making in H1, which will drive not only scale but also leverage, I do expect volume to increase as we go through the rest of the year, as well as unit economics to improve as we go through the rest of the year. The combination of both of those is going to have the second half EBITDA be higher than the first. The reason I'm confident is we've done this before; 2023 is exactly the same pattern as in 2022.

Ravi Inukonda: And when I'm looking at the business, whether it's Q1 or Q2 guidance or the rest of the year, I feel very good about both, you know, the top line as well as the bottom. And on the second point on R&D, I mean, Doug, our goal is, you know, not just to drive, you know, strong growth in 24, right, but for many years to come. We're fortunate that we are operating in large segments where we still find great opportunities to invest.

Ravi Inukonda: The key investment we're making is continuing to improve the product. As we improve the product, you're seeing that impact both retention going up as well as order frequency going up. For us, we are adding headcount this year. We're going to be thoughtful. We're adding engineers to help us improve the product. When I look at the rest of the year, I would expect OPEX levels to be similar to what you're seeing in Q1. But longer term, our goal is to continue to drive leverage on OPEX as we continue to grow the business.

Speaker Change: Okay. Thank you.

Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining us, and you may now disconnect your lines.

Speaker Change: Ladies and gentlemen that concludes today's call. Thank you all for joining and you may now disconnect your lines.

Operator: Yeah.

Operator: Okay.

Operator: Okay.

Operator: Yeah.

Operator: Yeah.

Operator: Hmm.

Operator: