DoorDash, Inc. (NASDAQ:DASH) Q1 2024 Earnings Call Transcript

DoorDash, Inc. (NASDAQ:DASH) Q1 2024 Earnings Call Transcript May 1, 2024

DoorDash, Inc. beats earnings expectations. Reported EPS is $-0.05672, expectations were $-0.07. DASH isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: 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 speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. I would now like to turn the call over to Andy Hargreaves. Please go ahead.

Andy 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, Chair and CEO, Tony Xu; and CFO, Ravi Inukonda. We’ll be making forward-looking statements during today’s call including our expectations for our business financial position, operating performance, our guidance strategies, capital allocation approach, and the broader economic environment. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those described. Many of these uncertainties 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.

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 may be found in our earnings release, which is available on our Investor Relations website. These non-GAAP measures should be considered in addition to our GAAP results and are not intended to be a substitute for our GAAP results. 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. Finally, this call is being audio webcasted 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.

See also 20 Countries That Increased Oil Production the Most in A Decade and 25 Best Countries for Expats With Low Taxes and High Quality of Life.

Q&A Session

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

Nikhil 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, 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 at scale. So it seems that there’s a chance the 3P model might always be at a somewhat of a disadvantage on a cost to serve basis here, and consumers are less paying higher prices for it. So would love to just get your perspective on, first, whether you agree with that or not and what levers 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 up, perhaps for quicker deliveries or broader selection within the context of a category like grocery, for example?

Tony Xu: Yeah. Hey, Nikhil, that’s a good question. So 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’s 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 regards to something like grocery, whether or not we got exactly all of the items that they had specifically ordered in the condition that they would expect. And so if you think about DoorDash’s journey or evolution in that process, it 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 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. We announced a lot of additions to the platform in Q1, whether it was with Ahold as well as more recently in Q2 with Wakefern, and, we added several dozen 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 a mark. On the logistics question specifically, I think a few things. One, we always thought that we had an advantage given just our Dasher density and the network that we built up, where the thesis would go, if you can 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, then you would have a cost advantage.

And that’s certainly something that we’ve seen. I mean, in fact, I think the positive surprise in our grocery business has been that even with smaller baskets and without a meaningful contribution from CPG ad dollars, we’re actually 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’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 sometimes with cost. Now we believe that we’ll 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 on the one hand, third party is 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 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 obviously are going to work on a model in which we can increase the amount of selection that we offer, reduce the cost in which that selection is made available, and improve the quality of the process. And I think on these dimensions we’ve certainly done that. And I think that that’s why you see the results that we’ve outlined where I think it’s third straight quarter now, where grocery has seen north of triple digits growth year-on-year. And so certainly I think we’re seeing that 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. So all things are pointing in the right direction. So we’re pretty excited about where things are headed.

Nikhil Devnani: Thanks, Tony.

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

Mark Mahaney: Thanks. If I could throw in two questions, please. First on 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 that’s progressing? Are there any areas of strength for you, things you want to — verticals you want to fill out? 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 ad question, and Ravi, maybe you can take a question on investment capacity. So, Mark, on ads, I don’t know how, maybe 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 on ads is that it’s going really well. I think that 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. We’re now working on building 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.

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 on the consumer front. We’re also turning our attention to the CPG ad side. Obviously, that’s something that came after. Our ads effort is about 2.5 years old, something like that. The first year and a half was really 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 on the marketplace, we’re seeing increasing pull 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.