Brad Erickson : Got it. Thank you.
Operator: Our next question comes from the line of Ken Gawrelski with Wells Fargo. Please go ahead.
Ken Gawrelski : Thank you very much. Two, if I may. First, on the regulatory side, I believe most of the Wolt markets are currently independent contractor model with the exception of Germany. It seems like the EU platform work directive is going to be published any day. And do you expect to have to reclassify Wolt workers in Europe? And then the second one, is based is on the capital return side, based on the ’24 EBITDA guidance and the renewed share purchase authorization, I was hoping maybe you could update us on your medium-term thoughts about capital returns? You talked about maximizing free cash flow per share. I know you talked a lot about what you’re doing on the numerator. Can you talk a little bit more about the denominator there? Thank you.
Tony Xu : Hey. Ken, I can start. This is Tony. And Ravi, feel free to follow. I think on your first question, which is about regulation in the EU and the platform workers directive. Yeah, I mean, it’s certainly an ongoing piece of work that regulators are coming up with. And I think the good news here is that they’re doing it in partnership with industry and we expect a very productive outcome for everyone. I think that, by and large, when I made my comment earlier to the — I think there was an earlier question about regulation. I mean, there really are just a handful of cities across the world. So not just EU or U.S. or other places in which I think governments don’t want to work productively with companies. I think the majority of vast, vast, vast majority scenario we’ve seen is that governments want to work with companies.
I mean, why wouldn’t you? I mean, why wouldn’t you want to increase the GDP of the local economy and create more work opportunities, more sales for local businesses and more accessibility for consumers. I think that every government recognizes that, that’s a positive sum situation for their constituents. And we see that in the EU. We also see that in most parts of the world. I think your second question was around capital allocation. Maybe I can start and then Ravi, feel free to take the rest. In general, I mean, we’re always trying to look to build products for customers. And we think that that’s the best way to maximize long-term free cash flow per share. Obviously, to your point, there’s two component parts to that. There’s the first component in which we’re doing our best to grow as fast as possible within a disciplined set of parameters that we set for ourselves.
A lot of that isn’t just a budget, but also just how we run the business and run different projects against their state of progress, whether they’re in search of product market fit, there’s a different set of operating metrics that we look at, if they’re in a phase of scaling and looking for efficient ways to grow. There’s another set of operating metrics. If they are cash flow generative. There’s another set of operating metrics we look at. So I think that’s on the former — on the latter or the denominator, we’re always looking to make sure that we do this with discipline. I mean stock-based compensation is certainly is a very real expense. We want to make sure that we’re as disciplined as possible with headcount. I’m pleased with the fact that we’ve been relatively flat on share count over the last six quarters, even though revenue has grown considerably over the same time period.
And look, I think it’s also been very healthy for company culture. I mean, DoorDash is a company that’s quite scrappy in terms of how well we — how we like to operate and we’d like to continue operating with the same speed and quality.
Ravi Inukonda : Okay, just a couple of points to add, right? Like we’ve given guidance around both SBC as well as the share count. I mean you can see — we’re focused on driving leverage from a stock-based compensation. I mean it’s a true real cost to the business. We’ve driven leverage last year and expect to continue to drive leverage in that. And from an overall share count perspective, you can see the RSU issuance that we’ve given, we expect the overall RSUs to come down because it’s actually — SBC is a lagging indicator in some ways.
Ken Gawrelski : Thank you.
Operator: Our final question today comes from the line of Michael McGovern with the Bank of America. Please go ahead.
Michael McGovern : Hey, guys. Thanks for taking my questions. I have two. First, I want to ask about the partner commission rate, which you mentioned is down year-over-year. Just curious, as you build out all of these new features for partners, you have under 1% churn for restaurants, as you mentioned. Is that rate going down just a function of signing up a lot of new merchants and kind of what is your expectation long term for your partner commission rate? And then secondly, I was just wondering if you could talk a bit about the advertising business. And when you mentioned in your full year guidance that net revenue margin going up in the second half of the year potentially, does the advertising business contribute significantly to that? So, thank you.
Tony Xu : Sure. Hey, Mike, I’ll start and feel free to add in here, Ravi. So on the first question, which I believe is around partner commissions, we’re always trying to maximize the value that we bring every single partner, right? And we’re fortunate that we’ve generated lots of sales on behalf of these merchants, and we’ve spent over $40 billion of R&D, sales and marketing team spend over the past few years in helping achieve that level of sales, which I think would be very difficult impossible for these merchants to replicate on their own. And I think that’s why you see that those churn numbers are low and actually, frankly, they continue to get lower. So for us, it’s making sure that we’re always delivering more value to these customers such that will continue to grow together.
I think there’s a long runway ahead before every physical merchant can truly argue and compete on their own as companies in the digital economy. I think we’ve done a nice job in our first decade of helping the restaurant category get there. But I think we have a lot more work to do certainly within restaurants, and I think we’re just getting started outside of restaurants. I think your second question was around ads. Yeah, I mean, the ads business has gone really well. I mean I think that it’s not something probably we’ve talked about that much, but it’s certainly grown, I think, commensurate to the size of business that we’re at. And for us, again, I think the key operating tenet here is that healthy ads business, we believe, in which it delivers best-in-class industry returns for advertisers as well as — continues to allow us to have the best consumer experience is one in which we have to have a healthy and growing marketplace.
That’s what causes or allows the cause for a healthy ads business, not the other way around. And so for us, it’s always making sure that we can achieve on those two dimensions where we have the best-in-class returns for advertisers, which we believe we have as well as the smallest or ideally 0 degradation in the consumer experience, which I’m really proud that the team has accomplished. It’s done really well.
Ravi Inukonda : Hey, Mike, I’ll take your question around the net revenue margin, right? I broaden that just to give you a little bit more context around how I expect the margins to scale through the rest of the year, across both revenue as well as gross margin. I would expect that to increase as we go through the rest of the year. Definitely, to your point, as is contributing to that. In addition to that, I expect us to drive leverage from an overall Dasher cost perspective. We’re consistently working on quality. We’re consistently trying to improve the overall efficiency we have on discounts and promos. Again, you should expect us to see drive improvements across the P&L, which will ultimately drive both revenue as well as gross margin, which will also flow through from a contribution and EBITDA margin perspective in the second half of the year compared to the first half of the year.
Michael McGovern : Got it. Thanks so much.
Operator: Ladies and gentlemen, this concludes today’s call. You may now disconnect.
