Release Date: May 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- DoorDash Inc (DASH, Financial) reported a significant growth in the grocery sector, with triple-digit growth year-on-year for the third consecutive quarter.
- The company has seen positive unit economics in new verticals, even with smaller baskets and without significant contributions from CPG ad dollars.
- DoorDash Inc (DASH) has expanded its platform by adding several dozen new retailers in Q1, enhancing consumer and retailer pull.
- Ad revenue for DoorDash Inc (DASH) is substantially larger than previously estimated, showing strong adoption across all cohorts and high engagement on the consumer front.
- International business is growing substantially faster compared to peers, with several countries in the international portfolio being contribution margin profitable.
Negative Points
- The logistics model of DoorDash Inc (DASH) faces challenges in competing with integrated models like those of Walmart and Amazon, potentially leading to higher costs for consumers.
- Regulatory impacts in cities like Seattle and New York have led to increased costs, making the service less accessible and affordable.
- The core U.S. restaurant business showed a slight deceleration in growth, although it remains a double-digit grower.
- Investments in regulatory markets like New York City and Seattle are expected to decrease but will require operational changes to improve profitability.
- There are ongoing challenges in managing the expanding international portfolio, which now includes 29 countries outside the U.S., adding complexity to operations.
Q & A Highlights
Q: Tony, can you discuss the logistics model for DoorDash in the context of competing with large incumbents like Walmart and Amazon in grocery delivery?
A: Tony Xu, CEO of DoorDash, highlighted that DoorDash initially focused on a top-up use case in grocery delivery, addressing mid-week runs for frequently consumed or perishable items, which was both a new consumer use case and an incremental opportunity for retailers. Despite the higher cost-to-serve of the third-party model, DoorDash sees advantages in Dasher density and network, leading to positive unit economics even with smaller baskets. Xu emphasized the trade-off between cost and benefits like speed and selection, and expressed confidence in improving cost efficiency and selection to enhance consumer value.
Q: How is the advertising revenue progressing, especially in terms of growth and vertical expansion?
A: Tony Xu noted that DoorDash's advertising business is substantially larger than the $100 million run rate suggested, with robust adoption across all restaurant cohorts and increasing interest from CPG advertisers. The company is focused on enhancing self-serve and reporting capabilities to provide clear visibility on ad spend effectiveness, aiming to offer leading return on ad spend and strong consumer engagement.
Q: What are the expectations for peak losses in other verticals and international markets?
A: Ravi Inukonda, CFO of DoorDash, explained that the company's investment strategy is not constrained by a fixed dollar amount but focuses on growing order frequency, retention, and unit economics. He highlighted significant growth and improving unit economics in the grocery and international segments, with several international markets achieving contribution margin profitability.
Q: Can you discuss any challenges or restrictions in expanding grocery selection on DoorDash's platform?
A: Tony Xu addressed the growing interest from retailers across various segments beyond grocery, such as home improvement and health and beauty, to join DoorDash. He emphasized that the challenge lies in prioritizing and sequencing integration efforts to meet retailer and consumer demands effectively, rather than resistance from potential retail partners.
Q: How is DoorDash managing regulatory challenges, particularly with wage policies in cities like Seattle and New York?
A: Tony Xu expressed concerns that regulatory measures intended to support earnings are making services less accessible and affordable, leading to reduced work opportunities for drivers and lower earnings for merchants. He stressed ongoing efforts to work with regulators to demonstrate the adverse effects of such policies and remains optimistic about most governments being productive collaborators.
Q: What drives the acceleration in platform services, and how is restaurant adoption evolving?
A: Tony Xu credited the growth in platform services to expanding fulfillment services to new geographies and verticals, and continuous product innovation. He noted a significant shift among physical retailers towards digital solutions, enhancing their operational efficiency and customer reach through DoorDash's platform.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
