DoorDash, Inc. 2022 Q3 Form 10-Q Summary
Business context and reporting period
DoorDash operates local-commerce marketplaces connecting merchants, consumers, and delivery providers. Its DoorDash Marketplace operated in four countries, while the Wolt Marketplace operated in 23 countries following the May 31, 2022 acquisition of Wolt. The company also offers Drive, Storefront, Bbot, Pickup, DoorDash for Work, DashPass, and Wolt+.
This unaudited Form 10-Q covers the three and nine months ended September 30, 2022, with comparisons to the same periods of 2021. Wolt contributed $136 million of revenue and $189 million of net loss from the acquisition date through September 30, 2022.
Key financial and operating metrics
| Metric | Q3 2021 | Q3 2022 | 9M 2021 | 9M 2022 |
|---|---|---|---|---|
| Revenue | $1.275 billion | $1.701 billion | $3.588 billion | $4.765 billion |
| Marketplace GOV | $10.416 billion | $13.534 billion | Not provided | Not provided |
| Total Orders | 347 million | 439 million | Not provided | Not provided |
| GAAP gross profit | $665 million | $714 million | $1.815 billion | $2.062 billion |
| GAAP gross margin | 52.2% | 42.0% | 50.6% | 43.3% |
| Loss from operations | $(100) million | $(308) million | $(298) million | $(754) million |
| Net loss attributable to DoorDash | $(101) million | $(295) million | $(313) million | $(725) million |
| Adjusted EBITDA | $86 million | $87 million | $242 million | $244 million |
| Net cash provided by operating activities | Not provided | Not provided | $525 million | $344 million |
Q3 revenue increased 33%, Total Orders increased 27%, and Marketplace GOV increased 30% year over year. Management attributed growth primarily to consumer and engagement growth, improved Dasher supply, and the Wolt acquisition.
Contribution Profit increased from $281 million to $420 million, and Contribution Margin increased from 22.0% to 24.7% of revenue. However, GAAP gross margin declined to 42.0% from 52.2%, primarily reflecting higher cost of revenue and increased depreciation and amortization. Adjusted EBITDA was approximately flat year over year despite revenue growth.
Expenses, cash flow, debt, and liquidity
- Q3 cost of revenue, excluding depreciation and amortization, increased 59% to $931 million, exceeding revenue growth. Drivers included higher order-management and platform costs, insurance reserves, first-party distribution costs, and personnel-related expenses.
- Q3 sales and marketing declined 6% to $418 million, while research and development increased 97% to $226 million and general and administrative expense increased 68% to $316 million.
- Q3 depreciation and amortization increased 188% to $118 million, including amortization of Wolt-related intangible assets and capitalized software.
- Stock-based compensation was $249 million in Q3 and $609 million for the first nine months, compared with $122 million and $357 million, respectively, in the prior comparable periods.
- Operating cash flow declined to $344 million for the first nine months from $525 million, primarily because of the larger net loss and working-capital changes.
- Cash, cash equivalents, and marketable securities totaled approximately $4.2 billion at September 30, 2022, including $2.320 billion of cash and cash equivalents, $1.492 billion of short-term marketable securities, and $365 million of long-term marketable securities. Funds held at payment processors were $251 million.
- The company had a $400 million unsecured revolving credit facility maturing August 7, 2025. No amounts were drawn, and the company was in compliance with its covenants. Issued letters of credit totaled $131 million.
- The company repurchased 5.6 million Class A shares for $400 million during the quarter, completing its authorized repurchase program.
Material changes versus the prior comparable period
- Wolt materially expanded international operations and increased goodwill from $316 million at December 31, 2021 to $2.198 billion at September 30, 2022. Wolt acquisition consideration was $2.842 billion, primarily paid in DoorDash stock.
- International revenue increased to $121 million in Q3 2022 from zero in Q3 2021 and to $179 million for the first nine months from $11 million.
- Revenue growth was strong, but GAAP profitability deteriorated: Q3 net loss including redeemable non-controlling interests increased from $101 million to $296 million, and operating loss increased from $100 million to $308 million.
- Accumulated deficit increased from $2.081 billion at year-end 2021 to $3.206 billion at September 30, 2022.
- Insurance reserves increased from $143 million to $351 million, while litigation reserves declined from $107 million to $29 million.
- A Canadian grocery and convenience joint venture formed July 1, 2022. DoorDash committed to contribute approximately $74 million over three years and had contributed approximately $32 million at formation.
Guidance, outlook, commentary, and risks
The filing does not provide a clear formal quarterly or annual revenue or earnings guidance figure. Management stated that existing cash, cash equivalents, marketable securities, and the available revolving facility should meet working-capital and capital-expenditure needs for at least the next 12 months and beyond, while also noting that future operating losses and negative operating cash flow could require additional capital.
The company expects continued investment in platform development, international expansion, new categories, acquisitions, and public-company infrastructure. It also expects growth rates to moderate from the elevated levels experienced during the COVID-19 period.
- Worker-classification risk remains material. The company faces claims and regulatory proceedings concerning whether Dashers and Wolt courier partners are independent contractors or employees. The San Francisco District Attorney action presents a reasonably possible loss, but the potential range is not estimable.
- The company paid $100 million in the second quarter of 2022 to resolve the Marko settlement related to certain California and Massachusetts worker-classification claims.
- More than 40 jurisdictions with company operations had price-control measures affecting local-commerce platforms. Additional fee or commission restrictions could reduce demand or margins.
- The company is subject to tax audits, including a California payroll-tax audit, and various sales and indirect tax examinations. It reported $83 million of unrecognized tax benefits as of September 30, 2022.
- In August 2022, the company reported a vendor-related security incident involving unauthorized access to personal data of certain consumers and Dashers.
- International expansion, Wolt integration, foreign-exchange movements, inflation, fuel costs, competition, insurance claims, cybersecurity incidents, platform outages, and changing consumer demand could adversely affect results.
- In November 2022, after the reporting date, the company deposited $133 million into an escrow account for insurance collateral and was required to deposit two additional $66 million installments on December 1, 2022 and February 1, 2023.
Important facts for investors to verify
- Whether revenue growth can continue while cost of revenue, research and development, general and administrative expense, and stock-based compensation remain elevated.
- The sustainability and quality of Adjusted EBITDA and Contribution Profit relative to GAAP losses and cash flow.
- The operating performance, integration costs, impairment risk, and potential synergies associated with Wolt.
- The potential financial impact of Dasher classification proceedings, Proposition 22 litigation, price controls, and other labor or regulatory changes.
- The adequacy of insurance reserves and the timing and amount of required insurance collateral deposits.
- The company’s ability to preserve liquidity while funding international expansion, acquisitions, capitalized software, share repurchases, and ongoing operating losses.
- The magnitude and timing of approximately $2.8 billion of unrecognized stock-based compensation expense related to unvested equity awards.
- The impact of cybersecurity incidents, data-protection obligations, foreign-exchange volatility, inflation, and competitive pricing on future margins.