DoorDash, Inc. Form 10-Q Summary
Business context and reporting period
DoorDash operates a local logistics platform connecting merchants, consumers, and independent-contractor Dashers. Its principal offerings are the DoorDash Marketplace, DashPass, Pickup, DoorDash for Work, Drive, and Storefront. This unaudited Form 10-Q covers the quarter and six months ended June 30, 2021, with comparisons to the corresponding 2020 periods.
Financial performance and liquidity
| Metric | Three months ended June 30, 2021 | Three months ended June 30, 2020 | Six months ended June 30, 2021 | Six months ended June 30, 2020 |
|---|---|---|---|---|
| Revenue | $1,236 million | $675 million | $2,313 million | $1,037 million |
| Net income (loss) | $(102) million | $23 million | $(212) million | $(106) million |
| Income (loss) from operations | $(99) million | $27 million | $(198) million | $(96) million |
| Net margin | (8)% | 3% | (9)% | (10)% |
| Adjusted EBITDA | $113 million | $79 million | $156 million | $9 million |
| Adjusted EBITDA margin | 9% | 12% | 7% | 1% |
| Contribution Profit | $290 million | $193 million | $499 million | $218 million |
| Contribution Margin | 23% | 29% | 22% | 21% |
Total Orders increased 69% year over year to 345 million in the second quarter, while Marketplace GOV increased 70% to $10.5 billion. For the six-month period, Total Orders increased 120% to 674 million and Marketplace GOV increased 121% to $20.4 billion.
Revenue growth reflected increased consumer engagement, new consumers, and greater Drive activity. Cost of revenue increased 72% year over year in the quarter, but declined to 45% of revenue from 47%. Sales and marketing increased 154% to $427 million, or 35% of revenue versus 25%, primarily because of higher Dasher acquisition costs and elevated advertising rates. Research and development increased 163% to $100 million, and general and administrative expense increased 145% to $216 million.
Stock-based compensation was $138 million in the quarter and $235 million for the first six months, compared with $3 million and $8 million, respectively, in the prior-year periods. The company had approximately $1.6 billion of unrecognized stock-based compensation expense related to RSUs and other equity awards as of June 30, 2021.
Net cash provided by operating activities was $418 million for the first six months, compared with $85 million in 2020. The increase was largely driven by non-cash stock-based compensation of $235 million and changes in operating liabilities. Investing activities used $936 million, primarily for purchases of marketable securities, property and equipment, and capitalized software. Financing activities used $492 million, including repayment of the convertible notes and $172 million of taxes paid for net share settlement of equity awards.
At June 30, 2021, the company held $3.3 billion of cash and cash equivalents and $1.3 billion of marketable securities, or approximately $4.7 billion of combined liquidity, excluding funds held at payment processors of $120 million. The company had no borrowings under its revolving credit facility, $39 million of outstanding letters of credit, and approximately $400 million of available revolving commitments. Total assets were $6.2 billion, total liabilities were $1.6 billion, and accumulated deficit was $1.8 billion.
Material changes versus the prior comparable period
- Quarterly revenue rose 83% to $1.236 billion; six-month revenue rose 123% to $2.313 billion.
- The company shifted from quarterly net income of $23 million in 2020 to a net loss of $102 million in 2021. The six-month net loss widened from $106 million to $212 million.
- Adjusted EBITDA improved in absolute terms, but margin declined from 12% to 9% in the quarter because sales and marketing grew faster than revenue.
- Contribution Profit increased, but Contribution Margin fell from 29% to 23% in the quarter, primarily due to higher Dasher acquisition spending.
- The company repaid its $340 million principal amount of convertible notes, plus accrued interest, for $375 million in February 2021.
- Marketable securities increased from $514 million at December 31, 2020 to $1.334 billion at June 30, 2021, while cash and cash equivalents declined from $4.345 billion to $3.334 billion.
- The company settled restricted stock units and paid $172 million of related tax withholding and remittance obligations during the first six months.
- A favorable sales and indirect tax resolution reduced previously reserved liabilities by $29 million during the first six months.
- The company changed certain U.S. merchant pricing models on April 27, 2021, offering restaurant partners a choice of three delivery commission rates tied to different levels of marketing support and services.
Guidance, outlook, commentary, and risks
Management expects Total Orders, Marketplace GOV, Contribution Profit, Contribution Margin, Adjusted EBITDA, and Adjusted EBITDA Margin to fluctuate in the near term as the company invests in growth, new products, geographic expansion, marketing, and platform improvements. Management expects these measures to improve over the long term with greater scale and operating efficiencies, but the filing does not provide specific quarterly or annual revenue or earnings guidance.
The company expects growth rates to decline as the effects of the COVID-19 pandemic and related changes in consumer behavior moderate, particularly following broader vaccine adoption. It also expects continued investment and potentially additional operating losses or negative cash flows, although existing liquidity and available credit are expected to fund working capital and capital expenditures for at least the next 12 months.
Worker classification remains a significant contingency. A proposed $100 million California and Massachusetts settlement received preliminary approval in July 2021, subject to final court approval. The company also disclosed approximately $75 million paid under individual arbitration settlements covering approximately 23,000 Dashers and Caviar delivery providers, with approximately $8 million of additional payments anticipated under remaining agreements. A San Francisco District Attorney action remains pending, and the possible loss range is not estimable.
Other key risks include reclassification of Dashers as employees, Proposition 22 and other evolving labor laws, price controls on delivery platforms, intense competition, higher Dasher incentives and acquisition costs, COVID-19-related demand normalization, cybersecurity and privacy incidents, payment processor and cloud-provider dependence, indirect tax assessments, litigation and regulatory investigations, seasonal volatility, and continued substantial stock-based compensation and related cash tax requirements.
Disclosure controls and procedures were assessed as effective at a reasonable assurance level, and the company reported no material changes to internal control over financial reporting during the quarter.
Important facts investors should verify
- Whether order and Marketplace GOV growth remains strong as pandemic-related demand normalizes.
- Whether sales and marketing spending, particularly Dasher acquisition costs, moderates enough to support improving margins.
- The cash-flow impact of RSU tax withholding, future equity settlements, and ongoing stock-based compensation.
- Final approval and total cost of the $100 million worker misclassification settlement, remaining arbitration claims, and the San Francisco District Attorney proceeding.
- Potential financial effects of Dasher reclassification, Proposition 22 implementation, and new labor or price-control legislation.
- Whether the company can sustain positive operating cash flow despite GAAP losses and continued investment.
- Changes in competition, merchant commission rates, consumer fees, Dasher pay, and retention across Marketplace and Platform Services.
- Any additional sales, indirect, payroll, or income tax assessments beyond recorded reserves.