DoorDash, Inc. 2021 Q3 Form 10-Q Summary
Business Context and Reporting Period
DoorDash operates a local logistics platform connecting merchants, consumers, and independent-contractor delivery providers (“Dashers”). Its principal offerings include the Marketplace, DashPass, Pickup, DoorDash for Work, Drive, and Storefront. This unaudited Form 10-Q covers the three and nine months ended September 30, 2021, compared primarily with the corresponding 2020 periods.
Key Financial Metrics
| Metric | Q3 2021 | Q3 2020 | 9M 2021 | 9M 2020 |
|---|---|---|---|---|
| Revenue | $1.275 billion | $879 million | $3.588 billion | $1.916 billion |
| Net loss | $101 million | $43 million | $313 million | $149 million |
| Net loss margin | (8)% | (5)% | (9)% | (8)% |
| Loss from operations | $100 million | $35 million | $298 million | $131 million |
| Adjusted EBITDA | $86 million | $86 million | $242 million | $95 million |
| Adjusted EBITDA margin | 7% | 10% | 7% | 5% |
| Total Orders | 347 million | 236 million | Approximately 1.0 billion | Not clearly provided in the filing text |
| Marketplace GOV | $10.416 billion | $7.252 billion | $30.8 billion | Not clearly provided in the filing text |
| Contribution Profit | $281 million | $215 million | $780 million | $433 million |
| Contribution Margin | 22% | 24% | 22% | 23% |
Revenue increased 45% year over year in Q3 and 87% in the first nine months. Total Orders increased 47% in Q3, while Marketplace GOV increased 44%. Growth reflected higher engagement, new consumers, geographic expansion, and increased Drive activity.
GAAP gross profit was $665 million in Q3 2021, representing a 52% gross margin, compared with $469 million and 53% in Q3 2020. Adjusted Gross Profit was $709 million, with a 56% Adjusted Gross Margin, versus 57% in the prior-year quarter.
Cash Flow, Liquidity, Debt, and Balance Sheet
| Item | September 30, 2021 | December 31, 2020 |
|---|---|---|
| Cash and cash equivalents | $2.861 billion | $4.345 billion |
| Short-term marketable securities | $1.299 billion | $514 million |
| Long-term marketable securities | $554 million | None reported |
| Total cash, cash equivalents, and marketable securities | $4.714 billion | Approximately $4.859 billion |
| Funds held at payment processors | $119 million | $146 million |
| Accumulated deficit | $1.926 billion | $1.613 billion |
- Operating cash flow for the first nine months was $525 million, compared with $315 million in the prior-year period.
- Investing cash flow was negative $1.520 billion, primarily due to $1.968 billion of marketable-securities purchases, $94 million of property and equipment purchases, and $73 million of capitalized software and website development costs.
- Financing cash flow was negative $487 million, including repayment of $333 million of convertible notes and $172 million of tax payments related to net share settlement of equity awards.
- The $340 million 2020 convertible notes were repaid in February 2021 for $375 million, including accrued interest. No convertible notes remained outstanding at September 30, 2021.
- DoorDash had a $400 million unsecured revolving credit facility, no borrowings outstanding, and $39 million of letters of credit issued. The company was in compliance with its covenants.
- Management stated that existing cash, cash equivalents, marketable securities, operating cash flow, and available revolver capacity should satisfy working capital and capital expenditure needs for at least the next 12 months.
Material Changes Versus the Prior Comparable Period
- Revenue growth outpaced expense discipline: Q3 total costs and expenses increased 50% to $1.375 billion, causing the operating loss to widen from $35 million to $100 million.
- Sales and marketing expense rose 54% to $446 million, driven by advertising, brand marketing, and higher Dasher acquisition costs. As a percentage of revenue, it increased from 33% to 35%.
- Research and development expense increased 180% to $115 million, principally due to higher headcount and stock-based compensation.
- Stock-based compensation increased to $122 million in Q3 and $357 million for the first nine months, compared with $3 million and $11 million, respectively, in the prior-year periods.
- Contribution Profit increased, but Contribution Margin declined from 24% to 22%, primarily due to first-party product sales and increased sales and marketing spending.
- Adjusted EBITDA was flat at $86 million in Q3, while Adjusted EBITDA Margin declined from 10% to 7% due to international expansion, new verticals, and higher Dasher acquisition costs.
- The company recognized $36 million of gift-card breakage revenue in Q3 after changing its estimate based on accumulated redemption history. Actual future breakage may differ from the estimate.
- A favorable resolution of a sales and indirect tax exposure reduced previously reserved liabilities by $29 million during the first nine months.
Guidance, Outlook, Commentary, and Risks
The filing does not provide a clear numerical revenue or earnings outlook for future periods. Management expects Total Orders, Marketplace GOV, and revenue to continue growing, but expects growth rates to decline as the effects of the COVID-19 pandemic wane and as the business becomes larger. Management also expects Contribution Profit, Contribution Margin, Adjusted EBITDA, and Adjusted EBITDA Margin to fluctuate in the near term while DoorDash invests in growth, international markets, new products, and operating infrastructure, with potential improvement over the long term if scale and efficiency increase.
- Worker classification: DoorDash continues to face litigation, arbitration, investigations, and regulatory scrutiny regarding Dasher classification, compensation, and its pay model. A California court found Proposition 22 unenforceable in August 2021; appeals were pending, and Proposition 22 remained in effect during further proceedings. Reclassification of Dashers as employees could materially increase costs and require changes to the business model.
- Legal settlements: A proposed California and Massachusetts worker-classification settlement totaled $100 million and had received preliminary approval. The company also reported approximately $75 million paid under certain arbitration settlements as of May 13, 2021, with approximately $3 million anticipated under remaining agreements.
- Competition and pricing: Intense competition may require higher incentives, lower commissions, consumer promotions, or greater marketing spending. Price controls in various jurisdictions have adversely affected, and may continue to affect, results.
- COVID-19 normalization: Pandemic-related demand benefited orders and Marketplace GOV, but management expects associated growth acceleration to diminish.
- Stock-based compensation and dilution: At September 30, 2021, approximately $1.7 billion of unrecognized stock-based compensation remained for RSUs and other awards, including $318 million related to the CEO Performance Award.
- Subsequent strategic transactions: On October 19, 2021, DoorDash closed a $400 million preferred-share investment in a European instant-grocery delivery company. On November 9, 2021, it agreed to acquire Wolt Enterprises Oy for approximately €7 billion in stock, subject to regulatory and other conditions, with closing expected in the first half of 2022.
- Other risks: Material risks include cybersecurity and data privacy incidents, dependence on AWS and payment processors, insurance and personal-injury claims, indirect-tax assessments, foreign-exchange exposure, execution of international expansion, and volatility in the Class A common stock.
Important Facts for Investors to Verify
- Whether order and Marketplace GOV growth remains durable after COVID-19-related demand normalizes.
- The sustainability of positive operating cash flow, given that nine-month cash generation was significantly supported by $357 million of non-cash stock-based compensation and working-capital changes.
- The effect of Dasher classification developments, Proposition 22 litigation, price controls, and other regulatory changes on delivery costs, pricing, and order volume.
- The size, timing, and accounting treatment of remaining litigation and regulatory exposures.
- The future expense and dilution impact of approximately $1.7 billion of unrecognized stock-based compensation.
- The terms, regulatory status, financing implications, dilution, and integration risks associated with the proposed Wolt acquisition.
- Whether Contribution Margin and Adjusted EBITDA Margin can recover as investments in growth, international markets, and Dasher acquisition moderate.