DoorDash, Inc. — Q2 2023 Form 10-Q Summary
Business context and reporting period
DoorDash operates a local commerce platform connecting merchants, consumers, and independent delivery contractors (“Dashers”). Its DoorDash and Wolt Marketplaces, membership products, and Platform Services operated in more than 25 countries. The filing covers the quarter and six months ended June 30, 2023, with comparisons to the prior-year periods. The financial statements are unaudited and presented under U.S. GAAP.
Key financial and operating metrics
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Revenue | $2.133 billion | $1.608 billion | $4.168 billion | $3.064 billion |
| Revenue growth | 33% | — | 36% | — |
| Total Orders | 532 million | 426 million | Not provided | Not provided |
| Marketplace GOV | $16.468 billion | $13.081 billion | Not provided | Not provided |
| GAAP gross profit | $951 million | $686 million | $1.872 billion | $1.348 billion |
| GAAP gross margin | 44.6% | 42.7% | 44.9% | 44.0% |
| Loss from operations | $(211) million | $(273) million | $(382) million | $(446) million |
| Net loss attributable to DoorDash | $(170) million | $(263) million | $(331) million | $(430) million |
| Basic and diluted loss per share | $(0.44) | $(0.72) | $(0.85) | $(1.21) |
| Adjusted EBITDA | $279 million | $103 million | $483 million | $157 million |
| Operating cash flow | Quarterly amount not separately stated | Quarterly amount not separately stated | $790 million | $145 million |
| Free cash flow | $311 million | $86 million | $627 million | $(5) million |
Q2 Net Revenue Margin was 13.0%, compared with 12.3% in Q2 2022. Contribution Profit increased to $620 million from $381 million, and Contribution Margin increased to 29.1% from 23.7%. Adjusted EBITDA margin as a percentage of Marketplace GOV increased to 1.7% from 0.8%.
As of June 30, 2023, DoorDash held $1.904 billion of cash and cash equivalents, $1.552 billion of short-term marketable securities, and $381 million of long-term marketable securities. Including these securities, liquidity was approximately $3.9 billion. Funds held at payment processors were $297 million. The company had no revolving loans outstanding under its $400 million unsecured revolving credit facility and had $134 million of letters of credit outstanding.
Material changes versus the prior comparable period
- Total Orders increased 25% and Marketplace GOV increased 26% year over year, driven by consumer and engagement growth and the inclusion of Wolt.
- Revenue grew faster than Marketplace GOV, which management attributed primarily to improved logistics efficiency.
- Gross margin improved by 1.9 percentage points in Q2, while operating losses narrowed from $273 million to $211 million.
- Net loss attributable to DoorDash declined by $93 million in Q2 and by $99 million for the first six months.
- Sales and marketing expense increased 12% in Q2, while research and development increased 31% and general and administrative expense increased 17%. Legal, tax, and regulatory expenses contributed materially to the general and administrative increase.
- Depreciation and amortization increased 58% in Q2 and 79% for the first six months, primarily due to capitalized software and acquired Wolt intangible assets.
- Stock-based compensation increased to $311 million in Q2 and $541 million for the first six months, compared with $231 million and $360 million, respectively, in the prior-year periods.
- Operating cash flow increased substantially, but cash, cash equivalents, and restricted cash declined by $55 million during the first six months, primarily because of $693 million of share repurchases.
- DoorDash repurchased 4.4 million Class A shares for $301 million in Q2 and 11.2 million shares for $693 million in the first six months. Approximately $57 million remained under the $750 million authorization at June 30, 2023.
Outlook, commentary, risks, and unusual items
Management stated that existing cash, cash equivalents, marketable securities, and available revolver capacity should be sufficient for working capital and capital expenditures for at least the next 12 months and beyond. The filing does not provide clear formal numerical revenue or earnings guidance.
- The company expects continued investment in platform development, geographic and category expansion, sales and marketing, and strategic transactions. It cautions that losses and negative operating cash flow could recur.
- A non-cancellable third-party platform service commitment of $892 million extends through May 2028.
- DoorDash recorded $77 million of litigation reserves and $568 million of insurance reserves in accrued current liabilities at June 30, 2023, compared with $37 million and $418 million, respectively, at December 31, 2022.
- The California Employment Development Department issued an assessment related to payroll tax liabilities for Dashers classified as independent contractors. DoorDash recorded an accrual and intends to appeal.
- The company faces continuing litigation and regulatory challenges concerning Dasher classification, compensation, pricing, consumer protection, taxes, privacy, data security, and payment practices. The San Francisco District Attorney matter presents a reasonable possibility of loss, but the possible range is not estimable.
- California Proposition 22 was largely upheld by an appellate court in March 2023, but the California Supreme Court granted review in June 2023. Changes to worker-classification rules could increase Dasher costs, require pricing changes, or materially alter the operating model.
- Key operating risks include intense competition, consumer and merchant retention, Dasher supply and compensation, price controls, international expansion, foreign exchange, cybersecurity, reliance on AWS and payment processors, insurance reserve adequacy, macroeconomic conditions, and integration of Wolt.
- At June 30, 2023, the company had approximately $2.5 billion of unrecognized stock-based compensation related to RSUs and other awards, including $123 million related to the CEO Performance Award. Future expense and share issuance may affect earnings and dilution.
Important facts for investors to verify
- Whether improved logistics efficiency and higher Net Revenue Margin are sustainable as order volume, geographies, and product mix change.
- The reconciliation and period definitions for reported non-GAAP metrics, particularly Free Cash Flow; the filing reports $627 million for the six months and separately cites $311 million for Q2.
- The potential financial and operational impact of the California EDD assessment, Dasher-classification proceedings, Proposition 22 review, and other regulatory actions.
- The adequacy of litigation and insurance reserves, including the increase in accrued litigation and insurance reserves.
- The effect of $693 million of share repurchases, substantial future stock-based compensation expense, and potential dilution from outstanding equity awards.
- Execution of the Wolt integration and the profitability of international, grocery, convenience, and other newer categories.
- Compliance with the $892 million platform-services purchase commitment and the terms, capacity, and covenants of the revolving credit facility.