DoorDash, Inc. — Q1 2023 Form 10-Q Summary
Business Context and Reporting Period
DoorDash operates local commerce platforms, primarily DoorDash Marketplace and Wolt Marketplace, connecting merchants, consumers, and delivery workers. The platforms operated in more than 25 countries during the quarter and included marketplace, membership, pickup, catering, white-label delivery, storefront, and merchant technology services.
This unaudited quarterly report covers the three months ended March 31, 2023, with comparisons to the three months ended March 31, 2022. The Wolt acquisition, completed May 31, 2022, significantly expanded international operations and affected year-over-year comparability.
Key Financial and Operating Metrics
| Metric | Q1 2022 | Q1 2023 | Change |
|---|---|---|---|
| Total orders | 404 million | 512 million | 27% increase |
| Marketplace GOV | $12.4 billion | $15.9 billion | 29% increase |
| Revenue | $1.456 billion | $2.035 billion | 40% increase |
| Net revenue margin | 11.8% | 12.8% | 100 basis-point increase |
| GAAP gross profit | $662 million | $921 million | 40% increase |
| GAAP gross margin | 45.5% | 45.3% | 20 basis-point decrease |
| Contribution profit | $319 million | $533 million | 67% increase |
| Contribution margin | 21.9% | 26.2% | 430 basis-point increase |
| Adjusted EBITDA | $54 million | $204 million | Increase of $150 million |
| GAAP net loss | $167 million | $162 million | Loss narrowed by $5 million |
| Net loss attributable to common stockholders | $167 million | $161 million | Loss narrowed by $6 million |
| Basic and diluted loss per share | $0.48 | $0.41 | Loss per share improved |
Revenue growth was attributed primarily to higher Marketplace GOV, organic order growth, the Wolt acquisition, and improved logistics efficiency. International revenue increased from $11 million to $189 million, while U.S. revenue increased from $1.445 billion to $1.846 billion.
Cost of revenue increased 40% to $1.069 billion, mainly due to higher order-management and platform costs, increased insurance reserves, first-party distribution costs, and higher personnel-related costs. Sales and marketing increased 20% to $496 million, research and development increased 56% to $231 million, and general and administrative expense increased 16% to $285 million.
Depreciation and amortization more than doubled to $123 million, reflecting increased amortization of acquired intangible assets and capitalized software. Stock-based compensation increased from $129 million to $230 million.
Cash Flow, Liquidity, Debt, and Capital Resources
- Net cash provided by operating activities was $397 million, compared with $20 million of cash used in Q1 2022.
- Free cash flow was $316 million, compared with negative free cash flow of $91 million in Q1 2022.
- Investing activities used $10 million, including $39 million for property and equipment and $42 million for capitalized software and website development, partly offset by marketable-securities maturities and sales.
- Financing activities used $390 million, primarily for $392 million of common-stock repurchases.
- Cash, cash equivalents, and restricted cash decreased by $2 million to $2.186 billion during the quarter.
- Cash, cash equivalents, and marketable securities totaled approximately $3.7 billion at March 31, 2023, comprising $1.833 billion of cash and cash equivalents, $1.573 billion of short-term marketable securities, and $314 million of long-term marketable securities.
- The company had a $400 million unsecured revolving credit facility maturing August 7, 2025. No borrowings were outstanding, and the company was in compliance with its covenants.
- Letters of credit totaled $133 million, including $99 million issued under the revolving facility.
- The company believes existing liquidity and available borrowings are sufficient for working capital and capital-expenditure needs for at least the next 12 months and beyond.
Material Changes and Unusual Items
- DoorDash repurchased 6.8 million Class A shares for $392 million during the quarter at a weighted-average price of $58.03 per share under a newly authorized $750 million program. An additional 1.7 million shares were repurchased for $108 million in April 2023.
- The company recorded $2 million of restructuring charges and made $49 million of cash payments related to the workforce-reduction plan announced in November 2022. The plan eliminated approximately 1,250 positions, or about 7% of the workforce at that time; related payments and expenses were expected to be completed by the end of Q2 2023.
- Interest income increased to $28 million from $1 million because of higher average interest rates on cash and marketable securities.
- Accumulated deficit increased to $4.4 billion at March 31, 2023, from $3.8 billion at December 31, 2022.
- Goodwill increased to $2.403 billion, principally from foreign-currency translation and a $3 million Wolt purchase-accounting adjustment.
- Unrecognized stock-based compensation totaled approximately $2.3 billion at March 31, 2023, including $150 million associated with the CEO performance award.
Guidance, Outlook, Management Commentary, and Risks
The filing does not provide a clear numerical full-year revenue, EBITDA, or free-cash-flow guidance range. Management stated that it expects existing liquidity to support needs for at least the next 12 months and beyond, while also noting that future operating losses or negative operating cash flow may require additional capital.
Management highlighted continued investment in platform expansion, international growth, new categories and services, technology, sales and marketing, and the integration of Wolt. Contribution profit and Adjusted EBITDA improvement reflected revenue growth, higher net revenue margin, logistics efficiency, and operating leverage in sales and marketing.
- Worker-classification risk remains significant. The California Employment Development Department issued an assessment in January 2023 concerning payroll tax liabilities for Dashers; the company intends to appeal. The San Francisco District Attorney’s action regarding Dasher classification remains a reasonable possibility of loss, but the possible loss range is not estimable.
- In March 2023, the California Court of Appeal upheld nearly all of Proposition 22; a petition for review was filed with the California Supreme Court in April 2023. Changes to worker-classification rules could increase Dasher costs, require pricing changes, or affect order volume.
- The company faces ongoing litigation, regulatory inquiries, tax audits, insurance claims, consumer-protection matters, privacy and cybersecurity risks, intellectual-property claims, and personal-injury claims. The filing states that certain potential losses may exceed recorded reserves, but many ranges are not estimable.
- Competition is intense across food delivery, grocery, convenience, merchant technology, and international markets. Pricing pressure, incentives, marketing costs, and merchant or consumer churn could reduce margins.
- Wolt integration, international expansion, foreign-exchange movements, macroeconomic conditions, inflation, fuel costs, discretionary consumer spending, and geopolitical events may affect results.
- The company relies substantially on third parties, including Amazon Web Services, payment processors, mapping providers, insurers, and background-check providers.
- The company continues to report GAAP losses and expects expenses and investments to increase. Significant future stock-based compensation expense may continue to affect GAAP profitability and dilute stockholders.
Investor Verification Checklist
- Verify the sustainability of the improvement in net revenue margin, contribution margin, Adjusted EBITDA, and free cash flow, particularly after excluding stock-based compensation and other adjustments.
- Assess whether order and Marketplace GOV growth remains organic versus acquisition-driven, and evaluate Wolt’s contribution and integration costs.
- Review worker-classification proceedings, the California EDD assessment, Proposition 22 litigation, and potential impacts on Dasher costs and pricing.
- Reconcile the $3.7 billion liquidity figure to cash, marketable securities, restricted cash, payment-processor funds, and insurance collateral that is not freely available.
- Monitor the remaining share-repurchase authorization, subsequent repurchases, and the effect of repurchases relative to ongoing equity-award dilution.
- Evaluate the magnitude and timing of approximately $2.3 billion in unrecognized stock-based compensation and future amortization of acquired intangible assets.
- Review insurance reserves, litigation reserves, indirect-tax exposures, and the company’s statement that certain potential losses cannot currently be estimated.
- Confirm that disclosure controls and procedures were effective as of March 31, 2023; management reported reasonable assurance and no material changes to internal control over financial reporting.