DoorDash, Inc. 10-Q Summary
Business context and reporting period
DoorDash operates a local logistics platform connecting merchants, consumers, and independent-contractor Dashers. Its principal offerings include the Marketplace, DashPass, Pickup, DoorDash for Work, Drive, and Storefront. This unaudited quarterly report covers the three months ended March 31, 2021, with comparison to the same period in 2020.
Key financial metrics
| Metric | Q1 2020 | Q1 2021 | Change |
|---|---|---|---|
| Revenue | $362 million | $1.077 billion | +198% |
| Gross profit | $148 million | $493 million | +233% |
| Gross margin | 41% | 46% | +5 percentage points |
| Loss from operations | $123 million | $99 million | Improved by $24 million |
| Net loss | $129 million | $110 million | Improved by $19 million |
| Net margin | (36%) | (10%) | Improved by 26 percentage points |
| Adjusted EBITDA | $(70) million | $43 million | Improved by $113 million |
| Adjusted EBITDA margin | (19%) | 4% | Improved by 23 percentage points |
| Total Orders | 103 million | 329 million | +219% |
| Marketplace GOV | $3.083 billion | $9.913 billion | +222% |
| Contribution Profit | $25 million | $209 million | +736% |
| Contribution Margin | 7% | 19% | +12 percentage points |
Revenue growth lagged Marketplace GOV growth because of higher Dasher payouts, including costs associated with California Proposition 22 and a period of Dasher undersupply, as well as a higher mix of DashPass orders carrying reduced consumer fees.
Cash flow, liquidity, debt, and balance sheet
- Cash provided by operating activities was $166 million, compared with $125 million used in Q1 2020. The improvement was supported by $97 million of stock-based compensation, $29 million of depreciation and amortization, and favorable working-capital changes.
- Cash used in investing activities was $7 million, including $32 million of property and equipment purchases and $22 million of capitalized software and website development costs.
- Cash used in financing activities was $496 million, primarily reflecting repayment of the convertible notes, $166 million of taxes paid for net share settlement of equity awards, and $10 million of deferred offering costs.
- Cash, cash equivalents, and restricted cash declined by $337 million during the quarter to approximately $4.008 billion at March 31, 2021.
- Cash and cash equivalents were $4.007 billion, marketable securities were $467 million, and funds held at payment processors were $127 million. Management stated that cash, cash equivalents, marketable securities, and available credit were sufficient for at least the next 12 months.
- The $340 million convertible notes were repaid in February 2021 for $375 million, including accrued interest. No amounts were drawn under the revolving credit facility; $36 million of letters of credit were outstanding.
- The company had an unsecured revolving credit facility with $300 million of commitments, potentially increasing to $400 million upon satisfaction of the IPO-related condition. The facility matures August 7, 2025, and the company was in compliance with its covenants.
- Accumulated deficit increased from $1.613 billion at December 31, 2020 to $1.723 billion at March 31, 2021.
Material changes versus the prior comparable period
- Revenue, orders, and Marketplace GOV accelerated substantially, driven by consumer retention and engagement, new consumers, Drive growth, and COVID-19-related increases in delivery demand.
- Cost of revenue increased 190% to $563 million but declined slightly as a percentage of revenue, from 53% to 52%, reflecting operating and product efficiencies.
- Sales and marketing increased 119% to $333 million but declined from 42% to 31% of revenue, reflecting operating leverage.
- Research and development increased 148% to $82 million, while general and administrative expense increased 106% to $169 million. Both declined as percentages of revenue.
- Stock-based compensation increased from $5 million to $97 million. The company reported approximately $1.2 billion of unrecognized stock-based compensation expense related to RSUs and other equity awards at March 31, 2021.
- The company paid $166 million for tax withholding and remittance obligations associated with vested equity awards and withheld 802,000 shares in connection with net share settlement.
- A $29 million favorable resolution of a sales and indirect tax exposure reduced previously recorded liabilities and benefited general and administrative expense.
- Capitalized software and website development costs increased materially, with $43 million capitalized in Q1 2021 compared with $11 million in Q1 2020.
Guidance, outlook, management commentary, risks, and unusual items
- Management did not provide specific financial guidance in the filing. It expects near-term fluctuations in Contribution Profit, Contribution Margin, Adjusted EBITDA, and Adjusted EBITDA Margin while continuing to invest for growth, with potential long-term improvement from scale and efficiency.
- Management expects the unusually high growth rates associated with COVID-19-related demand to decline following widespread vaccine rollout. Total Orders and Marketplace GOV are expected to continue growing, but at slower rates.
- Proposition 22 increased Dasher-related costs in California. The company may raise fees and commissions to offset some costs, potentially reducing order volumes and margins. Similar legislation in other jurisdictions could have comparable effects.
- The company continues to face substantial worker-classification litigation and regulatory scrutiny. A proposed $100 million California and Massachusetts settlement was filed in April 2021 but had not yet received final court approval as of the filing.
- More than 35,000 Dashers and Caviar delivery providers had filed or expressed an intention to file arbitration demands as of May 13, 2021. Agreements covering approximately 23,000 individuals had resulted in approximately $75 million of payments, including attorneys’ fees, with approximately $8 million of additional payments anticipated under remaining agreements.
- The San Francisco District Attorney’s worker-classification action remained unresolved. The company stated that a loss was reasonably possible, but the potential range was not estimable.
- Other principal risks include competition, pricing and commission controls, Dasher availability and costs, merchant and consumer retention, cybersecurity and data privacy, payment processing and cloud-provider dependence, tax assessments, personal injury claims, and volatility associated with a newly public company.
- The company reported effective disclosure controls at March 31, 2021 and no material changes to internal control over financial reporting during the quarter. A prior material weakness had been remediated as of December 31, 2020, according to management.
Most important facts for investors to verify
- Whether COVID-19-related demand normalizes faster or more sharply than expected and how that affects orders, GOV, revenue, and margins.
- The sustainability of positive Adjusted EBITDA and operating cash flow after excluding $100 million of stock-based compensation and other adjustments from Adjusted EBITDA.
- The magnitude and timing of future stock-based compensation expense, equity-award tax withholding, dilution, and related cash requirements.
- The final approval and cash cost of the proposed $100 million worker-classification settlement and the outcome of remaining arbitration, regulatory, and litigation matters.
- The ongoing effect of Proposition 22 and similar laws on Dasher costs, pricing, order volumes, and contribution margins.
- Cash usage, capital expenditures, and whether the company continues to require external financing despite its substantial post-IPO liquidity.
- Whether competition, merchant commission pressure, consumer promotions, DashPass adoption, and pricing controls constrain take rate and profitability.