DoorDash, Inc. — FY2020 Form 10-K Summary
Business context and reporting period
DoorDash operates a local logistics platform connecting merchants, consumers, and independent-contractor Dashers in the United States, Canada, and Australia. Its principal offerings are the DoorDash Marketplace, Drive white-label delivery, Storefront, Pickup, DashPass, and related merchant services. This filing covers the fiscal year ended December 31, 2020; the company completed its IPO in December 2020.
- More than 450,000 merchants, 20 million consumers, and 1 million Dashers used the platform monthly as of December 31, 2020.
- Revenue is reported primarily on a net basis because DoorDash considers itself an agent for merchants and consumers in Marketplace transactions.
- DoorDash had 3,886 employees worldwide at year-end.
Financial and operating metrics
| Metric | FY2019 | FY2020 | Change |
|---|---|---|---|
| Revenue | $885 million | $2.886 billion | +226% |
| Total Orders | 263 million | 816 million | +210% |
| Marketplace GOV | $8.039 billion | $24.664 billion | +207% |
| Gross profit | $335 million | $1.421 billion | +324% |
| Gross margin | 38% | 49% | +11 points |
| Operating loss | $616 million | $436 million | Improved by $180 million |
| Net loss | $667 million | $461 million | Improved by $206 million |
| Net margin | (75%) | (16%) | Improved by 59 points |
| Adjusted EBITDA | $(475) million | $189 million | Improved by $664 million |
| Adjusted EBITDA margin | (54%) | 7% | +61 points |
Revenue growth was driven by higher consumer retention and engagement, new consumers, increased Drive orders, and COVID-19-related demand for delivery during dining restrictions and shelter-in-place measures. Management attributed margin improvement to greater Dasher and platform efficiency, lower refunds and credits as a percentage of Marketplace GOV, higher merchant fees, operating leverage, and scale.
FY2020 included $322 million of stock-based compensation expense, compared with $18 million in FY2019. General and administrative expense increased 127% to $556 million, including higher legal, tax, regulatory, personnel, chargeback, and stock-based compensation costs.
Cash flow, liquidity, debt, and commitments
- Net cash provided by operating activities was $252 million in FY2020, compared with cash used of $467 million in FY2019.
- Net cash used in investing activities was $192 million, including $106 million of property and equipment purchases, $53 million of capitalized software and website development costs, and $28 million for acquisitions.
- Net cash provided by financing activities was $4.0 billion, primarily from $3.3 billion of net IPO proceeds, $382 million of preferred-stock proceeds, and $333 million of convertible-note proceeds.
- At December 31, 2020, DoorDash held $4.345 billion of cash and cash equivalents, $514 million of marketable securities, and $146 million of funds held at payment processors.
- The company had a $400 million unsecured revolving credit facility, no amounts drawn, and $44 million of outstanding letters of credit. The facility matures in August 2025, and DoorDash was in compliance with its covenants.
- The $340 million of convertible notes issued in February 2020 were repaid in February 2021 for $375 million, including accrued interest.
- Contractual obligations totaled $949 million, comprising $533 million of operating lease commitments and $416 million of non-cancelable purchase commitments.
- Management stated that available cash, marketable securities, operating cash flow, and available revolver capacity should cover working-capital and capital-expenditure needs for at least the next 12 months.
Material changes versus the prior comparable period
- COVID-19 materially accelerated order volume, Marketplace GOV, and revenue growth. Management expects growth rates to decline as vaccines become broadly available and consumer behavior normalizes.
- Contribution Profit increased from a $200 million loss to $663 million, and Contribution Margin improved from negative 23% to 23%.
- Sales and marketing expense increased 61% to $957 million, but declined to 33% of revenue from 67%.
- Cost of revenue, excluding depreciation and amortization, increased 162% to $1.368 billion, but declined to 47% of revenue from 59%.
- DoorDash completed its IPO at $102 per share, issuing 33 million Class A shares and receiving approximately $3.3 billion in net proceeds. Outstanding preferred stock converted into common stock.
- Accrued expenses and other current liabilities rose to $943 million from $345 million, including increases in litigation reserves, tax liabilities, operational accruals, merchant and Dasher payables, contract liabilities, and insurance reserves.
- The previously identified material weakness in revenue-to-cash reconciliation and financial-reporting resources was reported as remediated as of December 31, 2020, although management noted that additional weaknesses could emerge.
Guidance, outlook, commentary, risks, and unusual items
- No formal numerical revenue or earnings guidance is provided in the filing. Management expects Total Orders, Marketplace GOV, Contribution Profit, Contribution Margin, Adjusted EBITDA, and related margins to fluctuate in the near term as DoorDash continues investing in growth.
- Management expects longer-term improvement from increased scale, consumer adoption, and operational efficiency, but also anticipates higher expenses, continuing investments, and potential future operating losses.
- Key risks include normalization after the pandemic, intense competition, price controls and commission caps, Dasher reclassification or new worker-protection requirements, regulatory uncertainty, litigation, tax exposure, cybersecurity incidents, platform outages, reliance on AWS and Stripe, and difficulty retaining merchants, consumers, and Dashers.
- California Proposition 22 became effective in December 2020 and increased certain Dasher-related costs. Similar laws in other jurisdictions could increase costs and reduce order volumes.
- Worker-classification matters included an anticipated approximately $85 million of individual settlement payments and an amended proposed California and Massachusetts class settlement of $89 million that had not received final approval as of the filing date. The San Francisco District Attorney’s action remained unresolved, with the potential loss range not estimable.
- DoorDash paid $3 million to resolve a District of Columbia action concerning its former Dasher pay model and recorded a $11 million impairment related to a former headquarters lease right-of-use asset after a subtenant stopped paying rent.
- Unrecognized stock-based compensation totaled approximately $1.1 billion at year-end, including $401 million related to the CEO Performance Award. The award covers up to 10.379 million shares and is tied to sustained stock-price targets.
- The company has significant ongoing legal, regulatory, tax, insurance, and worker-classification contingencies. The filing states that outcomes are inherently unpredictable and that losses could exceed recorded amounts.
Most important facts for investors to verify
- Whether pandemic-driven growth in orders, GOV, and revenue can be sustained after normalization of consumer behavior.
- Whether positive operating cash flow and Adjusted EBITDA persist after excluding stock-based compensation and legal, regulatory, and other adjustments.
- The future cash cost and accounting impact of worker-classification settlements, Proposition 22, potential reclassification, and other regulatory requirements.
- The adequacy of the $178 million litigation reserve, $149 million of sales and indirect tax liabilities, and $55 million of insurance reserves at December 31, 2020.
- The effect of $1.1 billion of unrecognized stock-based compensation, the CEO Performance Award, and future equity issuance on expenses and dilution.
- The company’s ability to maintain merchant, consumer, and Dasher growth while controlling incentives, marketing spending, Dasher costs, and competitive pricing pressure.
- The company’s reliance on third parties, especially AWS for cloud infrastructure and Stripe for payment processing.
- The sustainability of liquidity after repayment of the convertible notes and funding of lease, purchase, litigation, tax, and RSU-related obligations.