Good day and thank you for standing by. Welcome to the DoorDash Q1 2021 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Mr. Andy Hargreaves. Please go ahead. Thanks, Mei. Hello, everyone. And thanks for joining us for our first quarter 2021 earnings call. I am pleased to be joined today by Co-founder, Chair and CEO, Tony Xu; and CFO, Prabir Adarkar. We’d like to remind everyone that we’ll be making forward-looking statements during this call, including statements regarding our expectations of our business, future financial results, guidance, and strategy. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those described in our forward-looking statements and such risks are described in our risk factors, including in our SEC filings, including Form 10-K. You should not rely on our forward-looking statements as predictions of future events. We disclaim any obligation to update any forward-looking statements except as required by law. During this call, we will discuss certain non-GAAP financial measures. Information regarding our non-GAAP financial results, including a reconciliation of such non-GAAP results to the most directly comparable GAAP financial measures may be found in our investor letter available on our Investor Relations website. These non-GAAP measures should be considered in addition to our GAAP results and are not intended to be a substitute for our GAAP results. Finally, this call in its entirety is being audio webcast on our Investor Relations website, and audio replay of the call will be available on our website shortly after the call ends. We’re going to go straight into questions today. So, Mei, please take the first question.

Our first question is from the line of Lloyd Walmsley from Deutsche Bank. Your line is now open.

Thanks for taking the question. Two if I can. Just first in the shareholder letter, you called out increased frequency from existing customers who order convenience and I’m curious if you can just put a finer point on that. Is that increases in frequency even on the food delivery side just more habituation to the app or is it more just a comment that convenience is additive and not cannibalistic? And I guess maybe in areas where the product is more full in terms of other things that you offer on the platform on top of food, convenience and other stuff? Are there similar dynamics where just the more categories people use it across, the more they use within individual categories? And then the second question would just be as far as the new commission packages, how are you seeing kind of merchants react to the new packages? Are they opting into the higher value bundles and what should we kind of expect in terms of take rate impact from that? Anything you can share that would be great. Thanks.

Hi, Lloyd. It’s Prabir. Why don’t I take the first question on the frequency comment and then Tony will take the second. It’s the latter thing you mentioned, which is what we actually find is that these categories are symbiotic with one another. So customers who order from new categories subsequently increase their frequency with restaurants by a greater amount than those who do not order from new categories. To definitely say, once you begin to use multiple categories, that actually increases your engagement with the core restaurant category. And then the other thing we found is that customers will actually engage with us across different categories beyond food, also creating stronger retention and engagement versus restaurants are pleased. Obviously, consumers are pleased with all of our restaurant selling it. So we’re actually seeing strength because the addition of categories basically makes a user stickier on our platform.

Yeah. Hey, Lloyd. On the second question, the business impact is reflected in our guidance and it’s something that we feel pretty comfortable with. As we tested this program, as we do with all of our new initiatives with merchants for about six months. So it’s meeting our expectations in terms of our rollout so far. But I thought I’d take a second to give you a bit of the guiding principles or the design principles behind why we shipped what we announced a couple of weeks ago. If you take a step back, we took quite a lot of actions during the pandemic to make sure that the businesses would be successful, that’s the entirety of why DoorDash was founded to make sure that these local businesses would succeed. And so during the pandemic, I’m very proud that the actions we took as well as hundreds of millions of dollars in investments we made allow these businesses to have eight times the odds of surviving the pandemic versus the average restaurant in the industry. Now, as we get out of the pandemic and as we start heading into reopening, which I’m very excited about, given where the country is in terms of vaccination rates increasing and such, we wanted to give these business owners and have been speaking with them for about six months, seven months about this, the best chance of getting out of the gate as fast as possible. And what we heard over and again was that they really wanted choice, choice on the spectrum of investing in growth and in which case, they can pick some of the higher price plans that allow them participation in programs like DashPass, where DoorDash is covering the cost of delivery or choice in the form of greater profitability, depending on how they’re seeing staffing and things like that, as they get into recovery. Choice in the form of whether the orders are coming from the DoorDash app or their own channel, where we’re offering a commission-free, no-cost product called DoorDash Storefront, which will allow them to build their own digital channels, as well as choice in the form of non-delivery use cases like pickup where we slashed rates from 15% to 6%. That really was the reason why we shifted to what we announced and we had been working with these merchants for about six months on it. In terms of the financial impact or the impact on the business, all of that is reflected in our guidance.

Just to add one point, if you actually look at these programs, there is an offset between the lower commission rate that comes with a higher consumer fee. It’s not a perfect offset, but just keep that in mind as you think about the ramifications going forward.

Next in line is Douglas Anmuth from J.P. Morgan. Your line is open.

Thanks for taking the questions. First, I just hope to talk more about your thoughts on the impact of reopening, and perhaps, just how your thoughts have changed relative to six months ago, if it has? And then the second question, just DoorDash supply, how do you get comfortable with how that can play out here in the coming months given some of the supply issues, of course, better dealt with ridesharing in some other areas? Thanks.

Hey, Doug. Thanks for the question. So the first thing I’ll say is, we were encouraged by the trends that we saw in the first quarter, particularly as markets reopened and in-store dining grew, the negative impact to consumer behavior was smaller than we initially anticipated and that enabled us to actually beat our Q1 guidance by 9%. What’s driving that is the commentary we made even at our earlier earnings call we talked about consumer behavior being sticky. So as consumers begin to use the product, new habits develop and those habits tend to persist and part of that’s been bolstered by the fact that the product has gotten routinely better over the course of time. Just over the course of this past year, the selection on the platform has improved in terms of the number of restaurants, as well as new categories, such as convenience stores and grocery stores. Quality has improved, and our affordability has gotten better. All these things continue to adapt and support the continued stickiness for consumers. As we look to the future, we’re optimistic about the balance of the year, which led to an increase of guidance by about 15% to $35 billion to $38 billion of GOV. On your second question, I know rideshare is focused on this. But it’s important to remember that rideshare drivers are a different pool of people than Dashers. Over 75% of our Dashers are students or other part-time or full-time jobs. On average, they dash less than 4 hours per week. Dashers don’t require a car; they can dash on bikes. Our population of Dashers tends to skew more female, and that’s likely because you don’t have to share your personal space with another individual. Our survey data shows that 21% of our Dashers are not building for rideshare, and only 6% say they prefer rideshare. So it’s a completely different pool of people. We had a little bit of a supply blip in March that we will solve the issue. We acted quickly and took a bunch of actions, including improving the efficiency of the logistics network, expanding our marketing funnels, and improving our conversion rates for Dashers. The result is that we’re now acquiring more Dashers per week than we were previously. So while supply is tight today, we expect that to be the case for the foreseeable future.

Thank you, Prabir.

Next is Youssef Squali from Truist Securities. Your line is now open.

Great. Thank you very much, and congrats on the impressive quarter. Just two if I may. First, can you just speak to the recent trends that you’ve seen so far? In May, I think your guide speaks to it, but anything to highlight in terms of just the competitive intensity and how you guys feel about the growth in the non-food delivery business in the quarter and its contribution to it? And second, as you look at the diversification that you’re embarking on into non-food, convenience, grocery, etc., I was wondering if you can just speak to the broader, well, first, how big you think that business could become over time? Is this a situation where you could see a scenario where half of your business is coming from these new initiatives, say, over the next three to five years? But probably also just how do you see that impacting the take rates over time? Thank you.

Sure. Hey, it’s Tony. I’ll start. So far the quarter is off to a great start. And what I’ll say is that the impact of reopening really has been more muted than we expected. Certainly, when we were looking at this last fall and even as we were starting to prepare for this towards even last summer. With respect to some of the new categories, we’re very excited about our progress. I mean, growing 40% quarter-on-quarter, our non-restaurant orders now totaling over 7% of our total orders. This happened in a pretty short period of time. We really in earnest launched our second category outside of restaurants in convenience, which we’re now the market leader in just under a year. Things are certainly ahead of plan and exceeding our expectations there. With respect to I think the broader question of how this plays out and unfolds, as I mentioned during our very first earnings call, we’re really investing in four areas. We’re investing, certainly, to grow our core business and we’re seeing greater strength there, especially as we saw record engagement in the quarter, as well as our investment into other use cases, such as pickup, where we’re also the market leader now, or the office business like DoorDash for Work. We are investing certainly into new categories. We’re also investing into the build-out of our platform, so DoorDash is as much a marketplace or app that grows your orders, as well as a platform that gives you products like DoorDash Drive and DoorDash Storefront to help merchants build their own channels. Finally, international market growth. So those are the four buckets where we’re investing. We’re very excited by both how things are progressing in these areas, as well as what that might mean for diversification in the future.

And Youssef, if I could just add to that. Some of the markets you mentioned, whether it’s convenience or grocery, these are extremely large markets; convenience is a $200 billion and $250 billion market, and grocery is an $800 billion trillion market. The unique thing is both of these have very low penetration rates. If you think about our platform and the success that we’re enjoying in convenience up to this point, despite launching that business 12 months ago. It’s because of the extensibility of our platform. We can take a hybrid approach that pairs together, not just third-party partners in our marketplace, like CVS, Walgreens, 7-Eleven, and even Rite Aid that we recently announced, but also we’re bringing our own first-party selection to consumers, and that’s to provide consumers a choice and serve them in underserved neighborhoods. So penetration is extremely low today, and there’s a lot of runway for growth.

Next question is from the line of Ross Sandler from Barclays. Your line is now open.

Hey, guys. Just a quick follow-up on our last one and then one other one. So the 7% of orders for non-restaurant, can you talk about the unit economics of that business? I think Instacart is mostly getting its profit pool from ads. Gopuff is a one-key business. So how do we think about the blended offering that you guys have and EBITDA per order? I think you mentioned is a little bit lower for convenience. Any color there would be helpful on the EBITDA per order. Then it sounds like based on the letter that you guys are expecting a little bit of a drop-off into the summer, which I think everybody can totally understand. The question is more like, as you look at the data, are you seeing new customers that came in in 2020 and those ones that are going to drop off or is it that the higher frequency DashPass folks who order like 5 times a month? I’m just going to order last, when we get to the summer. Any color on that would be helpful? Thanks, guys.

On the first question regarding the unit economics, we’re not actually breaking out these economics with these orders. What I will say is where we’re fortunate is that our core U.S. business is cash generative, and we’re taking that cash and investing it to grow some of the new verticals, such as convenience or expand into new merchant services like storefront. We’re fortunate to have a profitable core business that allows us to invest in various aspects. On the question regarding the summer seasonality in the trajectory, the reticle is baked into the guidance. Starting about April and going all the way through to later day, usually, as the weather improves, we see consumers engage in dining, and that behavior is generally consistent across both new customers that we recently acquired, as well as existing customers that have been active for a while. It could be just behavior that we tend to see as the weather improves and people want to go out a little bit more. You don’t see it in our historical numbers partly because of the rapid pace of customer acquisition. But if you look at it on a cohort level, it’s there for both new and existing cohorts.

Next is Ralph Schackart from William Blair. Your line is now open.

Good afternoon and thanks for taking the question. I’m just curious if you could provide maybe a little more color on Dasher pay and incentive trends that you’ve seen both in the quarter, maybe kind of quarter-to-date, and on the low talked about 40% pay increase and 30% decrease for the cost of consumers over a two-year period. It sounds like you’re in a better supply situation now, which is great. Just curious if you could give some more color on kind of recent trends and then signups or some of that’s getting passed on to the consumer. Eventually, as government incentive programs subside, do you think the driver incentives will normalize over time? Thank you.

Yes, maybe I’ll take that question. The summary is we’re expecting take rates to improve sequentially from Q1 to Q2, and in part that’s driven by the fact that Dashers will normalize because the supply state is actually better. The problem has been resolved and will drive the market back to health. Taking a step back just in terms of overall Dasher pay, we’ve said before in the context of overall strategy, our North Star is to reduce consumer prices, reduce the fees and commissions of merchants and increase earnings per Dasher. The $40 million year-over-year increase in Dasher earnings per active hour is consistent with our general philosophy. So as we continue to squeeze out more efficiency out of the logistics network and continue to improve our operations, that results in unit economic improvements. We invest a lot of that back into the ecosystem by taking down fees and by increasing Dasher earnings.

Great. And if I could squeeze one more. And just under the pickup opportunity, you talked about on the call. It seems a pretty good opportunity for you post-COVID environment. Maybe just talk about sort of how that’s been received by consumers and what we’ve learned. As you had sort of technology around that long-term, what are your views on this opportunity? Thank you.

Sure, I’ll take that. It’s Tony. I think the greatest privilege we probably have in this business is that people eat 22 to 25 times a week, maybe more, maybe less during this pandemic. But what I will say is that when someone is doing that kind of frequency of consumption, it’s never going to happen in one method. It’s never going to be all in cooking; it’s never going to be all in eating out or delivery. Especially as we get out of the pandemic, we’re going to see a return to those behaviors that I think are now priced commodities, grabbing a coffee on the way to work, or doing a walk along the block with your colleagues to grab a snack. We’re seeing quite a lot of excitement around the pickup products, not just because people are tired of being stuck at home, but because we consume so often, this becomes one of the natural use cases that govern our behavior. So we’re very excited to continue investing there.

Next is Deepak Mathivanan from Wolfe Research. Your line is now open.

Great, thanks for taking the question, guys. One for Tony and one follow-up for Prabir. Can you talk about your partnership strategy for the new categories? You’ve entered into partnerships with a lot of retailers directly, but as you kind of think about expanding further over the next few years, how should we think about your desire to work with platforms that have offline business integrations like online presence systems, point of sale software companies, and even companies like Facebook to scale the merchant side rapidly on both the marketplace and drive?

Yes, I’ll start. Hi, Deepak, it’s Tony. The way we look at all things is how do we build the best products for our marketplace. What it really means is how do we offer the best selection, quality, price, and customer service. For our platform business, where we’re building tools for merchants to allow them to grow their own digital businesses, it’s really about how do we allow them to be very successful across all the activities that they have to perform to build a digital business. With that guiding principle, we would consider any partnerships that achieve those means. They can look different depending on whether or not they fit into our marketplace or whether or not they fit into our platform. At DoorDash, we’re really thinking about building the system that has both components. One, the system is our app, which is trying to grow all of local commerce and bring everything inside your neighborhoods in minutes, not hours or days. On the other side, we’re trying to empower the merchants to replicate and grow on top of their four-wall business. That’s how we view our partnership strategy for the future.

Got it. Now that’s very helpful, Tony. Then Prabir, can you talk about the second half guidance on GOV? Should we expect that GOV to bottom out in Q3 and then start improving sequentially in Q4 into 2022? How are you thinking about the slope in the second half? Thank you so much.

Yes, the second half GOV has impacted by two factors. The first, we’re baking in some uncertainty concerning consumer behavior as markets continue to reopen and vaccination rates increase. The second factor is some seasonality; even in that region. It continues to shift from Labor Day until Q2 and Q3. As the winter season starts to set in, we expect to see growth from there right now. What I will say is that the GOV guidance for the year is materially higher than what we thought at the beginning of the year. The shape of the curve you see at the novel right but may indicate big picture. We’re feeling more optimistic today than we were earlier.

Next is Michael McGovern from Bank of America. Your line is now open.

Great, thanks for taking my question and congrats on the great quarter. I just wanted to ask maybe about a regulatory overview. It seems like there have been a lot of news items on the regulatory side recently. So maybe first if you could comment about the federal side and the comments from the Department of Labor Secretary recently and just any views on what could happen long-term on the federal side? Then I think some of your peers in the gig economy rideshare space have talked about potentially working out deals with states that might look similar to Prop 22. Can you share with us if you’re participating in those kinds of discussions or just what you think about the potential for regulatory developments on the state side as well? Thank you.

Yes, hey, Mike, it’s Tony. I’ll take that. We’re very excited by what we heard Secretary Walsh and the Biden administration say, which is that they’re very eager to work with us and private sector companies to figure out how to construct a model that takes us into the 21st century instead of moving backward to the 20th century. What DoorDash stands for is optimizing for the worker, the Dasher, the millions of drivers on our platform. The number one thing we hear over and again from Dashers is that they want this flexibility that has never existed in any labor environment before. The question is how do we marry that flexibility with traditional labor definitions with benefits and protections that we believe they deserve? What we heard from really anyone we spoke to is our willingness to engage in that conversation and construct forward to find a third way in which we can balance independence and flexibility with benefits. That’s true at the federal level and true at the state level.

And Mike, to be clear, the deal is that we aren’t taking immediate action and said we want to give context that we’re in dialog and collaboration with the government at the state level.

Got it. Maybe just one quick follow-up to that. I thought the prior comments about the difference between Dashers and rideshare drivers were really important, especially on the regulatory side. So could you talk about just the possibility that rideshare drivers and food delivery couriers are regulated separately? Or do you think that gig economy workers could all be lumped together long-term in terms of that regulatory response and development?

Yes, I’m not sure that we’ve got a full conclusion on this matter. As Tony indicated, Secretary Walsh’s comments suggest an openness to engage with the private sector to figure this stuff out. It’s a little early to signal whether rideshare drivers will be grouped together with the broader gig economy or if we will separate them. We’ll follow up if there are any updates on this topic as our conversations progress.

Next is Jason Helfstein from Oppenheimer & Co. Your line is open.

Thanks. This is Shawn on the call for Jason. So just one on how are you guys thinking about the risk around local pricing caps and how does this tie into the new merchant pricing model? Can you also talk about the competitive environment around non-food sales relative to the environment through restaurant deliveries— is it more competitive, the same, or less competitive? What are you guys doing there? Thank you.

Yes. Hi, Shawn, it’s Tony. I’ll start. On the first question around commission caps, what we expect is that these commission caps will be rolling off pretty soon. In fact, we’ve already seen some of this in some very large cities like Chicago, Kansas City, and Cincinnati. I saw some even roll off earlier this week, and we’re very encouraged. I think by what we’re seeing, which is elected officials allowing capitalism to do its job and allow everyone to really make things work for all audiences. We’re the first to be excited at DoorDash to have lots of folk go back inside restaurants. As that continues to happen, more and more folks will see delivery as an augmented way to help grow these physical businesses and to be one part of the portfolio for how they do business moving forward. With respect to the second question around the competitive environment and some of these newer categories. I would say that certainly things exceeded our expectations. If you look at the fact that we started just a year ago in our first non-restaurant category, convenience, and in about a year’s time, we’ve become the market leader in that category. That really shows the strengths of our platform across all audiences, the receptivity to our platform, how Dashers are willing to do deliveries across different hours of the day and across different categories, and how different types of merchants want access to the largest on-demand food audience that comes to us at the highest frequencies every month. So far, we are seeing quite a lot of progress in these areas. As Prabir mentioned earlier, we’re at the beginning of a massive transformation that’s just unfolding. Just to remind all of us, even in the core restaurant business, if you added all of the sales of the largest platforms in the U.S., it would only be about 10% or less of the entire restaurant industry. The same would be true for other categories we’re entering through convenience, grocery, and others, with that number still at very low single digits. So there is a massive runway ahead.

Next question is from the line of Ron Josey from JMP Securities. Your line is open.

Great, thanks for taking the question and really great quarter. I wanted to ask two please more on DashPass, and you talked about subscribers more than doubling year-over-year average order frequency is an all-time high. I think you mentioned that new users joining in 1Q was somewhat of a record, but can you talk about the strategic nature of DashPass? Here, just specifically as you think about increasing the penetration of new categories and how DashPass might help increase MAUs for new categories and how you see both DashPass and new categories working together. Then, Tony, maybe as a follow-up to your prior answer, could it be that the reopening's amount of change in consumer behavior might actually help longer-term about how we as consumers order things like restaurant food online and how you’re thinking about how the reopening might actually be a tailwind? Thank you.

Ron, Prabir here. DashPass is at the end of the day a core pillar of our strategy. Think about what we’re going to do for consumers. Its ability to deliver wider selection, the best quality, and superior affordability. DashPass right to the heart of both selection and price. DashPass as you know means consumers pay $10 subscription fee, which covers multiple industries, multiple deliveries and multiple orders, and we’re seeing the value proposition of a DashPass translate into sign-ups that have allowed us to grow the DashPass numbers to be double what it was a year ago. Another aspect of the strategy is to continue adding verticals into DashPass, so much the same way that Amazon Prime allows you to consume products across multiple categories; that’s our vision for DashPass with Starwood Food. Over time, we’ve added convenience stores, and as we continue to bring in categories, we can slot them into DashPass to improve the consumer value proposition.

With respect to the second question around the reopening as a possible tailwind, I guess no one has a crystal ball in terms of how this shapes recovery. I think in the earlier discussion how the slope of change occurs. What I would say is that the long-term trend is that when it comes to convenience, things always move toward greater convenience, which means that over the long-term, the tailwind thesis would be that some of the growth that was otherwise going to happen is simply shifted to the timeframe we see today. It allows more and more people to be comfortable with this type of business, which allows possibly faster entry into other categories as we power all local commerce. I think that’s kind of where we’re seeing it, but I do just want to remind people that convenience only moves in the direction of better convenience. If someone wants to go and eat inside of a restaurant, they’re probably not thinking about delivery. Conversely, if they’re thinking about takeout or delivery, they probably were never going to go inside the restaurant in the first instance. Therefore, if we step back and look at it over time, we’re privileged in that people eat 22 to 25 times a week, and we believe that a share of that will be growing into greater convenience.

Next is Spencer Tan from Evercore ISI. Your line is open.

Hi, thanks for taking my question. Just, I think one question around guidance. At the midpoint of your GOV and EBITDA guidance, you’re guiding to EBITDA accretion versus prior quarters. Just wondering if that’s a direct result from the commission structure change that you announced this quarter and how we should think about that? Maybe just providing a little bit more color around that specifically. And then secondarily, I guess, looking into the recovery, are you seeing any restaurants consolidate the platforms that they utilize? Do you think that DoorDash has a competitive advantage from that standpoint by offering other types of software as a service and storefront versus maybe some of the smaller competitors out there, having the ability to possibly gain a little bit more share from some of your comps? Thank you.

If I understand your question correctly, you’re asking if the increase in EBITDA margins we’re experiencing is due to our GOV picking up slightly? What I’d say is we provided a range of EBITDA, but we want to reiterate that we manage our business to maximize scale. To the extent that there are compelling investment opportunities available to drive top-line growth, we will pursue those aggressively. The reason for expanding our guidance is because we’re providing a roadmap to see how profitability can be driven at the bottom line given what we see as a good investment opportunity. The slight margin accretion you see is due to the sequential increase in the peak rate that we’re expecting in Q2 because the supply side is normalizing.

Yes, thanks. With respect to the second question, yes, we do believe that by having a wider portfolio of products, we can certainly serve more use cases both from a consumer perspective and from a merchant perspective. If you look, people eat 22 to 25 times a week and therefore, having more use cases, whether it be in delivery, pickup, or the office business, there’s a much larger addressable market stemming from that regard. On the merchant side, not only are we their largest source of incremental demand through our app, but the fact that we also empower their own channels for their deliveries means that we have greater order density. This drives lower fulfillment costs and allows us to take up greater kitchen capacity. Our suite of products generates competitive advantage for the consumers by providing more value beyond just delivery, as well as by allowing us to work with merchants more, taking more of their production capacity.

Next question is from Clara Linton from BTIG. Your line is now open.

Hi, good evening. Tony or Prabir, regarding some speculation on M&A that’s come up somewhat recently, I wanted to see if we could revisit how you guys are thinking about both new market entry and also specifically weighing up build versus buy options for doing that? Thank you.

Yes, look, we’ve said previously that one of our aspirations is to build a global company. We operate in the U.S., Canada, and Australia, and over time, we plan to expand outside these regions. As for M&A, we look at all the opportunities around us, and we’re fortunate to have a core business in the U.S. that generates cash, allowing us to invest organically. To the extent that M&A makes sense, it might be something we consider. However, the bar is extremely high since M&A can be complicated, and getting it right is difficult. Unless we have absolute conviction that M&A is the right tool, we will usually rely on organic growth mechanisms.

No further questions at this time. I turn the call back over to Mr. Andy Hargreaves.

Perfect. Thank you for the questions and thank you everybody for joining us today. Have a great afternoon or evening, and we’ll talk to you again in a few months. Bye.

This concludes today’s conference call. You may now disconnect.