Good afternoon and good evening. My name is Aaron, and I will be your conference operator for today. At this time, I'd like to welcome everyone to the DoorDash Q3 2024 Earnings Call. All lines have been placed on mute to prevent any background noise. Thank you. And with that, I would like to turn today's call over to Andy Hargreaves. Andy, you can begin.

Thanks, Aaron. Good afternoon, everyone, and thanks for joining us for our Q3 2024 earnings call. I'm very pleased to be joined today by Co-Founder, Chair, and CEO, Tony Hsu; and CFO, Ravi Inukonda. We'll be making forward-looking statements during today's call, including our expectations for our business, financial position, operating performance, profitability, our guidance, strategies, capital allocation approach, and the broader economic environment. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those described. Many of those uncertainties are described in our SEC filings, including our Form 10-Ks and 10-Qs. You should not rely on our forward-looking statements as predictions of future events or performance. 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 measures, including a reconciliation to non-GAAP measures to the most directly comparable GAAP financial measures may be found in our earnings release, which is available on our IR 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 is being audio webcasted on our IR website. An audio replay of the call will be available on our website shortly after the call ends. With that, Aaron, we'll pass it back to you, and we can take our first question.

Okay. Thank you, Andy. Our first question comes from the line of Nikhil Devnani with Bernstein. Your line is live.

Hi, thanks for taking the question. I wanted to ask a two-part question on international. So in the past, you've illustrated this dynamic in the U.S. business where as cohorts experienced go forward and mature a little bit you see improvements in the contribution margins by years three and four. Now that you've been operating in some of these international markets for a few years now, have you seen a similar arc and magnitude of improvement on the contribution margin front for these cohorts as well? Or is it a little bit different for market structure reasons or for other reasons? And then my second question is around the degree of fixed cost leverage that you can get operating in so many different countries at once. I'm sure you get to share some technology and talent, but given delivery is hyper local, how do those two things shake out? Is your fixed cost burden in your newer markets lower and easier to overcome or not really? Thank you.

Hey, Nik, it's Tony. I'll start and Ravi feel free to chime in here. I think on your first question, in short, the answer is yes. We are seeing similar progress both top line and bottom line in our international markets that we saw while building the U.S. And that's because if we were to rewind the clock three years ago when we first partnered with Volt, what we saw in the company was something that looks very familiar to us at DoorDash, which is a company that has built the leading product when it came to retention and order frequency. And that really drives the flywheel in terms of efficient growth. And so we continue to see this past quarter as well as in the last several years of partnering together with both continued strong progress where we virtually are gaining share in every single market that we play in. And we continue to see the bottom line perform in tandem. And so you are seeing that progression, and it's been very encouraging. I guess, I can start on the second question, and then I'll hand the mic over to Ravi. In terms of fixed cost leverage, in short, the answer is yes. As we add subsequent markets or subsequent even products, we do use the same team. You're right to say that these are hyper local businesses and services. So we do have to obviously start new in terms of acquiring each of the different audiences. But in terms of the tech stack, in terms of the products, in terms of the know-how whether that's expanding products within a geography or adding net new geographies, you do see that operating leverage.

Yes. Hey, Nik, let me add a couple of points there, right? Like when you think about the performance of the overall international business. I mean, it has a strong third quarter as well as the year itself has been very strong. When you think about it from a growth perspective, we are growing substantially faster than peers, which essentially means we've gained share in virtually most of the markets that we operate in. Last call, if you recall, I mentioned the fact that the overall international business is gross profit positive. It continues to be the case. The dynamics are similar, right? Like this is a scale-driven business. Our goal has always been, if we find good opportunities to drive retention and order frequency, we're going to double down and invest. That's the same formula we are using in the international market. We are pleased that the gross profit continues to improve. On the fixed cost, I mean, similar dynamics that we saw in the U.S. Again, a lot of it has to deal with scale. But if you recall where we are in the international markets, we are still very early. We're investing behind product, and that's what's causing the strength that you're seeing from a cohort retention and an order frequency perspective.

Thank you, both.

Thank you for your questions. Our next question comes from the line of Michael Morton with Moffett Nathanson. Your line is live.

Hi, everyone. Thanks for the question. I wanted to start firstly maybe one for Tony, and then a cohort question for Ravi. It's great to see the Wegmans grocery announcement. Just curious if we're getting closer to seeing an unlock of some of the largest grocers in the country who are not currently on DoorDash platform coming on to DoorDash? And then on the grocery topic and thinking longer term and your ability to make strides into the market. Could you talk about the trends that you see for the grocers who have been on the platform for the longer extended period of times that you see with larger baskets and maybe larger basket market share trends for the grocers have been on the platform for two years? And then for Ravi your comments on cohorts the last couple of quarters is really encouraging. The new cohorts coming in being as strong as ever. The question that we get from investors is, who are these people? What are the demographics isn't everybody already ordering food and clearly not? So we would love if you could maybe shine a little light on what they look like. Is this skewing younger, college-age students, more digitally inclined, who are moving out of their home every fall going to college? Anything there would be great. Thanks again.

Hey, Michael, it's Tony. Yes, on the first question related to grocery, we're pretty excited about what we're seeing in grocery. I mean, we launched grocery at this point almost four years ago now. And the entry point was by delivering a product that was relatively speaking, new to the market, which was solving for this top-up experience, where for consumers, we were replenishing that middle of the week run where you run out of the items that you consume the most often or the earliest or the ones that perish the most frequently, whether that's your berries, your fruits, your dairy products, your coffees, etc. And I think what that spurred was both an introduction that was easy to understand for consumers and also something that grocers hadn't seen before and made it very easy to onboard a lot of these grocers. Now all of these things take time, right? I mean we had to build a new catalog from scratch. We obviously wanted to make progress on understanding inventory and the reliability of the inventory fees that we're receiving, which we thought is one of the biggest problems to solve here. And we've made tremendous progress pretty much across the board, whether that's adding selection, including some of the largest grocers in the country. We're just as excited as you are about Wegmans, but also everyone else that whether that's the corner grocery store to the middle market grocery stores. And I think this is why you're seeing, when it comes to customer adoption, customers come to DoorDash first, new customers into the grocery delivery industry. And just in general, to delivery outside of restaurants come to DoorDash first before any other platform. And so I think you're already seeing a lot of this. And in terms of other trends, we see that as customers get used to ordering groceries on DoorDash, they tend to order more items each subsequent visit. So from a cohort perspective, you're noticing that we are increasing both the frequency as well as the spend and wallet share in terms of how consumers spend when it comes to their monthly bills on grocery. And that's increasing with every single cohort. So in short, I think what we've seen is, we have seen a much bigger market than we expected when it came to launching this pop-up run product, which now has nicely translated into shopping for the other types of occasions, including your weekly stock ups and those types of baskets. And we just continue to see whether it's on the new customer acquisition side, leading share there. And then also on the retention side, positioning us to really continue to grow in a way that will outpace others as well as outpace our previous cohorts.

Hey, Mike, it's Ravi. I'll take the one on cohorts side? Maybe I'll just level up and give you broadly on what we're seeing from an underlying cohort perspective. I mean, you're right, we've been very pleased with the cohorts. I think about it like a majority of the volume still comes from existing cohorts for us. The most instructive thing for me when we're operating the business is to look at the engagement of the older cohorts. And if you look at the older cohort, even cohorts as old as five, six, seven years old, we're still seeing good amount of retention as well as overall wallet share increase. And that tells you that the improvements we are making in the product, whether it's selection, whether it's adding new categories, all of that is driving the new, I mean, the cohort trend that you're seeing in the business. From a new cohort perspective, I'll have a couple of ways to think about this, right? One is we're still attracting a healthy amount of new consumers. It's not any different from a demographic perspective. We're starting to see cohorts coming from some of the suburban markets still. And the reason for that is, remember, this is a product that continues to change. We add more selection, grocery, in many cases, the selection is net new to the platform. And the second way we are seeing is not only are consumers new to restaurants, today, we actually add consumers that start their journey with grocery as the first order. That's a net new consumer that we're adding to the platform. But overall, when I look at the underlying cohorts, I mean the strength continues to be very strong, both across existing as well as new.

Thank you so much.

Thank you for your questions. Our next question comes from the line of Bernie McTernan with Needham. Your line is live.

Great. Thanks for taking questions. Just wanted to ask about the partnership strategy, especially in light of the Lyft announcement from tonight. So maybe just talk about the broader partnership strategy. I know you also partner with streaming companies, for example, but is there anything different here with the Lyft that there is the driver component as well?

Yes. Hey, Bernie, it's Tony. Maybe I can take this one. So one of the things we have at DoorDash that we believe in and follow religiously, is that we keep the main thing, the main thing. And the main thing at DoorDash is building and enabling local commerce. And so when you think about kind of our perspective on all things, partnerships as well as building products, the 80 goes towards building products, which means that it's because we've offered customers the best combination of selection, quality, affordability, and service that we get used the most often in our app. And because we get used the most often, it's how we actually are able to build not only the most useful but also the largest local commerce membership program, which is DashPass. Now that's the 80. The 20 is the partnerships piece, where for us, we do believe that there are others outside of our network that can offer attractive benefits to our members. You saw this a few years ago when we first launched our partnership with Chase, which we renewed in an expanded way earlier this year. Then you saw the announcement and partnership with MAX, which happened a couple of months ago in terms of adding streaming benefits to DashPass subscribers. And then today's announcement with Lyft, which we're really excited about. Lyft is a service that's used by millions of riders. And many of those riders already are DoorDash customers. Some of them are DashPass subscribers, but a lot of them are also not DashPass subscribers. And so I think it's a great opportunity for us to continue to add engagement to the DashPass program as well as new DashPass members. And in return, Lyft gets access to the largest local commerce platform that sees the highest frequency program of its kind when it comes to consumer membership programs. And so I think that will be great for them as well. But again, the 80 for us remains to be building the products. And if you think about it, the runway for just organic growth for DashPass, or really just for our own customer base is quite large. I mean we have hundreds of millions of customers who order with us every year, whether it's on DoorDash or on Wolt, and only a fraction of those are members of either DashPass or Wolt+. So we've got a long way to go just within our own ecosystem. And then when you look at this from the consumer's perspective, although we've done a reasonably good job in terms of enabling local commerce in the categories that we play in today, we still only represent a single-digit fraction of the restaurant industry and a much smaller fraction of that outside of restaurants. So I think there's a long runway ahead, and the main thing for us continues to be improving our products so that we can be the most useful to customers that they use our products most often, which will give us the privilege of having them as members in our programs.

Make sense. Thanks, Tony.

Thank you for your questions. Our next question is from the line of Shweta Khajuria with Wolfe Research. Your line is live.

Thank you so much for taking my questions. Let me try two, please. Ravi, the day rate contributors in the past, you've mentioned its ad growth and platform contribution as well as cost line efficiencies. Could you maybe please rank order them in terms of the impact on take rates as you think about maybe near to midterm? And then on price parity, either Tony or Ravi, where do you think you want to be when it comes to grocery price parity in the mid-to-long term? Is there a future where it's going to be the same as in-store prices? Is that the goal? Or is it that you want to be the most competitively priced online grocery delivery platform? Thank you, Tony.

Hey, Shweta, it's Ravi. I'll take the first one on the take rate, right? Let me start by just giving a broader framework around the interplay between revenue and GOV in our business. I mean if you think about revenue, it's been outpacing the GOV growth in our business. That's being driven by ads, as you mentioned, it's been driven by benefits that we get from the commerce platform. And any time we improve efficiency on the cost line, whether it's cash or cost or CLR, that drives revenue. So that's why revenue growth has been outpacing our GOV growth rate. And more specifically, what we saw in the third quarter was two things. One is advertising, and the second one is leverage from Dasher costs. I wouldn't read into the advertising as something has changed in which we operate the business. We are operating the ad business with the same amount of discipline. It's growing in a very healthy manner. We're also very proud of the leverage that we've generated on the Dasher side. A lot of that is being driven by the underlying improvements we are making on the product, and we are pretty happy with that. More broadly, when I think about on a go-forward basis, I would expect revenue to continue to outpace GOV growth. But I would not think of it linearly in terms of the same amount every single quarter. So if you think about the operating philosophy for us, when we find good opportunities to invest, we want to invest flexibly up and down the P&L. Sometimes those opportunities are going to present themselves in the revenue line. And we're pretty happy to take advantage of that.

Hey, Shweta, it's Tony. On your question on price parity, I think it's a good one. I do think though, in the eyes of the consumer, they think about grocery delivery against a few dimensions at the same instance, and it's not just about price, right? One of the challenges you see in the grocery delivery industry right now is that customers are asked to pay a premium even though they don't get exactly what they ordered. And that's one of the key problems that we're trying to fix here at DoorDash, which is, first and foremost, how do we get customers exactly what they order? We think that we're making great strides against that dimension. But there are other dimensions. Price is one of them, and we are working with each one of our retail partners to making sure that we do have prices as competitive and affordable as possible. We do have some partners already there in terms of having or matching in-store prices. But we think that we can do more there. And at the same instance, we have to continue to offer the level of convenience where we can be faster than what a customer can do on their own. And so I think the combination of those three things of getting people exactly what they ordered at prices that they would expect, certainly faster than they can do it on their own. That's kind of what we're going for. It is the combination of those things in which we're shooting for.

Thanks, Tony. Thank you, Ravi.

Thank you for your questions. Our next question is from the line of Deepak Mathivanan. Your line is live.

This is Cameron Lynch on for Deepak. Just two quick questions. First, can you help us unpack the 19% GOV growth we saw this quarter, a high level between core restaurant and other categories such as grocery, either qualitatively or quantitatively? And second, we saw that AOV trends were up slightly this quarter. Is this due to product mix or bed new price inflation. I would appreciate any additional color you can provide on what's driving this dynamic? Thanks.

Hey, Cameron. I'll take both of those. I mean look, I mean, we're really pleased with the performance of the business on the growth side. So let me talk about the inputs, and then I'll talk a little bit about the outputs and the various drivers in the business. From an underlying input perspective, right, I mean, the biggest thing for us is looking at the underlying cohorts. I answered the question to Mike, I talked about the fact that the cohorts continue to remain very strong. If I look at users, users are still growing at a double-digit rate. Users hit an all-time high in the quarter. Order frequency continues to be at an all-time high. A lot of that is being driven by the underlying work we've done, whether it's selection, quality or affordability. All this has set us up well, not just for the third quarter, but going forward as well. And from an output perspective, if you think about the various lines of business, the restaurant business, the growth has actually been very stable for the last few quarters. Both grocery and new verticals, international, they're growing much faster than the restaurant business and have gained share across grocery as well as most of the international markets that we've operated in. And to your second point around the overall AOV increase, we've seen some increase in the overall grocery business. Again, I wouldn't think of that as a major shift. Our goal is to ensure that we are bringing the highest number of consumers to order from more categories and the consumers ordering for more categories, that number continues to increase every single quarter.

Thank you.

Thank you for your questions. Our next question is from the line of Andrew Boone with JMP Securities. Your line is live.

Thanks so much for taking my questions. Ravi, I wanted to ask about the gross profit margin outperformance in the quarter. I understood the call out on the insurance benefit, but is there anything else that you guys want to highlight in terms of the outperformance there? And then Wolt acquired Tazz in Europe. Tony, can you just step back and talk about what may be attractive in terms of M&A targets going forward, and why that specific country and acquisition? Thanks so much.

Yes, Andrew. I'll address the first question regarding gross profit. There are two perspectives to consider. If you view the business as a collection of entities, you'll see that we have performed exceptionally well. The team has executed effectively against the plan set at the beginning of the year. We have achieved efficiencies in some areas while reinvesting those gains in others, which is reflected in our financial results. Specifically, advertising has contributed to the improvement in gross margin. Additionally, we anticipate a reduction in regulatory costs as the year progresses, which has also contributed positively. Lastly, we’ve achieved efficiency in logistics. However, it's important to note that we are not focused on a specific gross margin percentage. Our aim is to maximize overall profit dollars for the long-term. We plan to reinvest every dollar of efficiency back into the business, flexibly directing those investments across the P&L wherever opportunities arise. Our goal has always been to grow the business while maintaining a rigorous focus on unit economics, and we will continue operating under this philosophy moving forward.

Hey, Andrew, it's Tony. On the second question with regards to international M&A. Our standards and VAR continue to remain really high, and we are consistent in our approach, which really first and foremost, starts with asking ourselves the question, does this candidate help us launch a new geography, grow our TAM and/or our product portfolio. The second question we ask is, does this help accelerate us in a differentiated way that we couldn't do ourselves organically. Three is, do we believe that by partnering with the candidate that we can achieve long-term cash flows. And the last one, perhaps the most important, is do we have a team that has the management talent and bandwidth to execute on the opportunity in a single-threaded way. And when I look at that last one in particular, I mean, Wolt has been on an incredible run. I mean, ever since founding, I mean, actually, I should say that it's now been 10 years for Wolt, actually celebrated 10 years earlier this month, and they've achieved over $15 billion of sales for merchants in their lifetime and $3 billion of earnings for years, and they've just done great in their geographies and they continue to take share virtually everywhere they operate in and they've continued to help us perform just as a management team. And so when I look at the performance over the last three years, they certainly have earned the privilege to continue expansion. And then when I piece that together with TAS, playing in an attractive market in Romania, we get really excited about what the combination can provide.

Thank you.

Thank you for your questions. Our next question is from the line of James Lee with Mizuho. Your line is live.

Great. Thanks for taking my questions. Tony, could you comment on DashMart? Can you provide an update on which business models are performing well and which are still in progress? Additionally, could you discuss some of the growth constraints we should consider? Lastly, it seems some European peers are successfully making quick Commerce profitable. Can you help us understand the differences between North America and Europe? Thanks.

Sure. We're very excited about the progress of DashMart. If I take you back to when we started DashMart about 3 to 3.5 years ago, our initial focus was to establish a national service. This was largely to assist merchants, as we have consistently seen DashMart as an infrastructure to allow retailers to deploy their inventory. First, we needed to demonstrate to ourselves and to the merchants that we could effectively manage these warehouses. After 3 to 3.5 years, the team has certainly reached that milestone. They have learned how to execute by selling inventory that is exactly what is on the shelf, which is quite different from selling what is available in third-party stores. The execution has been at competitive prices, along with a great selection, high reliability, and speed. DashMart has continued to grow, capture market share, and perform very well. Beyond that, we have made significant strides in our partnership discussions with various retailers. We initiated this in Canada with Loblaws and are now beginning similar efforts in the U.S. and other countries, where we provide infrastructure for retailers to generate additional business during their off-hours and in areas where they may have limited reach. We're optimistic about the potential of DashMart both as an individual entity and in partnership with retailers and merchants, which I anticipate will continue moving forward.

Great, thank you.

Thank you for your question. Our next question comes from the line of Mark Mahaney with Evercore ISI. Your line is live.

Hey, this is David for Mark. A question on the commerce platform. Do you have any early feedback from merchant customers around the new products that you released last month? And then one more on the Lyft partnership, could you talk about the concentration of DashPass members between urban and suburban markets?

Sure. Regarding the DoorDash Commerce platform, this announcement has been in the making for a few years. It truly captures what DoorDash has evolved into, which consists of two main components. The first part of our mission has always been to enhance the local economy by driving incremental sales. The second part is empowering local businesses to transition into the digital space. Many physical businesses are now utilizing products like DoorDash Drive or storefronts to become their own digital hubs and serve their customers. We are witnessing this trend, particularly with hundreds of thousands of businesses now included in the DoorDash Commerce platform. The numbers demonstrate the excitement surrounding this. From the perspective of merchants, with DoorDash being the premier local commerce marketplace, it makes sense for retailers aiming to be more digitally focused to partner with us. As for your second question regarding DashPass, we identify both strength and opportunity in partnerships, whether they involve Lyft, Chase, or MAX, across our entire member base. We wouldn't be as enthusiastic if our target was limited to one customer group while overlooking others. It’s crucial to recognize that building membership programs primarily hinges on creating the most useful products that are frequently utilized. This constitutes roughly 80% of the effort needed to establish a membership program. The remaining 20% is represented by partnerships, and we are genuinely excited about our collaboration with Lyft, as we are with our other partners, believing they will benefit us across various regions.

And David, just to add to that, if you think about DashPass, it's a leading local commerce subscription program, and we continue to grow. In fact, in the third quarter results, we reached a record number of subscribers, exceeding 18 million DashPass members. They're widespread, not distinguishing between urban or suburban areas. We see strength across the board, which reflects in the overall share gains we've achieved this quarter as well.

Thank you for your questions. Our next question comes from Michael McGovern with BofA. Your line is live.

Hey guys, thanks for taking my questions. I have two. There's been a lot of attention on the topic of autonomous vehicles recently, especially regarding rideshare, but do you have a perspective on the potential future for the delivery use case of autonomous vehicles? Is that something you might consider for your partnership strategy? And secondly, regarding restaurant-sponsored listings, what are the latest trends you're observing in terms of merchant ROACE and consumer conversion? How is that impacting demand for the ads? Thank you.

Mike, I can address both of those questions. Regarding autonomy, we're very excited about it. As someone who has been involved in the autonomous sector for several years, I feel it’s been a long time coming. We've been focused on the autonomy delivery issue since 2017. It's important to highlight that this is quite different from autonomous ride hailing. It may be clear to some that when there's no passenger to easily enter or exit the vehicle and you need to load and unload for deliveries, the final 10 feet can be quite challenging. This situation reminds me of the early days of DoorDash. When DoorDash launched 11 years ago, many believed delivery would operate similarly to ride hailing regarding dispatch algorithms. However, if you used the same algorithm for ride hailing as you do for delivery, you'd often reach incorrect decisions. For instance, if you send the closest driver to a passenger in ride hailing but the inventory isn't available for delivery or the food isn't ready, it results in wasting everyone's time. There are significant differences between autonomous delivery and autonomous ride hailing, and we are taking a first-principles approach at DoorDash to integrate technology and operations effectively. We're excited about our developments and discussions with potential partners. Although it's a different challenge than some may assume, we hope to share more in the future. The second question was about ads and trends in that area. We're observing continuous progress in that business. Our marketplace is growing at robust rates given its scale. I've always maintained that a successful ads business is built on a strong marketplace foundation. This is evident as our ads business continues to provide leading return on ad spend for advertisers, including both restaurants and retailers. We're also seeing improvements in consumer conversion, which is nearing organic levels. The combination of these factors, along with our marketplace being the largest in connecting consumers with local merchants, explains the continued rapid growth of our ads business at scale.

Thank you.

Thank you for your questions. We have our next question from Lee Horowitz with Deutsche Bank. Your line is live.

Hi, thanks. Maybe sticking with ads and moving over to CPG advertising. You guys have obviously been stacking multiple quarters of really strong grocery volume growth and getting that marketplace to scale. I guess this is probably presumably grabbing the attention of your CPG advertising partners. Have you gotten any indication from those partners in your conversations as they think about budgets for next year, that they be leaning a bit more aggressively into your platform, just given how much you have grown over the last year or so?

Yes, I can follow on to the answer to the last question here. I mean the short answer is yes. I mean I think CPG advertisers have always been really excited about us because not only because of our strength in growth outside of restaurants, but also just the combined view that we can offer because you can certainly sell a CPG item across both restaurants and retailers across multiple categories. And by being the largest local commerce player, we get to offer the most data and most views and most shots on goal for every brand to win their fair share. And I think that's what's increasing the excitement. On the flip side, I think the team, our team also deserves quite a lot of credit for building and maturing the product portfolio, which is still an area of emphasis for both our CPG ad partners as well as our restaurant partners.

Great. Thanks. And maybe one follow-up just on grocery competition holistically. Obviously, it's very fierce. You have first-party delivery partners who can perhaps lean in on price, given vertical integration. You have other marketplaces that have other verticals that they can monetize on besides grocery and then obviously some focused grocery marketplaces. I guess within that hypercompetitive environment, where do you see as the most defensible sort of characteristics for DoorDash that should allow you guys to come out as one of the key winners in this vertical over a longer period of time?

It begins with creating the best product. This is essential for success in any competitive market. The restaurant delivery industry has followed this pattern for the past 11 years. DoorDash has reached its current position by focusing on building a product that ensures high retention and order frequency, which signifies that we've developed a superior offering. This foundation enables efficient growth. Therefore, product execution is crucial. Currently, we see that we are the first choice for consumers entering grocery delivery, whether they are new to the service or seeking local deliveries beyond restaurants. Historically, this has held true for us in the restaurant sector, where more than half of customers now turn to us for restaurant deliveries, and we are approaching the same success in the grocery market. We're observing strong retention and frequency across all customer segments, which continues to grow as we enhance our selection, pricing, delivery quality, and service. This relentless focus helps us build a lasting competitive advantage, allowing for sustained growth over the years.

And Lee, just to add to that, right, just on the consumer side, but we get good feedback from the merchant side as well, where merchants that we partner with have said that we're driving incremental same-store sales growth for them. The quality that we drive to the merchant has also been great. And you see that in the results where, A, we are the fastest growing in the U.S. as well as gaining share. And also from a cohort perspective, right, the retention and order frequency continues to increase.

Yes. I think the final thing I believe, Lee, is that like we also just get the most shots on goal. When you think about what gets delivered most often, it's prepared meals, which is in a different way of saying restaurant delivery. And because we're the leading player in that space and because we're also both in terms of size as well as the frequency we just get more at-bats with these customers, which is very helpful, especially if you're not in the restaurant category, say, in grocery or other retail categories. And it's also really helpful for advertisers, too.

Helpful, thank you.

Thank you for your questions. We have a final question for today from the line of John Colantuoni with Jefferies. Your line is live.

Great, thanks for squeezing me in here. So I want to start with sales and marketing leverage continues to be a really nice tailwind for EBITDA. Can you peel back the onion and talk a little bit about contribution from driver incentives. And sort of when you think about beyond the near term and look at supply and demand dynamics and your investments in driver experience, how are you thinking about the magnitude of the ongoing contribution to margin expansion from leverage on incentives? And second question, just turning to grocery. How important is capturing more of that big basket weekly shop to your long-term profit aspirations in grocery? And what are the capabilities and investments you still need to make to start driving more of those large basket orders? Thanks.

Yes, John, I'll start, Tony will be back. On your point around sales and marketing, I mean, look, John, when I think about sales and marketing or any type of operational efficiency that we drive in the business, it always starts with product because ultimately, product drives retention for us, which drives leverage in sales and marketing. If you break that apart, we've seen a lot of leverage on Dasher acquisition over the last couple of years. A lot of that is being driven by the product improvements that we've made. It's easier for Dashers to onboard. It's easier for Dashers to get paid; all of that is driving retention of existing Dashers higher, which ultimately drives leverage from a sales and marketing perspective. The second thing I would say is even on the consumer side, the teams have done a pretty good job of optimizing at a channel level. So you're seeing leverage from a consumer acquisition cost perspective as well. Looking ahead, I mean, I do expect us to continue to improve the product, which ultimately will drive leverage on sales and marketing. But I expect the pace of change to be slightly slower than what we saw in the last couple of years. But overall, when I think about whether it's Dasher acquisition or consumer acquisition, there's still opportunity for us to continue to go and drive leverage there.

Regarding the second question about larger baskets and grocery, we see these as additional benefits rather than necessities for our grocery model. Our low delivery and logistics costs allow us to successfully operate a high-growth business using smaller baskets, which helps us engage with consumers and grocers. We've been surprised by the size of this market. It resembles trends in Europe, where consumers often purchase several smaller baskets throughout the week instead of one large one. We believe this is a strategy we can sustain that others might struggle with. We do notice that after customers shop with us a few times, their purchasing habits tend to align, leading them to buy a few smaller baskets and one larger basket each week. This pattern emerges with every subsequent order and across different customer cohorts, but it isn't essential for our business to be viable.

John, just to add to that, right, I wouldn't think of it as a large basket versus a small basket. For us, when we build the business, we're trying to build the business for all baskets. If you think about it going back to your sales and marketing question, we have a strategic advantage because remember, we already have consumers on the platform. We already have Dashers on the platform. So the flow-through from a gross margin to contribution margin for us is very high. When I think about the unit economics, the team has done a phenomenal amount of work over the course of the last year. When I look at that in the P&L, that doesn't concern me. We have a combination of us being able to make the math work at smaller baskets, plus the sales and marketing leverage where we are focused on is what's the size of the opportunity in terms of scale as well as overall gross profit dollars.

Thanks so much.

Thank you for your question and ladies and gentlemen, that will conclude our DoorDash Q3 2024 earnings call. Thank you for attending. Have a great rest of your day.