DoorDash: High revenues, continuing losses

Key points

• Marketplace GOV’s Q2 2024 value exceeded management’s forecasts and amounted to USD 19.7 billion.
• Revenues increased 23% year over year to total $2.6 billion.
• Adjusted EBITDA exceeded the high end of forecasts, reaching a record $430 million.

DoorDash (DROP 8.35%)The food delivery giant recently released its second-quarter 2024 results (08/01/2024), showcasing a mix of record growth and ongoing challenges. The company reported gross market order value (GOV) of $19.7 billion, exceeding management’s forecast range of $19.0 billion to $19.4 billion. Revenue for the quarter reached $2.6 billion, up 23% from the same period last year. Additionally, adjusted EBITDA reached a record $430 million, beating the high end of management’s expectations of $325 million to $425 million. Despite these positive metrics, DoorDash continues to face headwinds, particularly around net losses and regulatory concerns.

About DoorDash

DoorDash operates as a technology company that connects consumers with their favorite local and national businesses through an online marketplace. The platform primarily facilitates food delivery, but has also expanded into other industries such as grocery, convenience stores, and retail. The company’s key growth areas include increasing the number of merchants and consumers on the platform, improving membership programs like DashPass, and ensuring the platform remains attractive to Dashers (delivery personnel).

DoorDash continues to improve the performance of its platform and user experience to drive consumer and merchant growth. Key factors driving the company’s success include the number and diversity of participating merchants, competitive membership programs, and the scale of Dasher engagement. The company’s strategic initiatives revolve around network effects, which make the platform increasingly valuable as more users and merchants join.

Key achievements in Q2 2024

Total orders in Q2 2024 increased to 635 million, up 19% from 532 million in Q2 2023. GOV Marketplace reached $19.7 billion, up 19.6% year-over-year from $16.468 billion. The increase was driven by increased transaction volumes and higher market penetration.

Revenue for Q2 2024 increased 23% year-over-year to $2.6 billion, compared to $2.133 billion in Q2 2023. The company’s net revenue margin also increased slightly to 13.3% from 13.0% in the same period last year, mainly due to an increase in advertising revenue.

DoorDash reported record adjusted EBITDA of $430 million, exceeding the high end of management’s guidance range of $325 million to $425 million. This reflects improved operating efficiencies and improved margin structures. Gross profit was $1.195 billion, with gross margin of 45.4%, compared to 44.6% in the prior year.

However, the company also had significant expenses. Sales and marketing expenses were $509 million, up 8% year over year. Research and development expenses rose 13% to $303 million, and general and administrative expenses rose 45% to $494 million, primarily due to impairments on office leases and litigation reserves.

Free cash flow improved to $451 million, compared to $311 million in Q2 2023. The company’s liquidity also improved, with cash and cash equivalents increasing from $2.656 billion at the end of December 2023 to $3.430 billion at June 30, 2024.

DoorDash continued its international expansion, entering four new countries and over 500 new cities with the help of its partner, Wolt.

Despite these positive developments, DoorDash still reported a net loss of $158 million for Q2 2024, although this was an improvement from a loss of $172 million in Q2 2023. The company is also grappling with higher legal and regulatory expenses, including a significant $83 million in impairments on office leases and $44 million in additional legal costs.

Looking to the future

DoorDash forecasts third-quarter 2024 Marketplace GOV to be between $19.4 billion and $19.8 billion and adjusted EBITDA to be between $470 million and $540 million. Management also forecasts full-year stock-based compensation to be between $1.1 billion and $1.2 billion and depreciation and amortization expense to be between $560 million and $590 million.

Investors should focus on DoorDash’s ability to navigate regulatory challenges and competitive pressures while continuing to grow in its key verticals. The company’s focus on innovation and expansion, particularly in DashPass and new market segments, will be a key area to watch in the coming quarters. DoorDash expects legal expenses to decline in the third quarter of 2024, which could positively impact its future financial results.

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