DoorDash on Thursday reported higher than expected revenue growth and marketplace gross order value in its second quarter, indicating that, even in a rocky economy, customers are still turning to food delivery.
The company posted revenue of $1.6 billion in the three-month period, up 30% from the same period a year ago. Also, the company said that total orders placed in Q2 grew 23% year-on-year to 426 million, a record high. In the first quarter of 2022, the company placed a total of 404 million orders, a 23% increase from the first quarter of 2021.
Marketplace GOV (that is, or the total value of its app orders and subscription fees) also hit a new high, rising 25% to $13.1 billion. The growth was in line with what the company reported for its first quarter ended March 31.
“We spend most of our time and energy building products and working to improve our execution,” DoorDash CEO Tony Xu and CFO Prabir Adarkar said in the company’s shareholder letter.
DoorDash’s U.S. consumer engagement remains in line with previous years, officials said, despite widespread changes in consumer discretionary spending.
The company also observed that US traders increased prices on the platform in Q2, which coincided with the overall increase in food prices. This caused consumers to order slightly fewer items per order on average, which it said raised the subtotal on its US Marketplace to a low single. -Percentage of marks on year-to-year basis.
The rise may come as a big relief to investors, many of whom were worried that consumer belt-tightening in the face of a recession would be bad news for non-essential services like food pick-up.
In their letter to shareholders, DoorDash executives pointed to three factors as to why the company didn’t see a big impact from the change in discretionary spending.
DoorDash said members of the company’s subscription service DashPass in the US, Canada and Australia continue to sign up. Its second quarter was the second-largest period of DashPass net additions in the past eight quarters. The company also said that adding new merchants to its marketplace, innovation in the app and adoption of DashPass have helped bring down the overall cost to consumers. The company said that all factors that help the consumer end up driving engagement.
“This has helped offset the impact of higher subtotals and resulted in a modest y/y increase in total consumer cost of average orders,” Xu and Adarkar said in the letter. “This has improved our affordability compared to alternatives, and highlights the benefits of DashPass as an affordability tool to consumers, as a way for merchants to drive volume in a variety of environments, and for our business.”
The company’s market penetration is also relatively low. Based on third-party data, DoorDash said it anticipates less than 8% of total restaurant spending and less than 1% of total grocery and convenience spending. This provides a runway for continued growth in consumers and spending, it said.
Food has also historically been a more inefficient category, the company said. According to data from the US Bureau of Economic Analysis, over the past 60 years, spending on restaurants and groceries has declined only twice on a year-over-year basis.
In this context, Doordarshan raised some of its key point of view.
DoorDash raised its guidance for its full-year marketplace gross order value, which it said was attributable to a softer economic environment in the second half of the year. It now expects full-year 2022 marketplace GOV to be in the range of $51 billion to $53 billion, up from its prior estimate of $49 billion to $51 billion. This guides to 21% to 26% year-over-year growth.
The company also expects its third-quarter government to be in the range of $13 billion to $13.5 billion, indicating lower growth than the previous quarter.
Still, Xu and Adarkar said the company will “continue to assess the effects of changing consumer behavior on our business.”
“If consumer engagement moves more meaningfully, it could spur a strategic change in the amount of capital we deploy or how we deploy it. In any environment, we build our long-term focus on building such products. We intend to maintain a focus that delights our customers and improves the efficiency of local commerce,” he said.
The company said that macroeconomic concerns can also draw people into the company’s work.
DoorDash also closed its acquisition of its European subsidy, Vault, within the quarter.
“Volt’s retention and order frequency metrics suggest a foundation based on operational excellence and customer passion that mirrors our own. In June, Vault operated with a 12-month retention of approximately 30%, which is the highest ever.” We think our industry is excellent,” Xu and performance wrote. “Vault also has a track record of driving a steady increase in cohort-level order frequency. When combined with retention, we believe this suggests its ability to execute effectively, across various markets. Delights consumers in the U.S., and supports improved growth rates and margin expansion over time.