DoorDash reported greater-than-expected revenue growth and market value of second-quarter gross orders on Thursday, indicating that even in a rocky economy, customers are still resorting 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. At the same time, the company said the total number of orders it delivered in the second quarter grew 23% year-over-year to 426 million, marking an all-time high. In the first quarter of 2022, the company reported 404 million total orders, which was also a 23% growth from the first quarter of 2021.
The marketplace’s gross order value (GOV, or the total value of app orders and subscription fees) also hit a new all-time high, rising 25% to $13.1 billion. That growth was in line with what the company reported for the first quarter, which ended March 31.
“We spend most of our time and energy building products and working to improve our execution,” said Tony Xu, DoorDash CEO and CFO Prabir Adarkar, in the company’s shareholder letter.
The executives added that despite broader shifts in consumer goods spending, DoorDash’s consumer engagement in the US remains in line with previous years.
The company also saw US traders increase prices on the platform in the second quarter, coinciding with the general increase in food prices. As a result, consumers ordered slightly fewer items per order on average, which they say drove U.S. market subtotals up a low-single digit year-over-year.
The growth could come as a huge relief to investors, many of whom feared that tightening the consumer belt in the face of a recession would spell bad news for non-essential services like takeaway.
In their letter to shareholders, DoorDash executives pointed to three factors that explain why the company has not seen a greater impact from shifts in discretionary spending.
DoorDash said members of DashPass, the company’s subscription service in the US, Canada and Australia, have continued to sign up. The second quarter was the second-largest period of net gains from DashPass in the last eight quarters, it said. The company also said that adding new merchants to its marketplace, innovation in the app and greater adoption of DashPass helped lower overall costs for consumers. All of these factors help consumers increase engagement, the company said.
“This has helped offset the impact of higher subtotals and resulted in only a slight increase in total consumer costs from an average year-over-year order,” Xu and Adarkar said in the letter. “This has improved our affordability compared to alternatives and highlights the benefit of DashPass to consumers as an affordability tool, to merchants as a way to generate volume in different environments, and to our business.
The company’s market penetration is also relatively low. Based on third-party data, DoorDash estimates less than 8% of total restaurant spending and less than 1% of total grocery and convenience spending. That provides a launch pad for continued consumer and spending growth, it said.
Food has also historically been a more inelastic category, the company said. Over the past 60 years, spending on restaurants and groceries has fallen just twice year on year, according to data cited by the U.S. Bureau of Economic Analysis.
In that context, DoorDash brought out some of its key prospects.
DoorDash raised its outlook for its full-year marketplace GOV, which it believes is responsible for a weakening economic environment in the second half of the year. It now expects the GOV marketplace to be between $51 billion and $53 billion for the full year 2022, up from previous estimates of $49 billion to $51 billion. This leads to an annual growth of 21% to 26%.
The company also expects third-quarter GOV to be between $13 billion and $13.5 billion, which would indicate low growth from 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 changes more meaningfully in the future, it could lead to tactical changes in the amount of capital we deploy or how we deploy it. In any environment, we intend to maintain our long-term focus on building products that delight our customers and enhance the potential of local commerce,” they added.
Ongoing macroeconomic concerns could also drive people to work for the company, the company said.
DoorDash also completed the acquisition of Wolt, the European subsidy, within the quarter.
“Wolt’s retention and order frequency metrics suggest a foundation of operational excellence and customer obsession that mirrors ours. In June, Wolt was operating at nearly 30% retention for 12 months, which we believe is excellent in our industry,” Xu and Adarkar wrote. “Wolt also has a track record of driving consistent growth in order frequency at the cohort level. Combined with retention, we believe this indicates the ability to perform effectively, delight consumers in a variety of markets, and sustain superior growth rates and margin expansion over time.