Last year was a big year for food delivery service DoorDash. Not only did the pandemic have a huge impact on its business, but the company filed its IPO in December in which the company raised $3.4 billion. Last week, DoorDash reported its fourth quarter and full year 2020 financials last week with impressive results, including quarterly records for total orders, marketplace GOV and adjusted EBITDA.
Handling the pandemic
In the company’s February 25 earnings call, the company’s first since going public, CEO and co-founder Tony Xu addressed the pandemic.
“2020 was a difficult year for all of our audiences, and our operations had great challenges and faced enormous uncertainty. While exhausting at times, I'm proud that our team chose optimism, built plans, prepared for all scenarios and executed 24/7 to ensure that we did our part in seeing the best of our local communities. While much of the work began in March 2020, a lot of the impact was carried into Q4. We prioritized safety by shipping no contact delivery, distributed more than 10 million units of PPE in the form of hand sanitizers, gloves and masks to Dashers, and we collaborated with merchants on tamper-proof packaging,” Xu said.
Other actions DoorDash took to mitigate the impact of the pandemic included:
- Providing grants to nearly 2,000 restaurants to help them adapt to winter during COVID
- Offering flexible earning opportunities to people who had lost jobs or were furloughed during the pandemic
- Helping more than 1 million Dashers earn over $2 billion during Q4
- Reducing commissions by half to merchants, totaling more than $100 million
- Donating free DashPass subscriptions to healthcare workers
- Partnering with organizations like New York City Department of Public Schools, United Way and Feeding America to deliver food, groceries and supplies to people in need
- Powering the delivery of 6.5 million meals to people in need during 2020
“I want to thank all of our teams worldwide and the millions of consumers, Dashers and merchants who each stepped up in their own ways to navigate the pandemic,” said Xu.
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Financial highlights for Q4 2020
- Total revenue was $970 million, a 226% increase from Q4 2019 revenue of $298 million.
- Total orders were 273 million, a 233% increase year-over-year from 82 million orders in Q4 2019.
- Marketplace GOV was $8.2 billion, a 227% increase year-over-year.
- GAAP gross profit was $477 million, a 311% increase year-over-year.
- GAAP net loss was $(312) million compared to $(134) million in Q4 2019.
- Adjusted EBITDA was $94 million, compared to Adjusted EBITDA loss of $(103) million in Q4 2019.
- The company did not share subscription totals for its DashPass subscription program, though they did refer to retention rates in their investor letter.
In the company’s investor letter, the company highlighted operational efficiencies and areas of opportunity. The key among them is that the COVID-19 pandemic put a spotlight on the gap between brick-and-mortar merchants and online competitors. Technology was a key differentiator and an area where DoorDash can help non-digital merchants create online storefronts to become part of the DoorDash network. This helps DoorDash to grow its merchant base, while assisting restaurants in increasing sales by reaching more customers.
The company also reported that the company saw strong growth in restaurant and non-restaurant merchants in the fourth quarter. They believe this is an opportunity for the future.
“Although we experienced rapid growth in restaurants on our Marketplace in 2020, we believe we still have substantial room to increase penetration in the restaurant vertical in the coming years,” DoorDash said.
In 2020, the company launched convenience and grocery deliveries, its first non-restaurant merchants. Though they saw growth in this area, DoorDash said it has “substantial work” to do to improve the consumer and merchant experience.
“In 2021, we intend to continue to drive development in convenience and grocery, and will look to add additional categories where we believe we can add significant value,” said the company.
Customer acquisition and retention
In the fourth quarter, DoorDash’s customer acquisition costs increased because of advertising expenses. They are pleased with their progress, however, because they have had strong engagement and higher average retention rates, average order frequency and average value of orders at levels above pre-pandemic levels. They also report “excellent engagement” with older consumers.
Outlook for Q1 and full year 2021
Because so much uncertainty surrounds the pandemic and the success of vaccines, DoorDash was hesitant to provide solid guidance for the first quarter and the full year. They shared the following ranges:
- First quarter marketplace GOV between $8.6 billion and $9.1 billion
- Full year marketplace GOV between $30 billion and $33 billion
- First quarter adjusted EBITDA between $0 to $45 million
- Full year adjusted EBITDA between $0 and $200 million
“Our outlook anticipates the successful rollout of COVID-19 vaccines, among other things. Though we cannot predict the short or long-term effects this will have on consumer behavior, our guidance assumes it creates headwinds to growth in total orders and average order values. We caution investors that the outlook for 2021 remains highly uncertain, and consumer behavior could deviate from the expectations included in our guidance,” DoorDash said.
“Our guidance also assumes that the timing of scaled vaccinations will coincide with our seasonally softer Q2 and Q3 periods. Consequently, our forecast assumes increasing consumer churn, reduced order frequency at the cohort level, and slightly smaller average order values beginning in Q2. Because of this, our full year 2021 guidance assumes marketplace GOV in Q2 and Q3 will be below the levels we expect in Q1,” said the company.
Like Zoom, DoorDash is among the companies that did exceedingly well in the pandemic. They had a stellar 2020, hitting triple-digit increases in most categories. This allowed the company to go public, expand into the non-restaurant market, and to support merchants, consumers and Dashers throughout the pandemic. That means though that 2021 will not be as rosy. The company expects that and, judging by the drop in DoorDash’s stock price since the February 25 financials were released, investors know that too.