The chief executive of food delivery app DoorDash says the company will be able to thrive after Covid-19, even though a successful rollout of the vaccine will probably mean headwinds for his business this year.
With the food delivery sector growing rapidly due to the widespread shutdown of indoor dining, DoorDash more than tripled its revenues in the final months of last year. Worries about what comes next sent its shares down more than 10 per cent in after-hours trading on Thursday.
“Habits, especially consumer habits, they tend to stick,” insisted Tony Xu, speaking to the Financial Times following the company’s earnings report, its first since going public late last year.
“Convenience tends to go in one direction, which is seeking greater convenience, especially when you think about how it’s getting aided by the fact that there might be some longer-term trends towards working from home.”
DoorDash has established itself as the market leading delivery app in the US. It reported revenue of $970m in the last three months of 2020, a 226 per cent increase on the same period the year before, and slightly above analysts’ estimates.
Its full-year losses narrowed, from $667m for 2019, to $461m last year. A fourth-quarter loss of $312m was well over double the figure for the same period last year, although it mostly included stock-based compensation related to its initial public offering.
Discounting those costs, as well as interest, tax, depreciation and amortisation, DoorDash said it had adjusted earnings of $94m in the quarter, versus a loss of $103m in the same period in 2019.
It gave vague guidance for the rest of the “highly uncertain” year. In a letter to shareholders, Xu warned that opening up societies would more than likely mean a squeeze on order numbers and average order value.
Reflecting that unpredictability, the company said its adjusted earnings before interest, taxation, depreciation and amortisation was expected to come in between $0 and $45m in this year’s first quarter, and between $0 to $200m for the entire year.
The company’s costs have continued to increase as multiple players — most notably Uber Eats — jostle in the sector. DoorDash’s cost of revenue in the fourth quarter of 2020 went up by more than 150 per cent, year-on-year. Its sales and marketing costs more than doubled.
“We definitely are still in investment mode,” Xu said. “Just because of the massive runway ahead in both the core category of restaurants as well as our goal to become a multi-category marketplace.”
DoorDash also warned that California’s Proposition 22 legislation — that, among other things, gives gig workers a guaranteed minimum earning of 120 per cent of minimum wage — would pull down its take rate, the average amount of revenue it makes on each order. In 2020’s final quarter, the take rate was 11.9 per cent.
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