DASH - NASDAQ

Hello. My name is Jean Louis. Welcome to the DoorDash Q1 2023 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] I will now turn the conference over to Andy Hargreaves. Please go ahead.

Thanks, Jean Louis. Good afternoon, everyone. And thanks for joining us for our first quarter 2023 earnings call. I am very pleased to be joined today by Co-Founder, Chair and CEO, Tony Xu; and CFO, Ravi Inukonda. We will be making forward-looking statements during today’s call being our expectations for our business, financial position, operating performance, market, guidance, strategies, our investment approach, alignment with merchants and Dashers, and the consumer spending environment. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those described. Many of these uncertainties are described in our SEC filings, including our Form 10-Ks and 10-Qs. You should not rely on our forward-looking statements as predictions of future events. We disclaim any obligation to update any forward-looking statements, except as required by law. During this call, we will discuss certain non-GAAP financial measures. Information regarding our non-GAAP financial measures, including a reconciliation of the non-GAAP measures to the most directly comparable GAAP measures may be found in our letters to shareholders, which is available on our Investor Relations website. These non-GAAP measures should be considered in addition to our GAAP results and are not intended to be a substitute for our GAAP results. Finally, this call is being audio webcasted on our IR website. A replay of the call will be available on our website shortly after the call ends. Jean Louis, I will pass it back to you and we can take our first question.

[Operator Instructions] Your first question comes from the line of [Technical Difficulty]. Please go ahead.

Hey, guys. Thanks for all the color. I guess I had two questions. The cohort data for new verticals looks great. Just a clarification, so that shows subsequent purchase frequency, just in grocery and convenience and these folks are also purchasing for restaurant as well, is that correct? And are we at a point where we can maybe put a flag in the ground and talk about how much GOV or how many users are in things like grocery and convenience? And then the second question is, some of your peers have talked about linearity in the quarter getting a little stronger exiting the quarter compared to January because of pandemic effects? Is that also what you guys saw, just trying to reconcile that with the 2Q GOV guide? Thanks a lot.

Yeah. Hey, Ross, I will -- it’s Tony. I will start with the first question and then I will let Ravi chime in on the second question. So I think your first question really was around the performance and the strength of the cohorts in our new categories. I mean, the answer to your question is, yes. I mean the retained -- the new cohorts are certainly stronger than previous cohorts, a lot of this has to do with improvements in product quality. So adding selection players like ALDI, we now are -- we now serve 20-plus of the top grocers in the U.S. Number two, we are also improving the quality of the experience itself, making sure that we are more accurate both in the filling of the carts, the ability to perfect the substitution experience when the items that we shop for are not inside the store. And we are also doing this with greater convenience by allowing you more choices of whether you want this delivered in 30 minutes, whether you want it delivered a bit later in the day. And so, for all of those reasons, that’s why you are seeing the cohort performance improve in new categories.

Hey, Ross. On the second question, consumer engagement and spending on the platform continues to be very strong. You can see that in our strong Q1 results, as well as the double-digit growth rate that we have driven consistently for the last two years in a row. I am not going to comment on the month-to-month, but it continues -- order frequency continues to be very good. In fact, it’s an all-time high. Retention continues to be very strong in the business, retention this past quarter is higher than the prior quarter. We feel very confident about the input metrics we are seeing and I feel very good about the guidance for Q2.

Thank you. Your next question comes from Deepak Mathivanan from Wolfe Research. Please go ahead.

All right. Thanks for taking the question. Tony, I wanted to ask about your efforts on groceries verticals. It’s still in early stages for you, but do you feel like you have the operating model sort of nailed down at this point, and perhaps, maybe talk about strategically what are the next steps in kind of scaling this huge opportunity? And then second one maybe for Ravi, it was nice to see the outperformance on EBITDA, but Prabir has always talked about profitability being the output metric based on the level of investments that you could make. Were there any sort of like strategic changes in your approach to investment areas in 1Q or for thinking for 2023? Maybe touch on areas where you are seeing nice returns on investment areas currently as well? Thanks so much.

Yeah. I will start with the first question, which really was around grocery and the performance there. I mean, you are exactly right. I think both in terms of the numbers that we saw as a business collectively at the top and the bottomline, I mean, you are seeing continued growth, certainly, in the core restaurants business, even faster growth in businesses like grocery and you are seeing improvements in the unit economics of all of our business lines, altogether, including things happening overseas as well, and so I think that’s really what’s reflected in the performance of the quarter. And specifically on grocery, while I think that we have made, I mean, tremendous strides, we continue to grow faster than others and continue to gain share. I think there’s still the long ways to go from the perspective of building the product. I mean, if you look compared grocery penetration in terms of online delivery in the U.S. relative to, say, online delivery of restaurant food, I mean, it’s substantially lower by multiples. And I think that’s because the off-line experience is still superior to the online experience, which means we have a long way to go to making sure that we can make the quality of the experience perfect, meaning you get exactly what you order that you can get it from all the places that you want to delivery from and that the prices are affordable or what you expect to pay in store. And I think there’s a long way to go between where we are today and where we will be in the future, but I am very, very proud of the progress that the team has made.

And Deepak to your second question, nothing has changed in terms of how we think about our investment philosophy. What you are seeing in Q1 is a combination of a few factors. Obviously, as you commented, we had GOV upside in the business, which drove some of the EBITDA upside in the business. When I look at the various lines of business, our core restaurant business is growing even at its scale is continuing to grow quite nicely, strong and stable growth for the last several quarters in a row. The profitability of that line of business is continuing to improve. Our investment areas, both new verticals and international had a very strong first quarter. Growth has been strong, we continue to gain share in both areas, as well as margins have improved both sequentially, as well as annually. Now if you combine that with the discipline we have had on our operating expenses where OpEx was flat for the last three quarters in a row, that’s giving rise to some of the EBITDA upside that you are seeing in the business. That said, we are constantly looking to reinvest back in the business, but there’s going to be times when there’s not going to be any efficient investment and it’s okay for us to have that drop to the bottomline. In general, our philosophy is to continue to drive efficient growth, while being disciplined with our investments and one of the disciplined parameters that we use is the EBITDA guidance that we have given.

Thank you. Your next question comes from the line of Bernie McTernan of Needham & Company. Please go ahead.

Great. Thank you. Maybe just a general question, how you guys are thinking about the opportunity for generative AI for DoorDash? I know AI has probably been integrated in the marketplace for quite some time, but any new opportunities that are being opened up? And then second, restaurant-specific partnerships like the recently announcement with Starbucks, how important are those for driving both GOV and contribution profit per order and just any way to frame the benefit there? Thank you.

Sure. Bernie, maybe I can take both. It’s Tony. On the first piece around generative AI, I mean, certainly, this is that’s coming out movement, right? And I think it’s super exciting, both as a technologist, as well as a user of the product. But also in terms of just seeing how fast developers are candidly making changes every day. And so, I think for us, it’s important to remind ourselves our purpose, our purpose is really to build the defining local commerce company, which means that when you have two battles going on the battle for bits and digital attention in the battle for atoms, we very much are in the camp of the second category of making sure that we can win that battle. So very much the focus still remains to make sure that we are the highest quality last-mile logistics network and making sure that, that asset is the most useful and most attractive as we think about how it interfaces with digital assistance in the future. But that said, we are absolutely already running different experiments internally with some of the latest models that have been published when it comes to generative AI. I mean I think it has great promise for achieving productivity gains and doing especially a lot of the manual work that we have to do when we try to digitize the physical world and build the catalog for every city. I think it has a lot of promise for making the consumer experience, shopping experience, a lot easier as well by reducing friction. So I think you should expect a lot of fun things to come in the future and will be a big part of that. I think your second question really was around adding restaurant selection and especially with companies like Starbucks joining the platform. I mean, certainly, this has always been a big part of building our product, right? I mean for us, it’s always about improving selection and adding to what customers want. It’s about certainly increasing the quality of the delivery experience, improving the affordability of our service, as well as the customer support. And so selection has always been key to making sure that we can give customers what they want. Bringing on Starbucks is something that we are super excited to do and we look forward to even more partnerships.

Thank you. Your next question comes from the line of Michael McGovern, Bank of America. Please go ahead.

Hey, guys. Thanks for taking my question. I had two. First was about, I have noticed in the application a lot of types of advertising and promotion of the new service where you will pick up UPS and FedEx packages and deliver them for customers. So I was just wondering what the high level strategy is around that service, because it seems to be really differentiated from what your other services are, so a cool new feature? And then secondly, I noticed that there’s a bit of a recent redesign in the layout of the interface on the application and I really like it, because it seems to -- it’s much more seamless in reordering things that you have ordered in the past. So I was wondering if that was the focus with this recent redesign? Thanks.

Sure. Hey, Michael. It’s Tony. I will take both of those questions. So on the first around package pickup and delivery, Yeah, it’s certainly something that we are very excited about. But I think at DoorDash, it’s really important to, again, recognize what we are trying to do. What we are trying to do is to make sure that we can help any physical business grow and connect as many possible physical businesses with as many possible consumers. And it doesn’t matter necessarily which direction in which travel is occurring, in terms of those connections. And so for us by having achieved, for instance, in the United States the greatest order density, we just have a lot more flexibility in terms of the choice of problems that we can solve for a lot of these customers and one of those problems that we heard about was this notion of solving returns in some of these package orders that you are dis -- you are kind of alluding to. And so it’s really something that’s very early stage, like, we run many new things at DoorDash all the time in the hope of solving increasingly higher customer expectations. This is one of them and we are excited about where things are right now, but there’s a lot of these things happening always at DoorDash. On the second question on some of the improvements with respect to reordering. We are always trying to reduce friction when it comes to the ordering experience. Certainly, reorders are very popular amongst, in particular, our most engaged consumers. But there’s a lot of things that we are trying to do to the app. We are trying to make it faster. We are trying to reduce the number of bugs. We are trying to make sure that you can find exactly what it is that you want that you can discover new things that might be enticing. So there’s a lot of things that we are trying to do to always improve the experience and it’s always with the mission of reducing friction.

Thank you. Your next question comes from the line of Michael Morton of MoffettNathanson. Please go ahead.

Thank you. I had a quick question on advertising. I was wondering if you could speak to the adoption rate you are seeing. It sounds to us like the SMBs are the early adopters. I would love to hear some details about the larger QSRs and their interest in the advertising platform? And then just a last question, if you would be interested, any additional details maybe around bookings growth in new verticals or just help us think about how that business is progressing? Thank you.

Yeah. I will start on the first question around ads and I will let Ravi take the second question. So with respect to advertising, I mean, you are right that, we are off to a pretty great start, and it’s a fast clip, especially given the high standards that we are trying to put out for ourselves, which is -- on the one hand, we certainly have to meet the goals and create best-in-class return on ad spend for advertisers and merchants. And on the other hand, we also have to achieve the best possible consumer experience, where there is little to no degradation in terms of what consumers expect to see. And this is hard to do, because I think, it’s really important to remember that with any marketplace business, and certainly, any desire to build an ad business, the most important thing is the engagement of the marketplace. And so this is something that I am really proud that our teams have balanced extraordinarily well, even though they have kept pace with, I think, the demands of what we see from advertisers, which is they want to run more ads and -- but we have to do that again in a very pro-consumer way and so we are seeing the demand on the advertising side from, candidly, every segment of merchants, whether -- and this goes for CPG companies in addition to the restaurants as well. So we are very excited that SMBs have found this to be a very capital efficient way to grow and effectively serve as their marketing department in some cases all the way to the largest brands in the world that you have heard of have the biggest budgets in the world that are finding a very, very large incremental use case when they work with the largest local commerce platform.

And Michael, just to add to what Tony talked about it, your specific question on the second one. Our ad business is growing, it’s growing quite nicely, it’s actually having an impact on our net revenue margin as well and our view for what that business is going to be is included in our EBITDA guidance for the rest of the year.

Thank you. Your next question comes from the line of Mark Mahaney of Evercore. Please go ahead.

Hi, guys. This is Ian Peterson on for Mark. It would be great if you could just provide us an update on DashPass and any engagement trends you can share there, both in the U.S. and also the subscription business in international as well with those? Thanks.

Ian, thanks for the question. DashPass came off of another great quarter, both in terms of sign-ups, as well as subscribers. For us the way we think about DashPass is, anything that you want in your city, you could get it for $10 a month, whether it’s pet food, whether it’s retail, whether it’s grocery, whether it’s convenience and that’s a very compelling value proposition for us. And what we are seeing is, as we are continuing to drive the overall product quality up, as we are making the product more affordable, as we are driving the selection up, that’s driving to more and more consumers graduate to DashPass and that’s driving the strength in the business, both domestically, as well as internationally. We are very comfortable with the progress we have made and Q1 was a very strong quarter for DashPass for us.

Thank you. Your next question comes from the line of Andrew Boone of JMP Securities. Please go ahead.

Hi, guys. Thanks for taking my question. I wanted to ask about Europe. It feels like you guys took share in international. Can you talk about what you are seeing competitively and what’s leading to greater traction? And then, Ravi, I wanted to follow up on an earlier answer that you gave about contribution margin improving. It sounds like you are now willing to drop more to the bottomline. Can you just talk about the piece of investments as it relates to new verticals? Is it just that the new verticals maturing or are you guys slowing down on any initial growth initiatives that may be more loss making? Thanks so much.

Yeah. I will start on the first question, which was around Europe and the competitive position. I think, this is a great place to remind ourselves of a lot of the investment thesis we had behind teaming up with Wolt, who runs the majority of the markets outside of the U.S. for DoorDash. And really, the first thesis was that when you have the highest retention and frequency of engagement that, that is what will really allow the most capital efficient growth, especially in a category that has very, very long runways left. And that’s really what we have seen in terms of the execution of the Wolt business. I mean even against difficult comps with Omicron of Q1 of last year, you see Wolt growing tremendously quickly year-on-year and certainly outpacing the rest of the class. And so I think that a lot of that, again, happens to do with the strength of the engagement of the consumer that Wolt has been able to build and it’s a reflection of the product quality and so especially as Wolt now introduces some of their newer products with Wolt+, which is its DashPass equivalent, as well as some other products that it’s borrowed from learning from the DoorDash U.S., I think, we are only going to see more growth in years to come.

And Andrew, to your second question, when I think about the contribution margin improving, I think of it in terms of two dimensions. One is the core restaurant business that’s growing, it’s growing quite nicely, as well as improving in terms of profitability. And when I look at the investment areas, when I think about the capital allocation, I look at it across two vectors. One is do -- does the product and investment have strong product market fit in terms of consumer demand, as well as the second one is, are they progressing in terms of unit economics? What you are seeing in Q1 ism both new verticals as well as international. They are growing quite nicely. They are gaining share in both of the areas, as well as the margins are improving both sequentially as well as annually. Now if you combine that with the fact, especially on the new vertical side, we have a structural advantage where we have a network of consumers and Dashers already built out, that’s giving rise to some of the efficiency gains that you are seeing in the business, which is naturally translating into margin improvement. When you put both of those businesses together, you have these businesses that are growing, they are growing nicely, the margins are improving, as well as the core underlying fundamentals are improving. It has all the similarities of what we saw in the restaurant business very early on and we have strong conviction that if we continue to execute well, these two areas are going to be drivers of strong free cash flow generation for us.

And put a different way, we are not slowing down any investments. It’s -- the businesses are just growing top and bottomline, and that’s what you are seeing in terms of the flow through towards the results.

Thank you. Your next question comes from the line of Brian Nowak of Morgan Stanley. Please go ahead.

Great. Thanks for taking my questions. I have two. The first one, I wanted to ask about how you think about the runway for new user growth in the U.S. and sort of what type of user growth are you thinking about in the full year guide to grow new people to come to the platform in the U.S. and how do you do that at this point, kind of where we are on penetration? Then the second one on Wolt. You had the asset now for quite a while. It’s been executing at a pretty high clip. Tony, what have been one or two of the biggest surprises to you about Wolt that maybe you didn’t even appreciate when you acquired the asset?

Yeah. Hey, Brian. Yeah. I will take both questions. On the first question about user adoption, I think, sometimes, it’s just important to remember that, it’s no different in acquiring users versus getting users who may have tried the product to use the product more often, which is we just have to improve the product. And so whether that means we didn’t have the right selection to attract a customer in that moment or that occasion, the right pricing, the right speed and/or quality of delivery or we messed up on customer support. I mean those are the building blocks of how we win any customer and I think the fact that people eat 20 times to 25 times a week is really, frankly, why I think there’s such a large runway left for growth. It’s not necessarily about can you serve all of the users and where are we on that journey? That’s one part of it, but then you have to multiply that by 20 times per week to 25 times per week and that potential. And so that’s at least how it works in my brain and to me, it’s the same of whether we want to go attract a new user or just win a new use case or in an incremental use case of the 20 times to 25 times occasions per week that a customer is eating and we know that, that happens all the time. So that’s the first question. On Wolt, which I believe is your second question, I mean, I would say a few things that I have come to appreciate even further. I think first is really the -- their ability to compete in a very capital efficient way has been, I think, just really, really interesting and unique. I mean I think sometimes, especially now as DoorDash is generating more and more positive free cash flow, it’s almost easy to forget when some of the constraints were even tighter and the budgets were a lot smaller and I think it’s been really impressive to watch what gold can do, I think, in that regard. And that’s really a testament to the team the ability to always focus on the product to make sure that we can keep increasing the retention and the frequency of the experience such that, that’s how we will actually outcompete both and make good investments, not just this year, but for years to come. I think the second is more a comment around maybe the market, which is in a lot of these European markets, I think, we maybe sometimes, because we live in the U.S. or maybe we live in other countries where e-commerce has been a bit more at the forefront or just has had longer to adopt for users that. A lot of these countries are just kind of having a lot of the physical stores come online for the first time and that’s true certainly for restaurants, but also outside of restaurants and I think a lot of the fast growth that you are seeing Wolt is their ability to serve all of the categories and very much the same goals that DoorDash has to become the local commerce -- company Wolt wants to do the same thing in all of its geographies and so I think that shared mission is really what allows us to work really well together.

And Brian, just to the specific question on the guidance point itself, we do expect to grow both users, as well as order frequency and that’s baked into our guidance that we have given.

Thank you. Your next question comes from the line of Youssef Squali of Truist Securities. Please go ahead.

Great. Thank you. I have two questions as well. So just on the guidance, Ravi. So, again, if I look at the GOV -- the total market GOV, it looks like, at the midpoint, the growth is in the low 20, if I look at the last nine months, the last three quarters, it was really more like 29% or 30%. Is there anything related to maybe Wolt annualizing now that’s kind of causing that number to decline so that -- is that just out of kind of lack of visibility potentially considering the macro, et cetera? Anything there could be -- would be really helpful? And then I guess as you look at the free cash flow, so certainly your execution has been pretty impressive. How should we be thinking about timing to hit positive free cash flow for the non-restaurant business on the back of just the stronger topline. Has that timing kind of shortened? Thank you.

Yeah. Youssef, let me start with the first one. On the GOV itself, a couple of points here. I mentioned earlier that, consumer engagement continues to be strong. When I look at both retention, as well as order frequency, I feel very optimistic about the signals that we are seeing in the business. That’s what’s giving us confidence to bump up the GOV guide for the rest of the year. To your specific point on the growth rate comp itself, we do lap the Wolt acquisition in June, so you are seeing an impact of that in the second half of the year. In terms of your second question on free cash flow, in terms of when I look at the new verticals business in Q1, it had a very strong first quarter, both in terms of growth, as well as improvements in margin. And underlying what you are seeing in the business is, as we continue to improve the quality, as we are continuing to make the product more affordable, that’s driving not just topline growth, but also we are seeing efficiency in the business and that efficiency is contributing to the improvement in margin. On the absolute dollar basis, we are not going to comment on it, but I feel good about the investment levels and that’s included in our EBITDA guidance for the rest of the year.

Thank you. Your next question comes from the line of Ron Josey of Citi. Please go ahead.

Great. Thanks for taking the question. I have two. Tony, in the letter, you talked about double-digit improvements in grocery quality and efficiency metrics. Can you just help us understand what these improvements were to drive the improvements in overall quality and efficiency, any insights would be helpful? And then, Ravi, just a quick clarification on contribution margins, last year, I think we saw convenience as a vertical become variable contribution positive. And so I am wondering if other newer verticals are contributing here, given the structural advantage that you talked about or do you expect perhaps grocery or alcohol or others to start delivering at least variable contribution margins by the end of this year? Thank you.

Yeah. Hey, Ron. On the first question around the improvement in the product quality and grocery. A big part of this stems from the fact that today physical stores, grocery stores, that is, don’t always know exactly what’s on their shelves. And that’s quite a hard problem to solve for a variety of reasons, we can literally go on for hours to talk about all of the different reasons. But that’s the problem that we have gotten better at in terms of making sure that we can get you exactly what you ordered. I am not saying we are perfect, and I mentioned, I think, to an earlier question that we are still the long ways to go in terms of where I want to see this product experience. But I think with tremendous strides in the two years that we have been doing this and I think as a result of that, you are seeing increases in the cohort engagement that we talked about in the letter and that’s showing, therefore, both basically a capital efficient way to grow. Because to me, the most -- the best way to achieve capital efficiency is through improvements in product quality and I think that, that was a very nice one-to-one correlation that we saw and that really stemmed from many quarters of work that showed up in some of the results in this quarter.

And Ron, to your second point, right, like, just to add on to what Tony said, some of the quality improvements that we are driving in the business is also resulting in the efficiency gains. Our third-party convenience that you talked about is variable profit positive and it’s continuing to improve. All categories within our new verticals umbrella, whether it’s grocery, our DashMart business, our third-party convenience are improving. We feel good about the progress and we talked about in the letter, overall on a margin basis, our new verticals is improving both sequentially, as well as annually.

Thank you. Your next question comes from the line of Rohit Kulkarni of ROTH MKM. Please go ahead.

Okay. Thanks for taking my question. One on AI, I know generative AI is on top of every investor’s mind. But I guess just internally speaking, maybe talk about longer term, how are you thinking about using AI to improve productivity of engineers, marketing salespeople. And in structurally, do you feel kind of DoorDash and all Silicon Valley companies are going to be much more profitable as they start to figure out applying AI to all the internal processes, maybe they become the first wave of adopters of these productivity tools? And then second question is on just new vertical margins, it’s been a couple of years since you have had these deem verticals and it feels that they are starting to pull ahead the overall margin profile. So maybe just structurally, can you talk about the various puts and takes between the core restaurant most profitable business versus all the new verticals as you start kind of layering on the incremental profits from them. How we should think about the overall profitability steady state as such?

Yeah. I will take the first question and maybe Ravi can take the second. With respect to AI and its ability to change the trajectory of some of these functions that you asked about in the question. Look, I mean, I think, it certainly represents the promise for a lot of productivity gains. In terms of how those productivity gains will be expressed in terms of financial results for a company, I think that’s very hard to estimate, because on the one hand, you are going to have the same number of people who can hopefully do more with what they have with now more advanced tooling. But then on the other hand, you have to not forget the customer, the customer’s expectations are always going to go higher and higher and higher. Take coding, for instance, the number of engineers almost never seems to be enough in terms of what the demand for engineering talent is, as well as just frankly, like the number of things to build. And so I think that you are going to have kind of two forces competing for this, one is the productivity gains, which I certainly would expect to see, but then on the other hand, I also believe that customer expectations always go in one direction, which is higher and higher and higher and so I think the balance of the two will be -- what all of us will be going through.

Hey, Rohit. On your second question on margins. The way it is I think about it is. Our core restaurant business is growing, as well as improving in terms of overall profitability. But we still are a small portion of the overall sales for the restaurant industry. So we continue to invest behind that business. It’s important that we continue to invest behind quality, invest behind making the product more affordable, because that’s going to drive long-term growth in that business. Secondly, on new verticals, what we are seeing is, some of the quality improvements that Tony touched on earlier in the previous question, that’s driving efficiency in the business. That business as a whole is improving in terms of margin, both sequentially, as well as annually. But the market there is very large, we are still underpenetrated and I think if we continue to improve the overall product, that’s going to drive long-term free cash flow generation for us. It’s a business that we are going to continue to invest in and continue to improve the product experience for our consumers, merchants, as well as Dashers.

Thank you. Your next question comes from the line of Eric Sheridan of Goldman Sachs. Please go ahead.

Thanks so much for taking the question. Maybe two quick ones, if I can squeeze in. First, when you look out over the landscape in 2023 and beyond, what do you continue to see as some of the key investments you need to make on the merchant side of your plate -- of your platform that will continue to drive more merchant growth, more merchant adoption and where you can gain deeper relationships and market share of the merchant side? That would be number one. And then number two, when you look further out, how should we be thinking about you making the app more shoppable for lack of a better term. We talked on the last call about increasing velocity and order volume among your user base, and I am just curious, given all the direct traffic you have to app, how do you think about overlaying all the SKU diversification you have built on possibly driving greater levels of frequency and app across all those SKUs? Thank you.

Yeah. Hey, Eric. I will take both of those questions. On the first question with respect to merchants, I mean, basically, the short answer is that we are going to have to solve more and more of their problems in order to work more and more deeply with them with the goal of helping them improve same-store sales and profitability. And sometimes these things take swings, right? I mean, take for example, if we can span out a little bit in the years of 2021 and 2022, particularly when consumers were roaring back inside stores. There was a big focus for merchants to make sure that they can staff up to meet that in-store demand and they needed to take maybe the guest pedal off of digital for a bit. You are starting to see some of this now swing back, for instance, as these merchants are lapping those years of in-store growth and they are now returning back into investing into their digital channels. So I think you are going to see these kinds of ebbs and flows. But I think all of this is really in the name of how do we build enough tools and products for merchants to better understand their customers, better engaged with those customers, the long-term relationships with those customers, do it through the first-party channel and whether that’s being powered with products like DoorDash Drive and Storefront or the third-party DoorDash Platform and the Marketplace. And so I think there’s a lot there that we are going to have to continue to do to just solve more and more problems, because just like consumer expectations, for merchant expectations grow, too. And I think they are always going to be on this -- when you are a business owner, particularly, if you are like my mom or a single-store owner, you are going to have 50 things you are thinking, but at the end of the day, you are always thinking between growth and profitability and dynamic. Your second question is, I think, how do you make the app more shoppable and this is a phenomenal question. I mean I think it’s going to be -- it’s certainly the endeavor that we are marching on, where we are becoming more and more of a multi-category destination. I mean you see this certainly in the numbers and you see this, I think, even in the fact that we are now acquiring more new customers into the grocery and convenience sectors more than anyone else and for the first time. And so I think that is telling us that customers expect DoorDash to be able to deliver upon those experiences, whether they are coming in and trying to buy a baseball bat from DICK’S Sporting Goods or trying to buy a pound of lettuce from a grocery store. And so we are doing lots of things right now. We are improving the catalog. We are making sure that there’s improvements to search. We are making sure that we can create an item-based shopping experience. There’s lots of things that we have to do in order to catalog digitally, the physical world and then present that catalog in concert with our merchants, so that it makes sense to the consumers and that they can achieve the merchant goals too. I mean this is the delicate and very important responsibility that we have to make sure that DoorDash can work for everyone. And if it can work for everyone, then we believe the results will be something that we are proud of.

Thank you. Your next question comes from the line of Lloyd Walmsley of UBS. Please go ahead.

Thanks. Two questions on just some of the numbers, if I can. First, just if we look at sales and marketing, it looks like growth there stepped up a bit from 4Q to 1Q. I am wondering if that’s kind of a new newish normal. And then, similarly, we saw a nice step-up in gross profit margins, so wondering if that -- if we should be thinking about that as a new level or just continuing to expand that? Thanks.

Yeah. Hey, Lloyd. I will take the gross margin one first. On the last call, I mentioned that 2023 gross margin was going to be higher than Q4 levels. That’s exactly what you are seeing in the business. A few factors at play here, over the last year and a half, we have driven a number of improvements on the product side, which has made our logistics engine more efficient and you are seeing that leverage come through in terms of Dasher cost per order. Quality has been a key priority for us and what we have noted is that we continue to work on quality that’s driving retention higher. We are seeing the benefit in terms of growth, as well as lower credits and refunds costs. That, combined with our ads business, which I mentioned earlier, that’s growing -- that’s also having an impact on our margin. That said, we don’t operate or run the business to a specific margin target. Our goal is to invest flexibly across the P&L in order to be able to drive efficient growth. To your second question on sales and marketing, Q1 was a strong quarter in terms of topline volume for us, and in order to support that volume, we had to acquire more Dashers. That’s the result of your Dasher acquisition cost going up, which is driving sales and marketing higher. That said, I would not read too much into the volatility. If you take a look at over the course of the last year, we are doing a ton of leverage on sales and marketing, all from product improvements that we have made. I do expect there to be more leverage on the sales and marketing side and that view is included in our EBITDA guidance that we have given.

Thank you. Your last question comes from the line of John Colantuoni of Jefferies. Please go ahead.

Great. Thanks for taking my question. Curious to dig a little bit into DashPass member adoption of new verticals like grocery, retail and convenience, and how that compares to non-members? And related to that, we know DashPass members order more once they become members and more -- order more than non-members. But I am curious to hear if you are able to provide any color on how these upticks and frequency vary across verticals. Do grocery or retail orders increase even more than restaurant orders after user becomes a member? Thanks.

Hey, John. It’s Tony. I will try to answer your questions. I don’t think we run the business that way in the sense that we are trying to necessarily steer a customer into one category or the other. Instead, what we are trying to do is we are trying to build the best-in-class experience within each category and then allow the customer to choose which one of those experiences make the most sense for them for that particular shopping occasion. And then DashPass, to your point, is something that we can stitch across to provide the greatest possible value, because we are going to give you everything inside your city within that DashPass membership. So I don’t think that we are trying to necessarily steer people one way or the other. I think it’s probably intuitive that prepared meal, something like restaurant food is going to have the highest frequency. But that makes sense, because we 20 times to 25 times a week, which is the highest possible shopping category that we have relative to other categories. But that said, I mentioned earlier or to an earlier question that we now are attracting more new customers into the industry outside of restaurant foods than anyone else. And so people are now coming to DoorDash for the first time, not shopping from restaurant food, but also shopping for their grocery items, their liquor needs, their retail items et cetera and et cetera. So I think this is just one of those things where as long as we continue to build the best possible shopping experience within each category and then stitched across the categories and then overlay that with the value of DashPass, we will be in a good position.