DASH - NASDAQ

Good afternoon, and welcome to the DoorDash Second quarter 2023 Earnings Call. My name is Briana and I will be your conference operator today. Please note that this call is being recorded. [Operator Instructions] I will now turn the call over to Andy Hargreaves. You may begin your conference.

Thanks, Briana. Good afternoon, everyone, and thanks for joining us for our second 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 such non-GAAP measures to the most directly comparable GAAP financial measures may be found in our earnings press release, 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. An audio replay of the call will be available shortly after the call ends. Briana, I will pass it back to you and we can take our first question.

Thank you. [Operator Instructions] Your first question comes from Deepak Mathivanan with Wolfe Research. Your line is open.

Great. Hi, guys. Thanks for taking the question. Maybe one for Tony and one for Ravi. Tony, can you give a little more color on what categories will be acceleration in U.S non-restaurant verticals in 2Q? Are there any that is sort of at an inflection point of the ESCO, where we can expect healthy contribution to growth over the new few quarters. And then maybe one for Ravi. The illustrative excel cap was very helpful. And can I ask maybe if you kind of like think about Dash in the context of that. Where the company currently is? Do you think you’re in year two or year four in the chart? Or maybe asked another way. Are you at a place right now where the rate of profitability increase in many different businesses is kind of offsetting the rate of losses in a few which could lead to sort of sustained profitability improvement? Or is this sort of a transitory period in which you’re looking for signals before you scale investments in many other products. Thank you so much. Any context you can add would be great.

Hey, Deepak. Its Tony. I will take the first one on growth outside of restaurants. I mean, hopefully you all saw in our June update when we celebrated 10 years as a company, we actually rolled out one of our biggest product updates this year. And that really, one of the featured things that we shipped was actually the launch of both our grocery and retail tabs. And I think this is another good example of how we do product development in a very disciplined way, which kind of, I think aligns a bit to the sentiments behind your second question where everything effectively stage gated, and we give maximum exposure or investment, once we see that they are ready for primetime. And I think when it comes to a lot of these categories outside of restaurants, I think you saw a lot of that growth for us happened in the first couple of years of the pandemic in which we launched with third-party convenience retailers, whether they be the likes of Walgreens, CVS, 711, and many, many others. But then, over the last 2.5 years, we built a multibillion dollar grocery business from scratch. And it was really ready for primetime exposure. And that's one of the things that you saw, as we now have more non-restaurant stores on the platform in North America versus any other platform. We're growing faster than every other platform and gaining share dramatically in virtually all categories. And certainly -- and very specifically also in grocery. You also see this in retail. We've seen a lot of growth in categories that is even outside of food, whether that be in sporting goods with Dick's Sporting Goods, or office supplies with Office Depot and OfficeMax, or the pet category with PetSmart and Petco, or the Health and Beauty category with Sephora. So a lot of this is happening. And we found ourselves in a position where not only were we seeing very resilient growth in the core U.S restaurants category, at all-time high frequencies, which gives us just more shots and goal to introduce a lot of these new categories. But we also saw the readiness in terms of product market fit from a selection, quality of service and affordability perspective, when it came to our grocery and our retail offerings. And that's why we made the announcement and why we shipped the features that we did in June.

Deepak, to your second point, maybe taking a step back like what you're seeing in the business is a combination of a couple of things. One, the growth in the business continues to be very strong. In fact, in Q2, growth actually accelerated compared to Q1. Given the business is positive on a unit economics basis, that's driving some of the upside in EBITDA that you're seeing in the business. At the same time, our core restaurant business is continuing to improve in terms of overall profitability, as well as both new verticals as well as international also becoming efficient when you look at the unit economics year-on-year. That's driving the underlying EBITDA upside that you're seeing in the business. But for us, as you know, it's always important that we are constantly looking to reinvest back in the business. We did that in Q2 as well, which drove some of the upside in growth, as well as the category share gains that Tony talked about. Two, as I look forward, our goal is to constantly reinvest because our goal is to build the largest local commerce business possible and referring back to the chart rate, ideally the chart goes on forever, because they're always looking to manage efficiently. They're always looking to reinvest back into business to build the largest local commerce business possible.

Thank you. Your next question comes from Mark Mahaney with Evercore. Your line is now open.

Okay. Let me try two questions. One high-level question for you. Tony, you talked about solving big problems for local commerce. So could you sketch out what you think are some of those big problems that you've not yet fully or not yet partially addressed, like logistics and marketing? Like, when you think about those problems beyond that, what do you think are the biggest problems for local commerce? And then would you provide any color on just talk about Wolt, the acquisition here we are a year on in, how do you think that's fair to stick on according to plan, better than plan, the year on in, the positive and the negative surprises you've come across? Thank you very much.

Yes. Hey, Mark. I'll take both of those questions. On the first one, with respect to large problems to solve, I think first -- I think this probably goes without saying, but I think it's worth repeating, just given the resilience or continued resilience, I should say, of the strength of the restaurant delivery business. And even though that business has achieved a great deal, it's still single-digit percentage representation of the U.S restaurants industry in terms of total sales. So I think I don't want to just skip over some of the businesses that we do run today versus just talk exclusively about the invention of new businesses or solving new problems. So I think there's still a lot to solve in our core business, which I believe has many, many years of runway in it. And when we talk about some of these new categories, that's obviously almost starting just many years behind, given the fact that we launched a lot of these new businesses, about 2.5 years ago. So I want to start with that as context, but I think when you talk about a lot of local commerce, I mean, let's think about it. I mean the pandemic in many ways was a very alarming and aggressive wake up call for every business to be an omni-channel business. And I think it -- for a period of time forced physical retailers to exclusively invest in online because that was the only channel available to them. But I think that as we now kind of, especially as e-commerce goes back into a bit of the steady state curve of adoption, I think there's a lot of problems there to solve, I think that there's the world only tends to want to go faster, customer expectations tend to only go in one direction, when it comes to something like delivery, whether that's with food or other types of items beyond food, that is only going to happen at a greater and greater rate, and if you're a physical retail, or you need to think about how you’re going to participate in that. And so there's lots of logistical problems we have to solve in order to do that. And we're investing quite tremendously in building up certainly these partnerships, but also in a lot of infrastructure, so that we can create the tooling with products like DashMart, such that we can work concurrently with all of these retailers so that they can actually compete, I think at the highest scales with global ambitions. So, I think that's a big part of still making sure that last mile delivery can be true, not just for a handful of retailers, but for every retailer, small, medium, and large. Second and beyond this, there's a lot of tools that now local businesses need to invent. I think a lot of times people think, oh, e-commerce, that's just a website, or that's just a mobile app and you're done. Well, actually, everything needs to be rethought, right. For example, if you used to take care of customer support requests inside your store, whether it's a shopping request, or a dining request, well, you can't do that anymore, if the orders are happening through your digital channel. You're going to have to invent customer service in a different way. If you're used to being once very successful buying real estate at the right locations at the right prices and effectively using that as a way to market, well that's no longer good enough. And there's going to be many ways in which you're going to have to think about not only attracting customers, but building repeat relationships with all of the customers that you do have. And so, I think there's lots of problems to solve. But whether that's in logistics, whether that's in customer service, whether that's in, honestly, every part of what you do now needs to turn from physical to digital. That's what all businesses need to do. So there's a lot of work and the roadmap ahead is quite lengthy. Your second question was about Wolt. In short, Wolt is meeting our expectations which are really high to start with. I mean, in general, we tend to have very high expectations of ourselves and I think when you look at the Wolt performance, or the thesis, I should say, starting a couple of years ago before we close the partnership a year ago, it was really betting on a world class team that has achieved the highest retention and order frequency, in other words, build the best product in the world. And whether or not we can keep growing those geographies, which had long runways for growth as well as take some of their exceptional management, and run a global portfolio. And so those are kind of the two thesis involved in a couple of years ago. And on the first point of whether or not we can keep growing, I mean, I think you kind of see it in the growth rates. We're growing at multiples of what anyone else is growing internationally. And we're also improving our unit economics at the same time. And so, I think, from a business perspective, that's really meeting the bar. The second is more of a management perspective. And what you see there is that we'll actually, Mickey and the team actually runs all of DoorDash's markets outside of the U.S. And so I think we're seeing a very, very strong start on that front as well as that team now is taking up a bigger geography. And we now get to split the management bandwidth in the right way, so that we can give international, which is a huge investment area for us the right single threaded focus and do the same for our U.S business as well.

Thank you, Tony.

Your next question comes from Nikhil Devnani with Bernstein. Your line is now open.

Hey, there. Thank you for taking the question. I had one on the investment framework as well in the letter. So you mentioned kind of a 6-year period of investment and $1 billion spent on U.S restaurants, before it start to generate some cash. When you look at the investment areas you have today, do you expect them to take longer to return and costs more? Because they might be more operationally complex, so there's more incumbents? Or do you expect the return to actually be quicker, because you've already built a strong network of consumers in Dashers? And then maybe a second question. Tony, you've talked about people eating 20 to 25 times a week as the opportunity. What's the ceiling you think on frequency for your business? And kind of the primary constraints between bridging the gap to that point? Thank you.

Yes, all right. Well, Nikhil, maybe I'll take both of those. I think the first is on the -- how we think about investments. And the second is really around where we are on frequency and where it can go. On the first, let me just say, we kind of offered a quantitative framework in the shareholder letter on how we've thought about things. But it was meant as a guide, not as something that is just a formula that always can be applied, right? I mean, sometimes these things take judgment. And so, the answer to your question about our timelines or investment dollars is going to be larger or longer or shorter, or I guess less, it really depends on the problem at hand, right? I mean, obviously, we have a benefit of having the largest local commerce audience that has the greatest frequency, which gives us the most shots on goal. But that doesn't mean that we just win de facto. I mean, we have to still build the best-in-class product for each problem that we're trying to solve. And then I think the benefit of the scale will actually really translate in a way that makes productive sense for all of the audiences and frankly, generate a great return for everybody. And so I don't think there's necessarily one way to think about this. We try our best to play first principles approach to each problem. We obviously want to take advantage where we can, but the way we tend to think about this is, first and foremost, how do we solve a problem that in a way that is significantly better than how incumbents are doing it today, make sure that we are very disciplined in both the product investment as well as the dollar investment in which we stage gate that those investments because precious resources, whether it's the attention we can give in our distribution, or the dollars that we have in our budgets, or frankly, the people that we have working at the company, that's a big consideration. And then the final consideration is whether or not we see an efficient path towards strong long-term economics. And so that's just in general how we think about it, but I wouldn't over rotate necessarily on that being the exact formula that we have to repeat over and again. The second question I think has to do with frequency and its long-term potential. The short answer is we continue to see the numbers grow, right. And I think on the one hand, we -- there's a few ways to look at this. I think, in your question, I think you're kind of saying, well, there's 20 to 25 eating opportunities, be it shopping opportunities on top of that, but we are talking about north of 100 occasions a month. That's certainly I think theoretically, max. And I think that's one way to look at it. We also can look at it from just some of our power users or top decile users are actually doing today. So it's not even a theoretical number. And we think that we can keep growing much, much bigger, I guess, is the short answer. I mean, our top decile users are using our service, a very large number of double-digit times, I guess, is what I would say. And so for us, it's thinking about, well, how do we actually graduate people to that. And the answer is there isn't a silver bullet here, right. It's the combination of the selection of stores, the affordability of the program, the quality of the service, and making sure that we get the efficient -- we can deliver the efficient frontier for each individual user, each individual occasion. And if we can do that these numbers will continue moving up.

Great.

And Nikhil just add to what Tony said, right, like our goal is to target track our teams for both unit economics as well as volume. We're comfortable with the timeframe as long as we're making progress across both of those. And if you look at the results of both of our investment areas, we are growing quite nicely as well as the unit economics continue to improve. We obviously want to run these businesses efficiently. We're happy with the progress we've made so far.

Great. Thank you both.

Your next question comes from Ron Josey with Citi. Your line is now open.

Great. Thanks for taking the question, guys. Maybe two. Tony, I think you mentioned this earlier as well, but just the frequencies at all time highs and what's traditionally a slower quarter 2Q, just talk about the drivers here now. I guess more is this DashPass users having greater impact, newer cohorts ramping faster, the revamped app, as we talked about. I'm sure it's all of the above, if there's anything to call out, though, that would be interesting on frequency. And then, Ravi, on contribution profit, I think the press release talked about U.S. restaurant marketplace generating annualized $2.4 billion in contribution profit this quarter. So can you just talk about -- and that's essentially all contribution profit for the company. So talk about the margins across nonfood? I think convenience are we sustainably positive there. Talk about grocery, Wolt, any insights there would be helpful. Thank you.

Yes. So on the first question, in terms of where the growth is coming from, I mean, we are seeing mainly in two big areas, right? One is users and the other is the frequency. And you're right, in that, there is no one individual driver of this. I mean DashPass did have a record quarter. So it continues to achieve on highs. So you're right, as one of the assumptions that, that was one of the drivers. But we're also just seeing stronger and stronger cohorts. I think that this is a question at the -- certainly at the beginning of the pandemic, and certainly at the beginning of the reopening or the first reopening in 2021. But I think what you've seen now for 8 to 10 straight quarters in addition to the output metrics, GOV, the revenue, the input metrics we're seeing are stronger and stronger cohort retention and growth. And that's a combination of offering the best selection, quality, affordability. The new use cases, to your point, around non-restaurants certainly adds to it. But there's also improvements in the core restaurants business as well. So I think all of these things is adding to it. But the short answer to your question, what's driving the growth, it's users and frequency.

Yes, Ron, just a couple of points there on your second question. I mean, the $2.4 billion contribution that was the U.S. restaurants contribution from Q3 of last year. Obviously, that has grown substantially since that point. What we're seeing in the business is as we continue to improve the underlying product, whether it's adding more selection, improving the quality of the product, that's driving efficiency of all lines of business. What we saw this past quarter, like I mentioned earlier, core restaurants improved in terms of unit economics as well as profitability are both new verticals and international areas improved in terms of unit economics. More specifically, when I look at the new verticals area, last year, we mentioned that third-party convenience was positive on a unit economic basis. It has continued to grow from that point, both grocery as well as DashMart, there's been a step change improvement in the unit economics compared to last year. International business accelerated in the quarter as well as unit economics improved. Again, all of the unit economic improvement we are seeing is being driven by product innovation. We've driven leverage on Dashers costs. We've driven leverage across credits and refunds as well as sales and marketing.

That’s great. Thank you guys.

Your next question comes from Lloyd Walmsley with UBS. Your line is now open.

Thanks. Two questions, if I can. Just first, just following up on Mark's question earlier, can you maybe give us a sense of some of the interesting greenfield investment areas, that might be interesting to you all. It seems like maybe there's -- you're open to things that are perhaps less directly adjacent than some of what we've seen already like advertising or otherwise. Am I misreading that? Anything you can share there? And then the second one is just -- it seems like we're in a sweet spot getting healthy growth and good margins. Clearly, core restaurant business firing on all cylinders and good progress on unit economics of the investment areas. But as you showed in your letter, sometimes unit economics are improving a lot, but as you fuel investment behind that, it could be like a headwind on an absolute basis. Where are we in that cycle with some of these investment areas? Like should we expect while unit economics are getting a lot better, just a step up in investment behind that, that may mute the flow through of that? Like anything you can share on the kind of medium-term outlook for where we are in that cycle there on existing growth investments. Thanks.

Yes. Maybe I'll take a shot at the first one and maybe say a few things on the second one, too, and then I'll -- and ask Ravi to jump in on the second one as well. I think on the first one, I mean, you're right in the saying that there is no like exact formula of what are the exact adjacent problems to solve when it comes to unlocking local commerce, right? I mean I think if you think about today, even e-commerce is still a minority of overall retail. And then when you look within local commerce, so the small, medium and large physical businesses offline that are trying to come online and kind of compete against maybe digital only or kind of traditional e-commerce players, I mean, they're even further behind, right? And so our mission has always been to grow and to empower these businesses. So we have to, on the one hand, build a marketplace that can drive incremental demand at profitable sales. And on the other hand, we have to give them tools. And so some of these tools are related. But at the end of the day, it's just what does it take to solve the customers' problems. And we think that local businesses can solve a lot of the problems when it comes to consumption that traditional e-commerce businesses solve. And so we have to just make sure that we can build the tooling to allow them to do that, both through their own channel as well as through ours. I think on the second question, I think one of the important things here is we certainly -- there's kind of like two thoughts I have on your question. The first is, we don't get to control when product market fit occurs, right? And so a lot of the -- even though we would love to have prescribed organizational time lines set around every project with a perfect formula that's exactly replicable across all projects, that's not exactly what the customer cares about. The customer is going to vote with their activity, whether or not we've done a good enough job. And so for us, sometimes these things are you move one step forward, a couple of step sideways, one step backwards, three steps forward. And I think that while what we demonstrated in our restaurants business as well as these investment areas is that when you step back and take a look holistically over a multiyear horizon, you get this nice looking up into the right graph, that's not usually what happens in real life, right? So I think it's pretty hard sometimes when you're just making investments during the period, especially as you're searching for product market fit to have any prescribed time lines. But on the flip side, it doesn't mean that you have to bet at all in that period of time either, right? I think a lot of what we are trying to explain in our shareholder letter is just our investment philosophy that we are not just betting at all costs. We are betting when we see signal. And when we see that signal, do we actually scale? This is true in our product development. We didn't release the grocery -- we didn't release maximum exposure to our grocery product until very recently after 2.5 years, we didn't do that for our retail categories either. And we don't do that from a dollars and cents perspective on the P&L either. So I think when it comes to time line, I think judgment is quite important. And I think the most important thing to take away from the shareholder letter is that with a disciplined way in thinking about how to make these investments.

Lloyd, just to add to what Tony talked about, right, like your second question. For us, we don't focus on the absolute level of investment in terms of the quantum of dollars. Our philosophy has always been, we goal our teams, we goal our lines of business on two metrics, which is demand in terms of volume growth as well as unit economics. As long as both of those are progressing in the right direction according to plan, we are happy to continue to invest because the most important thing in our business is scale, and we've seen that in our restaurant business, we've seen that in our third-party convenience business. Our goal is as long as we're seeing success in terms of volume and the unit economics are continuing to improve, we're going to invest behind our investment areas.

Yes, makes sense. Thank you, guys.

Your next question comes from Douglas Anmuth with J.P. Morgan. Your line is now open.

Thanks for taking the questions. A couple just on the Dashers side. Can you just talk about the drivers of lower-than-expected acquisition costs in 2Q? And then what makes you think those efficiencies may not continue in the back half? And then with the update recently, any thoughts, early thoughts I know, but on the flexible pay model for Dashers and perhaps any discussion around unit economics for you guys? Thanks.

Yes, Doug, I'll take both of those. The Dashers acquisition cost itself, in any given quarter, there's some volatility in our Dashers acquisition costs. So I wouldn't read too much into it. Let me give you a few examples. In Q1, we under forecasted volume. So we had to ramp our Dashers actual acquisition spend in the quarter. That's what we saw in Q1. In Q2, we saw a couple of things, right? First, the underlying product improvements we made that helped us in terms of Dashers retention. Number two, we also benefited from seasonality where you have college kids come back during summer. And we see this every single summer. What we said in our letter is we expect the product improvements to continue to bear fruit in the second half, but we don't expect the same level of benefit or efficiency from seasonality. But again, I won't read too much into the quarter-to-quarter movement because there's some inherent volatility in Dashers acquisition. To your second point, the Dasher product change as we made -- that was not a financial move for us. For us it was mostly about offering choice, offering flexibility to Dashers. If you think about our Dashers, really Dashers are at different parts of their journey. Some Dashers are new to the platform where they just want to hit the button go and start earning. There's others who are more experienced, that want to pick and choose the orders that they want to go after. For us it was truly about giving a choice to Dashers to continue to engage with us on the platform, depending on where they are in their journey, less so about a financial move for us. Hopefully that helps.

Helpful. Thank you.

Your next question comes from Brian Nowak from Morgan Stanley. Your line is now open.

Great. Thanks, guys. Maybe two. The first one, Tony, can you sort of talk about your 10-year old sort of the oldest, the core U.S. restaurant business. As you sort of think about customers voting with their activity, talk to us about sort of how you break down the forward growth and what you have to invest in to kind of continue to grow that core U.S. restaurant business from here across users, frequency, spend per transaction? How do you continue to get customers to devote more in that core oldest business? And then the second one on the grocery non-restaurant piece in the U.S. Recognize the new app design is having an impact. When do you think about sort of increasing your marketing to bring new users into the funnel for grocery first? Has that started yet? Or is that something to think about in the back half or in '24? Thanks.

Yes. Maybe I can take a shot at those. I think on the first question of growing the U.S. restaurants business. Well, I wish it was just one lever that we'd have to pull. But I mean, we continuously have to work on selection, the quality of the service, the affordability of the programs and our customer support, right? I mean this is one of these businesses where I think it's really easy to make surface level comments about the business, but really the execution happens at the order level. And you have to be better on each one. And for us, I think the criteria to be better, it really goes back to the hallmarks of how we have achieved the scale that we have in the restaurants business in the first place, which is offering the best combination of selection, quality, affordability and service. And so there's certainly a lot of things that we have in the books planned for each one of these areas, but that's really how we always think about building a better product. And we can measure whether or not we're making progress based on our retention and order frequency. And we continue to have the highest retention in order frequency rates amongst any other platform. The second question, I mean, in some ways, some of this is already happening, where we have, to your point, customers may be finding out about DoorDash for the first time through a non-restaurant category whether that's groceries or pets or flowers or some of the retail categories that we discussed earlier. Already outside of the restaurant category, we had tracked more of new customers that are ordering from these non-restaurants for the first time in the industry than any other platform. And I think that's pretty remarkable, given that a lot of these categories for us when we started about 2.5 years ago, which suggests that some of this activity is actually already happening organically. Of course, we are investing in some marketing behind this for sure, and especially as I think we are making the evolution of -- from being a restaurant delivery product to something that delivers your entire city. We're not there yet. Obviously, we have a long ways to go on the selection, the quality and affordability. But I think it's encouraging to see that we already attract more new customers into this field than anyone else and that a lot of customers are coming to us for the first time, not for restaurants.

I'd just like to what Tony talked about, right? What we saw in the quarter was growth in both users as well as order frequency. Order frequency hit an all-time high, it's growing year-on-year. User growth has also been very strong. The way at least we think about it is, if you think about our platform, we have roughly over 30 million active shoppers on the platform any given month. But if you look at that number over the course of the last year, that number is multiples higher. It's just a fraction of the overall users using the platform, right? That tells you the scope of the opportunity on the user growth side. Order frequency again, very similar. The blended order frequency across the platform is mid-single digits off of the base of more than 100 usable movements. So when I look at both of those, the scope of the opportunity in front of us is large. The good news is, again, what moves both is largely the same. It's improving selection, improving quality, making the product more affordable. So when I look ahead, as we are continuing to innovate on the product, I'm confident that we'll drive growth both across users as well as order frequency.

Thank you both.

Your next question comes from Eric Sheridan with Goldman Sachs. Your line is now open.

Thanks so much for taking the question. In reading the letter and some of the answers so far in the call, I just wanted to come back to this concept of signal. If you think about the mix between being a marketplace and being more of a first-party player yourself in e-commerce, and what signal you might be looking for when you think about a business like DashMart and thinking about growing geographic footprint or SKU diversification inside that business as a potential area for investment over the medium to long-term to be a larger, more scaled one key player against the local commerce opportunity? Thanks.

Yes. So Eric, I'll take that. I think it's important to start with the context of why we even are investing in some of our 1P efforts in the first place, which really comes back to this capability point of making sure that we can enable every small, medium and large physical business to compete effectively and efficiently in the digital world. And at the end of the day, what we are trying to build ultimately is a product that can deliver you everything from your city exactly what you ordered and at around the same price that you would have paid yourself to do that service. But today, that's not where status quo is, right, in terms of, I think, any product, that delivers anything outside of restaurants for sure. And so that's kind of why we invested in DashMarts in the first place. And so it's always in concert of -- with in partnership, excuse me, with our merchant partners of how to make sure that something like DashMart can be a useful service for them. It's not necessarily a signal of, oh, is our 1P now going to take a bigger portion. It's actually instead learning how to do it really well, such that when we work with these third parties and think about inventing some products for the future that this could be one capability set in our back pocket.

Thanks, Tony.

Your next question comes from Ross Sandler with Barclays. Your line is now open.

Thanks, guys. First of all, shout out to Andy or Ravi's idea was to put the SBC table at the bottom of the letter. I appreciate that. But my question, Tony, is about DashPass. So you guys were, I think, the first in the industry to roll out subscription, and it obviously drives a huge amount of value. But now we are at the point in the industry where it's maturing and there's a lot of other subscription services from folks that compete with you guys in grocery, folks that compete with you guys in restaurant, e-commerce companies that compete with you guys. So as you look out into the future of DashPass, do you feel like selection -- in your advantage in selection is enough to continue to differentiate? Or do you think you'll need to add different things to the bundle whether that be like physical retail or, I don't know, digital services, et cetera, to continue to differentiate DashPass? Any thoughts on that? Thanks a lot.

Yes. So there's -- I mean customer expectations always going in one direction, right? I think except there is plenty of times, and I think that goes for subscription programs, too. But the other thing that goes for subscription programs is the most important thing is usage, right? You want to subscription programs that are really successful are those that get used the most often, which is what drives the value, right? And sometimes that's measured in dollars and cents, that sometimes that's measured in time spent on the service and over time saved from a service and et cetera, right? And so for us, I don't think it's necessarily one advantage, right? I wish if it were just one advantage, then it actually be quite easy to invest from a product perspective. But it's always been thinking about the selection, the quality, the affordability of the program such that we can drive the north star of usage. And so we are going to always have to invest to make sure that our products are getting us the most. I think the benefit for us is that the category that we started in eating, which we've talked about on this call for a bit, is the largest and most frequent, which means that it does have the largest usage from both I think how people think about spending their discretionary income to just what they do physically to survive. And so I think that was a very natural candidly reason why we started in the restaurant delivery category. But as we expand and try to be more useful to the cities that we operate in and all of the different types of categories of retail that we participate with, we are going to have to keep thinking about investing more into things that will continue to drive the usage of our subscription program, which is ultimately what will drive the value of DashPass.

And, Ross, just to add to what Tony said, right, like what you're seeing in the business is as we are continuing to improve the selection and the quality of the business, that's driving MAUs. These MAUs are retaining at a higher rate. They're ordering more. As they order more, they habituate on the platform and graduate to DashPass. In fact, if you look at Q2, DashPass has a record quarter where subscribers grew not just quarterly but on an annual basis, it was one of the best quarters ever for DashPass for us.

Thank you.

Your next question comes from Michael McGovern with Bank of America. Your line is now open.

Hey, guys. Thanks for taking my question. Just maybe a couple for Ravi on guidance. It looks like even at the upper end of guidance for Q3, we're expecting a little bit of a quarter-on-quarter drop in GOV. So I'm just curious, is that just seasonality or anything else to point out there for the quarter-on-quarter drop? And then second question, if I take the upper end of guidance between Q3 and the full year, looks like Q4's EBITDA profit and margin will be in Q4 than at any other point in the year. So just in that upside scenario hitting the upper end of guidance, what are some of the factors that contribute to that?

Mike, I'll take both of those, right? Like on the guidance point itself, I mean, what we are seeing in the business is, a, obviously, consumer spending continues to be strong, the underlying cohorts continue to be very stable. That's what's giving us confidence to, first of all, bump up the GOV guide for the rest of the year. What you're noticing in Q3 is normal seasonality that we largely see every year. There's nothing more to that outside of seasonality. In terms of EBITDA guidance, I mean, again, like I said earlier, right, the combination of continued improvement in growth for us, the overall business is positive on an unit economic basis, Q4 growth is higher than Q3. You're going to see some upside in EBITDA flow through. Number two, the product improvements that we are making is continued to drive efficiency. But again, important to remember, right, like we're constantly looking to reinvest back in the business. And if we have good opportunities to invest, we are going to continue to drive efficient growth as long as we can stay within our disciplined parameters.

Got it. Thank you.

Your next question comes from Youssef Squali with Truist. Your line is now open.

Excellent. Thank you so much. So maybe, Tony, going back to the investment letter and the framework that you're putting out there, outside of customers and Dashers and the network that creates, which arguably are super powerful, can you maybe talk about core competencies that you believe that you're kind of leveraging just better than anybody else out there that kind of gives you this potential compare [indiscernible] advantage that's allowing you to grow so much faster? And then, Ravi, I think you talked or you mentioned that your GOV, your aggregate GOV accelerated year-on-year. Was that -- is that statement true for U.S. GOV as well? Thank you.

Yes. So on the first question, I think there's basically like a time line or sequencing, if you will, almost of how to arrive at the answer to your question, which is, first, when it comes to building a product from the very beginning, the -- what allows that product to grow faster relative to someone else's is whether or not we solve the customer's problems better, right? And I think what's hard to see in this business is that it's really a combination of things that a customer is asking us to solve. They're asking us to make sure we can get the right stores and the right items from those stores at the right price point, at the right service level. And obviously, if things go south, that we fix it. And there is no shortcut in many ways and kind of betting on any one of these factors, you kind of have to be better at the combination. And I think that if you can achieve that, then you can have this time line where after a certain point of scale, it translates into a few structural benefits. One of those benefits is recall customers kind of come to us first at the eating app. We are working on that to make that true in every country. But in the United States, that's certainly the starting point. And again, when eating is the starting place where you have the most shots on goal, and Ravi talked about the multiples of the 30 million monthly active shoppers who shop with us once a year. I mean there's an even bigger number than that that comes and just open who doesn't shop at all. And so in many ways, we don't have to acquire any more new customers from external channels. We can just go within our own ecosystem because we started with the largest one, which -- when it comes to consumption, which is eating. Other benefits come from the scale logistics components that you talked about, right, knowing how to operate that really efficiently is something that continues to compound in terms of giving a natural funding source for other types of investments that we want to make. So I think the way I think about this is always the execution starts first, making sure that we can solve a problem better than someone else can so that we can create the best product. That's what generates the growth. And then structurally, over time, what are the things that actually -- can we actually use the product advantage that we built to generate a structural advantage? And I think you're seeing that in both instances, which is why you've seen the resilience the growth in the core restaurant business. It's why you've seen faster growth and share gains in these non-restaurant businesses as well as improving -- or very, very quickly improving unit economics. And that's why we're continuing to invest.

Youssef, on your second question, orders accelerated from Q1 to Q2, not GOV. And if I break it down by the different lines of business, core U.S. restaurants, even at our scale, the order growth was stable. Both new verticals, International, as Tony just mentioned, they both accelerated from Q1 to Q2.

Got it. Okay. That’s helpful. Thank you both.