DASH - NASDAQ

Thank you for standing by, and welcome to the DoorDash Q3 2023 Earnings Call. I would now like to welcome Andy Hargreaves, VP of Investor Relations to begin the call. Andy, over to you.

Thank you very much. Good afternoon, everybody, and thanks for joining us for our Q3 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, our guidance, strategies, our investment approach, 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 and risks are described in our SEC filings, including 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 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 Investor Relations website. And an audio replay of the call will be available on our website shortly after the call ends. Operator, I will pass it back to you and we will begin taking questions.

[Operator Instructions] Our first question comes from the line of Nikhil Devnani with Bernstein. Please go ahead.

Hey, guys. Thank you for taking my question. I had a two-parter on the U.S marketplace. So everyone is obviously worried about a variety of headwinds and a softening consumer, yet your business is accelerating in the U.S. Can you comment on, one, what drove that acceleration? And then as a follow-on, I think the perception is your marketplace is highly discretionary, but given all the data you see in how consumers actually use your service, would you agree with that assessment? And how do you think about the sensitivity of demand?

Hi, Nikhil, it's Tony. Maybe I'll start and Ravi, feel free to chime in. On the first part of the question, I mean you're absolutely right. I think we saw a phenomenal quarter where frankly, every line of business has accelerated in growth and improved in its unit economics. And that's impressive, especially given the fact that we're a lot larger today than we were a quarter ago and certainly a year ago. In terms of the U.S. restaurant business or the marketplace in general, I mean, a few phenomenon are going on, but really it's the result of product improvements we've made. Whether you look a quarter ago or a year ago, we've added selection to the platform on the restaurant side, and we've added a lot of selection on the non-restaurants front, literally going from 0 nearly 3 years ago to a multibillion-dollar business that's at scale now growing fast and contributing quite significantly. And we have over 100,000 stores on the platform that are outside of restaurants. And when you look outside of restaurants and into the convenience or grocery or alcohol segments, almost half of new customers that come into the industry in the U.S. come to DoorDash first. And so that's certainly adding in terms of the selection. Second, we've continued to improve the quality of service, whether it's our timeliness, our speed, our accuracy. Third, we've improved the affordability of the programs, both for our non-DashPass members as well as for our DashPass cohorts. And fourth, we've improved customer support all along the way. And so it's really the result of many years of work on the fundamentals and mastery of that and continuing to see opportunities to continue improving the product, both in terms of efficiencies and just product quality to the customer that's leading to the growth of all of the lines of business in the U.S., and that's what you kind of saw culminate in some of the numbers that we reported in Q3. I think with respect to the second question, it's -- I think we've -- our business has always been very dynamic in terms of all of the headwinds and tailwinds it's faced in the 10 years that we've been building DoorDash. And that's certainly been true in the last 3 years. Obviously, we lived through a global pandemic. We lived through peak pandemic. We have lived through peak inflation. We've lived through lots of other macro factors, including some of the ones impacting us today. And I think it's important to remind ourselves of a few things. While it's virtually impossible to estimate or isolate the quantum impact of any one of these macro factors, I think it's a lot easier to think about things that we do control. And as mentioned in the answer to the previous question, we've continued to improve our product. And that's certainly within our control and as dynamic, if not more dynamic, than some of the macro changes that we face. I think, second, we benefit from the fact that our first category, the restaurants category, stems in the sense that while sure, maybe not every meal has to be eaten when it comes to delivery or takeout, but when you think about every category that lends itself towards convenience, and we all know that convenience only lends itself towards the direction of greater convenience. Food is the most resilient and highest frequency category. I mean, this is true in every line of eCommerce. In fact, if you look at our cohort performance, which we talked a little bit about in our shareholder letter this quarter, you see that virtually every single cohort, including those that just joined our platform a couple of months ago are doing way better than any of the cohorts even during the pandemic. And so I think as you see that behavior across every line of -- every segment of customers every cohort across time, I think you start to gain a different picture of just the fact of the product improvements as well as the number of shots on goal that we get to take relative to others in capturing that customer. And the final comment I'd make is, in spite of our performance and our market leadership, we are still a tiny fraction of what's addressable. I mean in the U.S. restaurants category, as 1 example, we are less than double-digit percentage sales of the industry. I think you looked globally within restaurants, we are a much tinier single-digit percentage. And if we included all the other categories that we now entered, we are barely noticeable. And so I think we have a long runway left. We have a lot more work to do to get our product to where we would like it to be. But I think the product improvements that we've made in the years leading up to these moments have certainly helped us build a product that endures.

Thanks, Tony.

Our next question comes from the line of Ross Sandler with Barclays. Please go ahead.

Hey, guys. If I can ask three quick ones, that would be great. First, Tony, on the international footprint. We are now into -- well past the year into the Wolt integration. How do you feel about that? And are there any geographies that you think might be interesting from an M&A perspective in the future for international? Second question is we keep getting this one a lot from the investment community. Maybe you guys can clearly the air on the GLP-1 diet drugs. Is there any way to think about how that might impact your business in the future? It's obviously not impacting it now. And then lastly, Instacart is now, there is a public company. Just curious to get any milestones on grocery GOV as we sit here at the end of '23 from you guys? Thanks a lot.

Great. Hey, Ross. I'll do my best to take them the first two in order and maybe I'll let Ravi take the third one. So I think the first question was around international. I mean you're absolutely right. We are very excited about our execution on the international front. We continue to grow at multiples of what we see around the world, virtually across any geography. That doesn't mean that we are pleased yet with where our product is. We still have a lot of room left to go. But I think it does stem from why our outperformance has occurred, which is I think the hallmarks at any great marketplace have the fundamental characteristics of great retention order frequency and unit economics. And I think when you look at our international business or our new categories business or a restaurant business, you see all of these characteristics present. And that's why we've been very interested in leaning in and making the investments that we have at size, at scale, because of what we see. And the international business continues to see those points of execution. I think if we remind ourselves even a couple of years ago of the investment thesis behind our partnership with Wolt, it really centered on two big pieces. One of which was here is a business that has leading world-class retention and order frequency, and the question is, can we invest behind that in a concentrated way and hopefully add to the excellent execution that they've already seen. And so far, the answer has been yes to that. In fact, Miki and the team now runs our entire portfolio, certainly the Wolt portfolio as well as the DoorDash portfolio outside of the United States. And the second part of the thesis was that there is a long runway for growth in a lot of these countries, and we continue to see that, too. In the 27 countries outside of the U.S. that we operate in, we are in some ways behind where the U.S. is from a penetration perspective and also product adoption perspective. There just is a lot more population we have to address. There are more merchant partners we've yet to partner with. There's a lot more customer problems given the fact that some of these places are a little bit behind from a technology footprint. And so there's a lot of work to do, but it also means that there's a lot of runway ahead. And I think that's why you've seen continued momentum, and it's adding now to the overall growth of the company. I think your second question was around some of the recent discussions externally around a certain class of drugs. First and foremost, I hope that they actually work these drugs. As a former scientist, I'm a big believer, whenever a great science can actually meet the challenges of its time and I do think that they're solving a worthy problem. So first and foremost, for the patients, I hope that they work for the long-term. Second, we don't see any immediate or noticeable impacts in the business relative to, I guess, what the commentary may be out there about this class of drugs. And I think this kind of goes a little bit to the first question that was asked, which is it's been really hard to size any one macroeconomic factor, whether it's a headwind, a tailwind, a side wind. I think instead, what we focused on is just continued improvement on our product velocity, product quality and execution. And I think that the dynamic changes we make in our product can outweigh many of the macro factors that may be at play.

Ross, on your third question around grocery. I mean, look, we are really pleased with the performance of the grocery business. Our focus over the last couple of years has been how do we increase the usage? How do we increase the adoption of not just our grocery business, but really, in fact, the entire new verticals, all of the categories that we operate in? What we are seeing in the business today is a couple of things, right? One is more number of users are ordering from both restaurants as well as new verticals. And that's driving two things. We are seeing the new verticals business overall accelerate from the prior quarter. As well as when you look at the grocery business itself on the GOV to the specific question you asked, our GOV has doubled year-on-year. If you look at that paired with the efficiency that we've seen in the business, we've driven a ton of efficiency across the business. In fact, when I look at the unit economics, there's been a dramatic improvement in unit economics. You have to realize we have a strategic advantage because we have a network of consumers. We have a network of Dashers already built out, and that's allowing us to improve unit economics at a much faster pace. For us, the way we operate the business is we look at signals around retention. We look at signals around order frequency. We look at signals around unit economics. We continue to be very pleased with the improvement across all three. Our goal is to continue to invest behind improving selection, improving the product quality because our strong belief is that this is going to be a strong long-term ROI generating business for us.

Our next question comes from the line of Deepak Mathivanan with Wolfe Research. Please go ahead.

Hey, guys. Thanks for taking the question. Just wanted to ask a couple of ones. So first, I wanted to ask about the product initiatives for 2024. You entered into a lot of categories and new markets in 2022. And 2023 was more of a year of execution and sort of like a refinement that helped profitability, obviously, as an incremental driver. What are the big business opportunities for '24? Or should we view it as another year of execution and refinement of existing businesses? That's the first question. And then second one, the acceleration in the order frequency at this scale in the core restaurant business is pretty impressive. Are you seeing some of the maybe less common use cases, I don't know, maybe breakfast orders or corporate orders or anything that's helping incrementally in the recent quarters? Can you help unpack the trends in use cases a little bit?

Sure. Deepak, maybe I can start and take the questions and then Ravi, feel free to chime in. The first question, which stems on '24 and some of the initiatives that we are thinking about. First, our goal is to grow and to empower local economies. So we are always looking for problems to solve and jobs to be done. And obviously, we want to make sure that we have a strong point of view where we can do it at least 10x better than, however, the problem is currently being solved. And so when we looked at, if we rewound the clock for instance to 2019, we were thinking quite a lot about what other problems we could solve. And many of the problems that we actually heard came from our customers directly. I'll give a few examples. When I came to consumers, a lot of the challenges that we had heard were really making sure that we can help solve their other problems. Again, because we started in the restaurants category, which has the highest frequency of activity and the fact that we would show up to many consumers' doors many times a week, I think consumers started asking the question, well, what else can you do for me? And similarly for merchants, I think there were many questions that they wanted our help with, this is even well before the pandemic of how can they become an omni-channel business. And that's why we certainly made further investments into products like DoorDash Drive, but also started the creation of DoorDash Storefront, which has continued to serve various merchant cohorts and segments. And we continue to build further services as we think about how can we help a merchant build their first-party channel as much as we help build their third-party channel of DoorDash. And as I kind of keep thinking along the years, I mean, advertising came in that way as well. Many merchants as well as advertisers that are new to our ecosystem kind of approached us and said, hey, it looks like you have a high frequency setup with the largest number of local commerce business where you can measure everything very, very closely and directly. Is there a way in which you can be more useful, I think, to all of the audiences? And that's kind of how we thought about all of the different problems. When I think about '24 or '25 or '26, that's generally how we think about things, too, where we start with certainly our core set of businesses, which today is five businesses, where in 2019, it was closer to one business. And so it's a little bit more varied now and complicated in terms of thinking about all the different opportunities because we believe each one of these five businesses are still actually in their earliest innings, even the U.S. restaurants business. But we are also looking at opportunities to always solve more problems. And I hope that as we listen to our audiences more deeply and can get and operate at a lower level of detail, we will actually be able to pick up new problems to solve. Now we always do this in a fairly disciplined way. Again, I think at DoorDash, we really believe in investing appropriately towards the stage of the project. And so usually, when we are solving these problems and we have many of these experiments going on, we tend to take fairly small bets. And it's only until we believe that we've nailed product market fit as well as finding an efficient way to grow, do we actually concentrate behind that bet and go all in for it. And so that's how we are thinking about '24 in that way, too. I think your second question was around the continued growth in engagement and frequency of our customer base in restaurants even at our current scale. Well, I think there's a lot of things that drive this. I think sometimes when we think about businesses like our oldest business, the U.S. restaurants business, we tend to think that perhaps it's closer to the ninth inning of progress versus the third inning of progress. And I tend to think, at least when I talk to our customers, that we are way closer towards the third inning than the ninth inning. And we just have a lot more work to do in terms of making improvements to the product. There isn't one single thing that we're doing that's yielding, I think, some of the improvements that you're seeing in the results. But really, it's years of working on the selection, the quality of service, the affordability of the program, the added value to our DashPass members as well as improved customer support, that's producing some of the results today. It will be really hard candidly to look backwards and say, "hey, in which year did the product work actually lead to the results that led to this quarter's efforts". But I think instead, what we do is, we are always trying to make continued improvement. And I think whenever we've taken that focus, we've surprised ourselves to the upside of how much more there is to go as well as the compounding effects that can happen over time.

Yes, Deepak, maybe just to add a couple of thoughts to what Tony talked about. Look, I mean we've had a phenomenal year so far, what we are seeing both on the top line as well as the bottom line. Part of that is, in fact, being driven by all the investments we made, whether it's on the product side or investments in new verticals as well as the investments we've made in international over the last couple of years. What we are seeing is we are seeing really strong growth across all lines of business that we operate in. These categories that we operate in are large. There's really lots of customer problems, as Tony talked about, that we need to continue to work on and improve. Our goal and philosophy is we will continue to invest as long as we see good signal on both volume as well as unit economics, because this is the blueprint for us to drive really strong free cash flow in the many years to come in our business.

Got it. Thank you so much.

Our next question comes from the line of Ron Josey with Citi. Please go ahead.

Hey, thanks for taking the question. Tony, I wanted to ask a little bit more about just take rates on a year-over-year basis. They continue to expand and roll down a little bit sequentially. Just talk just a little bit more on the progress you're making to keep and/or drive take rates higher. So progress around wait times, incentive spend, how you see advertising fit in there? Any insights on where take rates might go? And then we are now a quarter into Dash's new app and layout and heard some of the comments around grocery prior, but any change in behavior that you've seen from the new app now that we are a quarter in? Thank you.

Let me take the first one on take rate and then I'll let Tony chime in on the second one. Look, I mean, we are not managing the business to a specific margin target, let alone a margin across any line of the P&L. What you're seeing on the take rate side is, if you actually look at the underlying drivers of the business across the various lines of business, the net revenue margin has actually increased sequentially as well as year-on-year. What you're seeing on the output is really the mix shift of various lines of business. If you recall the comments that we made earlier, new verticals, our international business is actually growing faster than our restaurant business. And you're really seeing the mix shift of those two businesses, which are still early in terms of their journey starting to take impact from an overall take rate perspective. That said, our goal is always how do we find efficiencies across every line of the P&L and using that efficiency to continue to reinvest back in the business to drive growth. And we did that exactly the same in this quarter, right. We found a lot of efficiencies as was a good contributor to the revenue upside that you're seeing in the business, we use that to continue to drive efficient growth, which gave a result of some of the accelerated growth that you're seeing in the business.

And in terms of your second question about consumer behavior, given some of the app changes that we announced earlier this summer. I mean we continue to see, I guess, more confirmatory evidence that consumers really like the changes. And I think it's usually pretty rare to see this because whenever you make a pretty sizable change like the one that we made to our consumer app, you tend to get a, who moved my cheese reaction. And I think instead, we actually saw behavior that suggested the opposite where customers were naturally shopping across different categories. And I think one of the drivers of this was that we actually made sure that our progress within each vertical was fairly robust in terms of the level of product market fit that we wanted to achieve before we actually redesigned the entire app experience such that we weren't reorienting consumers to something that we were pushing upon them, but rather it was meeting them where they want it to be given that they were pulling us in terms of the demand that they naturally suggested and showed across each line of business. So we are seeing, as I mentioned before, customers continuing to cross-shop across different categories quite naturally and those numbers continue to increase. We are seeing many -- for many consumers, the first interaction with DoorDash actually tends to be sometimes outside of the restaurant category. And I think these are some of the factors that have contributed to the fact that when you look outside of restaurants and you look at the convenience, grocery, alcohol segments, customers that are adopting eCommerce in these categories for the first time, about half of them are coming to DoorDash first.

Thank you, Tony.

Our next question comes from the line of Eric Sheridan with Goldman Sachs. Please go ahead.

Thanks so much for taking the question. Maybe just one on a broader topic. We've seen a ruling in New York City on compensation and investors continue to ask a lot about how the Department of Labor might play out. Any updated thoughts on the regulatory environment overall? And how are you thinking about aligning investments against that potential for nuance in the regulatory environment in the quarters ahead? Thanks so much.

Yes. Hey, Eric, it's Tony. I'll start and feel free, Ravi, to chime in. I think in general, we have the same point of view on the regulatory landscape today as we had shockingly even 10 years ago, which is that, by and large, governments, lawmakers, regulators, they actually want to work productively with companies like ourselves to really co-create, I think, what the future of work and future of labor will be. And if you think about it, the reason why tens of millions of Dashers have come to the DoorDash platform over time or millions come to our platform every single month or the fact that the DoorDash Dasher app is actually one of the most downloaded consumer apps on the Apple iTunes store is because they simply don't earn enough income from the full time jobs that they do have. 90% of our Dashers Dash fewer than 10 hours a week. The average Dasher does 3 to 4 hours a week, over 80% plus of them have full time jobs. And so they're really seeing DoorDash as a bridge between what income they earn today and the income that they hope to earn to meet the cost of living. And so -- and I think that most regulators actually understand this point, but we -- our hypothesis 10 years ago and kind of our views updating to this day has always been that there might be a handful of jurisdictions, who probably don't want to work productively with businesses and support this new paradigm and instead, candidly create policy that's just bad policy that will achieve unintended consequences that go counter to their goals. And when we think the New York City legislation or proposed legislation is one of those bodies, we see similar activities in Seattle. But when you, again, count up all of the regulatory discussions, I think it still favors kind of our original hypothesis, which is outside of a handful of jurisdictions. Most governments, lawmakers and regulators want to work productively with companies like DoorDash to do the right thing for Dashers.

Eric, just to add to what Tony said, really on the New York City, one, we've gotten a couple of questions about this as well. That is not live yet. We do expect 2 year back from the judge at any point, just like everybody else. Our goal and philosophy and how do we respond to some of these changes has always been the first and foremost priority is to drive efficiency in every market that we operate in because our goal is to ensure we have sustainable unit economics. To the extent we are not able to meet our goals around unit economics, we do realize there's going to be increased cost in the system. Like Tony talked about, we don't think it's great because that just reduces the transaction activity across the ecosystem, which means lower sales for merchants as well as internal lower earnings for Dashers. And from the financial impact perspective itself, any impact from New York City ruling in Q4, we've included that in our EBITDA guidance that we've given. Our goal is to manage the business to be within that range that we've talked about.

Great. Thank you for the color.

Our next question comes from the line of Doug Anmuth with JPMorgan. Please go ahead.

Thanks for taking the questions. Recognize that product improvement factors are outweighing macro, but we've heard a number of companies call out some early 4Q volatility from either macro or geopolitical. Just curious if you can get anything has changed there at all into 4Q? And then, Ravi, can you talk a little bit more about your improvements to GAAP profitability and just how we should think about that path in upcoming quarters? Thanks.

Sure. I can start on the first question, and Ravi, feel free to chime in and also take the second question. With respect to the macro dynamics, again, I think it's just really, really hard to size any one of these things. And I think when you sum it all up and as you mentioned, there's lots of things going on in the world today, with the economy, with other events across the globe. And there's certainly puts and takes, I think, to each one of these things. And I think that when -- it's not just the fact that we have product improvements that I think that has helped out way and helped execute very efficiently and continue to grow at higher rates even at our increased scale. It's also the fact that, when you look at every category of spend, food is one that everyone has to spend in. Sure, one may argue that you don't have to spend it on delivery, but what we tend to see is that there's also the macro trend of convenience increasing in the direction of greater convenience. And so if someone has some dollars to spend, it tends to start with the category of the highest frequency where they also seek convenience. And there's just more opportunities to do that given that someone consumes food 20 to 25 times a week. So we are not seeing any of the activity perhaps that I think some other categories in commerce are seeing, but I think it's really multifaceted. There's the product improvements there's the fact that people have to spend on food, and it tends to, therefore, lend itself towards the category where for eCommerce, it's the most resilient and the highest frequency. I mean, you can say this for the past 60 years, which obviously has a lot of macro dynamics as well. And you see that in only 2 out of the 60 years, I think, did the restaurant industry in the U.S., at least ever decline. And so I think it gives you a sense of the robustness of this category. And then I think the final point is we are still a lot earlier than people think in the category than perhaps our scale suggests. And that means that we are not where we need to be at in terms of where our selection of merchants are, whether it's restaurants or new categories, the affordability of the program, the quality of the service and our customer support. We have to make improvements in all areas.

Doug, just a few more points to what Tony touched on, and then I'll talk about the second question that you asked. We obviously have a lot of signal in the business. I mean we watch this very closely. When I look at the underlying cohorts, I mean they're really strong. If you look at the performance of not just Q3, but actually the first 9 months of the year, cohorts continue to improve, and I look at retention, it's very stable. Our users, in fact, at our scale are growing double digits. Order frequency, like we talked about earlier, continues to grow. So we are very pleased with the performance of the business and a lot of strength that we are seeing in the business. To your second point around GAAP profitability itself, as we've mentioned before, GAAP net income in and of itself is not an explicit target that we are managing the business towards. Financial has always been how do we maximize the long-term free cash flow in the business. And what you're truly seeing in the business today is every single line of business is becoming more efficient. We've dramatically improved the unit economics across the restaurant business, new verticals as well as our international business. I do expect every business to be profitable over time. And as and when that happens, the overall business is going to get to be GAAP net income positive as well. But that's not an explicit target that we are driving the business towards.

Thank you both.

Our next question comes from the line of Brian Nowak with Morgan Stanley. Please go ahead.

Great. Thanks for taking my questions guys. Tony, I wanted to go back to one of the comments you made earlier where you talked about investing appropriately towards the stage of the product. So can we talk a little bit about grocery through that lens? So give us some examples of areas of investment that you made this year based on the state of the product that maybe you -- I would say, okay, 1 year later, we can do more of this in '24. I'm just trying to get an understanding for what are the areas you've pressed on hardest in investment in grocery? And what are the areas where you think that there could be more investment to come to really drive that business faster for longer in '24 and beyond? Thanks.

Sure. I mean -- okay, we can take many flavors of this question because, I mean, this is probably something that I spend the majority of my time on, which is initiative and product reviews, because I do think it's really hard to apply the correct judgment certainly correctly every time, depending on the phase of the project. And -- but take a few instances, right? For instance, we really didn't -- one of the first choices we made on grocery was, well, what's the right product to build. And I think there were many external beliefs of perhaps what you have to build in order to create a sustainable grocery business. But we took the view of what is the actual problems left to be solved, first and foremost, coming from our customers. And one of the things that we heard, for example, was that while what's really frustrating about grocery delivery is that the items that either perish the fastest or that we consume as consumers the most frequently. So think about your berries or your milk or your eggs or your cereals or your coffees. It's really annoying in the middle of the week to have to go back into the store and somehow go and get it. Whereas for other types of shopping behavior, if I'm already out on the weekends anyway, and I'm buying other things for the week, maybe it's less of a big deal. And so the first product we've built was actually to solve a smaller basket topic use case, which really introduced ourselves to consumers and helping address a problem we heard. And then I think had the byproduct of introducing ourselves to grocers, too, because this was a use case that they hadn't been investing that much into. And then I think it surprised everyone how large that opportunity occurred. So that's like one version of this, which is before we kind of just look at what everyone else is doing, that's first and foremost, start by building the correct product. And I think building the correct product has a lot of implications on do we use engineers and business people and other functions correctly and therefore, get the most out of the team's potential. I think there's a version of that shows up. I think number two, another example would be, while we didn't really spend much on marketing when it came to building the grocery business. Now Ravi echoed some of the kind of reasons why because, well, one, we do have the largest audience of local commerce customers coming to our app shopping as well as just coming to the app and including those that don't shop. And so we had a bit of a benefit there. But at the same instance, we also didn't want to invest in marketing because the product wasn't good enough yet. And so I think those are two, I guess, examples I would call out where you have to make the right call on how to make the most efficient use of your resources. And first and foremost, for us, it starts with solving the right customer problem correctly. And whenever we see something that's not being solved correctly, and we think there's an opportunity to build something 10x better, we are going to go for it. And then the question becomes, well, is there an efficient way to grow, then we are going to think about that and if we have an advantage there. And then finally, what's the path towards building a very large cash flow generating business that will maximize total profit dollars in the long run. And I think that's kind of the sequencing of how we thought about things. I think so far, we've made good decisions in grocery and a lot of these paths, I think you're seeing some of the combination or the middle of impact of the results in this quarter. But we've got a long ways to go and we have to keep making good decisions.

Great. Thanks, Tony.

Our next question comes from the line of Michael Morton with MoffettNathanson. Please go ahead.

Thank you. Two questions, if I can. One, start with for Tony and then the second for Ravi. On the advertising business, kind of following up to the prior question. How do you feel about your product's ability to serve some of the larger enterprises that goes for the QSRs, who kind of demand sophisticated solutions, but also now moving into the grocery business? In our conversations with CPGs, there's a concern about incrementality in advertising for grocery retail marketplace -- retail media networks because the fact that there's not a lot of unit growth there. So whoever can win the incrementality measurement kind of like wins the market for advertising. So curious to how you think about your product there. And then just second for Ravi. Really impressive levels of operating leverage. Just curious if maybe some details of the drivers behind it? Like is this like Dash might be hitting some type of maturity, natural like attrition in the employee base. And like if this is kind of a level we should think about going forward and how operating expenses philosophy could maybe change there? Thank you so much.

So to your first question, I think I really agree with the premise of the customer research that you did, which is that incrementality obviously, is a huge driver of return on ad spend. And I think that's why, at least my view and our company's view on advertising is the most important thing about building a highly incremental advertising business is to build the biggest and most robust marketplace and not to confuse the sequence or the order of operations there. And so when our grocery business is growing more than doubling year-on-year, I think that's a good start, especially relative to other choices in the marketplace from an advertiser's perspective. But look, I mean, there's a lot of work to be done. I think we have a long ways to go in building out our advertising product. We are super excited about, I think, the growth we've seen. We are even more excited about I think the amount of demand that is coming into the ecosystem for a product like ours, where I think they recognize in addition to our growth and especially at our scale, they also see the opportunity across different categories. And so there's a lot of excitement both from enterprise merchants, whether it's in the restaurant category or in the non-restaurant categories as well as from advertisers. And so we got a lot of work to do. We are not certainly pleased with where we are with the product that's usually how we feel about all of our products. But I think we've got a lot more to go. Certainly, in advertising, it's been a 2.5 year effort. I think it's already amongst, I think, some of the most desired online advertising platforms. Yes, I think we’ve a very, very long road ahead.

Mike, on your second point on the efficiency and leverage that you're seeing in the business. I mean you're right. I mean really pleased with the performance. Really proud of the team's execution here. I think what you're seeing is a combination of a couple of things. One, I mean, look, I mean, Q3 was a really strong quarter for us, not just across the top line, but also across unit economics. Every single line of business has continued to outperform our expectations, both on volume as well as unit economics. A lot of the EBITDA upside that you're seeing in the business is being driven by that. Two, to your point, we've done a lot of things around operating expenses. Operating expenses, as you could see have been relatively flat for the last 4 quarters in a row. The team has expressed a lot of discipline around the cost structure in general, while we've continued to grow revenue north of 25%, 30% over the same time frame. That said, there are also a couple of things that helped us in Q3. There was a one-time sales tax benefit that helped us in Q3 as well as the continuity of leverage that we are seeing across the board. But when I look ahead, our goal is to continue to drive further leverage in the business, whether it's improvement in unit economics or the fixed cost leverage that you're seeing in the business. And you can see that in the strong Q4 guide that we've given as well.

Our next question comes from the line of Michael McGovern with Bank of America. Please go ahead.

Hey, guys. Thanks for taking my question. Just a couple on the cohort chart. If you look at some of these post-COVID cohorts, it seems as though the slope in trajectory for marketplace GOV is a little bit lower than the steeper slope for pre-COVID cohorts even after the COVID spike. So I'm curious what gives you confidence that you can get the post-COVID cohorts to that same slope in growth? And then also curious what kind of contribution you're seeing from non-restaurant in the newer cohorts versus older cohorts? Do you see newer users ordering more frequently from non-restaurant? Thank you.

Yes. Let me take both of those. I'll start at the cohort chart, right, like the two big takeaways that at least on the cohort chart is one, I actually look at the annual cohorts going as back as 7 years. I mean, every single cohort still continues to grow. And the second one is, if you actually look at the 2023 cohorts, in fact, it's the second best cohort that we've ever had, second only to the Jan '20 cohort, which obviously had some impact from COVID. What you see in the underlying cohorts is as we are continuing to improve the selection as we are making the quality of the product better as the service levels continue to increase, we are seeing strength across all the cohorts that we operate in. When I look at the newer cohorts from an order frequency perspective, in fact, the newer cohorts are starting out at a higher level than many of the older cohorts are starting out. And to your second point around what is the contribution from both restaurants as well as new verticals, the behavior that we've seen from user base is, the number of users that use both restaurants as well as new verticals, that number continues to increase every single quarter. The impact that's having on the business is that's lifting overall engagement of the cohorts up. We are starting to see that in the order frequency for the entire cohort. Again, to be very clear, we are not trying to drive the order frequency of just restaurants or new verticals, the way we think about it is how do we bring more users back, which is helping us drive overall users at a double-digit rate. How do we get them to use the product more, which is what's being reflected in the overall order frequency going up. In fact, I mean, we are very pleased with the progress, and this is contributing to the strong growth that you've seen over the last couple of years.

Got it. Thank you.

Our next question comes from the line of Andrew Boone with JMP Securities. Please go ahead.

Thanks so much for taking my questions. I wanted to go back to operating expenses and specifically sales and marketing. It continues to be very efficient. I understood you guys called out Dasher acquisition costs in the letter. But is there anything you can share on customer acquisition costs just as DoorDash's awareness continues to be higher? And then for my second question, I wanted to ask about the elasticity of grocery delivery costs. Tony, you've mentioned the customer cost out a couple of times in your past responses. What are the largest levers you have to pull to make grocery delivery cheaper for the consumer? Thanks so much.

Let me take the first one on sales and marketing, and Tony, if you were to take the second one. Yes, you're right. I mean, we've seen a ton of leverage on the sales and marketing in general. One of the biggest areas where we've driven a ton of leverage is Dasher. For us, whenever we think about efficiency in the business, it always starts with product. We've done a ton on the logistics side over the last couple of years. We've redesigned the Dasher app. We have given Dashers the opportunity to both own by time as well as own by effort. The combination of both of those things, what that does is it improves retention, it improves order frequency on the dasher side. We are seeing retention on Dashers go up. We are seeing engagement levels go up. The effect that's having on the P&L is we're seeing leverage on both Dasher pay as well as the Dasher acquisition cost. Second, to your specific point around consumer acquisition, we operate the business to a payback period, we are seeing healthy unit economics. We are seeing the unit economics continue to grow. As long as we are comfortable with the payback period, our goal is to continue to drive new user adoption. In fact, order [ph] was driving the overall growth in MAUs is they're continuing to see still healthy levels of user acquisition.

Hey, Andrew, with respect to your second question about lowering the costs of grocery delivery. I mean I think there's -- there are quite a few dimensions. I probably won't be able to share in much detail about all of the initiatives we are working on. But it starts with, obviously, how do you create the lowest possible cost structure for everybody involved. If you can do that, I think we can all agree that we all have then the choice of to what degree we actually want to lower the cost of the program. And obviously, we always want to continuously lower the cost of the program, so that we can drive greater and greater adoption and engagement in a way that still makes sense for the business, especially when it comes to maximizing total profit dollars in the long run. But I think there's other things, too. And so you should expect to see us continue to work on co-creating interesting products that haven't yet been built together with grocers and really just continue to solve all of the different challenges that they have. And hopefully, it won't just lower the cost of delivery for grocers on DoorDash, but also for grocers through their first-party channels and their in-store businesses as well.