By Preetika Rana
DoorDash Inc.'s revenue tripled in the first quarter, showing sustained demand for food-delivery services even as coronavirus vaccinations picked up and the nation moved toward reopening.
The San Francisco-based company reported revenue of $1.08 billion for the three months through March, up from $362 million in the same quarter a year earlier, beating Wall Street's forecast. Analysts polled by FactSet had expected revenue of $994 million.
"The negative impact that we were expecting in consumer behavior was smaller than we were anticipating," Chief Financial Officer Prabir Adarkar said in an interview Thursday. The company's better-than-expected revenue helped drive shares up nearly 8% in after-hours trading.
While DoorDash slightly narrowed its loss to $110 million from a loss of $129 million in the same quarter last year, the figure missed analysts' projections of a $63 million loss. Mr. Adarkar said the company was focused on investing in growth and capitalizing on the shift in consumer behavior in the near term.
The Covid-19 pandemic served as an unexpected boon for DoorDash. The company gobbled up more than half of the U.S. food-delivery market in January, up from just over one-third a year ago, according to market research firm Edison Trends. Analysts say the company leapfrogged its rivals thanks to a strong footprint in the suburbs, a wider selection of restaurants and greater operational efficiency in delivering the food itself.
But a looming question for DoorDash and its competitors is just how much will change as the U.S. gradually reopens amid widespread coronavirus vaccinations. While growth might slow from the breakneck pace of 2020, Mr. Adarkar said he believes that consumer behavior will stick, and the company is positioning itself to capitalize on that.
DoorDash quickly expanded its offerings during the health crisis to include grocers and convenience stores, pinging consumers as they paid for their food to ask them if they wanted household items from a nearby store. That is helping the company drive up average order sizes while reducing the cost of each delivery because drivers can carry multiple orders at the same time.
"It gives you other reasons to come back to the platform," Mr. Adarkar said. "Earlier, you thought of DoorDash only when you were hungry and wanted to order your lunch. Today you can turn to it when you're out of toothpaste, Tylenol, a carton of milk -- and over time, we'll keep adding new verticals," he said.
DoorDash said non-food orders grew 40% in the first quarter compared with the last three months of 2020, a blistering pace that made non-food orders account for 7% of total orders in the three months through March.
That uptick, among other things, led the company to raise its full-year outlook on the value of orders placed on its platform. DoorDash said it expects order value this year to be in a range of $35 billion to $38 billion, up from the $30 billion to $33 billion range it forecast just three months ago.
DoorDash hasn't posted an annual profit since its inception eight years ago, but it was the only major food-delivery platform to turn a quarterly profit during the pandemic last year.
The company has been profitable on an adjusted earnings basis before taxes, interest, depreciation and amortization for four consecutive quarters, counting the latest March quarter. Companies often point to an adjusted metric that strips the business of certain costs to show investors a path to profitability. Uber Technologies Inc., whose Eats division competes directly with DoorDash, is expecting to post its first profit on such a basis before the end of the year, for example.
DoorDash said Thursday it now sees a range for annual adjusted Ebitda of flat to $300 million, compared with an earlier range of zero to $200 million.
"We're focused on maximizing scale as opposed to increasing our Ebitda," Mr. Adarkar said, adding that the company widened its range because it wanted to invest to keep customers, expand its offerings and improve its underlying technology so deliveries could become faster and more efficient.
Companies typically offer incentives to drivers before a busy period. Because first-quarter demand outstripped DoorDash's initial projections, it posed another problem: not enough drivers to deliver people's orders. Mr. Adarkar said he doesn't expect the shortages to continue, however, saying that the company is acquiring more drivers on a weekly basis in the second quarter than in the first quarter.
There are other challenges as DoorDash navigates a post-pandemic world. Some restaurants are pushing back against the fees that food-delivery apps charge by driving more orders toward their websites and aggressively investing in pickup services as the country reopens. Regulators in cities including New York, San Francisco and Seattle stepped in to cap app fees during the health crisis. Many cities are considering making those changes permanent, a move that would further strain such apps' thin margins.
Keeping restaurants happy is crucial if DoorDash wants to maintain its lead. The company altered the way it charges restaurants to deliver their food last month, allowing them to choose from three commission rates: 15%, 25% or 30% of every order. DoorDash said it would offer restaurants varying degrees of marketing and product support based on the different fee levels. But to offset lower restaurant rates, it said it would raise delivery fees for consumers so that driver pay remains unchanged.
Previously, restaurants didn't have a choice. Delivery apps charged restaurants a cut of every order and set the rate. Some bigger chains used their scale to negotiate commissions as low as 15%. Many small restaurants paid as much as 30% of every order.
Write to Preetika Rana at firstname.lastname@example.org
(END) Dow Jones Newswires