Despite tripling revenue in the fourth quarter of 2020, profit remained out of reach for DoorDash, which held its first earnings call as a public company Thursday.
The San Francisco-based delivery operator widened its quarterly loss to $312 million, compared to a loss of $134 million in the same period last year. But DoorDash CFO Prabir Adarkar said much of that net loss was associated with one-time stock-related charges tied to the company's initial public offering.
In an after-market interview with Insider, Adarkar said adjusted EBITDA, or earnings before interest, taxation, depreciation, and amortization, has been positive for three consecutive quarters.
Still, DoorDash's stock fell more than 5% when the market closed Thursday.
Welcome to Wall Street.
Adarkar is not rattled.
"We're growing faster than all of our US peers. And we're the category leader in the food delivery space," Adarkar said during a phone interview after Thursday's earnings call.
During the investor call, he and CEO Tony Xu said the company is seeing success by strategically casting a wider net beyond restaurant delivery. DoorDash has expanded its platform to include delivery of groceries, household goods, clothing, pet supplies, and drugstore basics through partnerships with CVS, Walmart, Macy's, and 7-Eleven.
The company, founded in 2013 in a Stanford dorm room, recently highlighted this business evolution in a Super Bowl ad.
On-demand delivery in food and retail has massive runway, they told investors.
"This is just the beginning," Xu said.
Subscriptions a key profit driver
DoorDash, which went public in December in one of the biggest IPOs of 2020, said total orders in the quarter increased 233% to 273 million. Much of that growth was driven by DashPass subscribers, users who pay about $10 a month for unlimited free deliveries on orders totaling more than $12.
Adarkar said gross profit tends to be higher for members enrolled in this subscription service compared to a non-DashPass user. That's not only good for DoorDash, but it's good for restaurants that pay an added fee to be listed as a DashPass merchant.
Adarkar said restaurants benefit because these subscribers spend more money, more often.
"Our DashPass consumers engage more frequently compared to those people that aren't in DashPass," he told Insider. "And that generates incremental sales for the restaurant."
When DoorDash filed its intention to go public last fall, it said it had about 5 million subscribers. Adarkar did not disclose the current membership number, only stating it is growing as the company continues to add a variety of merchants to the program.
Commission caps cost DoorDash $36 million
During the pandemic, several jurisdictions ordered temporary commission caps on the rates restaurants pay third-party delivery operators.
Some cities ordered fees not to exceed 15% per order, which is about half of what delivery providers typically charge restaurants.
On Thursday, DoorDash said it was operating under price controls in 73 jurisdictions at the end of the fourth quarter, up from 32 in the previous quarter. The temporary caps cost the company $36 million in revenue.
Revenue generated from commission fees cover the cost of being listed on the delivery company's marketplace, along with associated delivery costs.
In a letter to shareholders, DoorDash said it expects "price controls to almost double" in the current first quarter compared to the fourth quarter.
Once on-premise dining resumes, Adarkar said he expects those caps to be lifted.
Until that happens, the CFO told investors that DoorDash has started to charge consumer fees "to recoup some of the costs related to price controls."
"The commission caps have been steadily increasing over time," Adarkar told Insider.
What will DoorDash do if caps become permanent?
DoorDash has been in talks with city officials and "no one's discussed making them permanent," he told Insider.
"All the commission caps that are in place today are tied to emergency orders," he said. "So when in-store dining resumes, which by the way, it's slowly occurring in the state of California, our expectation is that these commission caps will fall away."
Menu inflation hurts order volume
DoorDash isn't the only one increasing fees levied at consumers. Restaurants are also engaging in menu inflation to offset commission fees, and that hurts order volume, Adarkar told Insider.
Menu inflation, or premium pricing, occurs when restaurant chains inflate the price of menu items listed on delivery apps. Some inflate the price as much as 20%. Chipotle Mexican Grill, for example, recently began inflating delivery prices by about 13%.
"Beyond a certain price point, the data shows that it [menu inflation] does dampen demand," Adarkar told Insider.
On the earnings call, Adarkar said it is better when restaurants keep prices inline with store prices.
"We're hopeful that as in-store dining resumes, merchants will recognize that keeping prices consistent with their in-store actually is the right path forward because it boosts the amount of demand as possible to their delivery channel," he said.
Why invest in robots?
DoorDash recently announced plans to buy Chowbotics, a vending machine robot that prepares custom salads in under a minute.
Owning Chowbotics paves the way for DoorDash merchants to add a new revenue channel with a delivery only product, Adarkar said.
"Stretch your imagination here," he said. "If you can have a machine mix a salad, you could extend that to other types of food."
Chowbotics' robot, dubbed Sally, also allows restaurants to test their menus in new markets.
"This allows us to have merchants actually sell their food autonomously prepared through the robot in new geographies," he said. "They can access new geographies before they make these big investments to expand into a new state or to a new city."
Does this mean Sally would be cranking out food other than salads?
"Potentially," Adarkar told Insider. "A lot of this is just vision, right? We were excited by what we saw. We think this has a tremendous future. We love the vision that the team has. And it just makes a lot of sense for us."
