DoorDash, Inc. (DASH) Q2 2022 Earnings Report, Transcript and Summary

Good afternoon and thanks welcome to the DoorDash Quarter Two 2022 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] And finally, I would like to advise all participants that this call is being recorded. Thank you. I would now like to hand over to Andy Hargraves, Vice President, Finance and Investor Relations. Andy, please begin your call.

Thank you very much. Good afternoon and thanks, everybody for joining us on our second quarter of 2022 earnings call. I'm pleased to be joined today by Co-Founder, Chair, and CEO, Tony Xu; and CFO, Prabir Adarkar. We'll be making forward-looking statements during today's call, including our expectations of our business and the Wolt business following on our acquisition, the macroeconomic environment, financial position, and operating performance, our market and local commerce opportunity, future financial results and guidance, our strategy with investment approach. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those described and some risks are described in our risk factors including in our SEC filings, including Form 10-K and 10-Q. 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'll also discuss certain non-GAAP financial measures. information regarding our non-GAAP financial results including a reconciliation of non-GAAP results to the most directly comparable GAAP financial measures may be found in our investor letter, which is available on our IR 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 in its entirety is being audio webcast on our IR website. An audio replay of the call will be available on our website shortly after the call ends. As in previous quarters, we'll go straight to questions. So with that, operator, please go ahead and take the first question.

Thank you. [Operator Instructions] And your first question today comes from the line of Deepak Mathivanan from Wolfe Research. Your line is open.

Great. Thanks for taking the questions. Maybe one for Tony and one for Prabir. Tony, given the state of the market and kind of competition, it feels like at least some levels of incentives has come out of the system. Now, maybe perhaps from smaller players and kind of niche categories. Can you talk about whether you're seeing any benefits from favorable operating environment, either on frequency or kind of, customer acquisition right now? And then maybe Prabir, I know, you don't want a guide for 2023 specifically yet, but maybe how should we think conceptually about the 2023 EBITDA band? As your profit ports become larger, do you still see kind of big investment areas that would maybe keep the profit bands at these levels? Or can it gradually [indiscernible]? Thank you so much.

Hey, Deepak its Tony. Yes, look on the first question our business has been always very competitive, ever since we founded the company nine years ago. And I think that what's been very impressive to us is just how resilient our business has been, both in light of competitive activities, both recent, and in the years that we've been building DoorDash as well as just the macro environment. As you know, we do see some consumer spending softening, but largely, we've been not impacted by that downward pressure. I really think that you see a lot of kind of the premise of your question reflected in our results. I mean, this is a quarter in which we beat topline, as well as in bottom-line, we grew results 25% GOV year-on-year. And we beat quite handily on the bottom-line, as well. And this is on top of a lot of the types of things that we're investing in. One that I will call out is that while we're not seeing any elevated pressures from certain types of incentives from competitors, what we are doing is we are taking care of our audiences. We invested over $40 million alone in the second quarter just to make sure that the Dashers, who are on the road, doing the hard work, can keep the profits that they expect to keep given some of the rising costs with fuel. And so, we're not seeing any of the elevated pressures we're seeing fairly normal activity on that side. And I think as a result, given our industry leading retention and order frequency, you continue to see our growth and our share gains.

And Deepak on your second question around 2023, we're not providing quantitative 2023 guidance today, we will provide 2023 guidance when we report Q4, which is on a normal cycle, but I will provide some sort of thematic context. The first thing I'll say is going into 2023, we do expect our core U.S. restaurant business to grow and increase its contribution profit. At current course and speed, we plan to increase annually EBITDA by a modest amount. Now, note that this is after absorbing a full year of Wolt. So, said definitely core DoorDash ex-Wolt will expand a bit into 2023, even though the consolidated EBITDA won't grow meaningfully. And the only caveat we'll make to this is this could change if we identify attractive growth opportunities. We continue to remain in investment mode and look for these opportunities that benefit or retention order frequency, but at current course and speed, we would expect annual EBITDA to grow by a modest amount.

Okay. Thanks, Tony. Thanks Prabir.

Thank you. Your next question comes from the line of Lloyd Walmsley from UBS. Your line is open.

Thanks for taking the question. Two, if I can. In the letter, you guys talked about being logistics-led marketplace. I guess how much room do you all see over the next few years to reduce cost per order? What are some of the key drivers to kind of get there and like where's the lowest hanging fruit? And then second one would just be you've talked in the past about how you don't try to beat EBITDA, you really try to kind of come in in the range. And if you beat it, it's because there just weren't attractive investment opportunities, like it was -- was there like something changing in the marketing landscape or any reason you guys let it flows through or just a function of some of the, kind of, inflation coming through as a surprise and you didn't have time to reinvest? If anything you can share there, it'd be great. Thanks.

Yes. Hey, Lloyd, it's Tony, I'll take the first question and maybe Prabir can take the second part of the question. With respect to efficiency gains from logistics, I think this has been a hallmark of the DoorDash story and also, the Wolt story now that we've officially closed that partnership, in which if you think about the game that we're playing, or the business that we're in, we're really in the game of building a minimum efficient scale business. That's the type of business when you're talking about a hyperlocal business where order density is the most important metric. And in order to achieve that, you kind of have to do two things. One of the things you talked about in your question, which is really around high quality logistics efficiency, and the other is high quality, retention and order behavior from customers, without discounting, and that sort of activity. And DoorDash has really achieved both. And on the part around getting extra logistics efficiency, we continue to find areas of opportunity. I mean, we've certainly been leaders in our space, up to this point. But I still see massive room to keep increasing the selection on our platform and improve the logistics quality on our platform, the affordability of our service, and certainly our customer service levels. On logistics, more specifically, whether it's working on efficiency improvements at the store, as well as how we think about how we ought assign orders, especially now that we're entering multiple categories of deliveries, in addition to restaurant deliveries, I think there's a long room to go. And we're seeing that both in our numbers -- in the most recent quarter, as well as in the quarters leading up to this point.

And Lloyd on the second part of your question, first I'll talk about Q2, and then I'll talk about some general philosophy. In terms of the Q2 performance and EBITDA, it was really a matter of two factors. The first was subtotals. As we described in the letter, as a result of consumer price inflation, our subtotals were higher because of higher item prices. And that then translates into higher commission dollars as well as high service fees, both of which benefit revenue and drop through to EBITDA. So, that's what drove the upside in Q2 in terms of EBITDA, In terms of general philosophy, I'll say our EBITDA is a function of really two things. First, it's the margin expansion that we continue to drive in our U.S. restaurant business. That's one thing. The second is the level of investment we make, which is discretionary, by the way below investment we make in our new verticals and in our international businesses. That level of investment varies from quarter-to-quarter based on the signals we see. And you can see that volatility in our historical trends where some quarters will produce more EBITDA than others because depending on what we see, in terms of retention all the frequency, we might invest more or less. And so our EBITDA range is really meant as a guiderail. But when we land within that range base, depending on the level of investment.

Okay, thank you.

Thank you. Your next question comes from the line of Youssef Squali from Truist Securities. Your line is open.

Great. Thank you very much, guys. Congrats on a really impressive quarter all things considered. My question is around the Wolt contribution. Can you maybe speak to the contribution that you're making in into the 2022 top and bottom-line? How to think about growth there considering kind of what's going on in Europe? And just broadly speaking, maybe Tony, can you address the issue about -- how do you kind, of take relatively subscale business in Europe that's across multiple geographies, and kind of grow it meaningfully for it to become a big part of the business? Your position to U.S. has been quite the opposite. You've been market leader, market dominant and in the single market. So, any help there would be great. Thank you.

Maybe I'll start and then Tony can chime in. I mean, the Wolt business goals 30% year-on-year, and that's in stark contrast to what we've seen with other companies that operate in a similar geographic region. And really, it all comes back down to two things is the fundamentals of the business in terms of its industry leading retention and growing order frequency. And we've seen it as long as you create a product that has high retention or the frequency, it ultimately translates into better growth, because you're retaining your customers better and that benefit compounds versus alternatives, when you end up losing customers because of poor retention. And where we're at in terms of the investment cycle, the bull markets are relatively new, both in terms of merchant adoption, as well as user adoption, as an example, even in its oldest market, adoption levels are less than 10% of the population, that test drive, there's a lot of room to grow, just as you grow your footprint within these countries, as well as you grows merchants selection, and grow the consumer base. And so that's driving investment we're making and we'll continue investing, as long as we see strong signal on retention and all the frequency.

Yes, and on the second part of the question, I think it's important to start with maybe some historical context, and go down memory lane, not just, just a few years ago, DoorDash was certainly not the market leader and DoorDash, especially, five, six years ago was quite capital-constrained relative to any of its peers by a pretty far margin. And so, how was it possible that a, 'subscale company' was able to rise to market leadership, while it really was mastering the order level execution of the business, and again, you know, this is a hyperlocal business for order density, and achieving minimum efficient scale, through leading a retention order frequency, which is really, you know, measured in whether or not you build a superior product of selection, quality prices, and service. And then on the other end, whether or not you have the most capital efficient logistics operations, and I think when I look at the elements that cause DoorDash, to rise to market leadership, I find very similar kinds of characteristics and the Wolt business, which is what excited us about their business, not only today, as Prabir mentioned, far outgrowing some of their European peers. But maybe much more excited, are we in their potential, because when I compare the foundation of what they've built, and I look at, you know, the opportunity ahead of them, I mean, even in their oldest markets, bolt is less than 10% penetrated. On a global basis, both DoorDash and Wolt in our non-U.S. markets are less than 5% of restaurant sales, and outside of restaurants, less than 1% of non-food spend. And so when I compare the foundation that bolt has built on one hand, and on the other hand, compare it to the opportunity head, it's exactly what Prabir said, which is that it's absolutely the right time to invest. And I think you already see evidence of this as Wolt has become a market leader in many of their markets already.

That's great. Thank you. And Prabir did you quantify the contribution to the $51 billion to $53 billion in GOV from Wolt?

Well, we don't break out the guidance between Wolt and DoorDash. But when we do report earnings, you will split out organic versus OLS contribution.

Got it. Thank you both.

Thank you. Your next question comes from the line of Bernie McTernan from Needham. Your line is open.

Great. Thanks for taking the question. We've noticed a lot of groceries in the marketplace doing delivery and online ordering in house in addition to being opened up to third-party marketplaces like yourself, so they're a competitor, but also a partner. Can you talk about some of the advantages that you have for customer acquisition and retention relative to them? And then also, with the 50% growth? And will this past quarter for GOV, 50% higher probably than some of the other European delivery operators? Can you just remind us whether it's market growth or just pure market share gains in terms of what's driving this growth?

Sure. Maybe I'll take the first question. And I'll let Prabir take the second question. So, I'm not sure if this touches exactly the spirit of your question. But we view all merchants including grocers, as partners, maybe think about the mission of the company, the mission of the company is to, on one hand, build the largest local commerce marketplace, where we're driving incremental demand to all of these retailers, whether they be restaurants, grocers, convenience stores, other types of retail stores. And then on the other hand, build the largest local commerce platform where we give the tools whether it's logistics as a service in the form of DoorDash Drive, or ordering as a service in the form of DoorDash Storefront to all of these retailers so that they can build their own digital operations. So, we really view in equal parts, our mission to help grow on one hand, which is to bring that incremental demand and on the other hand, empower them to do it on their own. In fact, we see these customers on these different channels to be quite different. I mean if you think about it if a customer is quite used to and knows exactly what they want to order from a particular retailer, it probably makes quite a lot of sense for them on that occasion to actually order directly from the retailer. But on -- the greatest privilege that we have in this business is that people eat 20 to 25 times a week. And they shop even more times than that on top of that when you consider their non-food spend. And so for other occasions, maybe when they're not exactly sure what it is that they're looking for, but they want to buy something from the neighborhood, that's where the DoorDash Marketplace really comes in hand. And so we really view the retailer, the merchants, whether it's a grocer or other type of store, as our partner, and we have two ways in which we help them.

And Bernie, on your second question around Wolt's growth, it's really driven by two things, it's MAU growth that was aided by some customer acquisition, but also by just by higher retention compared to the other players in the market. And then second order frequency growth, as Board brings on more selection both in the restaurant as well as the non-restaurant category, we're seeing some of the same things, as you saw in the U.S. where order frequency at a cohort level has continued to grow. And both of those things, particularly in the face of some of the more extreme COVID reversion that you saw in Europe, have led to the 50% year-on-year growth that they've decided.

Great. Thanks for taking the questions.

Thank you. Your next question comes from the line of Brian Nowak from Morgan Stanley. Your line is open.

Thanks for taking my questions, guys. I have two. Just the -- the first one -- the gross margins in the quarter were a little weaker than we thought at least. Could you just sort of talk to us about some of the put some takes on gross margins of the business? And how should we think about the gross margins of the business sort of going into the into the back half and maybe even longer term 2023? Thanks.

Hey, Brian, it's Prabir. So, let me let me start on both of your questions. So, first, our cost of sales increase that we saw on a year-on-year basis was only driven by two things, DashMart and insurance costs on DashMarts, as we've launched more and more DashMarts, the cost associated with those orders impacts cost of sales. So, roughly half of the increase in cost of sales as a percentage of GOV is driven by DashMarts. The other half roughly is driven by an increase in insurance costs, which was in line with our expectations, pointed to our comments from last quarter, where we said we experienced an increase in insurance reserves due to the outsized have been backed up a few large games. And we began to take actions on -- to improve the safety on our platform starting last quarter. But it takes a while for these changes to reflect on our claims data. And so as we previously discussed, we expect insurance costs to increase in the near-term. On the whole -- both the DashMarts cost increases as well as insurance cost is reflected in the guidance we provided. And so it's not incremental to the guidance, it's already reflected in there. In terms of gross margin for Wolt, here Wolt is combination of as I view it, so three distinct pieces. There's investments that are going into Japan and Germany. These are brand new market that we launched less than two years ago. Well, to get the flywheel going in terms of selection and quality and price. You've got investments in both market which is the equivalent of our DashMarts Wolt's first party distribution business, and then you've got the rest what I call core food delivery. Core food delivery is at consistent increase in gross margin levels and as we continue driving efficiency and order density, the local level, you start seeing the same type of efficiency in terms of Dasher cost kick in to produce increasing levels of gross margin. Japan and Germany both markets remain in investment mode and we continue to work on coverage, selection, quality and price there.

That's very helpful. Thanks Prabir.

Thank you. Your next question comes from the line of Eric Sheridan from Goldman Sachs. Your line is open.

Thanks so much for taking the question. Maybe two if I can. First, Tony, I know you're talking a lot in the shareholder letter about not seeing anything yet on the consumer spending behavior patterns. But I think one of the questions we all get a lot from investors is you're seeing some large companies already say how they would run their business differently if the consumer spending environment did change? Is there any sense you can give us of how you're sort of game planning out different economic scenarios for the business? And how you might change investment philosophies or growth philosophies for the company if you did hit a rougher patch in terms of consumer spending and went through the platform? And then maybe additional question on grocery and convenience at some of the new categories. Can you give us a little bit of sense of folks who use multiple products across the platform, what that might mean in terms of LTV or how you're thinking about leaning in and promoting different category expansion on a per customer basis, what that might do for the unit economics, longer term? Thanks so much.

Hey Eric, it's Prabir. Maybe I'll start with the first one around how we're going to manage the business and EBITDA impact of growth and Tony can talk about the impact from some of the new categories. So, maybe the first place to start is our core U.S. restaurant business is growing and continues to generate significant cash flow. And historically, we've taken that cash flow and invested the vast majority of it in order to grow and scale in these large and underpenetrated categories in which we operate. Again, as I said earlier, these investments are discretionary and so that means, the reason we're investing is because we continue to see strong signals of product market fit, as well as improving unit economics. Just to give you an example, if I -- on any given day, if I look at the top 10 stores on DoorDash in terms of sales, DashMart shows up, and that's a strong signal of product market fit. To the extent that we don't see continued improvements in terms of unit economics or continued improvements, retention or frequency, we will alter the pace of our investment. We've been very disciplined in terms of capital allocation so far, and we'll continue to do so going forward.

Yes, and I think, if there's -- I'll add a little bit in terms of just my view on, the macro environment. And then and then I'll hit your second question about, the multi-category customer. So, obviously, we've been looking right, in terms of how the tough macroeconomic headwinds that, I think is hitting a lot of industries, how that might apply to us. We've been searching for this for many quarters now. And I think so far, the reason why largely we've been less impacted is because well, one, you know, our product is dynamic, it's been constantly improving. If you look at selection, for instance, in the 12 months, leading up to the end of the second quarter, we've added 80,000, net new stores onto the platform, we've made improvements to many quality metrics, in terms of our delivery experiences, whether it's speed, or accuracy, and other types of improvements, we've made many improvements to the shopping experience to lower the friction for consumers. And so I think that's one point. The second point is, I think we still have to remember that relative, especially to other maybe categories of commerce, or E commerce, we are still very early in our penetration, you know, even as the market leader just take the U.S. as one example, we're less than 8% of total restaurant industry sales. And we compare that to other categories of commerce, it is much earlier in its evolution. And then the final thing I would just add is just if you study macro -- as we've been looking at macroeconomics, I think there's only been a couple years in history in which food spend has actually declined due to challenging macroeconomic pressures. And I think that's just because it is less of a discretionary spend relative to other categories of spend. But that's said, to Prabir's point we're equal opportunity, growth investors that are very disciplined, you know, DoorDash, historically hasn't had a lot of resources. And so we take very seriously every dollar of spending, and as you saw in the second quarter, if we don't think that there's a great investment to be made over the same time period to generate a great return, we're not going to make that investment. And so that's true with all new projects, that's true with marketing investments, that's true with engineering and product investments. That's true with headcount, that's really true for every line item in the P&L. All right. Moving on to your second question, which I think was about the impact of consumer shopping in multiple categories? Well, one, this is just part of the mission of the company is to make sure we bring everything inside the neighborhood and not just from restaurants. And two, the last disclosure we made was -- I think, in the fourth quarter, we said that about 14% of our customers are now shopping in these non-restaurant categories, and we are seeing higher retention order frequency activity from these customers who are, who are engaging in multiple categories. And I think this makes quite a lot of sense as we're solving now different jobs and tasks for the customer. But that said, look, we still have to earn every inch. We have a long ways to go in terms of the product experience in each one of these categories, before we'd be satisfied with that behavior.

Thank you.

Thank you. Your next question comes from the line of Andrew Boone from JMP Securities. Your line is open.

Hi. Good afternoon, and thanks for taking my questions. I know you guys talked earlier about the logistics benefits that you guys are running through the platform. But can you double click on the drivers of Dasher cost savings you guys highlighted in the letter? And then we haven't talked about Drive in a while? Can you provide an update there? Is there any change that you're seeing in terms of enterprise adoption now that we're kind of beyond peak COVID? Thanks so much.

Andrew, maybe I'll start with the Dasher cost question, and then Tony can take the one on our platform services. So in terms of Dasher cost, I mean, at the end of the day, there's multiple components of this, including, as Tony alluded to earlier, how stores operations, in terms of how quickly they get the Dasher in and out. So there's opportunities to continue optimizing that, there's opportunities to continue dispatching from closer and closer Dashers which, by the way, as the density of your network increases, as you get more orders occurring within a certain neighborhood, within a certain store, you've got the ability to not just batch, but you've got the ability to get the Dasher to the store quicker than you otherwise might have. And so there's really -- if you think about the sources of opportunities, really reducing the amount of time it takes for a Dasher to get to the store, and reducing the amount of time that the Dasher spends in the store. And we continue to work both those levers and that's what's resulted in the improvement in terms of Dasher cost that we're seeing. The second thing I'll say, which is really just to clarify, last year was anomalous in terms of Dasher cost, because we were operating in a very expensive labor environment that was fueled by fiscal stimulus. So, in some ways, Dasher cost this year just -- at least my mind, normalizing back to historical levels versus ending incremental. So last year was elevated, this year isn’t.

Yes. And with respect to the second question around our platform service products, such as Drive, we see continued excitement for the stores, but I mean, in many ways our platform services business experiences similar seasonality is our marketplace business versus the second and third quarters are generally more muted in activity. And that's mostly because as you know, customers are back out, many of whom are taking advantage of the good weather, as well as perhaps last vacations from the beginning of two years of COVID. And now eating out again, or visiting retail stores again, that -- these stores have to make sure that their in-store activity is protected and taken care of, and that customer service levels are exceptional, before they invest aggressively in their off-premise business. So while there's some seasonal kinds of activity happening in that business. I think the COVID highs in terms of the excitement to invest in continue to accelerate the momentum behind e-commerce for all of these retailers, across any category remains just as high as ever. And so that's something that we expect to continue to help grow our platform services business, whether they're large merchants, like some of the ones you mentioned, who participate with products like DoorDash Drive or smaller merchants that really need help getting online for the first time and growing their kind of same-store sales off-premise with products like DoorDash Storefront. And so our focus right now is making sure that those products can be easier to use and that we can build products to help teach the playbooks that we've used to build a successful digital marketplace in our own right, such that these businesses can do it on their own.

Thank you.

Thank you. Your next question comes from the line of Ron Josey from Citi. Your line is open.

Great. Thanks for taking the question. Maybe two please. The chart in the note and letter that talks about existing consumer order rates, 2022 is trending higher than previous years and suggesting that these users in 2022 are more engaged. I’m sure, can you just talk about the drivers here as a greater repeat rates, adoption newer verticals impacted DashPass, I'm sure it's all the above. And so maybe the bigger question is just, are these newer users, these newer cohort of users talking about how that compares to the prior cohorts? Are they just doing more? And then maybe, Prabir, as a quick follow-up, you mentioned just a strong cash flow generated from the US restaurant business, any way to provide some guideposts or insight in terms of that profitability to that US restaurant business? Thank you.

Hey, Ron. So on -- let me start with the second first. On the US restaurant profitability, we're not actually -- we haven't provided any disclosure to break that out other than to say that continues generating more contribution profit and has improved both in terms of its net revenue margins, as well as its contribution profit as a percentage of GOV on a year-on-year basis. So we're happy with the progress there. And as we've said previously, it's a valuable funding source that we use to make investments in these new categories that were growing. In terms of your question around the order rate chart, really by the way the purpose of that chart was to demonstrate the fact that the order rate trends were similar to what we've seen historically. And to make the point that increase inflation, as well as potentially weakening consumer spending has not had an adverse impact relative to old cohorts. And so it's hard for us to untangle the impact of consumer spending from ordinary core seasonality. But taking a step back in terms of the 2022 cohorts, we're happy with the quality so far. Remember, we run our sales and marketing to a payback period, we've been operating within the same payback period for quite some time now. And so what's driving that is not just enhanced order frequency, which has continued growing on a year-on-year basis, as a result of improvements in selection, quality and price as well as the new categories that we’re adding, but also improvements in terms of the core margin structure of the product. And so the core product has gotten more profitable in part due to subtotals. But also, in part because of improvements in terms of Dasher cost, the quality of our orders, which improves our customer support costs and so on. And that coupled with the order frequency is contributed to better LTVs and probably the same payback.

Thanks Prabir. Appreciate it.

Thank you. Your next question comes from the line of Ross Sandler from Barclays. Your line is open.

Hey, guys. Two for me. Prabir, the 30% retention stat for Wolt. Is that comparable to the 48% for core DoorDash? I know they don't have a subscription business built out yet. And some of their markets are a little bit younger. So could you just walk us through that? And how does that 30 compare it to some of the EU competitors that they face in their home markets? And do you think the gap is as wide between that 30 and the competition as it is between the 48 and your US competition? Then the second question is just you guys give a good overview of how the consumer is holding up. I'm just curious as the frequency for DashPass kind of standalone holding up as well as non-DashPass and others a mix shift towards DashPass, which is driving up frequency. But could you just talk about those two kind of separately? Thanks.

Yes. Ross, maybe I'll start and Tony can chime in. So first, on the 30% retention, I'm not sure what the 48% is that you're referring to. The 30% is month 12 retention. And if you actually compare that to DoorDash versus Wolt and apples-to-apples basis, it's pretty comparable in some markets is even higher. So we feel good about the retention stats when you compared to our data. And when you look at our data using third-party sources, we understand that our retention is better than everybody else in the category. In terms of the European competitors, there isn't an exact apples-to-apples source where that compares market-to-market based on what we're seeing in terms of competitors in the UK and other markets that are covered, the 30% actually compares very favorably. On the question of DashPass, DashPass frequency as well as order frequency of classic product, you really need to look at it on a cohort level. Yes, you've got mix shift between as you get more DashPass subscribers, the blended order frequency grows. But even on a cohort level, the underlying order frequency has continued to grow. And what's driving that is these new categories. We're seeing people adopt new categories, Tony referred to the 14% adoption rate at the end of Q4, which has continued to grow in Q1 and Q2 and that's driving order frequency and frequency growth at the cohort levels.

Thank you. Your next question comes from the line of Jason Helfstein from Oppenheimer. Your line is open.

Thanks. I just want to dig a bit more into DashPass, with the economy reopening and kind of return to work progressing in a certain direction and increased use of ride sharing? Is it making it customer acquisition of DashPass any less efficient or more challenging? And then secondly, I think you said that you point out Dasher costs are down this year versus last year, but specifically in perhaps this month and last month, are you seeing the cost to acquire new Dashers come down even any further? Thank you

Yes, Jason. So first on the DashPass front, what I should say is we've not observed any impact on our DashPass signups as a result of people going back to the office and increases ride sharing or anything like that, in fact, our DashPass subject has continued to grow both on the year-on-year basis, as well as quarter-on-quarter basis to record highs. So we feel good that DashPass is a key component of driving better affordability for consumers, and the growth has been consistent and reliable. So that's great. In terms of Dasher costs, the reduction in Dasher costs was really driven by two things. There's the Dasher cost per order, which I mentioned earlier was really a normalization from the elevated levels last year, because of increased fiscal stimulus. There also was, if you recall last year increased advertising costs because everyone is competing for Dashers and that environment has gotten a little bit better, which has driven lower Dashers costs in Q2, and those dasher costs continue to remain where they were in the last couple of months of the quarter.

Thank you.

Thank you. Your next question comes from the line of Douglas Anmuth from JPMorgan. Your line is open.

Thanks for taking question. I just wanted to circle back on profitability and just the EBITDA guide for the full year. Should we think about the increase at the low end there. Should we think about that as the same dynamics that you suggested in 2Q in terms of driven mostly by inflation? And is that all coming on the Dash side of the business? Or is -- are we seeing any improvement perhaps in your outlook there for Wolt? Thanks.

Doug, can you clarify, are you talking about Q3 or Q4?

The full year outlook for EBITDA.

Yeah. The full year outlook of EBITDA, I mean, we're bringing it up because we've made progress here in the business both in terms of overall scale has increased relative to our expectations at the beginning of the year. If you remember our guidance at the beginning of the year was -- I think it was 49 million to 50 million at the top end. So that's gone up. Second, we are seeing positive benefits in terms of sub totals, which we talked about earlier, which results in more revenue and EBITDA. Third, Dasher costs are trending slightly better and that's been driven by two things as product changes that have helped drive increased retention of our Dashers as well as some of the macro factors such as rising cost of living and declining consumer savings that are helping increase the retention of our existing fleet. So it's these various factors that have given us a little more confidence on EBITDA, as a result of which, we have increased the low end of our guidance. And it's really a commitment to say that, we're going to stay above breakeven.

Thank you. Your next question comes from the line of Nikhil Devnani. Your line is open.

Hi, there. Thanks for taking the question. Just on the Q3 guide, if we take Wolt out, it looks like GOV is set to kind of step down sequentially for core DoorDash. Just wondering if you get there with the assumption that the July trends kind of hold roughly flattish through the quarter? Or is there some further kind of softness embedded in that outlook? And then as a second question, just given all the macro concerns, have you seen any indications that consumers are trading down here in the types of restaurants that they order from? And any kind of color you can provide on the demographics of the customer base would be helpful. Thank you.

Sure. Maybe I'll take a crack at that. So the first thing I'd say is our consumer metrics remain healthy. So if you look at what happened in Q2, our MAUs grew by double digits year-on-year, order frequency grew, our pace of consumer acquisition continued to remain healthy. And these signals provide a solid foundation for growth in the long term. With respect to the second half specifically, we expect normal course seasonality this year. So in general, we've experienced growth in Q4 and Q1. Sequential growth in Q2 and Q3 is usually muted as a result of summer seasonality. In fact, if you look at our Q2 to Q3 growth last year, you'll see that our GOV dipped a little bit, and we're baking that in. into the guide. The second point, I'll make is the macro environment continues to remain uncertain and so we haven't seen any impact from weakening consumer spend, at least so far in Q2, but we're accounting for that uncertainty because it could have an impact on normal course seasonality in the bounce back that you see in Q4. And so that's what we're baking into our guidance. And then can you repeat the question on macro?

Yeah. Just any indication that consumers might be trading down in the types of restaurants they order from? And just a reminder what your demographics look like for the customer base? Thanks.

Yeah. What I'll say on that point is at least based on the data we've seen so far, we haven't seen anything that would point to a particular income peer or people shifting from certain types of restaurants to another. In fact, I think we said in the letter, Shopclues increased because of higher item prices. But that was offset by fewer items per order as consumers responded to inflation. So it's less that they're shifting away and adjusting their buying behavior from other restaurants. They just -- they're spending the same amount, just buying a few things. And that just goes to show you how resilient the category is. Convenience and delivery and dining in has become a stable part of people's lives and you're seeing that in the data.

Thank you. Your next question comes from the line of Michael McGovern from Bank of America. Your line is open.

Hey, guys. Thanks for taking my question. I wanted to dig a little bit into the gas rewards program. Just curious, I noticed you listed as the program as one of the contributing factors to Dasher cost per order actually being down. So I was wondering, is there a potential impact on Dasher supply or Dashers per order when the gas rewards program ends? And then secondly, is there a chance that that could be extended beyond August 31, if there is a potential supply impact from that? And are the savings from that ending in August currently being baked into guidance for Q3 and for the full year?

Michael, it's Prabir. Maybe I'll take a your question. Yeah, we spent over $14 million in gas savings program, and we see very positive feedback from Dashers. You are the commentary I think you're referring to is it's not a Dasher cost per order reduced, but what ended up happening is the retention of our existing fleet improved. And that the improvement in that retention of the existing fleet was driven by three things is the product changes that will need in order to help attention, it's the gas rewards program that frankly displays the increase in fuel costs for Dashers and third, the macro factors that we talked about around declining consumer savings and rising inflation. And so it's the combination of these three things that we believe improved the retention of our existing fleet that then resulted in us needing fewer new Dashers, and therefore, acquiring a greater portion of our Dashers organically than we otherwise would. That then translate into lower that costs. In terms of renewing the program, it's too early to say right now. We have assume that we will -- we continue to operate the current Dasher program to the end of August, and we'll make a color depending on where gas prices are high as well as other things. At the end of the day, it might be a cheaper way to obtain Dashers, what we'll see as we need progress here in the quarter.

Okay. Great. Thank you very much.

Thank you. Your next question comes from the line of Mark Mahaney from Evercore ISI. Your line is open.

Hey. I wanted to ask about whether you're seeing any pressure from competitors in nonurban markets, either on the restaurant supply, acquisition side or consumer incentives? And since the Amazon Grubhub deal was sort of announced, does that show up in any of the metrics that you track? Thank you very much.

I can lead off and then feel free to chime in here, Prabir. So far, we haven't seen impact whether it's recent competitor announcements or moves to invest in certain types of geographies versus other types of geographies in the numbers, but obviously, we're taking stock of what's happening. But I think it's important to remember, regardless of what's happening in the external environment that our focus is making sure that we continue building the best products. I mean, at the end of the day, the customer, whether it's for our platform or someone else's, they're going to judge all of us on the combination of the selection of places we deliver from the quality of that delivery experience in terms of speed, timeliness and accuracy, the affordability of the platform and the customer service level. And it's that combination, I think, that so far has been evidenced or performance with leading retention and order frequency that has separated us from the pack. And we have to just keep making sure that we stay ahead on that dimension. At the end of the day, it's that combination that ultimately is going to judge us or anyone else and even if you offer the product for free if that combination isn't where it needs to be for the customer, I'm not sure it's going to matter.

Okay. Thank you, Tony.

Thank you. This concludes today's conference call. I would like to thank our speakers, and thank you all for joining us today. This now concludes the call. You may now disconnect.