DoorDash, Inc.

Pleased to be joined today by co-founder, chair, and CEO, Tony Hsu, and CFO, Ravi Anaconda. We'll be making forward-looking statements during today's call, including our expectations for our business, financial position, operating performance, our guidance strategies, capital allocation approach, and the broader economic environment. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those described. Many of these uncertainties are described in our SEC filings, including our Form 10 case and 10 cues. We 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 also discuss certain non-GAAP financial measures, information regarding our non-GAAP financial measures, including a reconciliation of the non-GAAP measures to the most directly comparable GAAP measures may be found in our earnings release, which is available on our Industrial 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 the same website shortly after the call ends. Donald, I'll pass it back to you, and we can take the first question.

Thank you. Ladies and gentlemen, we will now begin our question and answer session. If you have dialed in and would like to ask a question, please press star followed by the number one on your telephone keypad. We'll pause for a moment to compile the Q&A roster. Thank you. The first question comes from the line of Nikhil Devnani from Bernstein. Please go ahead.

Hi, thanks for taking the question. I wanted to ask about what you're seeing from an overall demand perspective. There's a lot of talk right now about softening restaurant demand. Your outlook points to some deceleration, but still looks very healthy. So I guess to what degree are you seeing changes in behavior or softening on that front? And my follow on to that is a bit more of the secular story here. So, I mean, how would you characterize the new customer funnel for the US restaurant marketplace? I think there's a common perception that all customers should have been acquired during the pandemic, but what do you see on that front in terms of how new customers are still adopting this service today, and how does that make you, how do you think about where we are on kind of the growth curve there? Thank you.

Hey, Nikhil, it's Tony. I'll take both of those and feel free to chime in, Ravi. You know, we're seeing really strong demand on the consumer side. So we're not actually seeing, you know, some of the challenges that you may be hearing about or reading about in other headlines. I think there are a few reasons for this. You know, I think first, we're still in the earliest innings of the, you know, move towards digital and the overall omni-channel experiences that every restaurant and retailer is participating in. And, you know, we're seeing a lot of demand but we're lucky to play in the part that is growing. I mean, if you looked at digital only, that's growing not just for us at DoorDash on our marketplace, it's also growing, you know, for us in our first party platform as we power a lot of these restaurant and retailer websites for ordering as well as their delivery channels. And they see that too, by the way, you know, while some restaurants to your point may be seeing some headwinds in traffic, I mean, their digital channels are growing very robustly, many multiples of, you know, I think their overall growth and we see that, you know, similarly, but at the same time, we're still just single digit penetration in restaurants and outside of restaurants, we're even lower than that. So we see a long runway for growth there. You know, the second point I'd make is that, you know, our product continues to get better. I mean, if you looked at our cohort behavior, whether it's retention or order frequency, I mean, all of these things are as good or better than even our pandemic cohorts, you know, for every cohort, you know, since the pandemic. And so I think that's a reflection and testament to the work that the team is doing. You know, we already have category leading selection, but we're continuing to extend that lead. We have the best quality as well as lowest cost logistics network in the most places in the US, not just for restaurants, but also for retail, that continues to get more accurate and faster. You know, we continue to work on our affordability programs. I mean, DashPass had an all time high in terms of its subscriber base. So I think a lot of people are resonating, you know, across all of the dimensions in which we are judged from the consumer's view. The final point I'd make is that, you know, we are increasing the number of use cases on DoorDash. We continue to see just tremendous growth, much faster than the industry. I mean, you know, many, many, many fold faster than anyone else, both in the US as well as globally in restaurants, but also outside of restaurants. And then recently we're seeing, you know, customers come to us for the first time, actually, you know, for non-restaurant use cases. And so, and in terms of your question on new customers, I mean, we actually see, you know, a couple of things. You know, one, we still acquire, you know, more than anyone else. I mean, more than, in restaurants, more than one out of every two new customers that come into the industry. Outside of restaurants, we're about one in every two. So in any category of local commerce, we acquire more new customers than anyone else. And I think what you see about the point about like, hey, look, you know, is the new customer point saturating? You know, the way I think about this is, you know, for us at DoorDash, yes, we have, you know, tens of millions of customers every single month, but we have many multiples of that ordering with us every single year. So within even our own ecosystem, whether they're a new customer or a customer that's an occasional customer that's coming back now to the platform, within our own ecosystem, we have a long runway for growth. And so, yes, we're getting new customers, especially in restaurants and new categories. I mean, I mentioned some of those stats, but we're also getting customers who are in our ecosystem. They don't participate yet with us, you know, every single month or every single day, but increasingly they're getting this.

And Nikhil, just to add a couple of points, you know, to what Tony talked about, right? The demand on the platform continues to be very strong. When we look at the underlying cohorts, they're very strong. The recent cohorts are actually as strong as any of the older cohorts that we've seen. Even for the core restaurant business, when I look at the growth rate in GOV on a -over-year basis, the growth in Q2 is very consistent with what we saw in Q1. Even from a linearity perspective, the business actually grew faster in June compared to April. Tony talked about some of this, but Dash Pass had a really strong quarter, all-time high in terms of subscribers, order frequency continues to be at an all-time high. So the underlying cohort strength is actually very strong, and the demand continues to be very strong across the board for us.

Thank

you both. The next question comes from the line of Ross Sandler from Barclays. Please go ahead.

Hey guys, first one on the take rate, it's up quarter on quarter, year on year, the revenue take rate. And in the letter you talked about reducing consumer fees, and you just mentioned Dash Pass growing a lot faster than overall. So could you talk about like what's driving that? Are you seeing efficiencies on Dasher cost or something else like drive causing that take rate to go up as much as it is? And then the second one is, you also mentioned that the majority of your largest international markets have better retention than US. Could you just give us a little bit more color on what's driving that? Is that kind of the breadth of offering or levels of competition or something else? That's all, thanks a lot.

Hey, Ross, I'll take the first one. Tony, if you're ready to jump in on the second one. On a take rate perspective, Ross, let me break out what's going on with revenue. If you think about a revenue, there's a few different components. You have the ads business, which is growing really fast. You have a platform business, which is also growing really fast. Both of those are driving the improvement you're seeing in both revenue growth as well as take rate. At the same time, you also have cost lines, whether it's Dasher or quality. The team has done a great job of improving that compared to last year. We're seeing improvements in efficiency. For us, the goal has always been continue to drive improvements from an efficiency perspective. But at the same time, we're also gonna continue to find opportunities to reinvest that back in growth. As I look ahead from a take rate perspective, I do expect us to improve and grow our ads business as well as our platform business. Even on the cost lines, there's still a lot of opportunities for us to continue to drive improvements in efficiency. At the same time, we're gonna try to find good opportunities where we can drive investments in retention or the frequency while continuing to improve the overall take rate in the business.

And Russ, on the second question about international markets and just the retention and frequency levels there, I mean, it's really a story of two things. One is, well, we started with a very robust set of fundamentals and foundation, right? I mean, this really was the key investment thesis behind teaming up with Volts. I mean, when we were looking internationally in terms of expansion opportunities, one of the things that we were able to do perhaps the top thing that got us most excited about teaming up with Volts was the fact that they have leading retention and frequency in every market that they competed in. And that's a combination of a few things, right? But at the end of the day, it comes down to offering the best combination of inputs for customers, the best selection, the best quality of service in terms of delivery quality, the best affordability and the best support. The second thing I would say is that since teaming up with Volts, which closed in 21, it's been a couple of years now, we've added some of the lessons that we've learned at DoorDash, lessons in making improvements to each one of these inputs. And that combination, I think, is what you see that's driving the growth and virtually taking share gains in every market that we play in.

The next question comes from the line of Michael Martin from Moffett-Natanson, please go ahead.

Hi guys, thanks for the question. If we could maybe do two, one on international, following up on some of the comments Tony just made and then maybe a quick one on groceries. Tony, I loved hearing more about the retention aspects for international, but like you talk about in the press release today, two full years with Volts. Love to learn some more just beyond the retention aspects, some key takeaways after running this business for two full years on what it takes for the best performance in these international markets. Is it market structure, market share, consumer spending capabilities? And then how that might dictate your plans to grow in new countries and, or maybe exit certain markets where you don't like the industry structure. And then just a quick one on CPG advertising, some learnings and differences you've picked up compared to your restaurant advertising business would be great, thank you.

Sure, yeah, I mean, on the first question regarding international and just lessons learned, I mean, the first thing I would say is that there's no silver bullet in operating these kinds of businesses, but the story is really the same in virtually every market. Sure, every market to your point has different challenges and different dynamics in the market, but at the end of the day, it comes down to who can create the best service for customers, couriers and merchants. And I think remembering that as simple as it sounds is actually quite important because I think there's always a lot of competitive activities in our space, but I think that making sure that you can win on building the best product as measured by the highest retention and frequency levels, I mean, that's kind of what we've always held ourselves to. That's what the customer holds us to. And I think that we've been lucky in that we've been able to achieve that bar at least better than anyone else in all the markets that we plan, but at the same time, it's also not good enough. If you look at just how under-penetrated so many of these markets are, especially outside of the United States, and that's true in the restaurants category, but that's true virtually in every category, which just means that we've got a long ways to go before we're satisfied with what we've done for customers in solving the local commerce opportunity. With respect to CPG, I think it's been just a really fast learning curve for us. I think we had a lot of attention and excitement from virtually every top CPG advertiser because they saw the largest local commerce platform offering ads for the first time three years ago that had the highest frequency, the highest membership base for local commerce, and the highest cross-sell between categories. Obviously, their question is like, hey, what are you waiting for? When are you guys going to actually open up the platform so that we can meet new customers? At the same time, we also have to balance the other side, which is an advertising business can only be built off the back of a healthy and robust marketplace business, and it doesn't really go the other way around. So you need the marketplace business to grow in order for your advertising business to have a long runway for healthy growth. And so that's kind of what we've always looked for, but it's always two guiding principles. How do we offer the best in-class consumer experience with no degradation in experience, and how do we offer the best return for advertisers? And that's true for small restaurants, that's true for big restaurants, that's true for big CPGs, that's true for small mid-market CPGs. I think that one thing that you see now that we're in the third year of doing this is, we're starting to finally make great progress in just offering a very balanced portfolio. I think we started by offering and introducing ads to restaurants, where I think that was something that was very natural to some of the activities that we had done before then. But now, that's pretty much fully built out for CPGs, and I think now it's making sure that we grow that in a responsible way, achieving again the balance between consumer happiness and advertiser returns.

Hey Mike, it's Ravi. Just to add a couple of points that Tony talked about on the international side. Again, the formula for us, like Tony mentioned, is largely similar. We're seeing strength in retention, we're seeing strength in order of frequency, as well as gross profit. Last call, I talked about the fact that the entire international portfolio is gross profit positive, and it has continued to improve. For us, what's important is we wanna drive scale, scale drives efficiency in the business. We've done that in the US, and it's the same formula we're using in the international markets as well.

Thank you. The next question comes from the line of Andrew Boone from JMP Securities. Please go ahead.

Great, thanks so much for taking my questions. You mentioned in the press release, better frequency for new verticals. Can you help us better understand that, the drivers, and then where are you seeing better frequency? And then a question really on ramping new merchants. We've noticed that incentives are kind of larger. As we think about you guys normalizing on selection, can you just help us understand the size of the investment it takes to bring new merchants onto the platform? Thanks so much.

Sure, I can take the first part of the question. I mean, Andrew, I guess in general, we see order frequency increases both within restaurants and incrementally on top of that from new verticals. It depends a lot on the geography and which new

selection

that has been onboarded or how strong the selection density is within a market. For example, obviously we've been very strong in grocery and in convenience. That's been a big focus for us for years. And we're excited actually. Actually just this morning, we announced an update to our partnership with Chase, which now makes us Chase's exclusive partner in both restaurant delivery and grocery delivery for all of their card holders. And so I think you're seeing the appreciation of our performance, not just by consumers, but also by other large companies out there that are trying to tap into a very valuable base of customers, a lot of whom are coming to us for a grocery and for these new verticals. But there are examples where we just launched recently, for example, it's Alta Beauty. So as we've launched Health and Beauty, some customers come to us for the first time, whether it's the Alta, to Sephora, to other Health and Beauty merchants for the first time or Lowe's in the home improvement category. So it's not coming from one area. As we add more categories, we see more order frequency growth.

Yeah, Andrew, I'll take the second one. Maybe just a couple of points on the first one that Tony mentioned, right? Our goal is to drive overall order frequency up. We're not trying to drive just the restaurant order frequency up or the new verticals order frequency up. In fact, looking at the order frequency in a blended basis is not how we think about the business. It's truly a co-ordered business. When I look at the cohorts, even the aged cohorts, they're engaging better with us. Their order frequency is going up, partly because the product has gotten better. You have more categories. Delivery times have gotten better. The entire base, the order frequency continues to go up. The newer cohorts are actually joining at better order frequency than many of the older cohorts. Andrew, second point on selection investments. I mean, look, our goal is to continue to drive selection higher. It's a core part of our strategy. We are adding selection in restaurants. We are definitely adding more selection on the grocery side as well as international. The way we think about it is as long as we are driving incremental GOV, as long as the conversion is continuing to increase, we're going to continue to drive selection higher. And you're seeing that strength being reflected in not just the demand, but the underlying cohorts of the business as well.

Thank

you. The next question comes from the line of Brad Erickson from RBC Capital Markets. Please go ahead.

Thanks. Just have two here. One, on the incremental flow through of EBITDA, so relative to GOV, it looks like it ticked up a bit quarter over quarter, maybe a couple hundred basis points. Can you call out just any drivers of the difference there if you can? And then second, kind of bigger picture, Ravi, you just talked about the improving unit economics on the gross margin side across all parts of the business. So it kind of seems like that should roughly rhyme with EBITDA expansion over time. What are any other sort of considerations as to why that would not be the case, if you could? Thank you.

Yeah, let me take the first one and I'll get into the second one. On the EBITDA side that we saw in Q2, I mean, there's two factors, right? One, you saw us continue to drive higher growth, GOV came in better than expectations. The overall business is gross profit positive, so you're seeing that flow through to the bottom line. Two, you also have improvements in unit economics, gross profit across most major lines of business. You're seeing that impact the overall business as well. From a philosophy perspective, Brad, I mean, I think, I wanna be clear, right? Like our goal is to grow as fast as we can by being inside of the range from an EBITDA perspective. I would expect that to be the case going forward in Q3 as well. But longer term, let me break the business apart, right? On the restaurant side, we've done a great job of improving the contribution margin in H1 despite absorbing some of the regulatory costs. There's still a lot of opportunity for us to continue to drive margin higher there. It's not gonna be at the same clip as we've done over the last couple of years. New verticals as well as international are still early. We're seeing good growth, we're seeing good opportunities to continue to invest there. But these businesses are not truly optimized for efficiency. As we continue to drive efficiency higher across the P&L, I would expect margins to continue to improve. More importantly for us, the formula has always been invest behind retention, order frequency, as well as continued improvement in gross profit. We have seen that in the business. If we find good areas to continue to drive investment, we're gonna do that. Our goal is to drive GOV growth while being disciplined from an overall investment perspective.

Got it, that's great, thank you.

The next question comes from the line of Bernie McTernan from Needham. Please go ahead.

Great, thank you. Just wanted to stick on international. Tony, you mentioned the shareholder letter, how international ambitions remain well above what you've been able to achieve so far. So just wanted to see, does that mean more countries, different categories or different products coming to your current, and basically, do you have the right asset mix currently to achieve those ambitions?

Yeah, hey Bernie, I mean, I guess to add to some of the comments I made previously, we have a good foundation to build from in all of our markets. I mean, that's kinda how we start. And if you don't have that, I think it's difficult to kind of solve every local commerce problem. For us, that obviously starts with the restaurants business, which, whether it's internationally or here in the US, we have leading retention and frequency, which is a great place to build upon. And we've added quite a lot of categories into all of our markets, actually. And those are growing really, really nicely. But when I look outside of the US, I would say that the vast majority, virtually every country outside the US for us, is still behind what we think the penetration levels ought to be if we actually brought all of the products that we have in market here in the US, overseas. We're not there yet, right? We have a great house in which that the structure is very, very good. We're growing many-fold faster than our peers. We're doing a nice job of launching new products that we've built from the DoorDash side to all of our markets. But on the flip side, I would say that the levels there are still not where they ought to be. We've got a long ways to go on getting restaurant selection where it needs to be. We are off to a fantastic start outside of restaurants, especially given that retail, I would say, is a little less developed on a comparative basis when you look outside of the US versus, say, the retail industry within the US. And then when I look at the five businesses that we have, as well as other businesses that we're incubating, I think the potential to bring this globally to be the largest local commerce platform in any country, I think that remains just a very, very large opportunity for many years of growth. Makes sense.

Thanks, Tony.

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

Hey, guys, thanks for taking my question. I want to ask again a little bit about restaurant menu inflation. Is there any dynamic underlying the AOV number that is basically suggesting that there is some level of food inflation and maybe you have some offsetting things like drive that are making AOV not increase? And then also just quickly, I want to see if you comment on regulatory with Prop 22 being upheld in California. And are you still seeing any impact in New York City and Seattle from regulatory changes there? Thank you.

Hey, Mike, I'll take the first one. Tony will take the second one on regulatory. On the first one, look, inflation was not had a big impact on our business. If you think about it, right, like when inflation first peaked about a year ago, we saw fewer items per order, but overall we've also driven consumer fees down. So when I look at overall, even the restaurant business from an AOV perspective, it's relatively flat year on year. So we're not seeing any impact on that. And pretty pleased with the progress we've made on overall affordability, which is continuing to drive the growth that you're seeing in the business.

Yeah, second question with respect to regulatory. You know, it's actually pretty much the same story that I think we've communicated ever since doing the first earnings call. And really it reflects even what we thought 10 years ago when we started forecasting what might be true in regulatory, in particular on the labor piece across the world, which is, you know, I think in the majority of the world, the overwhelming majority, most jurisdictions want to actually support us in giving dashers what they want, which is the flexibility of a work opportunity that's never existed before, and also protections that we believe they deserve. I mean, to your point or the premise of the question, you're right. I mean, it's good to see that lawmakers most recently have held Prop 22 here in California. We expect that, you know, we expected that not just because we're right on the wall, but because we think it's the right thing to do. It's actually giving users in this case, the dash or the driver, exactly what they're looking for. You know, I always have to remind people that over 90% of dashers do fewer than 10 hours a week on the platform. The average dasher does three to four hours a week. You know, the overwhelming majority, over 80%, 85% of dashers actually have full-time jobs. So they're specifically telling us we do not want to be told, you know, what hours to work or where to work though. And so we see that most governments, lawmakers around the world, certainly here in the US as well, actually want to, you know, do right by the dasher and actually support us in what we want to do for workers. I also hope, you know, whether it's this election cycle or future election cycles, whether it's here in the US or around the world, that, you know, things will moderate a bit in terms of temperature and that this can be, you know, something that we as a company, as well as other companies in the space can work productively with any government to actually achieve what dashers want. And I don't know, Robby, did you want to comment on New York or Seattle or any of these economic activities?

Yeah, maybe on New York and Seattle, you know, I talked about the fact in the last call that we did take a meaningful amount of impact on EBITDA from the regulatory costs in Q1. That did come down in Q2, just like I said it would. A lot of that is being driven by the underlying improvements we made in product to drive efficiency higher. I do expect those costs to continue to reduce as we go through the rest of the year. Look, I mean, our goal in philosophy has always been any market that we operate in, want to run with sustainable unit economics and that's going to be true for these markets as well. It's not going to be a step function change, it's going to be a gradual change. We really like, you know, what we're seeing in the business from an overall efficiency improvement perspective for those markets.

Got it, thank

you.

The next question comes from the line of Ron Josie from CB. Please go ahead.

Great, thank you for taking the question. Can you hear me okay?

Yep,

go ahead, Ron. Oh, great, perfect. So maybe a follow up on what we were talking about earlier and all the improvements on efficiencies. You know, the letter, the press release talked about reducing order defect rates and merchant churn while also lowering fees. And I'm just wondering, this lowering fees, is this passing along the savings? And you're sort of seeing the benefits of, call it lowering fees, more efficiency, lower fees, higher order rates, it's all coming together. I wanted to get your thoughts on just, are you passing along these things to consumers and then therefore seeing, you know, improving top line growth? I'm curious on that dynamic, thank you.

Yeah, hey Ron, it's Tony. I mean, look, we're always trying to do one thing, right? Which is to move fees in one direction. I don't think I've ever spoken to a consumer who's asked us to raise prices. And so we are always trying to lower the fees and pass them on. And there's various ways in which you can do this. You know, we're obviously trying to be more affordable. We're trying to increase and widen the selection lead that we have. We are trying to improve the quality of our logistics system. We believe we have the best one, but it doesn't mean that it's perfect. And so we have to get more accurate. We have to get faster. We have to be better about finding every product in the physical world, especially now that, you know, a lot of what we do is outside of restaurants and, you know, inventory remains a challenge for every physical retailer. And so there's a lot of work to do. You know, we're not yet satisfied with where we are on all of the dimensions. We appreciate and tremendously, you know, respect all of the efforts that our teams have done in terms of building the best product, in terms of having category leading retention and frequency. We're not there yet. In the eyes of the consumer, we can still be more affordable. We can still have better selection. We can still have better quality and better support. So we're working on all of those things.

And not just to add to that, right? Like the way we think about investing is our goal is to grow as fast as we can while trying to be within the discipline parameters. What you're seeing in the business is restaurant growth has been very strong. We're continuing to drive margins there higher. You're seeing very similar dynamic in both new verticals as well as international. But not just the growth, but overall improvement in profitability has been higher. For us, whenever we think about a dollar of efficiency, the next step we think about is how to back in the business because you want to drive order rates higher. You want to drive scale higher. The scale ultimately drives efficiency. And that's the consistent cycle that we've been on and nothing has changed in regards to how we operate the business.

Thank you, Tony. Thank you, Ravi.

The next question comes from the line of Lee Horowitz from Deutsche Bank. Please go ahead.

All right, thanks for the questions. You know, in the past you've called out sort of fixed op-ex as a percentage of GOV for 24, that's expected to be stable. I guess that's still the operating assumption that we should be thinking about for this year. And then sort of looking beyond this year, how are you thinking about sort of your ability to drive leverage on a go-forward basis as you digest sort of an admittedly small step in fixed op-ex? And then maybe just on the advertising business, I guess looking out to next year, you guys will have stacked up some really nice growth within your grocery business, which I assume was open up the eyes of some of your CPG ad partners. Would you expect sort of CPG ad participation in the advertising product perhaps lag some of the volume growth as we've heard from some of your competitors in this space? Thanks so much.

Hey, Lee, I'll take the one on op-ex. Tony will take the second one. Look, I mean, our goal is not just to grow strongly in 24, but our goal is to continue to drive strong growth for many years to come. For us, the key there is continue to innovate on the product side. What we're seeing in the business is continue to invest behind the product. You're seeing improvements in retention, you're seeing improvements in order frequency. I mentioned earlier, the 23 and the 24 cohorts are as strong as any of the older cohorts we've seen. Our philosophy has always been to invest behind the strength that we're seeing in the business. We are investing, we're adding resources in select areas, mostly on the engineering and the product side. And I think the benefits of that from an overall growth as well as an efficiency perspective. And I think about op-ex, I would expect op-ex roughly to be at the same level on a percentage of GOV basis for the rest of the year. I mean, looking forward, our goal is to continue to scale the business and our goal is to drive leverage in op-ex just like any other part of the P&L.

Hey, Lee, on the second question about the pacing of CPG ad growth, I mean, we really like what we see, right? I mean, right now the focus, again, and it'll always be this, is to make sure that the principle that building a great marketplace comes before building a great ad business. And if your marketplace business isn't growing in a sustainable and healthy way, that's not going to degrade the consumer experience, it almost doesn't matter everything that comes after that sentence. And so, for us, I mean, to your point, you're right. I mean, our new verticals, whether it's grocery, convenience, alcohol, other retail categories, business is growing really fast. Every CPG is a customer and the question is like, how fast do we get into that spend? The way I think about this is there's no rush to doing it. And actually, you can actually make a pretty big mistake if you get into it too quickly. I mean, as long as we have the biggest audience with the greatest level of activity in terms of frequency, engagement, retention and frequency, we're always going to be available to the CPG advertiser. And I think they're always going to be interested and they're always looking for the best returns. And I think it tends to come from the marketplaces that aren't just the biggest, but also the ones with the highest activity and the highest growth rates. And so that's the balance for us. I mean, our CPG advertiser is growing really, really fast and very pleased with the performance by the team. But again, in terms of pacing, I almost think of it as sequencing, which is the marketplace, the health of the marketplace should always come before the monetization of the marketplace.

Oh, well, thank you.

The next question comes from the line of Swetha Kajuria from Wolfe Research. Please go ahead.

Thank you for taking my questions. Let me try two, please. One is on advertising growth. So could you talk about your current ad tech stack and where you are in terms of your product and where you think there is opportunity to continue to grow and gain greater share? That is, whether you're talking about attribution or your targeting capabilities or telling CPGs that we can get you incremental customers that you can't find elsewhere, whatever that is, where are you today and where's the opportunity? And second is on competitive dynamics. Through the quarter, there was a lot of talk about perhaps you potentially losing share clearly doesn't sound like you are. Could you talk about whether you're seeing greater competitive intensity in suburban markets in the US and what you're seeing in international markets? Thanks a lot.

Sure, I can take both of those and feel free, Ravi, to add. And H-way, on the first question on ad tech stack and just where we are, I mean, it's a -year-old business. I mean, it's growing lights out fast. I think if we're a standalone business, people would be very pleased with its performance. But again, to me, it's not about rushing it. Even though it's growing really, really fast and we're in no disadvantage relative to anyone else, it doesn't mean that we should just step on the gas all the way. So there's a lot more room. I mean, if you look at where we started with ads, most of the stack was built for restaurants. And that probably makes sense given our history. But Nord-Ash is no longer just a one category, one country company. We are five business lines, 30 plus countries. And so to your point, we have to evolve and build maturity in the stack for bigger restaurants, for CPG advertisers, for advertisers across all categories, not just in food, but in all of retail. So I think there's a very long and straightforward roadmap. What I liked is that, and certainly what they've told me and also what we see in terms of their investments with us is that they're

ready to

go. And they're always gonna be there so long as we offer the best in class returns for them, which we believe derive from having the leading marketplace, both in terms of users as well as usage. And I think the rest will take care of itself. So we feel good about the growth there, but there's a lot more to come. On the second question, I mean, to be candid, we haven't really seen much change in the competitive landscape. I mean, there might be a lot of activity, but there's not a lot of progress, if you know what I'm saying. I mean, I think it's mostly noise that we've kind of heard. And I think that whether you look at new customer acquisition, you look at existing behavior, you still see that, at least in the eyes of the consumer, they seem to really prefer DoorDash. And I think what it speaks to is that you're always gonna have a lot of activity. I mean, we've seen, I've been doing this for over 11 years. I've seen periods of very high promotional activity, high partnership activity, high other forms of activity. But at the end of the day, the one thing that any marketplace or any consumer product is judged on is retention and frequency. And that's something you can't cheat. You can't just game on a one-time basis. And all roads always points back to the marketplace that offers the best combination of selection, quality, price, and support. So far, we are that marketplace, as long as we can continue our extension of our lead in the product. I feel really strong about our position, irrespective of activity. But I think it's always been competitive. I expect this to always be competitive. But in terms of what's actually happening, whether it's in suburban markets, urban markets, nothing's really changed.

Thank you, Tony. So, Ravi, just to add to the first point on ads, right? Like, I mean, we're still very early in our journey, like Tony talked about, right? Like, you're seeing the impact of ads on both revenue as well as EBITDA, but majority of the ad revenue is in the US. It's mostly focused on restaurants at this point. Still early from a CPG, as well as an international perspective. We're holding our teams with the constraint on conversion, as well as merchant role ads. As long as those continue to be best in class, we're gonna continue to improve the overall ad business.

Thanks, Ravi.

The next question comes from the line of John Colantoni from Jeffreys. Please go ahead.

Thanks for taking my questions. You added tens of thousands of new merchants to the US marketplace. I'm curious how that additional supply compared between the restaurant delivery business and the verticals. And I know that just, that's just one of a number of investments that you're making to help drive improvements to the consumer offering. But I'm curious if you could help frame how much more room you have to continue expanding supply over time. And second question, just curious if you can quantify the impact of New York and Seattle and the changes that you made there on GOV and EBITDA in the second quarter.

Thanks. Hey, John, it's Tony. I'll take the first one on adding selection and maybe Ravi, you can take the second one. On adding selection, it's really everywhere, John. I mean, there is no like one category we're particularly targeting. I mean, we are trying to represent every city in a digital way, which means unless we have every breathing merchant that is alive in the city, we don't have great selection. And so that's really true. I mean, if you even were to drive out from any city center, our selection probably wanes as you go further out. And so I think we've got a long ways to go. And don't forget also with restaurants, there's always new restaurants coming in. One interesting fact about the restaurant industry, and this is virtually true in every country is that the total number of restaurants every year almost always exceeds the previous year, but it's not necessarily the same set of restaurants. And that's because restaurants come and go. And so there's always a ton of work to do there. So the room to run on restaurants is almost this perennial kind of body of work. And then with retail, I mean, we're just getting started. And so I think we have a long ways to go in terms of adding selection.

John, on New York and Seattle, from an overall GOV perspective, I mean, the combination of both of those markets don't make up a large portion from an overall company perspective. So the impact from GOV and volume from an overall company perspective has been small. Individual markets we're seeing some elasticity, but not to impact the overall total company growth rate. From an EBITDA perspective, I mean, look, Q1, I mentioned that we did take a meaningful amount of impact from these costs. That cost did come down in Q2. A lot of that is being driven by improvements we've made on the product and the efficiency side. As we go through the rest of the year, I do expect the cost impact from an EBITDA perspective to go down. This is part of the reasoning I mentioned, causing H3 to be higher than H1, where we're seeing impact from regulatory costs continue to reduce as well as the volume continues to grow, as well as the gross profit for the various lines of business continue to grow as we go through the rest of the year.

Thanks so

much. The next question comes from the line of Mark Zika-Tolby from the Benchmark Company. Please go ahead.

Thank you. Maybe switching gears a little bit, talking about price parity, obviously an important topic. Doesn't seem to get much progression though. And I'm curious if you're close to any initiatives that might incentivize grocers to get there, possibly like prioritize ad placement, maybe what some of the puts and takes are there. And then maybe flipping the ad expansion discussion on its head. I'm curious where you have seen, maybe in certain verticals or environments, degradation in app engagement or order frequency as a result of increased ad load. Thanks.

Hey Mark, it's Tony. I'll take both of those and feel free to add here, Robbie. Look on price parity, I mean, you're absolutely right that it's an important point in terms of affordability. We're always trying to make our products and services more affordable. That's true in restaurants, that's true in grocery, that's true in convenience, that's true across the board. There's no simple or silver bullet answer to your question. I mean, we're constantly working to make sure that we can align the business model and the incentives such that we can offer the most accessible and affordable service. Now look, all of this comes in conjunction with other things, right? It's not hold, you can't just hold one thing static. I mean, there's a lot of other things that we have to do in terms of making sure that the inventory is actually there, making sure that if you didn't get what you were hoping to get, that the substitution we made is perfect or acceptable to you. And so there's a lot of things that have to come together for what you're talking about. Price obviously is one component or one input in which we are judged, but there are so many other components too. And they sometimes interplay, right? As we find efficiencies in our logistics work, or if we can rip out inefficiencies that shouldn't be in our system, those are costs that we can use to help fund other programs. And so there's a lot going on. There's no simple answer to your question, but it's something that will be a perennial part of what we do. On the second question, I mean, it's a great question, which is that you're absolutely right that ads do have an impact, a negative impact on the consumer experience. And that's why I kind of harp on this all the time where you have to not be confused in terms of what drives what. And in this case, it's a healthy marketplace that enables an ad business and not the other way around. And so this is one thing in which I think we've been more conservative on in making sure that we protect the consumer experience. And so, in terms of seeing degradation, we haven't seen much of it, partly because of how we're designing the systems. Again, we're super proud of, I think, our ads business. I think the size of the business would be impressive as a standalone company. But at the same time, we have to make sure the sequencing is right, where we are always making sure that we have the most engaged, the largest audience when it comes to local commerce. That will make it easy for everything else from an ad perspective.

That's

helpful. Thank you.

Ladies and gentlemen, this concludes today's Q&A session and today's conference call. You may now disconnect. Thank you for your participation.