Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2022. This discussion contains forward-looking statements that are based on current plans, expectations, and beliefs that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including, but not limited to, those identified below and those discussed in the section titled “Risk Factors” and other sections of this Quarterly Report on Form 10-Q. Our historical results are not necessarily indicative of the results that may be expected for any period in the future.

Overview

DoorDash, Inc. is incorporated in Delaware with headquarters in San Francisco, California. We provide a local commerce platform that enables local businesses to address consumers’ expectations of ease and immediacy and thrive in today’s convenience economy.

We operate a local commerce platform that connects merchants, consumers, and Dashers. Our primary offerings are the DoorDash Marketplace and the Wolt Marketplace (our "Marketplaces"), which together operate in over 25 countries across the globe. Our Marketplaces provide a suite of services that enable merchants to establish an online presence, generate demand, seamlessly transact with consumers, and fulfill orders primarily through independent contractors who use our platform to deliver orders ("Dashers"). Dashers that use our DoorDash Marketplace and Wolt Marketplace are referred to as "DoorDash Dashers" and "Wolt courier partners," respectively, in this Quarterly Report on Form 10-Q. As part of our Marketplaces, we also offer Pickup, which allows consumers to place advance orders, skip lines, and pick up their orders conveniently with no consumer fees, as well as DoorDash for Work, which provides merchants on our platform with large group orders and catering orders for businesses and events. The DoorDash Marketplace also includes DashPass and the Wolt Marketplace includes Wolt+. DashPass and Wolt+ are our membership products, which provide members with unlimited access to eligible merchants with zero delivery fees and reduced service fees on eligible orders.

In addition to our Marketplaces, we offer Platform Services, which primarily includes DoorDash Drive and Wolt Drive, which are white-label delivery fulfillment services that enable merchants that have generated consumer demand through their own channels to fulfill this demand using our platform. Platform Services also includes DoorDash Storefront, which enables merchants to create their own branded online ordering experience, providing them with a turnkey solution to offer consumers on-demand access to e-commerce without investing in in-house engineering or fulfillment capabilities, and Bbot, which offers merchants solutions for their in-store and online channels, including in-store digital ordering and payments.

Financial and Operational Highlights

We use the following financial and operational metrics to help us evaluate our business, identify trends affecting our business, formulate business plans, and make strategic decisions:

Three Months Ended September 30,
(In millions, except percentages)20222023
Total Orders439543
Total Orders Y/Y growth27%24%
Marketplace GOV$13,534$16,751
Marketplace GOV Y/Y growth30%24%
Revenue$1,701$2,164
Revenue Y/Y growth33%27%
Net Revenue Margin12.6%12.9%
GAAP gross profit$714$962
GAAP gross profit as a % of Marketplace GOV5.3%5.7%
Contribution Profit(1)$420$640
Contribution Profit as a % of Marketplace GOV3.1%3.8%
GAAP net loss including redeemable non-controlling interests$(296)$(75)
GAAP net loss including redeemable non-controlling interests as a % of Marketplace GOV(2.2)%(0.4)%
Adjusted EBITDA(1)$87$344
Adjusted EBITDA as a % of Marketplace GOV0.6%2.1%
Basic shares, options and RSUs outstanding as of period end446450

(1)Contribution Profit and Adjusted EBITDA are non-GAAP financial measures. For more information regarding our use of these measures and reconciliations to the most directly comparable financial measures calculated in accordance with GAAP, see the section titled “Non-GAAP Financial Measures."

Total Orders. We define Total Orders as all orders completed through our Marketplaces and Platform Services businesses over the period of measurement.

In the third quarter of 2023, Total Orders increased to 543 million, or 24% growth compared to the same quarter of 2022. The increase in Total Orders was driven primarily by growth in consumers and increased consumer engagement.

Marketplace GOV. We define Marketplace GOV as the total dollar value of orders completed on our Marketplaces, including taxes, tips, and any applicable consumer fees, including membership fees related to DashPass and Wolt+. Marketplace orders include orders completed through Pickup and DoorDash for Work. Marketplace GOV does not include the dollar value of orders, taxes and tips, or fees charged to merchants, for orders fulfilled through Drive, Storefront, or Bbot.

In the third quarter of 2023, Marketplace GOV increased to $16.8 billion, or 24% growth compared to the same quarter of 2022, driven primarily by growth in Total Orders.

Net Revenue Margin. We define Net Revenue Margin as revenue expressed as a percentage of Marketplace GOV.

In the third quarter of 2023, Net Revenue Margin increased to 12.9% from 12.6% in the same quarter of 2022, primarily due to growing contribution from advertising revenue and improved logistics efficiency.

Contribution Profit. We define Contribution Profit as our gross profit less sales and marketing expense plus (i) depreciation and amortization expense related to cost of revenue, (ii) stock-based compensation expense and certain payroll tax expense included in cost of revenue and sales and marketing expenses, (iii) allocated overhead included in cost of revenue and sales and marketing expenses, and (iv) inventory write-off related to restructuring. Gross profit is defined as revenue less (i) cost of revenue, exclusive of depreciation and amortization and (ii) depreciation and amortization related to cost of revenue.

We use Contribution Profit to evaluate our operating performance and trends. We believe that Contribution Profit is a useful indicator of the economic impact of orders fulfilled through DoorDash as it takes into account the direct expenses associated with generating and fulfilling orders.

In the third quarter of 2023, Contribution Profit increased to $640 million, compared to $420 million in the same quarter of 2022, driven primarily by growth in revenue, partially offset by increases in cost of revenue and sales and marketing expenses.

Contribution Profit is a non-GAAP financial measure with certain limitations regarding its usefulness. It does not reflect our financial results in accordance with accounting principles generally accepted in the United States ("GAAP") as it does not include the impact of certain expenses that are reflected in our condensed consolidated statements of operations. Accordingly, Contribution Profit is not indicative of our overall results or an indicator of past or future financial performance. Further, it is not a financial measure of total company profitability and it is neither intended to be used as a proxy for total company profitability nor does it imply profitability for our business.

Adjusted EBITDA. We define Adjusted EBITDA as net income (loss) including redeemable non-controlling interests, adjusted to exclude (i) certain legal, tax, and regulatory settlements, reserves, and expenses, (ii) loss on disposal of property and equipment, (iii) transaction-related costs (primarily consists of acquisition, integration, and investment related costs), (iv) impairment expenses, (v) restructuring charges, (vi) inventory write-off related to restructuring, (vii) provision for (benefit from) income taxes, (viii) interest income, net, (ix) other expense, net, (x) stock-based compensation expense and certain payroll tax expense, and (xi) depreciation and amortization expense.

Adjusted EBITDA is a performance measure that we use to assess our operating performance and the operating leverage in our business.

In the third quarter of 2023, Adjusted EBITDA increased to $344 million from $87 million in the same quarter of 2022, driven primarily by growth in Contribution Profit.

Free Cash Flow. We define Free Cash Flow as cash flows from operating activities less purchases of property and equipment and capitalized software and website development costs.

In the third quarter of 2023, Free Cash Flow increased to $324 million, compared to Free Cash Flow of $99 million in the same quarter of 2022, driven primarily by an increase in net cash provided by operating activities.

Results of Operations

The following table summarizes our historical condensed consolidated statements of operations data:

Three Months Ended September 30,Nine Months Ended September 30,
(In millions)2022202320222023
Revenue$1,701$2,164$4,765$6,332
Costs and expenses:(1)
Cost of revenue, exclusive of depreciation and amortization shown separately below9311,1562,5743,360
Sales and marketing4184491,2531,416
Research and development226250579750
General and administrative311289847915
Depreciation and amortization(2)118128258379
Restructuring charges5—82
Total costs and expenses2,0092,2725,5196,822
Loss from operations(308)(108)(754)(490)
Interest income, net94014101
Other expense, net(2)(1)—(6)
Loss before income taxes(301)(69)(740)(395)
Provision for (benefit from) income taxes(5)6(14)14
Net loss including redeemable non-controlling interests(296)(75)(726)(409)
Less: net loss attributable to redeemable non-controlling interests(1)(2)(1)(5)
Net loss attributable to DoorDash, Inc. common stockholders$(295)$(73)$(725)$(404)

(1)Costs and expenses included stock-based compensation expense as follows:

Three Months Ended September 30,Nine Months Ended September 30,
(In millions)2022202320222023
Cost of revenue, exclusive of depreciation and amortization$30$36$72$103
Sales and marketing26306990
Research and development99119249350
General and administrative9493219276
Total stock-based compensation expense$249$278$609$819

(2)Depreciation and amortization related to the following:

Three Months Ended September 30,Nine Months Ended September 30,
(In millions)2022202320222023
Cost of revenue$56$46$129$138
Sales and marketing30295095
Research and development295169137
General and administrative32109
Total depreciation and amortization$118$128$258$379

The following table sets forth the components of our condensed consolidated statements of operations data as a percentage of revenue:

Three Months Ended September 30,Nine Months Ended September 30,
2022202320222023
Revenue100%100%100%100%
Costs and expenses:
Cost of revenue, exclusive of depreciation and amortization shown separately below55%53%54%53%
Sales and marketing25%21%26%22%
Research and development13%12%12%12%
General and administrative18%13%18%14%
Depreciation and amortization7%6%5%6%
Restructuring charges—%—%—%—%
Total costs and expenses118%105%115%107%
Loss from operations(18)%(5)%(15)%(7)%
Interest income, net1%2%—%2%
Other expense, net—%—%—%—%
Loss before income taxes(17)%(3)%(15)%(5)%
Provision for (benefit from) income taxes—%—%—%—%
Net loss including redeemable non-controlling interests(17)%(3)%(15)%(5)%
Less: net loss attributable to redeemable non-controlling interests—%—%—%—%
Net loss attributable to DoorDash, Inc. common stockholders(17)%(3)%(15)%(5)%

Comparison of the Three and Nine Months Ended September 30, 2022 and 2023

Revenue

We generate a substantial majority of our revenue from orders completed through our Marketplaces and the related commissions charged to partner merchants and fees charged to consumers. Commissions from partner merchants are based on an agreed-upon rate applied to the total dollar value of goods ordered in exchange for using our Marketplaces to sell the partner merchants’ products. Fees from consumers are for the use of our Marketplaces to arrange for delivery services. We recognize revenue from Marketplace orders on a net basis as we are an agent for both partner merchants and consumers. Our revenue therefore reflects commissions charged to partner merchants and fees charged to consumers less (i) Dasher payout and (ii) refunds, credits, and promotions, which includes certain discounts and incentives provided to consumers, including those for referring a new customer. Revenue from our Marketplaces is recognized at the point in time when the consumer obtains control of the merchant’s products.

We also generate revenue from membership fees paid by consumers for DashPass and Wolt+, which is recognized as part of our Marketplaces revenue. Revenue generated from our DashPass and Wolt+ memberships is recognized on a ratable basis over the contractual period, which is generally one month to one year depending on the type of membership purchased by the consumer.

In addition, we generate revenue from other sources, including from our Platform Services, which primarily consists of our Drive and Storefront offerings. We generate revenue from Drive by collecting per-order fees from merchants to arrange for delivery services that fulfill demand generated through their own channels. Revenue from Drive is recognized at the point in time when the consumer obtains control of the merchant’s products.

Three Months Ended September 30,Nine Months Ended September 30,
(In millions, except percentages)20222023% Change20222023% Change
Revenue$1,701$2,16427%$4,765$6,33233%

Revenue increased by $463 million, or 27%, during the third quarter of 2023, compared to the same quarter of 2022. The increase was primarily driven by a 24% increase in Marketplace GOV to $16.8 billion. During the third quarter of 2023, revenue grew at a faster rate than Marketplace GOV during the same period primarily due to growing contribution from advertising revenue and improved logistics efficiency.

Revenue increased by $1.6 billion, or 33%, during the first nine months of 2023, compared to the same period of 2022. The increase was primarily driven by a 26% increase in Marketplace GOV. For the first nine months of 2023, revenue grew at a faster rate than Marketplace GOV during the same period primarily due to growing contribution from advertising revenue and improved logistics efficiency.

Cost of Revenue, Exclusive of Depreciation and Amortization

Cost of revenue primarily consists of (i) order management costs, which include payment processing charges, net of rebates issued from payment processors, costs associated with cancelled orders, insurance expenses, costs related to placing orders with non-partner merchants, and costs related to first party product sales, for which we take control of inventory, (ii) platform costs, which include costs for onboarding merchants and Dashers, costs for providing support for consumers, merchants, and Dashers, and technology platform infrastructure costs, and (iii) personnel costs, which include personnel-related compensation expenses related to our local operations, support, and other teams, and allocated overhead. Personnel-related compensation expenses primarily include salary, bonus, benefits, and stock-based compensation expense. Allocated overhead is determined based on an allocation of shared costs, such as facilities (including rent and utilities) and information technology costs, among all departments based on employee headcount.

Three Months Ended September 30,Nine Months Ended September 30,
(In millions, except percentages)20222023% Change20222023% Change
Cost of revenue, exclusive of depreciation and amortization$931$1,15624%$2,574$3,36031%

Cost of revenue, exclusive of depreciation and amortization, increased by $225 million, or 24%, for the third quarter of 2023, compared to the same quarter of 2022. The increase was primarily driven by an increase of $201 million in order management costs, driven primarily by growth in Total Orders.

Cost of revenue, exclusive of depreciation and amortization, increased by $786 million, or 31%, during the first nine months of 2023, compared to the same period of 2022. The increase was primarily attributable to an increase of $578 million in order management costs and an increase of $61 million in platform costs, driven primarily by growth in Total Orders. Additionally, personnel-related compensation expenses and allocated overhead increased by $129 million, primarily driven by increased headcount.

Sales and Marketing

Sales and marketing expenses primarily consist of advertising and other ancillary expenses related to merchant, consumer, and Dasher acquisition, including certain consumer referral credits and Dasher referral fees paid to the referrers to the extent they represent fair value of acquiring a new consumer or a new Dasher, brand marketing expenses, personnel-related compensation expenses for sales and marketing employees, and commissions expense including amortization of deferred contract costs, as well as allocated overhead.

Three Months Ended September 30,Nine Months Ended September 30,
(In millions, except percentages)20222023% Change20222023% Change
Sales and marketing$418$4497%$1,253$1,41613%

Sales and marketing expenses increased by $31 million, or 7%, for the third quarter of 2023, compared to the same quarter of 2022. The increase was primarily driven by an increase of $18 million in advertising expenses and an increase of $7 million in personnel-related compensation expenses and allocated overhead.

Sales and marketing expenses increased by $163 million, or 13%, during the first nine months of 2023, compared to the same period of 2022. The increase was primarily driven by an increase of $94 million in advertising expenses and an increase of $48 million in personnel-related compensation expenses and allocated overhead primarily driven by increased headcount.

Research and Development

Research and development expenses primarily consist of personnel-related compensation expenses related to data analytics and the design of, product development of, and improvements to our platform, as well as expenses associated with the licensing of third-party software and allocated overhead.

Three Months Ended September 30,Nine Months Ended September 30,
(In millions, except percentages)20222023% Change20222023% Change
Research and development$226$25011%$579$75030%

Research and development expenses increased by $24 million, or 11%, for the third quarter of 2023, compared to the same quarter of 2022. The increase was primarily driven by an increase of $38 million in personnel-related compensation expenses and allocated overhead, partially offset by an increase in capitalized software and website development costs of $13 million.

Research and development expenses increased by $171 million, or 30%, during the first nine months of 2023, compared to the same period of 2022. The increase was primarily driven by an increase of $208 million in personnel-related compensation expenses and allocated overhead, partially offset by an increase in capitalized software and website development costs of $38 million.

General and Administrative

General and administrative expenses primarily consist of legal, tax, and regulatory expenses, which include litigation settlement expenses and sales and indirect taxes, personnel-related compensation expenses related to administrative employees, which include finance and accounting, human resources and legal, chargebacks associated with fraudulent credit card transactions, professional services fees, transaction-related costs, bad debt expense, and allocated overhead.

Three Months Ended September 30,Nine Months Ended September 30,
(In millions, except percentages)20222023% Change20222023% Change
General and administrative$311$289(7)%$847$9158%

General and administrative expenses decreased by $22 million, or 7%, for the third quarter of 2023, compared to the same quarter of 2022. The decrease was primarily driven by a decrease of $10 million in personnel-related compensation expenses and allocated overhead, primarily driven by a decrease in headcount and a decrease in transaction-related costs of $7 million.

General and administrative expenses increased by $68 million, or 8%, during the first nine months of 2023, compared to the same period of 2022. The increase was primarily driven by an increase of $72 million in personnel-related compensation expenses and allocated overhead, and an increase of $63 million in legal, tax, and regulatory expenses, partially offset by a decrease in transaction-related costs of $63 million.

Depreciation and Amortization

Depreciation and amortization expenses primarily consist of depreciation and amortization expenses associated with our property and equipment and intangible assets. Depreciation primarily includes expenses associated with equipment for merchants, computer equipment and software, office equipment, and leasehold improvements. Amortization includes expenses associated with our capitalized software and website development costs, as well as acquired intangible assets.

Three Months Ended September 30,Nine Months Ended September 30,
(In millions, except percentages)20222023% Change20222023% Change
Depreciation and amortization$118$1288%$258$37947%

Depreciation and amortization expenses increased by $10 million, or 8%, for the third quarter of 2023, compared to the same quarter of 2022. The increase was primarily driven by an increase of $23 million in amortization expense related to

increased capitalized software and website development costs, partially offset by a decrease of $15 million of amortization expenses for acquired intangible assets.

Depreciation and amortization expenses increased by $121 million, or 47%, during the first nine months of 2023, compared to the same period of 2022. The increase was primarily driven by an increase of $77 million in amortization expense related to increased capitalized software and website development costs, and an increase of $30 million of amortization expenses for acquired intangible assets.

Restructuring Charges

Restructuring charges primarily consist of separation-related payments and other termination benefit costs associated with restructuring activities.

Three Months Ended September 30,Nine Months Ended September 30,
(In millions, except percentages)20222023% Change20222023% Change
Restructuring charges$5$—*$8$2*

***Percentage not meaningful.

Restructuring charges were not material in the periods presented.

Interest Income, Net

Interest income, net primarily consists of interest earned on our cash, cash equivalents, and marketable securities.

Three Months Ended September 30,Nine Months Ended September 30,
(In millions, except percentages)20222023% Change20222023% Change
Interest income, net$9$40*$14$101*

*Percentage not meaningful.

Interest income, net increased by $31 million for the third quarter of 2023, compared to the same quarter of 2022. The increase was primarily driven by an increase in average interest rates earned on marketable securities during 2023.

Interest income, net increased by $87 million during the first nine months of 2023, compared to the same period of 2022. The increase was primarily driven by an increase in average interest rates earned on marketable securities during 2023.

Other Income (Expense), Net

Other income (expense), net primarily consists of gains and losses from transactions denominated in a currency other than the functional currency.

Three Months Ended September 30,Nine Months Ended September 30,
(In millions, except percentages)20222023% Change20222023% Change
Other expense, net$(2)$(1)*$—$(6)*

*****Percentage not meaningful.

Other income (expense), net was not material in the periods presented.

Provision for (benefit from) income taxes

Provision for income taxes is primarily attributable to U.S. income tax expense, as well as income tax expense attributable to foreign operations. Benefit from income taxes primarily results from losses and credits for which an income tax benefit can be recognized.

Three Months Ended September 30,Nine Months Ended September 30,
(In millions, except percentages)20222023% Change20222023% Change
Provision for (benefit from) income taxes$(5)$6*$(14)$14*

*****Percentage not meaningful.

The provision for income taxes for the third quarter of 2023 is primarily attributable to positive pre-tax book income in the United States resulting in federal and state income taxes. The benefit from income taxes for the same quarter of 2022 is primarily driven by the losses generated in non-U.S. jurisdictions for which a tax benefit can be realized.

The provision for income taxes for the first nine months of 2023 is primarily attributable to positive pre-tax book income in the United States resulting in federal and state income taxes. The benefit from income taxes for the first nine months of 2022 is primarily driven by the losses generated in non-U.S. jurisdictions for which a tax benefit can be realized.

Non-GAAP Financial Measures

We use adjusted cost of revenue, adjusted sales and marketing expense, adjusted research and development expense, adjusted general and administrative expense, Contribution Profit, Contribution Margin, Adjusted Gross Profit, Adjusted Gross Margin, Adjusted EBITDA, and Free Cash Flow in conjunction with GAAP measures as part of our overall assessment of our performance, including the preparation of our annual operating budget and quarterly forecasts, to evaluate the effectiveness of our business strategies and to communicate with our board of directors concerning our business and financial performance. We believe that these non-GAAP financial measures provide useful information to investors about our business and financial performance, enhance their overall understanding of our past performance and future prospects, and allow for greater transparency with respect to metrics used by our management in their financial and operational decision making. We are presenting these non-GAAP financial measures to assist investors in seeing our business and financial performance through the eyes of management, and because we believe that these non-GAAP financial measures provide an additional tool for investors to use in comparing results of operations of our business over multiple periods with other companies in our industry.

Our definitions may differ from the definitions used by other companies and therefore comparability may be limited. In addition, other companies may not publish these or similar metrics. Further, these metrics have certain limitations in that they do not include the impact of certain expenses that are reflected in our condensed consolidated statements of operations. Thus, our adjusted cost of revenue, adjusted sales and marketing expense, adjusted research and development expense, adjusted general and administrative expense, Contribution Profit, Contribution Margin, Adjusted Gross Profit, Adjusted Gross Margin, Adjusted EBITDA, and Free Cash Flow should be considered in addition to, not as substitutes for, or in isolation from, measures prepared in accordance with GAAP.

We compensate for these limitations by providing a reconciliation of adjusted cost of revenue, adjusted sales and marketing expense, adjusted research and development expense, adjusted general and administrative expense, Contribution Profit, Contribution Margin, Adjusted Gross Profit, Adjusted Gross Margin, Adjusted EBITDA, and Free Cash Flow to their respective related GAAP financial measures. We encourage investors and others to review our business, results of operations, and financial information in its entirety, not to rely on any single financial measure, and to view adjusted cost of revenue, adjusted sales and marketing expense, adjusted research and development expense, adjusted general and administrative expense, Contribution Profit, Contribution Margin, Adjusted Gross Profit, Adjusted Gross Margin, Adjusted EBITDA, and Free Cash Flow in conjunction with their respective related GAAP financial measures.

Adjusted Cost of Revenue

We define adjusted cost of revenue as cost of revenue, exclusive of depreciation and amortization, excluding stock-based compensation expense and certain payroll tax expense, allocated overhead, and inventory write-off related to restructuring. We exclude stock-based compensation as it is non-cash in nature and we exclude allocated overhead as it is generally a fixed cost and is not directly impacted by Total Orders.

The following table provides a reconciliation of cost of revenue, exclusive of depreciation and amortization, to adjusted cost of revenue:

Three Months Ended September 30,Nine Months Ended September 30,
(In millions)2022202320222023
Cost of revenue, exclusive of depreciation and amortization$931$1,156$2,574$3,360
Adjusted to exclude the following:
Stock-based compensation expense and certain payroll tax expense(29)(37)(72)(104)
Allocated overhead(7)(8)(24)(25)
Inventory write-off related to restructuring——(2)—
Adjusted cost of revenue$895$1,111$2,476$3,231

Adjusted Sales and Marketing Expense

We define adjusted sales and marketing expense as sales and marketing expenses excluding stock-based compensation expense and certain payroll tax expense, and allocated overhead. We exclude stock-based compensation as it is non-cash in nature and we exclude allocated overhead as it is generally a fixed cost and is not directly impacted by Total Orders.

The following table provides a reconciliation of sales and marketing expense to adjusted sales and marketing expense:

Three Months Ended September 30,Nine Months Ended September 30,
(In millions)2022202320222023
Sales and marketing$418$449$1,253$1,416
Adjusted to exclude the following:
Stock-based compensation expense and certain payroll tax expense(27)(30)(70)(90)
Allocated overhead(5)(6)(14)(18)
Adjusted sales and marketing$386$413$1,169$1,308

Adjusted Research and Development Expense

We define adjusted research and development expense as research and development expenses excluding stock-based compensation expense and certain payroll tax expense, and allocated overhead. We exclude stock-based compensation as it is non-cash in nature and we exclude allocated overhead as it is generally a fixed cost and is not directly impacted by Total Orders.

The following table provides a reconciliation of research and development expense to adjusted research and development expense:

Three Months Ended September 30,Nine Months Ended September 30,
(In millions)2022202320222023
Research and development$226$250$579$750
Adjusted to exclude the following:
Stock-based compensation expense and certain payroll tax expense(99)(119)(250)(351)
Allocated overhead(5)(5)(13)(14)
Adjusted research and development$122$126$316$385

Adjusted General and Administrative Expense

We define adjusted general and administrative expense as general and administrative expenses excluding stock-based compensation expense and certain payroll tax expense, certain legal, tax, and regulatory settlements, reserves, and

expenses, transaction-related costs (primarily consists of acquisition, integration, and investment related costs), impairment expenses, and including allocated overhead from cost of revenue, sales and marketing, and research and development. We exclude stock-based compensation as it is non-cash in nature and we exclude certain legal, tax, and regulatory settlements, reserves, and expenses, transaction-related costs, as well as impairment expenses, as these costs are not indicative of our operating performance.

The following table provides a reconciliation of general and administrative expense to adjusted general and administrative expense:

Three Months Ended September 30,Nine Months Ended September 30,
(In millions)2022202320222023
General and administrative$311$289$847$915
Adjusted to exclude the following:
Stock-based compensation expense and certain payroll tax expense(96)(94)(220)(277)
Certain legal, tax, and regulatory settlements, reserves, and expenses(1)(14)(44)(53)(112)
Transaction-related costs(2)(7)—(65)(2)
Allocated overhead from cost of revenue, sales and marketing, and research and development17195157
Adjusted general and administrative$211$170$560$581

(1)We exclude certain costs and expenses from our calculation of adjusted general and administrative expense because management believes that these costs and expenses are not indicative of our core operating performance, do not reflect the underlying economics of our business, and are not necessary to operate our business. These excluded costs and expenses consist of (i) certain legal costs primarily related to worker classification matters, as well as a settlement entered into in connection with an initiative to serve underrepresented communities, (ii) reserves and settlements or other resolutions for or related to the collection of sales, indirect, and other taxes that we do not expect to incur on a recurring basis, (iii) expenses related to supporting various policy matters, including those related to worker classification, other labor law matters, and price controls, and (iv) donations as part of our relief efforts in connection with the COVID-19 pandemic and Russia's invasion of Ukraine. We believe it is appropriate to exclude the foregoing matters from our calculation of adjusted general and administrative expense because (1) the timing and magnitude of such expenses are unpredictable and thus not part of management’s budgeting or forecasting process, and (2) with respect to worker classification matters, management currently expects such expenses will not be material to our results of operations over the long term as a result of increasing legislative and regulatory certainty in this area, including as a result of Proposition 22 in California and similar legislation.

(2)Consists of acquisition, integration, and investment related costs, primarily related to the Wolt acquisition.

Contribution Profit

We use Contribution Profit to evaluate our operating performance and trends. We believe that Contribution Profit is a useful indicator of the economic impact of orders fulfilled through DoorDash as it takes into account the direct expenses associated with generating and fulfilling orders. We define Contribution Profit as our gross profit less sales and marketing expense plus (i) depreciation and amortization expense related to cost of revenue, (ii) stock-based compensation expense and certain payroll tax expense included in cost of revenue and sales and marketing expenses, (iii) allocated overhead included in cost of revenue and sales and marketing expenses, and (iv) inventory write-off related to restructuring. We define gross margin as gross profit as a percentage of revenue for the same period and we define Contribution Margin as Contribution Profit as a percentage of revenue for the same period.

Gross profit is the most directly comparable financial measure to Contribution Profit. The following table provides a reconciliation of gross profit to Contribution Profit:

Three Months Ended September 30,Nine Months Ended September 30,
(In millions, except percentages)2022202320222023
Revenue$1,701$2,164$4,765$6,332
Less: Cost of revenue, exclusive of depreciation and amortization(931)(1,156)(2,574)(3,360)
Less: Depreciation and amortization related to cost of revenue(56)(46)(129)(138)
Gross profit$714$962$2,062$2,834
Gross Margin42.0%44.5%43.3%44.8%
Less: Sales and marketing$(418)$(449)$(1,253)$(1,416)
Add: Depreciation and amortization related to cost of revenue5646129138
Add: Stock-based compensation expense and certain payroll tax expense included in cost of revenue and sales and marketing5667142194
Add: Allocated overhead included in cost of revenue and sales and marketing12143843
Add: Inventory write-off related to restructuring——2—
Contribution Profit$420$640$1,120$1,793
Contribution Margin24.7%29.6%23.5%28.3%

Adjusted Gross Profit

We define Adjusted Gross Profit as gross profit plus (i) depreciation and amortization expense related to cost of revenue, (ii) stock-based compensation expense and certain payroll tax expense included in cost of revenue, (iii) allocated overhead included in cost of revenue, and (iv) inventory write-off related to restructuring. Gross profit is defined as revenue less (i) cost of revenue, exclusive of depreciation and amortization and (ii) depreciation and amortization related to cost of revenue. Adjusted Gross Margin is defined as Adjusted Gross Profit as a percentage of revenue for the same period.

The following table provides a reconciliation of gross profit to Adjusted Gross Profit:

Three Months Ended September 30,Nine Months Ended September 30,
(In millions, except percentages)2022202320222023
Gross profit$714$962$2,062$2,834
Add: Depreciation and amortization related to cost of revenue5646129138
Add: Stock-based compensation expense and certain payroll tax expense included in cost of revenue293772104
Add: Allocated overhead included in cost of revenue782425
Add: Inventory write-off related to restructuring——2—
Adjusted Gross Profit$806$1,053$2,289$3,101
Adjusted Gross Margin47.4%48.7%48.0%49.0%

Adjusted EBITDA

Adjusted EBITDA is a measure that we use to assess our operating performance and the operating leverage in our business. We define Adjusted EBITDA as net income (loss) including redeemable non-controlling interests, adjusted to exclude (i) certain legal, tax, and regulatory settlements, reserves, and expenses, (ii) loss on disposal of property and equipment, (iii) transaction-related costs (primarily consists of acquisition, integration, and investment related costs), (iv) impairment expenses, (v) restructuring charges, (vi) inventory write-off related to restructuring, (vii) provision for (benefit from) income taxes, (viii) interest income, net, (ix) other expense, net, (x) stock-based compensation expense and certain payroll tax expense, and (xi) depreciation and amortization expense.

The following table provides a reconciliation of net loss including redeemable non-controlling interests to Adjusted EBITDA:

Three Months Ended September 30,Nine Months Ended September 30,
(In millions)2022202320222023
Net loss including redeemable non-controlling interests$(296)$(75)$(726)$(409)
Certain legal, tax, and regulatory settlements, reserves, and expenses(1)144453112
Transaction-related costs(2)7—652
Restructuring charges5—82
Inventory write-off related to restructuring——2—
Provision for (benefit from) income taxes(5)6(14)14
Interest income, net(9)(40)(14)(101)
Other expense, net21—6
Stock-based compensation expense and certain payroll tax expense251280612822
Depreciation and amortization expense118128258379
Adjusted EBITDA$87$344$244$827

(1)We exclude certain costs and expenses from our calculation of Adjusted EBITDA because management believes that these costs and expenses are not indicative of our core operating performance, do not reflect the underlying economics of our business, and are not necessary to operate our business. These excluded costs and expenses consist of (i) certain legal costs primarily related to worker classification matters, as well as a settlement entered into in connection with an initiative to serve underrepresented communities, (ii) reserves and settlements or other resolutions for or related to the collection of sales, indirect, and other taxes that we do not expect to incur on a recurring basis, (iii) expenses related to supporting various policy matters, including those related to worker classification, other labor law matters, and price controls, and (iv) donations as part of our relief efforts in connection with the COVID-19 pandemic and Russia's invasion of Ukraine. We believe it is appropriate to exclude the foregoing matters from our calculation of Adjusted EBITDA because (1) the timing and magnitude of such expenses are unpredictable and thus not part of management’s budgeting or forecasting process, and (2) with respect to worker classification matters, management currently expects such expenses will not be material to our results of operations over the long term as a result of increasing legislative and regulatory certainty in this area, including as a result of Proposition 22 in California and similar legislation.

(2)Consists of acquisition, integration, and investment related costs, primarily related to the Wolt acquisition.

Free Cash Flow

We define Free Cash Flow as cash flows from operating activities less purchases of property and equipment and capitalized software and website development costs.

The following table provides a reconciliation of net cash provided by operating activities to Free Cash Flow:

Nine Months Ended September 30,
(in millions)20222023
Net cash provided by operating activities$344$1,188
Purchases of property and equipment(131)(94)
Capitalized software and website development costs(119)(143)
Free Cash Flow$94$951

Credit Facilities

On November 19, 2019, we entered into a revolving credit and guaranty agreement with JPMorgan Chase Bank, N.A., an affiliate of J.P. Morgan Securities LLC, and Goldman Sachs Lending Partners LLC, an affiliate of Goldman Sachs & Co. LLC, which, as amended and restated on August 7, 2020, and further amended on October 31, 2022, provides for a $300 million unsecured revolving credit facility maturing on August 7, 2025, which increased to $400 million in aggregate revolving commitments upon the consummation of an initial public offering, with a sublimit for the issuance of letters of credit in an aggregate face amount of up to $200 million. Loans under the credit facility bear interest, at our option, at (i) a base rate equal to the highest of (A) the prime rate, (B) the higher of the federal funds rate or a composite overnight bank borrowing rate plus 0.50%, or (C) an adjusted SOFR rate for a one-month interest period plus 1.00%, or (ii) an adjusted SOFR rate (based on an interest period of one, three, or six months) rate plus a margin equal to 1.00%. We are also obligated to pay other customary fees for a credit facility of this size and type, including letter of credit fees, an upfront fee, and an unused commitment fee. As of September 30, 2023, we were in compliance with the covenants under the

revolving credit and guaranty agreement. As of December 31, 2022 and September 30, 2023, no revolving loans were outstanding and $99 million and $116 million of letters of credit were issued under our revolving credit facility, respectively.

Liquidity and Capital Resources

In December 2020, we completed our IPO in which we received net proceeds of $3.3 billion from sales of shares of our Class A common stock in the IPO, after deducting underwriting discounts and commissions.

As of September 30, 2023, our principal sources of liquidity were cash, cash equivalents, and marketable securities of $4.3 billion, which consisted of cash and cash equivalents of $2.3 billion, short-term marketable securities of $1.5 billion, and long-term marketable securities of $474 million. Additionally, funds held at payment processors of $385 million represent cash due from our payment processors for cleared transactions with merchants and consumers, as well as funds remitted to payment processors for Dasher payout. Cash and cash equivalents consisted of cash on deposit with banks, commercial paper, institutional money market funds, and U.S. Treasury securities. Marketable securities consisted of certificates of deposits, commercial paper, corporate bonds, U.S. government agency securities, and U.S. Treasury securities.

We have generated significant operating losses from our operations as reflected in our accumulated deficit of $4.9 billion as of September 30, 2023. To execute on our strategic initiatives to continue to grow our business, we may incur operating losses and generate negative cash flows from operations in the future, and as a result, we may require additional capital resources. We believe our existing cash, cash equivalents, and marketable securities, along with the $400 million in available borrowings under our unsecured revolving credit facility, will be sufficient to meet our working capital and capital expenditures needs for at least the next 12 months and beyond.

In February 2023, our board of directors authorized the repurchase of up to $750 million of our Class A common stock. Repurchases may be made from time to time through open market purchases or through privately negotiated transactions subject to market conditions, applicable legal requirements, and other relevant factors. Open market repurchases may be structured to occur in accordance with the requirements of Rule 10b-18 of the Exchange Act. We may also, from time to time, enter into Rule 10b5-1 plans to facilitate repurchases of our Class A common stock under this authorization. The timing and actual number of shares repurchased may depend on a variety of factors, including price, general business and market conditions, and alternative investment opportunities. As of September 30, 2023, approximately $51 million remained available under the repurchase authorization, all of which was repurchased in October 2023, completing our $750 million repurchase program.

Our future capital requirements will depend on many factors, including, but not limited to our growth, our ability to attract and retain merchants, consumers, and Dashers that utilize our platform, the continuing market acceptance of our offerings, the timing and extent of spending to support our efforts to develop our platform, and the expansion of sales and marketing activities, the timing and extent of spending for policy and worker classification initiatives. Further, we may in the future enter into arrangements to acquire or invest in businesses, products, services, and technologies. We may be required to seek additional equity or debt financing. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital when desired, our business, financial condition, and results of operations could be adversely affected.

The following table summarizes our cash flows for the periods indicated:

Nine Months Ended September 30,
(In millions)20222023
Net cash provided by operating activities$344$1,188
Net cash used in investing activities(119)(223)
Net cash used in financing activities(376)(702)
Foreign currency effect on cash, cash equivalents, and restricted cash(28)(16)
Net (decrease) increase in cash, cash equivalents, and restricted cash$(179)$247

Operating Activities

Cash provided by operating activities was $1.2 billion for the first nine months of 2023. This consisted of a net loss including redeemable non-controlling interests of $409 million, offset by non-cash stock-based compensation expense of $819 million, non-cash depreciation and amortization expense of $379 million, non-cash reduction of operating lease

right-of-use assets and accretion of operating lease liabilities of $84 million, and other net non-cash expenses of $23 million, as well as $292 million net inflows from changes in operating assets and liabilities primarily driven by an increase in accrued liabilities and other current liabilities, offset by an increase in prepaid expenses and other current assets and payments for operating lease liabilities.

Cash provided by operating activities was $344 million for the first nine months of 2022. This consisted of a net loss including redeemable non-controlling interests of $726 million, offset by non-cash stock-based compensation expense of $609 million, non-cash depreciation and amortization expense of $258 million, non-cash reduction of operating lease right-of-use assets and accretion of operating lease liabilities of $58 million, and other net non-cash expenses of $24 million, as well as $121 million net inflows from changes in operating assets and liabilities primarily driven by an increase in accrued expenses and other current liabilities and decrease in funds held at payment processors, offset by an increase in prepaid expenses and other current assets.

Investing Activities

Cash used in investing activities was $223 million for the first nine months of 2023, which primarily consisted of purchases of marketable securities of $1.6 billion, purchases of property and equipment of $94 million, and cash outflows for capitalized software and website development costs of $143 million, partially offset by proceeds from maturities and sales of marketable securities of $1.6 billion.

Cash used in investing activities was $119 million for the first nine months of 2022, which primarily consisted of purchases of marketable securities of $1.6 billion, purchases of property and equipment of $131 million, and cash outflows for capitalized software and website development costs of $119 million, partially offset by proceeds from maturities and sales of marketable securities of $1.6 billion and net cash acquired in acquisitions of $71 million.

Financing Activities

Cash used in financing activities was $702 million for the first nine months of 2023, which primarily consisted of repurchases of Class A common stock of $699 million.

Cash used in financing activities was $376 million for the first nine months of 2022, which primarily consisted of repurchases of Class A common stock of $400 million.

Non-cancelable Purchase Commitments

In May 2023, we amended a third-party platform service agreement under which we have a non-cancellable purchase commitment of $892 million through May 2028.

Critical Accounting Policies and Estimates

Our condensed consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q are prepared in accordance with GAAP. The preparation of condensed consolidated financial statements in accordance with GAAP requires us to make certain estimates, judgments, and assumptions that affect the reported amounts of assets and liabilities and the related disclosures at the date of the financial statements, as well as the reported amounts of revenue and expenses during the period presented. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ significantly from our estimates. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations, and cash flows could be affected.

There have been no material changes to our critical accounting policies and estimates as described in our Annual Report on Form 10-K for the year ended December 31, 2022.

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