DoorDash reports surge in lockdown revenue in IPO filing

Soaring demand during the pandemic allowed food delivery app DoorDash to post revenues of $1.9bn for the first nine months of 2020, helping narrow its losses as it unveiled financial figures for the first time ahead of its hotly anticipated initial public offering.

In its prospectus, published on Friday, the US-based company provided a detailed accounting of its business model, as it attempted to convince investors of its prospects in a sector that has been marked by steep losses and consolidation.

During the pandemic, DoorDash’s revenues increased more than 200 per cent, up from $587m in the same period in 2019. The company said it now had 18m active users of the platform, which currently operates in the US, Canada and Australia, along with 1m workers providing its service.

DoorDash reported that it was profitable on an adjusted earnings basis, before including interest, taxes, depreciation and amortisation, making $95m on that basis to September this year. It also reported net income of $23m in the second quarter before reversing into losses in the third quarter.

The company is aiming to be valued at more than $20bn in the IPO and begin trading in December, according to people familiar with its plans. It will list under the symbol “DASH” on the New York Stock Exchange.

“We believe that our business will be successful and sustainable in the long term as our business model becomes more efficient, through increasing scale and continual operational improvements, and as our sales and marketing and promotions investments normalise,” DoorDash wrote in the prospectus.

DoorDash’s IPO comes after a turbulent year for the meal delivery sector, which has undergone consolidation even as user demand has surged during lockdowns.

“It really looks like they’re knocking on the door of sustained profitability,” said Asad Hussain, mobility sector analyst with PitchBook. “We think there’s a long runway of growth ahead of them. We think these shifts in consumer behaviour are going to be consistent.”

This week, Uber received regulatory approval in the US for its $2.7bn acquisition of Postmates, which is expected to bolster the company’s position in the Los Angeles market. The ride-sharing group has yet to report a profit in its food delivery business.

Uber and DoorDash previously discussed a merger last year at the behest of their common shareholder, SoftBank’s Vision Fund, but eventually walked away from the talks, the Financial Times had reported.

DoorDash’s losses narrowed to $149m on revenues of more than $1.9bn through the third quarter this year, compared with losses of $533m on revenues of $587m during the same period last year. It held more than $1.6bn in cash and cash equivalents at the end of September.

Data from Edison Trends showed DoorDash commanded 48 per cent of the US food delivery market in October, up from 34 per cent a year prior. That made it the market leader ahead of a combined Uber and Postmates, which would represent about 35 per cent of business, according to the data provider.

Line chart of US food delivery market share by transactions (%) showing DoorDash stretches lead over rivals

The company said it had 5m users of its $9.99 DashPass subscription service, though did not break out how many of those were part of free trials.

Among its risk factors, DoorDash notes an unpredictable regulatory environment over its classification of workers as independent contractors. 

DoorDash was among the five gig economy companies that contributed to the $200m fund supporting a recent California ballot measure legalising independent contractor status for its workers. The company, along with its rivals, said it would now look to push similar regulation nationwide.

The filing listed 18 separate ongoing legal challenges related to employee classification. It added that DoorDash had agreed to pay $89m to settle a class-action lawsuit involving workers in California and Massachusetts — up from the initial proposed settlement of $41m. 

Separately, more than 35,000 workers had filed, or signalled an intention to file, arbitration claims over employment status. The company said it “reached agreements that would resolve the worker misclassification claims of a large majority of these individuals”. The cost of doing so would be approximately $85m, including legal fees, the company said.

The company also warned that its multi-class stock structure will concentrate voting power with chief executive Tony Xu.

DoorDash’s IPO comes as other large venture-backed companies, such as vacation rental marketplace Airbnb, prepare to go public before the end of the year, capping one of the busiest periods for new US listings.

SoftBank’s Vision Fund owns nearly one-quarter of DoorDash’s class A common stock, while the venture firm Sequoia Capital owns more than one-fifth, placing them in line for big paydays once the company goes public. DoorDash was most recently valued at $16bn by private investors in June.

Goldman Sachs and JPMorgan are serving as lead underwriters on the offering.

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