Good afternoon, and welcome to the DoorDash Quarter Two 2022 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press the star one again. For operator assistance throughout the call, please press star zero. Finally, I would like to advise all participants that this call is being recorded. Thank you. I would now like to hand over to Andy Hargreaves, Vice President, Finance, and Investor Relations. Andy, please begin your call.
Thank you very much. Good afternoon, and thanks, everybody, for joining us on our second quarter 2022 earnings call. I'm pleased to be joined today by Co-founder, Chair, and CEO Tony Xu, and CFO Prabir Adarkar. We'll be making forward-looking statements during today's call, including our expectations of our business and the Wolt business following our acquisition, the macroeconomic environment, financial position, and operating performance, our market and local commerce opportunities, future financial results and guidance, our strategies and investment approach. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those described, and some risks are described in our risk factors, including in our SEC filings, including Form 10-K and Form 10-Q. You should not rely on our forward-looking statements as predictions of future events.
We disclaim any obligation to update any forward-looking statements except as required by law. During this call, we'll also discuss certain non-GAAP financial measures. Information regarding our non-GAAP financial results, including a reconciliation of non-GAAP results to the most directly comparable GAAP financial measures, may be found in our investor letter, which is available on our IR website. These non-GAAP measures should be considered in addition to our GAAP results and are not intended to be a substitute for our GAAP results. Finally, this call in its entirety is being audio webcast on our IR website. An audio replay of the call will be available on our website shortly after the call ends. As in previous quarters, we'll go straight to questions. With that, operator, please go ahead and take the first question.
Thank you. At this time, I would like to remind everyone in order to ask a question, please press star, then the number one on your telephone keypad. Your first question today comes from the line of Deepak Mathivanan from Wolfe Research. Your line is open.
Great. Thanks for taking the questions. Maybe one for Tony and one for Prabir. Tony, given the state of the market and kinda competition, you know, it feels like at least some levels of incentives has come out of the system, you know, maybe perhaps from smaller players in kind of niche categories. Can you talk about whether you're seeing any benefits from a favorable operating environment, either on frequency or kind of customer acquisition right now? And then, maybe Prabir, I know you don't want to guide for 2023 specifically yet, but, maybe how should we think conceptually about the 2023 EBITDA band? You know, as your profit pools become larger, do you still see kind of big investment areas that would maybe keep the profit bands at these levels or, you know, can it gradually edge up?
Thank you so much.
Hey, Deepak. It's Tony. Yeah, look, on the first question, our business has been, you know, always very competitive ever since we founded the company nine years ago. I think that, you know, what's been very impressive to us is just how resilient our business has been, you know, both in light of, you know, competitive activities, both recent and, you know, in the years that we've been building DoorDash, as well as just, you know, the macro environment. As you know, we do see some consumer spending softening, but largely we've been not impacted by that downward pressure. I really think that, you know, you see a lot of kind of the premise of your question, reflected in our results.
I mean, this is 1/4 in which we beat, you know, top line as well as on bottom line. We grew results 25%, you know, GOV year-over-year, and we beat, you know, quite handedly on the bottom line as well. This is, you know, on top of a lot of the types of things that we were investing in. You know, one that I will call out is that, you know, while we're not seeing any elevated, you know, pressures from, you know, certain types of incentives from competitors, you know, what we are doing is we are taking care of our audiences.
We investeD over $40 million alone in the second quarter just to make sure that the Dashers who are on the road doing the hard work, you know, can keep the profits that, you know, they expect to keep given some of the rising costs with fuel. We're not seeing any of the elevated pressures. We're seeing, you know, fairly normal activity on that side. I think as a result, given our industry-leading retention and order frequency, you continue to see our growth and our share gains.
Yeah. Deepak, on your second question around 2023, we're not providing quantitative 2023 guidance today. We will provide 2023 guidance when we report Q4, which is on our normal cycle, but I will provide some sort of thematic context. You know, the first thing I'll say is going into 2023, we do expect our core U.S. restaurant business to grow and increase its contribution profit. At current course and speed, we plan to increase annually, but double by a modest amount. Now, note that this is after absorbing a full year of Wolt. So said differently, core DoorDash ex Wolt will expand into 2023, even though the consolidated EBITDA won't grow meaningfully. The only caveat I'll make to this is this could change if we identify attractive growth opportunities.
We continue to remain in investment mode and look for these opportunities that benefit our retention and order frequency. At current course and speed, we would expect annual EBITDA to grow by a modest amount.
Okay. Thanks, Tony. Thanks, Prabir.
Thank you. Your next question comes from the line of Lloyd Walmsley from UBS. Your line is open.
Thanks for taking the question. Two, if I can. In the letter, you guys talked about being, you know, a logistics-led marketplace. I guess, how much room do you all see over the next few years to reduce cost per order? What are some of the key drivers to kinda get there, and, like, where's the lowest hanging fruit? Then a second one would just be, you've talked in the past about how, you know, you don't try to beat EBITDA. You really try to kinda come in in the range, and if you beat it's because there just weren't attractive investment opportunities.
Like, was there, like, something changing in the marketing landscape or any reason you guys let it flow through or just a function of some of the kind of inflation coming through as a surprise, and you didn't have time to reinvest? If anything you can share there, it would be great. Thanks.
Yeah. Hey, Lloyd, it's Tony. I'll take the first question, and maybe Prabir can take the second part of the question. You know, with respect to efficiency gains from logistics, I think this has been a hallmark of the DoorDash story and also of the Wolt story now that, you know, we've officially closed that partnership, in which if you think about the game that we're playing or the business that we're in, we're really in the game of building a minimum efficient scale business. That's the type of business when you're talking about a hyperlocal business, where order density is the most important metric. In order to achieve that, you kinda have to do two things.
One of the things you talked about in your question, which is really around high-quality logistics efficiency, and the other is high-quality retention and order behavior from customers, you know, without discounting and that sort of activity. You know, DoorDash has really achieved both. On, you know, the part around gaining extra logistics efficiency, we continue to find areas of opportunity. I mean, we've certainly been leaders in our space up to this point, but I still see massive room to keep increasing the selection on our platform and improve the logistics quality on our platform, the affordability of our service, and certainly our customer service levels.
On logistics, you know, more specifically, whether it's, you know, working on efficiency improvements at the store as well as how we think about, you know, how we ought to assign orders, especially now that we're entering multiple categories of deliveries in addition to restaurant deliveries, I think there's a long runway, you know, to go, and we're seeing that both in our numbers, you know, in the most recent quarter, as well as in the quarters leading up to this point.
Lloyd, on the second part of your question, first I'll talk about Q2, and then I'll talk about sort of general philosophy. In terms of the Q2 performance on EBITDA was really, you know, a matter of two factors. The first was subtotals. As we described in the letter, as a result of consumer price inflation, our subtotals were higher because of higher item prices, and that then translates into higher commission dollars as well as higher service fees, both of which benefit revenue and drop through to EBITDA. That's what drove the upside in Q2 in terms of EBITDA. In terms of general philosophy, I'd say EBITDA is a function of really two things. First, it's the margin expansion that we continue to drive in our U.S. restaurant business.
That's one. The second is the level of investment we make, which is discretionary, by the way, but the level of investment we make in our new verticals and in our international businesses. That level of investment varies from quarter to quarter based on the signals we see. You can see that volatility in our historical trends, where some quarters we produce more EBITDA than others because depending on what we see in terms of retention and order frequency, we might invest more or less. Our EBITDA range is really meant, you know, as a guardrail, but where we land within that range varies depending on the level of investment.
Okay, thank you.
Thank you. Your next question comes from the line of Youssef Squali from Truist Securities. Your line is open.
Great. Thank you very much. Guys, congrats on a really impressive quarter, all things considered. My question is around Wolt contribution. Can you maybe speak to the contribution that you are baking in into the 2022 top and bottom line? How to think about growth there, considering kind of what's going on in Europe? Just broadly speaking, maybe Tony, can you address the issue about how do you kind of take, you know, kind of a relatively subscale business in Europe that's across multiple geographies and kind of grow it meaningfully for it to become a big part of the business? Your position in the U.S. has been quite the opposite. You've been market leader, market dominant in the single market. Any help there would be great.
Thank you.
Maybe I'll start, and then Tony can chime in. I mean, the Wolt business grew over 50% year-over-year, and that's in stark contrast to what we've seen with other companies that operate in this similar geographic region. Really it all comes back down to two things, you know. The fundamentals of the Wolt business in terms of its industry-leading retention and growing order frequency, and what we've seen is as long as you create a product that has high retention and order frequency, it ultimately translates into better growth because you're retaining your customers better, and that benefit compounds versus alternatives where you end up losing customers because of poor retention.
Where we're at in terms of the investment cycle, you know, the Wolt markets are relatively new, both in terms of merchant adoption as well as user adoption. You know, as an example, even in its oldest markets, adoption levels are less than 10% of the population. That tells us there's a lot of room to grow, just as you grow your footprint within these countries, as well as you grow merchant selection and grow the consumer base. That's driving the investment we're making, and we'll continue investing as long as we see strong signal on retention and order frequency.
Yeah. On the second, you know, part of the question, I think it's important to start with maybe some historical context and, you know, go down memory lane, not just, you know, just a few years ago, you know, DoorDash was certainly not the market leader. You know, DoorDash, especially, you know, five, six years ago, was quite capital constrained relative to any of its peers by a pretty far margin. How was it possible that a, you know, quote unquote, "subscale company" was able to rise to market leadership? Well, it really was mastering the order level execution of the business.
You know, this is a hyper-local business where order density and achieving minimum efficient scale through leading retention order frequency, which is really, you know, measured in whether or not you built a superior product of selection, quality, price, and service. Then on the other end, whether or not you have the most capital efficient logistics operations. I think when I look at, you know, the elements that caused DoorDash to rise to market leadership, I find very similar kinds of characteristics in the Wolt business, which is what excited us about, you know, their business, not only today, as you know, Prabir mentioned, you know, far outgrowing some of their European peers, but maybe much more excited are we in their potential.
Because when I compare the foundation of what they've built and I look at, you know, the opportunity ahead of them, I mean, even in their oldest markets, Wolt is less than 10% penetrated. On a global basis, both DoorDash and Wolt in our non-U.S. markets are less than 5% of restaurant sales, and outside of restaurants, less than 1% of non-food spend. When I compare the foundation that Wolt has built on one hand, and on the other hand, you know, compare it to the opportunity ahead, it's exactly what Prabir said, which is that it's absolutely the right time to invest. I think you already see evidence of this, as Wolt has become a market leader in many of their markets already.
That's great. Thank you. Prabir, did you quantify the contribution to that $51 billion-$53 billion in GOV from Wolt?
We don't break out the guidance between Wolt and DoorDash, but when we do report earnings, we will split out organic versus Wolt's contribution.
Got it. Thank you both.
Thank you. Your next question comes from the line of Bernie McTernan from Needham. Your line is open.
Great. Thanks. Taking the question. We've noticed a lot of grocers in the marketplace doing delivery and online ordering in-house, in addition to being open up to third-party marketplaces like yourself, so they're a competitor but also a partner. Can you talk about some of the advantages that you have for customer acquisition and retention relative to them? Then also, with the 50% growth in Wolt this past quarter for GOV, 50% higher probably than some of the other European delivery operators. Can you just remind us whether it's market growth or just pure market share gains in terms of what's driving this growth?
Sure. Maybe I'll take the first question, and I'll let Prabir take the second question. I'm not sure if this, you know, touches exactly the spirit of your question, but we view all merchants, including grocers, as partners. I mean, if you think about the mission of the company, the mission of the company is to, on one hand, build the largest local commerce marketplace, where we're driving incremental demand to all of these retailers, you know, whether they be restaurants, grocers, convenience stores, other types of retail stores. On the other hand, build the largest local commerce platform where we give the tools, whether it's logistics as a service in the form of DoorDash Drive or ordering as a service in the form of DoorDash Storefront, to all of these retailers so that they can build their own digital operations.
We really view, you know, in equal parts our mission to help grow on one hand, which is to bring that incremental demand, and on the other hand, empower them to do it on their own. In fact, we see these customers on these different channels to be quite different. I mean, if you think about it, if a customer is quite used to and knows exactly what they want to order from a particular retailer, it probably makes quite a lot of sense for them on that occasion to actually order directly from the retailer. On, you know, the greatest privilege that we have in this business is that people eat 20-25 times a week, and they shop, you know, even more times than that on top of that when you consider their non-food spend.
For, you know, other occasions, maybe when they're not exactly sure what it is that they're looking for, but they want to buy something from the neighborhood, that's where the DoorDash marketplace really comes in handy. We really view the retailer, the merchant, whether it's a grocer or other type of store, as our partner, and we have two ways in which we help them.
Bernie, on your second question around Wolt's growth, it's really driven by two things. It's MAU growth that was aided by some customer acquisition, but also by just higher retention compared to the other players in the market. Second, order frequency growth. You know, as Wolt brings on more selection, both in the restaurant as well as the non-restaurant category, we're seeing some of the same things as we saw in the U.S., where order frequency at a cohort level has continued to grow. Both of those things, you know, particularly in the face of some of the more extreme COVID reversion that you saw in Europe, have led to the 50% year-on-year growth that is cited.
Great. Thanks for taking the questions.
Thank you. Your next question comes from the line of Brian Nowak from Morgan Stanley. Your line is open.
Thanks for taking my questions, guys. I have two. Just the first one, the gross margins in the quarter were a little weaker than we thought, at least. Could you just sort of talk to us about some of the puts and takes on gross margins of the business? How should we think about the gross margins of the Wolt business sort of going into the back half and maybe even longer term, 2023? Thanks.
Hey, Brian, it's Prabir. Let me start on both of your questions. First, our cost of sales increase that we saw on a year-on-year basis was really driven by two things, the DashMarts and insurance costs. On DashMarts, as we've launched more and more DashMarts, the costs associated with those orders impacts cost of sales. Roughly half of the increase in cost of sales as a percentage of GOV is driven by DashMarts. The other half roughly is driven by an increase in insurance costs, which was in line with our expectations. You know, I pointed to our comments from last quarter where we said we'd experienced an increase in insurance reserves due to the outsized impact of a few large claims.
We began to take actions on to improve the safety on our platform starting last quarter. It takes a while for these changes to reflect on our claims data, and so as we previously discussed, we expect insurance costs to increase in the near term. On the whole, though, both the DashMart cost increase as well as the insurance cost is reflected in the guidance we've provided, and so it's not incremental to the guidance. It's already reflected in there. In terms of gross margin for Drive, really Drive's a combination of, as I view it, sort of three distinct pieces. There's investments that are going into Japan and Germany. These are brand new markets that were launched less than two years ago. We have to get the flywheel going in terms of selection and quality and price.
You've got investments in Wolt Market, which is the equivalent of our DashMart, Wolt's first-party distribution business. You've got the rest, what I call core food delivery. Core food delivery has had consistent increase in gross margin levels, and, you know, as we continue driving efficiency and order density at the local level, you'll start seeing the same type of efficiency in terms of Dasher costs kick in to produce increasing levels of gross margin. Japan and Germany and Wolt Market remain in investment mode, and we continue to work on coverage, selection, quality, and price there.
That's very helpful. Thanks, Prabir.
Thank you. Your next question comes from the line of Eric Sheridan from Goldman Sachs. Your line is open.
Thanks so much for taking the question. Maybe two, if I can. First, Tony, you know, I know you're talking a lot in the shareholder letter about not seeing anything yet on the consumer spending behavior patterns, but I think one of the questions we all get a lot from investors is you're seeing some large companies already say how they would run their business differently if the consumer spending environment did change. Is there any sense you can give us of how you're sort of game planning out different economic scenarios for the business and how you might change investment philosophies or growth philosophies for the company if you did hit a rougher patch in terms of consumer spending, and it went through the platform?
Maybe an additional question on grocery and convenience and some of the new categories. Can you give us a little bit of sense of folks who use multiple products across the platform, what that might mean in terms of LTV or how you're thinking about leaning in and promoting different category expansion on a per customer basis, what that might do for the unit economics longer term? Thanks so much.
Yeah, Eric, it's Prabir. Maybe I'll start with the first one around how we're gonna manage the business and EBITDA impact of growth to our sense, and Tony can talk about the impact from some of the new categories. Maybe the first place to start is, you know, our core U.S. restaurant business is growing and continues to generate significant cash flow. Historically, we've taken that cash flow and invested the vast majority of it in order to grow our scale in these, you know, large and under-penetrated categories in which we operate. Again, as I said earlier, these investments are discretionary, and so that means, you know, the reason we're investing is because we continue to see strong signals of product market fit as well as improving unit economics.
Just to give you an example, if on any given day I look at the top 10 stores on DoorDash in terms of sales, DashMart shows up there, and that's a strong signal of product market fit. To the extent that we don't see continued improvements in terms of unit economics or continued improvements or retention and order frequency, you know, we will alter the pace of our investment. You know, we've been very disciplined in terms of capital allocation so far, and we'll continue to do so going forward.
Yeah. I think I'll add a little bit in terms of just my view on, you know, the macro environment and then I'll hit your second question about, you know, the multi-category customer. Obviously, we've been looking, right, in terms of how the tough macroeconomic, you know, headwinds that I think is hitting a lot of industries, how that might apply to us. We've been, you know, certainly improving. If you look at selection, for instance, in the 12 months leading up to the end of the second quarter, we've added 80,000 net new stores onto the platform. We've made improvements to many quality, you know, metrics in terms of our delivery experiences, whether it's speed or accuracy, and other types of improvements.
We've made many improvements to the shopping experience to lower the friction for consumers. I think that's, you know, one point. The second point is, I think we still have to remember that relative, especially to other maybe categories of commerce or e-commerce, we are still very early in our penetration. You know, even as the market leader, just take the U.S. as one example, we're, you know, less than 8% of total restaurant industry sales. If you compare that to other categories of commerce, it is, you know, much earlier in its evolution.
Then the final thing I would just, you know, add is just if you study macro, or as we've been looking at macroeconomics, I think there's only been a couple of years in history in which, you know, food spend has actually declined, you know, due to challenging macroeconomic pressures. I think that's just because it is, you know, less of a discretionary spend, you know, relative to other categories of spend. You know, that said, you know, to Prabir's point, we're equal opportunity growth investors that are very disciplined. You know, DoorDash historically hasn't had a lot of resources, and so we take very seriously every dollar of spend.
As you saw in the second quarter, if we don't think that there is, you know, a great investment to be made over the same time period to generate a great return, we're not gonna make that investment. That's true, you know, with all new projects, that's true with marketing investments, that's true with engineering and product investments, that's true with, you know, headcount. That's really true for every line item in the P&L. All right. Moving on to your second question, which I think was about the impact of, you know, a consumer shopping in multiple categories. Well, one, this is just part of the mission of the company, is to make sure we bring everything inside the neighborhood, not just, you know, from restaurants.
Two, you know, the last disclosure we made was, I think, in the fourth quarter, where we said that about 14% of our customers are now shopping in these non-restaurant categories. We are seeing higher retention order frequency activity, you know, from these customers who are engaging in multiple categories. I think this, you know, makes quite a lot of sense as we're solving now different jobs and tasks for the customer. That said, look, we still have to earn every inch. We have a long ways to go in terms of the product experience in each one of these categories before we'd be satisfied with that behavior.
Thank you.
Thank you. Your next question comes from the line of Andrew Boone from JMP Securities. Your line is open.
Hi, good afternoon, and thanks for taking my questions. I know you guys talked earlier about the logistics benefits that you guys are running through the platform, but can you double-click on the drivers of Dasher cost savings that you guys highlighted in the letter? We haven't talked about Drive in a while. Can you provide an update there? Is there any change that you're seeing in terms of enterprise adoption now that we're kind of beyond peak COVID? Thanks so much.
Andrew, maybe I'll start with the Dasher cost question, and then Tony can take the one on our platform services. You know, in terms of Dasher cost, I mean, at the end of the day, right, there's multiple components of this, including as Tony alluded to earlier, you know, how stores' operations in terms of how quickly they get the Dasher in and out. There's opportunities to continue optimizing that. There's opportunities to continue dispatching from closer and closer Dashers, which by the way, as the density of your network increases, as you get more orders occurring within a certain neighborhood, within a certain store, you've got the ability to not just batch, but you've got the ability to get the Dasher to the store quicker than you otherwise might have.
You know, there's really, you know, if you think about the sources of opportunity, it's really reducing the amount of time it takes for a Dasher to get to the store and reducing the amount of time that a Dasher spends in the store, and we continue to work both those levers, and that's what's resulted in the improvement in terms of Dasher costs that we're seeing. The second thing, I'll say, which is really just to clarify, you know, last year was anomalous in terms of Dasher cost because we were operating in a very expensive labor environment that was fueled by fiscal stimulus. In some ways, Dasher cost this year just, at least in my mind, normalizing back to historical levels, versus ending incremental. Last year was elevated, this year isn't.
With respect to your, the second question around our platform service products, such as Drive, we see continued excitement, you know, for the Storefront. I mean, in many ways, you know, our platform services business experiences similar seasonality as our marketplace business where, you know, the second and third quarters are generally more muted in activity.
That's mostly because as, you know, customers are back out, you know, many of whom are, you know, taking advantage of the good weather as well as, you know, perhaps lost vacations from the, you know, two years of COVID and now eating out again or visiting retail stores again, that, you know, these stores have to make sure that their in-store activity is protected and taken care of and the customer service levels are exceptional, you know, before they, you know, invest aggressively in their off-premise business. While there's some seasonal kinds of activity happening in that business, you know, I think the COVID highs in terms of the excitement to invest and continue to accelerate the momentum behind e-commerce for all of these retailers across any category remains, you know, just as high as ever.
That's something that we expect to continue to help grow our platform services business, whether they're, you know, large merchants like some of the ones you mentioned who participate with products like DoorDash Drive or smaller merchants that really need help with getting online for the first time and growing their kind of same store sales off premise with products like DoorDash Storefront. You know, our focus right now is making sure that those products can be, you know, easier to use and that we can build products to help teach the playbooks that we've used to build a successful digital marketplace in our own right, such that these businesses can do it on their own.
Thank you.
Thank you. Your next question comes from the line of Ron Josey from Citi. Your line is open.
Great. Thanks for taking the question. Maybe two, please. You know, the chart in the note in the letter that talks about existing consumer order rates, 2022 is trending higher than previous years and suggesting that these users in 2022 are more engaged. I'm sure. Can you just talk about the drivers here? Is it greater repeat rates, adoption of newer verticals, impact of DashPass? I'm sure it's all the above. Maybe the bigger question is just are these newer users, this newer cohort of users, talk about how that compares to the prior cohorts. Are they just doing more? Maybe, Prabir, as a quick follow-up, you mentioned just a strong cash flow generated from the U.S. restaurant business.
You know, any way to provide some guideposts or insight in terms of that profitability of that U.S. restaurant business? Thank you.
Hey, Ron. Let me start with the second one first. On the U.S. restaurant profitability, we haven't provided any disclosure to break that out, you know, other than to say that it you know continues generating more contribution profit and has improved both in terms of its net revenue margins as well as its contribution profit as a percentage of GOV on a year-on-year basis. We're happy with the progress there. As we've said previously, you know, it's a valuable funding source that we use to make investments in these new categories that we're growing.
In terms of your question around the order rate chart, really, by the way, the purpose of that chart was to demonstrate the fact that the order rate trends were similar to what we've seen historically. You know, to make the point that increased inflation as well as potentially weakening consumer spending has not had an adverse impact relative to old cohorts. It's hard for us to untangle the impact of consumer spending from ordinary course seasonality. Taking a step back in terms of the 2022 cohorts, you know, we're happy with the quality so far. Remember, we run our sales and marketing to a payback period, and we've been operating within the same payback period for quite some time now.
You know, what's driving that is not just enhanced order frequency, which has continued growing on a year-over-year basis as a result of, you know, improvements in selection, quality, and price, as well as the new categories that we're adding, but also improvements in terms of the core margin structure of the product. The core product has gotten more profitable, in part due to subtotals, but also in part because of improvements in terms of Dasher cost, the quality of our orders, which improves our customer support cost and so on. That, coupled with the order frequency, has contributed to better LTVs and hopefully the same payback.
Thanks, Prabir. Appreciate it.
Thank you. Your next question comes from the line of Ross Sandler from Barclays. Your line is open.
Hey, guys, two for me. Prabir, the 30% retention stat for Wolt, is that comparable to the 48% for core DoorDash? I know they don't have a subscription business built out yet, and some of their markets are a little bit younger. Could you just walk us through that? How does that 30 compare to some of the E.U. competitors that they face in their home markets? Do you think the gap is as wide between that 30 and the competition as it is between the 48 and your U.S. competition? Then the second question is just, you guys gave a good overview of how the consumer is holding up. I'm just curious, is the frequency for DashPass kind of standalone holding up as well as non-DashPass?
I know there's a mix shift towards DashPass, which is driving up frequency, but could you just talk about those two kind of separately? Thanks.
Yeah. Ross, maybe I'll start, and Tony can chime in. First on the 30% retention, I'm not sure what the 48% is that you're referring to. The 30% is month 12 retention. If you actually compare that to DoorDash, you know, versus Wolt on an apples-to-apples basis, you know, it's pretty comparable. In fact, in some markets, it's even higher. We feel good about the retention stat, certainly compared to our data. When you look at our data, using third-party sources, you know, we understand that our retention is better than everybody else in the category. In terms of the European competitors, you know, there isn't an exact apples-to-apples source, right, that compares market to market.
Based on what we're seeing in terms of competitors in the U.K. and other markets that are covered, the 30% actually compares favorably. On the question of DashPass, you know, DashPass frequency as well as order frequency of our classic product, you really need to look at it on a cohort level. Yes, you've got mix shift between, you know, as you get more DashPass subscribers, the blended order frequency grows. Even on a cohort level, the underlying order frequency has continued to grow. And what's driving that is these new categories. We're seeing people adopt new categories. Tony referred to the 14% adoption rate at the end of Q4, which has continued to grow in Q1 and Q2, and that's driving order frequency growth at the cohort level.
Thank you. Your next question comes from the line of Jason Helfstein from Oppenheimer. Your line is open.
Thanks. I just wanna dig a bit more into DashPass. With the economy reopening and kind of return to work progressing in a certain direction and increased use of ride-sharing, is it making it customer acquisition of DashPass any less efficient or more challenging? Secondly, I think you said that, you know, you pointed out Dasher costs are down this year versus last year, but specifically in perhaps this month and last month, are you seeing the cost to acquire new Dashers come down even further? Thank you.
Hey, Jason. First on the DashPass front, you know, what I should say is we've not observed any impact on our DashPass sign-ups as a result of people going back to the office or increased ride-sharing or anything like that. In fact, our DashPass subs have continued to grow both on a year-on-year basis as well as on a quarter-on-quarter basis to record highs. We feel good that DashPass is a key component of driving better affordability for our consumers, and the growth has been consistent and reliable. That's great. In terms of Dasher costs, you know, the reduction in Dasher costs was really driven by two things.
There's the Dasher cost per order, which I mentioned earlier, was really a normalization from the elevated levels last year because of increased fiscal stimulus. There also was, if you recall, last year, increased advertising costs because everyone was competing for Dashers, and that environment has gotten a little bit better, which has driven lower Dasher costs in Q2. Those Dasher costs continue to remain where they were in the last couple of months of the quarter. Thank you.
Thank you. Your next question comes from the line of Douglas Anmuth from JP Morgan. Your line is open.
Thanks for taking the questions. Just wanted to circle back on profitability and just the EBITDA guide for the full year. Should we think about the increase at the low end there? Should we think about that as the same dynamics that you suggested in 2Q in terms of driven mostly by inflation? Is that all coming on the Dash side of the business, or are we seeing any improvement perhaps in your outlook there for both? Thanks.
Doug, can you clarify? Are you talking about Q3 or Q4?
The full year outlook for EBITDA.
Yeah. The full year outlook of EBITDA, I mean, we're bringing it up because we've made progress here in the business, both in terms of overall scale has increased relative to our expectations at the beginning of the year. If you remember, our guidance at the beginning of the year was, I think it was $49 or 50 billion at the top end. That's gone up. Second, we are seeing positive benefits in terms of subtotals, which we talked about earlier, which results in more revenue in EBITDA. Third, Dasher costs are trending slightly better, and that's been driven by two things.
There's product changes that have helped drive increased retention of our Dashers, as well as some of the macro factors such as, you know, rising cost of living and declining consumer savings that are helping increase the retention of our existing fleet. It's these various factors that have given us a little more confidence on the on EBITDA, as a result of which we have increased the low end of our our guidance. It's really a commitment to say, you know, that we're gonna stay above break even.
Great. Thank you, Prabir.
Thank you. Your next question comes from the line of Nikhil Devnani. Your line is open.
Hey there. Thanks for taking the question. Just on the Q3 guide, if we take Wolt out, looks like GOV is set to kind of step down sequentially for core DoorDash. Just wondering if you get there with the assumption that the July trends kind of hold roughly flattish through the quarter, or is there some further kind of softness embedded in that outlook? And then as a second question, you know, just given all the macro concerns, have you seen any indications that consumers are trading down here in the types of restaurants that they order from? And any kind of color you can provide on the demographics of the customer base would be helpful. Thank you.
Sure. Maybe I'll take a crack at that. The first thing I'll say is our consumer metrics, you know, remain healthy. If you look at what happened in Q2, our MEUs grew by double digits year-over-year. Our order frequency grew. Our pace of consumer acquisition continued to remain healthy. These signals provide, you know, a solid foundation for growth in the long term. With respect to the second half specifically, we expect normal course seasonality this year. In general, we've experienced growth in Q4 and Q1. Sequential growth in Q2 and Q3 is usually muted as a result of summer seasonality. In fact, if you look at our Q2 to Q3 growth last year, you'll see that our GOV dipped a little bit, and we're baking that in into the guide.
The second point I'll make is the macro environment continues to remain uncertain. You know, we haven't seen any impact from weakening consumer spend, at least so far in Q2. We're accounting for that uncertainty because it could have an impact on normal course seasonality and the bounce back that you see in Q4. That's what we're baking into our guidance. Can you repeat the question on macro?
Yeah. Just, any indication that, consumers might be trading down in the types of restaurants they order from, and just a reminder what your demographics look like, for the customer base. Thanks.
Yeah, what I'll say on that point is, at least based on the data we've seen so far, we haven't seen anything that would point to a particular income tier or people shifting from, you know, certain types of restaurants to another. In fact, I think we said in the letter, you know, our subtotals increased because of higher item prices, but that was offset by fewer items per order as consumers responded to inflation. So it's less that they're shifting away and adjusting their buying behavior from other restaurants. They're spending the same amount, just buying fewer things. That just goes to show you how resilient we're seeing that in the data.
Thank you. Your next question comes from the line of Michael McGovern from Bank of America. Your line is open.
Hey, guys. Thanks for taking my question. I wanted to dig a little bit into the gas rewards program. Just curious, I noticed you listed gas, the program, as one of the contributing factors to Dasher cost per order actually being down. I was wondering, is there a potential impact on Dasher supply or Dasher cost per order when the gas rewards program ends? Secondly, is there a chance that that could be extended beyond August thirty-first if there is a potential supply impact from that? Are the savings from that ending in August currently being baked into guidance for Q3 and for the full year?
Hey, Michael, it's Prabir. Maybe I'll take a stab at your question. Yeah. We spent over $40 million on the gas savings program, and, you know, we've received very positive feedback from Dashers. You know, the commentary I think you're referring to is, it's not that Dasher cost per order reduced, but what ended up happening is the retention of our existing fleet improved. That the improvement in that retention of the existing fleet was driven by three things. It's the product changes that were made in order to help retention. It's the gas rewards program that frankly defrays the increase in fuel costs for Dashers. Third, the macro factors that we talked about around declining consumer savings and rising inflation.
It's the combination of these three things that we believe improved the retention of our existing fleet that then resulted in us needing fewer new Dashers and therefore acquiring a greater portion of our Dashers organically than we otherwise would. That then translated into lower DAC costs. In terms of renewing the program, you know, it's too early to say right now. We have assumed that we will, you know, we continue to operate the current Dasher program through the end of August, and we'll make a call depending on where gas prices are as well as other things. At the end of the day, it might be a cheaper way to obtain Dashers, but we'll see as we make progress here in the quarter.
All right. Great. Thank you very much.
Thank you. Your next question comes from the line of Mark Mahaney from Evercore ISI. Your line is open.
Hey. Wanted to ask about whether you're seeing any pressure from competitors in non-urban markets, either on the restaurant supply acquisition side or consumer incentives. Since the Amazon Grubhub deal was sort of announced, does that show up at any of the metrics that you track? Thank you very much.
I can bat lead off, and then feel free to chime in here, Prabir. You know, so far, we haven't seen, you know, impact, whether it's, you know, recent competitor announcements, or, you know, moves to invest in certain types of geographies versus other types of geographies in the numbers. But obviously, you know, we're taking stock of what's happening. But I think it's important to remember, you know, regardless of what's happening in the external environment, that, you know, our focus is making sure that we continue building the best products.
I mean, at the end of the day, the customer, whether it's, you know, for our platform or someone else's, they're gonna judge all of us on the combination of the selection of places we deliver from, the quality of that delivery experience in terms of speed, timeliness, and accuracy, the affordability of the platform and the customer service level. It's that combination I think that so far has been evidenced by our performance with leading retention order frequency that has separated us from the pack, and we have to just keep making sure that we stay ahead on that dimension. You know, at the end of the day, you know, it's that combination that ultimately is gonna judge us or anyone else.
Even if you offer the product for free, if that combination isn't where it needs to be for the customer, I'm not sure it's gonna matter.
Okay. Thank you, Tony.
Thank you. This concludes today's conference call. I would like to thank our speakers and thank you all for joining us today. This now concludes the call. You may now disconnect.