Doordash to cut 6% of global workforce
Doordash Inc. is cutting about 1,250 jobs to rein in expenses, acknowledging that a rapid expansion during the pandemic boom has led to mounting losses.
“While our business continues to grow fast, given how quickly we hired, our operating expenses — if left unabated — would continue to outgrow our revenue,” chief executive Tony Xu wrote in a letter to staff on Wednesday.
The cuts will affect about six per cent of the company’s workforce, a mix of U.S. and non-u.s. based staff, according to people familiar with the matter asking not to be identified as the announcement was not yet public. By scaling back head count, Doordash aims to curb operating expenses, which topped US$2 billion in the third quarter, largely due to stock-based compensation and the absorption of Wolt, the Finnish food-delivery company it acquired last year.
Doordash’s net losses have more than doubled over the past year, increasing every quarter to US$296 million by the end of September, compared with a loss of US$101 million a year ago. The company reported adjusted earnings before interest, taxes, depreciation and amortization of US$87 million in the third quarter. That metric strips out expenses like stock-based compensation or non-recurring costs that executives deem to be outside the scope of operations.
Doordash shares jumped 4.4 per cent as the market opened in New York.
The San Francisco-based company is the latest technology firm to cut jobs amid higher interest rates and slowing economic growth. But unlike other companies that are seeing less consumer demand due to rising inflation, Doordash’s order volumes have remained resilient, growing 27 per cent in the third quarter compared with last year and boosting revenue to US$1.7 billion.
The pandemic supercharged consumers’ affinity for takeout when coronavirus lockdowns shuttered indoor dining. Doordash increased its share of the meal delivery market in the US and garnered 56 per cent of food delivery sales as of September, according to Yipitdata. But that growth has also come at a cost. Competition in the sector has only intensified, and the company has spent heavily to sustain growth by expanding its footprint in non-restaurant categories like convenience store items, groceries and alcohol. Last year Doordash acquired Wolt in an all-stock deal valued at about US$8 billion to increase its international presence.
Xu said Doordash “will continue to reduce our non-head-count operating expenses, but that alone wouldn’t close the gap.”
Some tech companies that are implementing cost cuts are finding other ways to reduce payroll costs. Lyft Inc., which eliminated 13 per cent of staff earlier this year, said it would be shifting hiring toward international markets like Canada and Eastern Europe, where equity is a smaller or nonexistent portion of an overall compensation package.
Xu said Doordash will offer affected employees recruiting support, honour stock that vests in February, and extend health benefits and termination dates until March to allow people living in the U.S. on temporary visas sufficient time to find another job.
While deteriorating economic conditions were not the primary reason for the job reductions, Xu added that Doordash is “not immune to the external challenges” and the company’s growth has tapered compared with pandemic metrics.
Rising interest rates and the prospect of an economic recession have contributed to a rout in tech stocks, as investors punish companies that have historically prioritized growth over profits.
Shares of Doordash and food-delivery rival Uber Technologies Inc. have fallen 64 per cent and 34 per cent, respectively, so far this year.