Q4 2019 Earnings Call
[music], ladies and gentlemen, thank you for standing by and welcome to Super Technologies, Inc. fourth quarter 2019 earnings conference call at.
As time, all participants are in a listen only mode. After the speakers presentation. There will be a question answer session.
Good question during the session you want me to press Star one on your telephone if you require any further system. Please press star Zero I would now like to hand, the conference over to your first speaker today and the writer Investor Relations. Please go ahead.
Thank you operator.
Thank you for joining us today and welcome to ever technologies fourth quarter 2019 earnings presentation on the call today, we have darkest Shahi Nelson check. We also have Kent Schofield and this is I believe writer me Investor Relations team.
During today's call will present, both GAAP and non-GAAP financial measures additional disclosures regarding these non-GAAP measures, including a reconciliation.
One of GAAP to non-GAAP measures are included in the press release supplemental slides in our filings with the FCC each of which is posted to investor <unk> Dot com.
Please note that we have also posted our 2020 investor presentation on our Investor Page I remind you that these numbers are unaudited and may be subject to change.
Certain statements in this presentation and on this call may be deemed to be forward.
Statements such statements can be identified by terms such as believes expects intend and day you should not place undue reliance on forward looking statements actual results may differ materially from these forward looking statements and we do not undertake any obligation to update any forward looking statements we make today.
For more information about factors that may cause actual results to differ materially from forward looking statements.
Please refer to the press release, we issued today as well as risks and uncertainties included in the section under the caption risk factors and management's discussion and analysis its financial condition and results of operations in our prospectus filed with the FCC in connection with our IPO on May 13, 2019, as well as our third quarter form 10-Q that was filed on November 15 2019.
Following prepared remarks today, we will open the call to question for the remainder of the discussion all growth rates look like year over year growth must under otherwise noted with that let me handed over to Darren.
Thanks, Emily Thank you all for joining US today 29, she was a major milestone year Gruber, we achieved 65 billion in gross bookings up 34% we crossed 100.
Third million Mark from Atsis, reaching 111 million in the fourth quarter and we increased the number of consumers using both rise in each by 60%.
We grew adjusted net revenue, 28% to 13 billion with growth accelerating from 18% in Q1, 43% in Q4.
We improve totally quarterly.
EBITDA of over 200 million year over year by 14 percentage points is it as a percentage of adjusted net revenue.
In 2020, we expect to see adjusted EBITDA losses to continue to decline.
To me. These results are validation of the strategies and 29 team will continue to relentlessly execute our plans for each.
Over the businesses in 2020.
In rides, we generated 742 million in rides adjusted EBITDA in the fourth quarter, covering or corporate overhead by 98 million.
We exited 2019 at a 3 billion dollar run rate for rides adjusted EBITDA within our growth continuing to accelerate in Q4.
The gross gross bookings in our high priority markets, Argentina, Germany, Italy, Japan, South Korea in Spain by four times the rate overall rides GB growth.
We expanded our set of products, serving high value consumers and use cases, including the launch of Gruber comfort, which grow which drove premium rides growth of 50.
5% in Q4 and over LIBOR for business, which achieved 1.2 billion and gross bookings in Q4.
We also continue pursuing low cost products, such as two and three wheelers and are using or superior matching capabilities and data models to drive more efficient shared rods products.
He needs we steadily.
Third honest strategy to be number one or number two in every market by leaning into our investment in some countries in exiting others.
We grew gross bookings by over 70% and are now were first or second position in well over half of our country's reflecting the significant majority of our gross bookings, including the us UK.
France, Mexico and Japan.
The divestiture of our each business in India, and our exit from East and South Korea or recent examples over strategic discipline.
We also saw a promising results in the U.S. our largest each market. We grew our use each business, 44% to 1.7 billion in GBS.
Maintained a strong number two position.
At the same time, we increased our us take rate 500 basis points year over year to the mid teens, despite a competitive environment.
In 2020 will continue to follow the rides playbook, focusing on turning the Dol towards healthy growth market leadership and margin expansion.
Inefficiently curtailing losses throughout the year with Q4 2019 in Q1 2020, reflecting peak investment for our each business.
And our freight and other best segments were focused on responsible expansion with a heavy focus on unit economics will continue to be thoughtful and disciplined and allocating capital by.
Weighing growth ROI and the impact on total company profitability to determine the appropriate investment in each of these segments.
In our advanced technologies group, having completed 1 billion in funding, we expanded mapping and data collection efforts of five cities and continue to make progress towards an autonomous future with plans to expand.
And our on road testing of cars and autonomous mode with the vehicle operator, President and select cities. Just this week. We issued we were issued a permit which gives us the ability to resume testing in California.
In 2020 will continue to drive our roadmap for Eightg through the hard work of our dedicated employees Pittsburgh San Francisco Denver in Toronto alongside the.
Support from our investors and partners, such as Toyota and Denso.
I also want to touch on the regulatory environment, we're boots on the ground business with a physical presence in every market in which we operate regulation has been and always will be a constant for us and while our dialogue with regulators is ongoing as it should be we have by and large moved away from the question of.
Whether Roger in should exist to more nuanced questions around taxes fees and driver status.
We've achieved significant wins this year, including the successful lawsuit against the cruising cap in New York.
I wanted to several additional states in Mexico movement on reform and Korea continued growth in Japan, and Germany, and just yesterday.
A positive ruling on employment classification from Brazil highest labor court.
We firmly believe we share many of the same goals of the cities in which we operate Thats why we will continue to work in a positive collaborative manner.
While at the same Tom defending the interests of drivers riders and others rely on.
Bubar platform.
Lastly, we believe that a more disciplined capital environment will be favorable for business going forward, but we aren't just sitting you're hoping for better environment, we're making proactive changes to achieve significant cost leverage for both Roger needs, We're focused operating playbook, including improved machine learning Algos and further.
Automation and targeting of incentive and online marketing spend stronger tracking and focus for our offline marketing campaigns, the reduction of defect rates and improves self service tools to improve customer sentiment as well of contact ratios.
Continued improvement and payment costs improve matching routing pricing algos to increase.
Our marketplace efficiency, allowing our drivers to earn more per active hour and tech enabled automation as well as good old fashioned cost control to leverage our operational cost structure across the board.
With many of the onetime changes from 2019 behind US we're excited to sharpen our focus on execution to grow our business.
At massive scale innovate faster than anyone else improve margins considerably allocate our capital effectively and efficiently and do the right thing for all of our constituencies ultimately driving to excellent revenue growth and profitability.
Our progress in 2019 on our 2020 plans gives me the confidence to.
Challenger teams to accelerate our EBITDA profitability target from full year 2021 to Q4 2020.
It's important to emphasize that we plan to achieve this profitably target assuming only modest improvements in the current competitive environment and with the without the assumption of any significant changes to our current portfolio.
Earlier businesses.
Further long term, we remain confident about achieving our overall company adjusted EBITDA margin of 25%.
Specifically, we expect rights to deliver adjusted EBITDA margin of 45% with a 25% take rate.
And our each business to deliver adjusted EBITDA margin of 30%.
With a 15% take rate.
Now to Nelson for more details on the numbers.
Thanks to our now onto our GAAP results for Q4 2019, our GAAP revenue of 4.1 billion was up 37%.
GAAP cost of revenues, excluding DNA of 1.9 billion decreased to 47% from 54.
<unk> percent of revenues in Q4 2018.
GAAP EPS was a loss of 64 cents and compares to a loss of $1.97 Q4 2018.
For the remainder of the call unless otherwise noted I will discuss key operational metrics as well as non-GAAP financial measures, excluding pro forma adjustments such as stock based.
Compensation.
Our total company global trips of 1.9 billion grew 28%.
Mobile trips are driven primarily by growth in eats and international rights, particularly in Latin America.
Monthly active platform consumers were 111 million of 22% year over year or 8% quarter.
Quarter, our rewards program reached over 25 million members across Us Latin America and Australia.
Total company gross bookings of 18.1 billion growing 28% or 30% on a constant currency basis.
Adjusted net revenue or ANRR was 3.7 billion up 43%.
On a constant currency basis.
Our and our take rate was 20.6% of gross bookings up 190 basis points year over year.
Non-GAAP cost of revenue, excluding DNA decreased 43% from 50% of an art.
Insurance and payments as a percentage of and our improved quarter over quarter.
Quarterly and year over year.
Turning now to non-GAAP operating expense.
Operations and support decrease year over year to 13% from 15%.
Of adjusted net revenue, reflecting continued drive support efficiency improvements offset by a mix shift to each transactions, which are which are seeking to.
To make further.
Sales and marketing decreased to 33% from 35% of adjusted net revenue versus Q4 2018.
This decrease is primarily due to optimization that performance marketing spend partially offset by an increase in promotion spend primarily related to agreed.
R&D decreased to.
18% from 14% of and are in Q4, 2018, NGL decreased from 15% from 18% of an art versus the year ago quarter.
Quarter over quarter, our spend increased slightly due to elevated professional services spend we expect the gain leverage across 2020.
Our Q4 2019.
Total company adjusted EBITDA loss was $615 million Q4, and Q1 as I'd mentioned on earlier calls reflect the peak of our investment needs and we expect total company adjusted EBITDA loss to shrink starting in Q2.
Now I'll provide additional detail in our segments.
First on rides rides gross bookings of 13.
I think 5 billion grew 20% on a constant currency basis led by the use of Latin America.
Brides and our $3 billion grew 32% on a constant currency basis, driven by continued favorable market dynamics and use stability in Latin America since the beginning in 2019, an increased focus on share rides.
Yes.
Rides adjusted EBITDA was 742 million.
Or a 24.4% of rides and our this represented a quarterly record on an absolute dollars and margin basis, with a 240 basis point improvement quarter over quarter as a percentage of and our.
Each gross bookings a four.
Our point 4 billion grew 73% on a constant currency basis, driven by continued trip growth in both of US in international markets combined with higher average gross bookings per trip.
We maintained a strong number two position in the us for the third straight quarter only four years from our market entry with each gross bookings.
And the use of 1.7 billion growing 44% year over year.
He said our was $415 million up 154% on a constant currency basis due to pricing changes in use coupled with benefits from lower courier costs in the second half of the year.
Excluding east, India, which we divested does a motto.
In January of this year, each take rate was 10.1% for the quarter.
These adjusted EBITDA was a loss of $461 million or negative 111% of and our excluding eight east India eats adjusted EBITDA would have been a loss of $418 million.
Each take rate declined sequentially consistent with our.
Outlook, driven by seasonal cost increases as well as our investments in competitive markets to strengthen and grow our leading position.
On freight we grew and our over 75% and adjusted EBITDA was a loss of 55 million.
Great growth was driven by volume growth of 89% offsetting lower pricing from market tightening.
Our freight business continued to expand its offerings to carriers, including INAP bundles, which allowed carriers to book multiple loads at once thereby reducing empty miles versus non LIBOR freight patch bundles.
Our other Beth segment had an our 35 million and an adjusted EBITDA loss of 67 million.
Q4 represents a seasonal.
For bikes and scooter business due to weather.
We continue to focus on building a sustainable.
Saleable business that serves as an important acquisition and engagement channel for our core transportation consumers.
Jump one permits to expand in key markets, such as Washington, DC, and four markets across Australia, and New Zealand.
Our permit when and DC will make us the largest combined Docklands fleet operator in the city across bikes and scooters.
80, GE adjusted EBITDA was a loss of $130 million.
And in Q4 2019, the corporate DNA in platform R&D of $644 million, which represents a gionee in R&D.
Not allocated to one of our five segments increased 13%.
In terms of liquidity, we ended the quarter with approximately 11.3 billion in cash and cash equivalents and short term investments.
Across a number of our businesses, we use M&A as an important strategic tool and most notably with our acquisition of Karim.
We also announced the.
Acquisition of a majority is that just Warner shop to bring grocery delivery to millions of consumers on the Replatform beginning in Latin America.
This transaction is expected to close in Q2 2020 subject to regulatory approval.
We will continue to explore ways in which M&A can accelerate or de risk our path to profitability.
Now I'll wrap up by providing guidance and some relative context.
We remain committed to delivering profitable growth for all of our stakeholders, both investing for long term growth and expansion, while ensuring disciplined with our capital allocation strategy.
In the second half of 2019, we began the process of streamlining our footprint with the.
Singled mine to focus on profitable global leadership in our core businesses.
Most notably we rationalize our shared rights product and then as we exited two significant markets with elevated losses.
While we have already started demonstrating strong profitability improvements.
We view 2020, as a truly transformational year.
Beyond which we believe we will emerge with stabilizing bookings and revenue growth continued focus on leveraging our cost base and positive EBITDA.
Importantly, as we continue to eliminate bookings that are essentially empty calories in 2020, we expect to expand take rates in EBITDA margins, resulting in slightly lower gross bookings growth.
With that context in mind, we expect 2020 reported gross bookings of 75 to 80 billion, reflecting constant currency growth of 17% to 25%.
And reported growth of 15% to 23% within FX headwind of roughly 150 basis points.
This outlook includes the modest positive impact from acquisition.
The cream and modest negative impact for our each divestiture in India.
Further while Q1 is typically our slowest sequential quarter growth, we expect gross bookings the modestly declined sequentially in Q1, 2020, primarily driven by year over year declines in the shared rides product and the divestiture mentioned earlier.
Starting in 2020 in this.
Spirit of further improving transparency, we will be providing and our outlook as well.
We believe this disclosure should allow investors visibility into the topline metric that our business leaders are measured against internally.
We expect adjusted net revenue of $16 billion to $17 billion in 2020, reflecting constant currency growth of 26 to 34.
8% and reported growth of 24% to 32%.
Our and our outlook implies a take rate improvement of roughly 150 basis points year on year.
We expect Q1 take rates to be relatively in line with the Q4 take rate consistent with our normal seasonal trends.
For 2020, adjusted EBITDA, we expect a loss of one.
0.45 to 1.25 billion.
Further we expect Q1 EBITDA loss to be similar to Q4 2019 levels with similar investment levels in needs.
Beyond Q1, we are expecting a meaningful improvement in profitability throughout the year, including a new breeds.
As far as stated based on our visibility into 20.
20 trends, we're pulling forward our profitability expectations and now plant plan to end 2020 with Q4, marking our first EBITDA positive quarter.
We recognized a significant work remaining to get to this milestone and our teams are focused on executing our plan.
Finally, we expect stock based compensation of three.
800, 350 million in Q1, and we expect our Q1 2020 basic and diluted weighted average share count to be 1.7 to $5 billion to $1.75 billion.
And now with that we're happy to take questions.
Thank you if you'd like to ask a question. Please press star followed by the number one on your telephone keypad.
Your first question comes from Heath, Terry from Goldman Sachs. Your line is open.
Great. Thanks.
When you look at the things that are driving demand in particularly in the rights business in the U.S. and globally.
Anything in particular that you would that you would point to you've obviously been able to improve.
Ability in that business significantly what what's allowing you to keep demand at these levels even issue bring profitability.
And even as you bring profitability, we know pricings, obviously been as a lever there have you been surprised by the level of inelastic city of of demand and is there anything else besides that that you.
Would you would point to.
Yes, I think the the most important factor that I point to is that we're we're moving from a society that was dependent on transportation based on owned assets to a society that is going to depend on transportation as a service based.
On shared assets, so there's a very very consistent tailwind.
That we have in the us and across the world and that tailwind is going to service, while and continues to two to service while going forward.
And I think people are changing the way that they live the they are changing certainly the way that they get around.
And especially the younger generation is not a generation that associates car ownership with freedom. They associate noncore, our ownership with freedom using our services in addition to that.
We continue to execute on the base business, we do think that we've got.
On pricing power and and we are putting that pricing power and careful way into the markets, we're investing pretty aggressively in our premium product.
When you look at comfort and the launch across the World. We look at our enterprise business. Both in terms of you for B and move Hooper for health are growing at.
Very very attractive rates.
They are a number of countries that I mentioned, our growth countries, Argentina, Germany, Japan, Spain, et cetera, where we think the regulatory framework, which hasn't been constructive in the past can be constructive in the past and work on a growing in those businesses.
In the right way in those countries in the.
The right way so to speak.
We think two and three wheelers are very very big opportunities for us going forward, especially in emerging markets and we think that once we rebase. Our shared ride segments Reprice said I think our share rides business will continue to grow because we're growing based on improving the efficacy.
Of the of matching algorithms of versus just growing through pricing. So you put it all together and we're confident that the rods business you will continue to be a strong topline growth company and our ability to drive margins, which you've seen in 2019 is certainly going to continue in 2020 as well.
Great. Thank star.
Welcome.
Your next question comes from Brian Nowak from Morgan Stanley. Your line is open.
Thanks for taking my question I have I have to the the first one on the the full year bookings guide. The 75 to 80 billion actually helpful. Just talk us or how you think about the growth of the.
Rides bookings within that guidance in and there's a lot of moving pieces in the rides bookings between pooling in Latam and everything else is sort of talk us through some of the puts and takes in rides bookings, we should make sure we consider and how you're thinking about that growth. This year and then on eat Darren tons, because im very healthy improvement and take rates as well as growth.
In in the us to talk to us as to how you think about the the keys to continuing to grow at this type of rate in the us on the each side is it more supply as a discounting what are the growth strategies in the us each business.
I'll start with the U.S season, then and then on Nelson can can get into the rides guide so to speak were the JV.
God.
I think the most important factor as it relates to the growth of the us business.
Has really been about selection.
We have been very focused on improving the selection and the number restaurants that we have.
In our each segments.
If you look overall.
Paul will be improved we've got almost 400000 active restaurants is up 78% on a year on year basis.
And we've added independents and we've added a number of big chains, and big names as well and I think that the improvement and selection.
It combined with our.
Technology over the top technology that allows us to essentially lifts restaurants.
Whether we have a direct relationships with them or not.
Is allowing us to improve conover addressable footprint.
And that combined with again, the tailwind of more and more people wanting the convenience of getting delivery in their home.
I think has combined to.
Two two to have a pretty strong top line and a pretty solid number two position.
In the U.S. So we like what we see I think that at some point the growth rates you get to the law of large numbers.
But I think that the team executed well in Q4 Q.
One we're going to continue to lean in and then really the back half of 2020 is is one where we want to combined growth.
But also improved margins with each business and in terms of the rides growth I mean, you've heard us talk before I mean by definition the law of large numbers does take hold.
As you know our business does over $1 billion.
So a week in terms of gross bookings. So I think you can tell in the guidance we are trying to.
We recognize the fact that we're not doing the empty calories and I think you've heard that both in dollars comments as well as mine, but we recognize the fact that.
We're going to really be focused on having profitability today.
No.
On past calls we've talked about the fact that we deemphasize share rides natus that is positive as well, we do actually met look at our trip growth as well as our gross bookings growth and so while the gross bookings growth based on the guidance. We gave you would suggest is below 20%. The trip growth is still above it and so we continue to look at.
Both but again, we're really focused on optimizing the system right now.
And if anything we probably because we are trying to take the empty calories out we are definitely much focus on it and so I think that as reflective in the overall guidance that we are doing.
Great. Thanks.
Next question your.
Next question comes from Justin Post from Bank of America Merrill Lynch. Your line is open.
Justin Post your line is open.
Just the there sorry about that sorry about that I was on mute Nora yes.
A couple of question for you pretty optimistic.
Our long term margin targets and take rates what are you seeing in your business that gives you confidence in those long term margins is a specific markets, you're seeing or is it a broad improvement you've seen over the last six months and then secondly, getting the EBITDA profitability in Q4.
Certainly higher than than street numbers do you.
Worry at all did that kind of boxes, you and limit your flexibility and is there any cushion in there theres some adverse a regulatory stuff. Thank you.
Yes, I think I'll.
Talking about these in the margin numbers in Q4, those assumption as it relates to Q4 and profitability is on the environment doesn't change.
Significantly one way or the other so there may be short term bumps, one way or the other on and we will deal with them.
We are assuming a rural that doesnt change significantly and we are challenging the team internally to get to profitability and we think that just as we challenged the team internally, we're going to communicate it's our investors and and.
Take is we expect to execute and it's not a single lever that is going to get us there it's multiple leavers.
And you know is at boxing us in its boxing ascent to execute effectively as a team and I'll take on that challenge and I think we will take on that challenge just to give you a little bit of context as to.
Our ability execute if you look at our rides business.
Q4 to Q4.
Our rides business grew 18 are about 700 million a little bit below 700 million in terms of revenue and over the same period with a 700 million increase.
In our they delivered a 550 million increase in EBITDA, So thats, an 80% flow through of incremental EBITDA from revenue growth to to EBITDA growth in order for us to hits.
Q4.
If you look at.
For example of the mid mid range of our revenue growth, let's say, it's it's the mid range of our revenue growth you would have about a billion to 1.1 billion of additional revenue Q4 next year to versus Q4. This year and are already to get to breakeven you need to drop about 55% of.
That incremental NR to the bottom line.
So we've executed on the Rightside, 80% our expectation is going forward, we're going to continue lean forward and we will invest in big time growth areas of the business, but we do think that this is a team that has shown as capability.
Do you know dropped 80% to the bottom line and I think that.
Our pushing ourselves to dropped 55% to the bottom line is not asking for too much and it does provide us flexibility to invest where appropriate.
To really work to operating costs appropriately and then pull back where it just doesn't make.
Makes sense to invest.
Got it. Thank you and then on the long term others in markets that really give you confidence in those long term take rates and margin targets.
I think on on the margin targets long term the rise of business we have.
You've seen the rides business essentially move in the right direction so were.
Pretty confident.
Of the rise long term margins when I look at each for example, our US business. The take rates are not quite up to our 15% take rate, but there certainly getting much closer.
And when we look at kind of the operating costs work that we've done on the rides business. If we run the same play that we.
We do needs, we're confident that we can hit those kinds of long term margins.
Thank you.
You're welcome.
Your next question comes from Ross Sandler from Barclays. Your line is open.
Hey, guys just one rise in one on each.
You mentioned that single rider truck volume was.
Three points higher than total, which would imply that you've already shopped a lot of Lloyd on Liverpool in 2019, so while these low calorie that you're talking about taking out in 2000. Each one is that more shared right do you sell is that.
Single rider couponing any color on.
What's incremental for 20 versus what we.
Oh on 19 already.
And then on each just a question high level like the Australian market is very profitable for you guys.
Is that because of the density because of something unique in terms of the fee structure or simply because as far less competitive and how can you asked several look like not without consolidation.
Thank you.
Hey, Rossum as far as the ride segment and shared rides et cetera.
We I'd say, we started shopping real would and shared rise in Q3 Q4. So we will continue to have tougher comps on a trip spaces with shared rise in Q on Q.
You too and then Q3 in Q4, you're going to get to comps that reflect the kind of long term growth rates that we expect there.
I think in Australia as far as the business goes there. It's just a really good market for us.
The market you know, it's it looks like a western market as far as this as far.
The structures go payment structures et cetera, and I think we just have a team on the ground thats executed really well and when a team on the ground executed really well you get really great top lines and very very healthy margin levels and building out added.
We do have some cities even here in the us where we have a profile that resembles what you're suggesting.
In Australia.
And then remember too that Australia, we do have three competitor so.
You should assume that basically every market that we compete that we're operating in we have anywhere from two to four competitors. It's the nature of these this market. These are very very large out hams to go after.
And we don't believe.
I'll leave that there'll be a single winner take it all but we believe that were in of we're in a unique position because of our global scale and because we're number one and most of the markets that we operate in and because we're multi product to have a structural margin advantage, which we can either take to the bottom line or deliver better service.
It's or or drive kind of stronger revenue margins than than our competition.
Your next question comes from Mark Mahaney from RBC. Your line is open.
Okay. Thank you.
Two things one.
Can you talk a little bit about synergies that you've seen between rights in each.
And potential synergies you think you can generate between those two and then secondly spend little time, just talking about some of the products that you've rolled out I don't know theres any read throughs, yet from some of the driver changes that you've made in California, and I don't mean for in terms of.
Complying with regulations or whatever I mean in terms of weather drivers are more interested.
Did in driving with with Uber because of those changes in likewise on the on the rider side some of the product changes some of the loyalty programs. What have you seen that's a indicated which ones which of these product changes have worked well from a from a rider perspective in which Havent worked well. Thank you sure absolutely. So in terms of the synergy goes I think there's no.
No single magical.
When it's a combination of a number of factors that we're putting together. So one is our cross promoting our services together. We now have subscription programs that are rides only eats only an MBR as well we have a loyalty program that.
Goes across the various products as well all of those coming together are significantly increasing the number consumers who use both of our services and whereas early on.
If what if a rider was using two of our services the number of transactions per month was about two weeks.
It's a single user now that number's closer to three X. So the the returns on higher usage of our products are actually going from a two extra three X, which for US is very very encouraging the number a loyalty program members that we have is 20.
5 million and growing because we're expanding that program on a global basis, and then I would never underestimate two very important factors. One is the power of the rubber brands everyone knows as you probably already have an account with US you probably have a credit card with his et cetera, it's very very easy to sign up I think.
Riders and.
Drivers Trust us across the world and end the leverage that we're getting on our technology spend.
We can spend more than anyone else in terms of driving innovation in terms of big data, having the most sophisticated matching and pricing algorithms out there and at the same time I think our technology spend is.
The percentage revenue NRG inane or overhead cost as a percentage revenue can be advantage versus the other players. It's just the scale advantage that we have so we got a customer advantage. We've got a brand advantage and we've got just a scale advantage all of which play a part.
In our model going forward.
And then as far as your your questions on drivers et cetera in California, the changes that we made.
It's too soon to tell at this point.
Our drivers the drivers are.
Reacting quite well to the increase in information.
That they're receiving.
On average the service levels as it relates to riders has done a little worse as far as a predictability of getting the ride that's something that we're working through a pretty carefully.
Prices in California are up more than let's say the rest the rest of the country. As a result of the combination of these factors so some of.
These changes are resulting in higher prices to the end customer, but it's very early and there's a lot of work to do going forward.
Okay. Thank you.
You're welcome next question.
Next question comes from Eric Sheridan from FBR. Your line is open.
Thank you so much maybe two if I can.
Darwin you've talked about the right business long term how are you thinking about the parts of the penetration curve that can be unlocked through product innovation or pricing dynamic moves over time I think one of the biggest questions. We get is just sort of how the industry continues to evolve towards disrupting car ownership.
Last transit things that can push the S curve.
Penetration higher over the next sort of five to 10 years, and then on either side of the business maybe using the U.S. An example, curious how you see the supply dynamics are the relationships with our the food industry developing over the next couple of years and how wide askew there might be in some of the economics.
The partnerships you see that evolved in that tasks on that business. Thanks, so much.
Absolutely so I think that when when we look at the rise business. There are four broad growth vectors. One is geographic growth, we talked about markets that were not as penetrated in that we will drive penetration the Germany's.
This brings the world second for us is using technology and improve matching algorithms to improve the efficiency of the marketplace.
And that is we think we're just in a much better place than anyone else. We've got higher a market density we've got more data than anyone else that if.
Efficiency, we can either delivered to the driver where we can deliver to the rider depending on what we think the best kind of growth driver is.
Third area for us is to drive low cost and low cost for us to wheelers three Wheeler shared rides once we repriced or shared rides and then introducing new products like transit.
Scooters into our portfolio as well so it's a combination of low cost and marketplace that introduces we think say aerie very significant Tam to us.
And then last but not least as enterprise segment. This is a LIBOR for business.
This is segmenting, our customer base, our premium customer base both.
In terms of service levels and the kind of product that we have out there is less of a factor in terms of bookings growth, but it's a very significant factor in terms of margin growth you put it all together and we think we have a very balanced kind of growth profile, both top and bottom line going forward.
As far as each business goes we think theres.
Plenty of room to run we've been really focused on improving selection I would say that we made big moves and selection in the second half of the year. So I do think that there's some year over year comping on the east side, especially in the first half of the year.
And we still think we're in the very early innings, we talked a little bit about for.
Example, Australia, where each business on a topline basis is comparable to our rides business.
Right now, it's not even close to that on a global basis. So we think that are each business has a long ago.
Thanks Star.
You're welcome.
Your next question comes from Doug and much from Jpmorgan. Your line is open.
Thanks for taking the questions said to first on eat you talked about leaning in more and one Q and getting more leverage in the back half of the year can you just talked about how far behind.
Do you think eat is on the rationalization path relative.
To the ride sharing industry and then second can you just talk about your.
We kind of findings around subscriptions and how that's working across both rides and eat thanks.
Yes for the rationalization goes it's it's up it's very tough to predict how markets are going to move but if if we kind of step back the same time last year.
You'll remember that in our ride segments, we leaned in pretty aggressively Q4 in Q1.
And then you've seen what happened in the second half as it related to rides margin improvement. It was it was quite substantial.
It's difficult to predict what's going to happen in the east segment, we do see signs.
Of rationalization.
In the marketplace, you see it with Ipos coming in and you just see it everywhere.
So while it's it's impossible for us to predict short term timing I think the long term rationalization trends are there and I think we as a team have demonstrated track record of being able to dry.
Five.
Rationalization internally and really being able to drive margins internally on with the right side and the east team is running the same exact play there just about a year behind the rights.
Side and appropriately so because we wanted to lean into growth.
On the side.
As far as subscription goes.
Very early but the results on a subscription rights have been promising for for a long time, we really just launched eats subs.
In in a few markets pretty recently and there are markets, where it accounts for more than 10% of volume. So we're pretty encouraged by what we see with the subs.
And then really the other area that were that we're very very early in the optimization of is buying kind of across hubers subscription products as well. So I think really 2020 is going to be the euro subscriptions at over.
Okay. Thank you Don.
Okay.
Your next question comes from.
Mark.
So Mike from Bernstein. Your line is open.
Yes, hi, Thank you for taking my question.
Just a follow on on market rationalization and some of the recent investments in divestments that have happened.
Well beyond that journey in terms of further kind of rationalization from an investment divestment point of view and as we think about some of the.
Items that will share does that include or expect to include additional kind of movements in that space.
And then a follow up question if I can around E.
Talk a little bit about how its behind but there is quite aggressive that both take rate and EBITDA targets coming up how does it get there is this a little bit of just flexing kind of pricing is there.
Scale up of the AD product or how do we think about the different components that will drive that thank you.
So on the first point in terms of the guidance that is basically our internal plan. So we don't really build in a lotta M&A divestiture.
That being said, we do have a capital allocation process that we go through.
Both for rides anyway.
And we are working closely with the team in terms of making capital choices and so you should expect that we'll continue to make choices.
You should expect us to continue to be active in that as we go through it there may be situations, where we're in two marketplaces and we have to pick right, but we.
Our committed to being one or two or taking action against that and you should also expect that if theres an opportunity for us the lean in to win a market that we think we want to be in that you should expect that action as well. So when I gave you the guidance. It was really our internal plans based on organically we are today.
With the same set of businesses, but that being said, we know we have lot of levers at our disposal and you should expect that.
Yes, it's incumbent upon the management team to deliver against the guidance.
And then as far as the the second question is.
As to our confidence in long term margins within we we have.
Big markets and the each business that are pretty close to the long term revenue margin.
And we so that gives us confidence we do think that there is opportunity with media et cetera.
That could actually help.
Attain margins above our long term guidance.
But we don't want to count on it.
And and then on the EBITDA side, you can imagine just we we the cost side of the businesses as much more predictable and we already have over 100 US an international cities that are segment EBITDA positive any today.
And.
Seeing that road map our rides roadmap. These cities that are positive today gives us a lot of confidence as it relates to long term east margins.
Great. Thank you.
You're welcome.
Your next question comes from I came you guys from Citi. Your line is open.
Great. Thank you good afternoon.
Just a two part question on 80 G. One financial and one strategic on the financial I was hoping you could dimension, what you're assuming terms HPG spend both this year as well as in the longer term and strategic question just around timing of when you expect to enter the kind of hybrid market of human drivers in a these their.
Talking potential partnerships and also.
Just the overall competitive environment can you just good with one of your competitors in San Francisco, suggesting that they might be ready to actually deployed on level for the next couple of years, just an update there would be helpful. Thank you.
So in terms of from modeling standpoint, I I wouldn't expect a demonstrable difference over the.
Year to regarding TJX or there may be some increase but it wont wont be significant.
So I don't think you're going to see a big step up there.
And as you know Endara mentioned in his script, we did raise funds in this last summer, which effectively prefunded about 18 months of 82 development and so.
I think you should expect us to continue to lean in there and on 80 Jay.
That being said all that are kind of talk more competitively what we're seeing out there and I think that the comment that out that would make is we don't think level for.
For a autonomous service.
That's also trying to develop a network is actually commercially viable.
We need to have what we've experienced as you need to have 99 plus percent.
Availability essentially for a daily use case for folks to use you over and over again, so level for doesn't cut it unless you.
Own a network and unless you operate a network or.
Unless you partner with the network that is actually the key of why we think that Eightg isn't a unique.
Place to succeed.
And why we're very much off for partnering players who may deploy level for.
And can take advantage of our networks to do so so I think thats kind of definitionally to what we've been talking about level forthcoming is coming in the next couple of years, we will be a part of that but level for an in network. Together. We believe is the only commercially viable product out there and were.
Uniquely situated to play a very important part in that game.
That's helpful. Thank you.
You're welcome next question.
Your next question comes from Lloyd Wamsley from Deutsche Bank. Your line is open.
Thanks to if I can just first can you talk broadly about just trends in the competitive.
Environment in the Rideshare segment are there any markets, where you're seeing competition pick back up or or is it continuing to move in the right direction in the U.S. and globally and then second question just on the 150 basis point take rate improvement.
In guidance can you give us a sense for how much of that is going to come from.
Food food delivery versus where I chair.
And is is that a function at all as like price increases or just simply rolling back existing.
Fiber incentives any anything you can share there.
Yes, it's a and as far as a competitive environment in the us from a long term standpoint or at the competitive environment.
As has been constructive has rationalized a in the past month or so we've seen.
Lift our competitor probably beyond balance more aggressive in terms of discounting and incentives.
We'll see where that leads.
We think from our standpoint, you know we've spoken about margins and.
And making sure that our investment in marketing incentives et cetera is an investment that makes sense from a return on invested capital basis.
And our being constructive as it relates to margins going forward on a global basis, we have multiple competitors in every single city, we have sometimes.
Competition Nab, sometimes the flows I'd say, it's largely constructive.
And we believe that gone up our future is in our hands because we're the ones as the largest player all around the globe who's kind of setting the standard so to speak.
Now if you want to us the second question in regard to.
Great I mean, I think it's going to happen both on rides and needs. Justin As example, and you heard me in my comments are each take rate in the fourth quarter was 9.5%, but if you exclude India and as you know we sold our Indian needs business that increased as a 10.1%. So I think as we think about how we continue to work through as we think about our capital allocation.
Category.
We are highly confident we'll be able to increase our each take rate otherwise, we'll just be continuing to play out will verde been doing and so we do expect that that will increase as well and it's really not one big thing. It's the combination of both and just getting more efficiency in terms of how we're spending.
All.
All right. Thank you.
Welcome next question. Your next question comes from Ron Josey from JMP Securities. Your line is open.
Great. Thanks for taking the question Don I wanted to ask will that more about eating contribution margin as a as take rates get to that 15% level and I ask only because really today.
Rob talked about relatively low.
Wins on QSR and non partner orders in the comment earlier today that you added a lot of non partners to the business within each so just can you talk little bit about maybe contribution margins on partners and and non partners on the networking and really how would those margins expand over time as we get to that profitability. Thank you.
Yes.
We're on our non partner volume for each is very very small as a percentage of our overall volume. This is a new feature that the team built out really in Q4 were being careful in rolling out the feature because we want to make sure that the delivery times the delivery qualities continued to be at the.
Levels of excellence that that that we insist on.
So I would not assume that non partner revenues are a significant percentage of our volume certainly in Q4 next year, we're going to build up our non partner volume, but we'll make sure that we do it in a way that makes sense both for the topline.
And on the bottom line.
Got it thank you.
Next question. Your next question comes from Jason Helfstein from Oppenheimer. Your line is open.
Thanks, maybe ask about California, what have you learned since making product changes in the California, what's driver feedback rider feedback.
And how is the change usage in spending day.
Hey, Jason again, I would stress that it's very very early driver feedback has been positive in terms of the information the empowerment that I think our driver a partners feel I think that the service itself prices have increased.
More than they have nationally so I think from a rider standpoint, the service on balance has gotten more expensive, but it's very very early in and you know I would comment to that 85 in general.
For a number of contractors et cetera has created a huge amount of uncertainty we rolled out these.
Changes to be very clear about our position as a platform.
And to make sure that our drivers have the freedom to choose when and if they want to work.
We're going to be working through we want this to be a win win for our drivers.
And for the riders on our platform and we're going to be.
Reiterating to get there.
Short term, it's been I'd say net negative for riders.
And it's Paul it's it's possibly a net positive for drivers or hopefully we can get to a win win situation.
Thank you.
You're welcome.
Your next question comes from Youssef Squali from Suntrust. Your line is.
Okay.
Okay, great. Thank you very much Dara on Karim in the Middle East or North Africa could you. Please.
That more about that.
Business, how big is Ed growth rate profitability and anything either from a technology or product standpoint that they have that you can leverage or vice versa and.
On the E business I think you said earlier that you are number one number two in every market in roughly half of the countries in which you operate which means roughly half the country isn't where you operate you're not number one number two what does that makes look like in your base case projection of breaking even by Q4. Thank you.
So this nelson's on.
And we're actually not breaking that out as you know the deal just closed and I think over time, we'll probably give some more disclosure around it but right now we're not going to break that out we know that will be positive in terms of its impact on the business and the team has actually done a very good job in terms of building out their marketplace. There are some things we.
We can learn from there, but the teams are working on right now, but it's really too early to tell because remember the deal just closed a few weeks ago, Yes, I'd say on the cream side the.
We talked about the steps that we made as it related to relate to the part of the platform in the Super AFE strategy to Crean team is absolutely looking.
And to drive the Super our strategy in the Middle East I think some of these developing markets that particular strategy has has great potential we see incredible innovation from that local team.
Across the number services, including payments as well.
So I think that we're going to be learning from the green team and they're going to be.
Earnings are learning from us.
They made real investments and their driver relations.
Captains and cream speak so to speak.
And again Thats something that we can learn from we really want to deepen our relationship with our earners around the world.
And we've seen.
Really interesting activity from the Korean team that we could that we can all learn from it.
As far as are each business a number one and number two we've been really encouraged by our our trends that we saw in Q4, we definitely leaned in to get to more number ones a number twos.
And I think next.
Here, we continue or we expect more of the saying we've been gaining category position in most of the countries in which we operate and we're pretty confident that by the end of next year.
You know, we're going to be number one number two with where the vast majority of our volume.
Most of it will be or.
Nx and some of it will be inorganic both on the buy and sell side.
Oh. Thank you welcome next question.
Next question comes from John Blackledge from Cowen Your line is open.
Great. Thanks.
Nuber for business the growth was stellar.
It was about 9% of.
Rights gross bookings could you just discuss how that mix might change over time kind of any differences in penetration us versus non U.S. markets.
And the margin profile for over for business kind of relative to the overall ride segment margin. Thank you.
Yes, I think I think that trend for.
Business is pretty simple, which is it's going to be higher percentage of our bookings growing forward and certainly higher percentage of revenue on average the Uber for business business has a higher premium share and our premium business is higher margin than let's say, our our X.
Or other.
Alex we are going to be investing relatively heavily in growing the you for be salesforce.
We have a more mature and larger salesforce in the us versus let's say Europe and some of the other countries. So expects us to lean in in the Salesforce, usually when you.
On a salesforce upfront that's probably.
Negative margins or call a breakeven margins, but then you know the lifetime value that our sales teams bring in over.
Over 345 years make a lot of sense.
And then when we do look at the retention of you for be customers.
Retention.
So our substantially higher.
And then call it.
Leisure customers or non you for be customers. So long term as you for be becomes a higher percentage of our business expect our marketing efficiencies to improve.
Thank you you're welcome.
Next question. Your next question comes from James Lee from Mizuho. Your line is open.
Okay. Thanks for taking my questions are dollar I was wondering you can give more color on the competition, let Pam you talked about that market being.
More stable since 2019, we heard that de de recently entered into some new.
Any new of learnings there.
Are you doing well because your competitors now more discipline or are you responding faster today or marketing initiatives and also dark and give update on on your status on the UK with regulatory situation. There how you expect that to play out thanks sure absolutely. So.
In terms of our last Ham markets I think it's a combination I think generally.
The competitive environment is remains quite competitive.
But more stable on a year on year basis, DDS, a competitor that we do not take for granted they're very good or what they do.
But if you look at our numbers for example, our in our growth rate.
In in Latam was pretty significant all year on your basis, and it turned positive and and very nicely positive. So we like the trends that we see in Atlanta markets. We think that we are more effective interest.
Response.
And we think that just a year on year. The market is is much more is much more predictable our last Tam markets is art Latam represents our fastest growing mega region.
And from a trip spaces. It is the largest region that we have on the right side as well so we're quite optimistic there.
And then in London as far as regulatory goes we're going to everyday in court, we respectfully disagree with Tfl.
Conclusions I'll remind you that two years ago in a in court we.
We won the right to operate in London.
And I think that.
Our safety levels, our service levels are across the board significantly significantly improved versus way. There were two years ago. The team is very focused on executing on safety around the world and I think London Lund.
London team, especially as is focused on it so.
So we expect that our day in court will be positive, but you know we know that we got to make a case in the meantime, we operate in London as we have as always and were we continue to optimize our business and its you know it's it's it's.
It's like any other day in London as far as our operations go.
Well. Thank you very much everyone for joining we're really appreciate your being here I think 2019 was a big big year for US we know that we've got a lot to deliver on 2020 bought the team is confident.
The team is subject to execute.
And to also build a great company and provide a great service for all of our users that's very much for joining us.
Ladies and gentlemen. This concludes today's conference call you may now disconnect.
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