Q1 2020 Earnings Call
[music].
Good afternoon, everyone. Thank you for calling in today Super Technologies Q1, Twentytwenty earnings Conference call.
Reminder, during todays session all parties will be in listen only mode.
Later, we will conduct a live interactive question and answer session.
Time, if you have a phone questions. Please press star one on your telephone keypad.
To withdraw your question simply press the pound key.
I'll now turn the call over to our first speaker Emily rotor with Investor Relations Ma'am. Please go ahead.
Thank you operator, thank you for joining us today and welcome to be technologies first quarter 2020 earnings presentation on the call today, you have dark off the Shockey Nelson Jay you also Kent Schofield and if I believe writer in the 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 of GAAP non-GAAP measures are included in the press release supplemental slides in our filings with the FCC each of which is posted two investor thought Hooper dotcom.
I remind you that these numbers are unaudited and maybe subject to change.
Certain statements in his presentation and on this call maybe deemed to be forward looking statements such statements can be identified by terms such as believe expect intend and that 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.
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, including the section under the caption risk factors and management's discussion and analysis of financial discussion condition and results of operations in our annual report on form 10-K filed with the ITC on March 2nd.
2020, and it any subsequent form 10, Qs and form 8-K filed with the ITC.
Following prepared remarks today, we'll open the call for questions. The remainder of this discussion all growth rates, reflecting year over year growth unless otherwise noted with that let me hand, it over star.
Thanks, Emily Thank you all for joining us today.
Seven weeks since I hope that you updated you asked all the state of our business at that time, there, but some people thought.
Cities are beginning to open up for the very least plan for recovery early but promising results in clinical trials for potential treatments and vaccines and perhaps most this borrowing of all global solidarity and support those on the front laws, but.
But the remains a lot, but no clear that the city state some countries will take action to reopen at different speeds in a different ways and there's a little consensus over the right way to do it.
Given this backdrop I want to tell you how why managing labor both through this crisis and for the long term.
My objective is based on the old one great skewed by Wayne Gretzky quote skate to where the puck is going not to work that.
Robert that means tight focus in three key areas.
First while we have a very strong balance sheet. It's my job to ensure that remains the case, regardless of how fast or slow the recovery. This.
Accordingly, we're taking a hard look at our overall cost structure and our other bets to ensure our core business at rides in each emerge a stronger than ever.
We significantly reduced our marketing and central spend and defer to real estate Capex for planned offices in Chicago, Dallas and Mexico City.
Cream are wholly owned subsidiary in the Middle East took a difficult step reducing its workforce by 31%.
Yesterday, consistent with lower trip volumes that are hiring freeze, we announced a reduction in our customer support and recruiting teams by more than 3700 employees.
And this morning, we announced several emerging or job units along.
Well this deal, but customers will still have access to bikes and scooters through our app.
Resulting in an annual EBITDA savings of 160 million in addition to meaningful Capex savings.
Altogether the actions, we've taken and the actions we intend to take of the near future will result in a reduction of more more than 1 billion in annualized fixed cost versus or Q4 plant.
Reaching profitability as soon as possible remains a strategic priority for us we believe the disruption caused by covert 19 will impact our timeline, but by matter of quarters and not years.
Second.
At a time when a rise business is down significantly due to shelter in place are each business is surging.
We've seen an enormous acceleration in demand since mid March with 89% year over year gross bookings growth in April excluding India.
And just last week he's crossed the 25 billion dollar gross bookings annual run rate.
Additionally, there's been a tremendous increase in restaurant sign ups, leading up to rapid improvement a selection in major markets like the U.S. as well as behavioral shifts, but the willingness of.
All the part of fine dining establish the establishment dishonor for delivered.
We believe these trends are here to stay and will result in an expansion of the entire category.
Some of you will recall my commitment on our Q3 2019 call to invest aggressively only into markets, where we're confident we can establish or defend a number one number two position.
System with that strategy on Monday, we announced Eatwise at eight countries. This move will allow us to redouble our efforts in markets with larger long term potential and higher returns like the U.S.
Improving each margin and cost structure over time, just as we did with rides remains a key priority and we're seeing improvements due to larger order sauces improve career efficiency and more efficient marketing and customer acquisition.
Finally, I want to talk about we're seeing in a rise business today and it won't sugar coated.
Opened 19 has had a dramatic impact on rides, where the business down globally around 80% in April.
Bill, there's some green shoots driving restraint optimism.
We've seen we called we growth globally for the past three weeks. This week is tracking to be our fourth consecutive week of growth.
Last week, we saw 9% trip growth and 12% gross bookings growth globally, we called week.
We believe that U.S. is off the bottom U.S. gross bookings were up last week by 12% overall, we call week, including New York City up 14%, San Francisco up 8%, Los Angeles up, 10% and Chicago up 11%.
Perhaps more interestingly gross bookings and large cities across Georgia, and Texas. These are two states would have started opening up significantly or ups is substantially from the bottom at 43% and 50% respectively.
Hong Kong is back to 70% of pre crisis gross bookings levels.
And in India, We began operating again in designated Green and Orange zones, which account for more than 80% of the country's 733 districts.
In France, a survey of writers for active before coven shows two thirds expect to take their next Hoover ride within a month.
90% expected to do the same and less than three minimums and 98% of all writers say they will take a trip against suggesting pre covert usage will build back steadily.
Nevertheless, it's very early days, our expectation is that the recovery will very geographically and will be nonlinear, meaning we'll see some markets a recovery while others temporarily retreat.
As the only truly scale global player. We think this represents an advantage both in terms of revenue coming in as well as operational insights we can apply across markets.
Today, we've seen that the rebound is led by weekday not to five trups, including can meet use cases.
Reference in 2019, 80% of our gross bookings were delivered from trips in a user's home city meeting people traveled around their own communities and 95% from trips and a user's home country.
We expect better recovery led primarily by can be trips will open up exciting new prospects for Hooper for business as companies look to move their employee to and from offices as well as partnership opportunities with transit agencies to move central workers were aggressively pursuing both in already working with M.T.A. in New York to do the lack.
Now fit more on our Q1 performance.
Our rides business experienced strong momentum through February with year over year gross bookings growth of nearly 20% for the two month period consistent with Q4 19.
As a locked out began to affect their business in mid March we experienced trip and gross bookings declines of nearly 40%.
And despite this sudden deterioration we're able to maintain strong Q1 take rate of 22.8% in rides adjusted EBITDA margin of 23.5% of adjusted net revenue clearly demonstrating the variable cost structure of arise business.
Our rights focus is now turn to recovery, specifically are providing safe experience for drivers and riders as they start to move around the committee does get.
And as we publicly confirmed several days ago, we're working through plans to require drivers and riders to wear masks or face coverings, when using a rubber in certain countries, including the U.S. as a category leader we tend to continue to set the standard for safety moving forward.
As a REIT business recovers, we believe we have a structural that for a number of reasons. Roger only players have been disproportionately impacted while our REIT bookings were down 80% in April a total company is only off about 40% helped significantly bites.
He has also allowed us to maintain high engagement with our existing customers and to bring in new customers onto our platform. This positions us to have a faster recovery than rides only players.
We also have a profitable Ross business globally with many non U.S. markets that are higher margin, allowing us to cross subsidize as necessary.
Our marketplace will also into recovery from a position of strength since we have a larger rider and driver base.
Quarterly many drivers have spent there Tom on Hooper during this period, because we've been able to offer them and alternative source of work in food delivery.
Finally, we expect a shared rise will be less important in the near term. This was historically sweet spot for a primary competitor in the U.S. with around a 50% category position on shared rugs.
Now turning to each of which performed extremely well in Q1 generating 4.7 billion gross bookings up 54% year on year and accelerating net revenue to 124% growth year on year, while expanding take rates, 11.3% and significantly reducing EBITDA loss to 313 million.
In addition to our core each product, we're seeing strong demand for grocery and convenience items given that we've accelerated our plans launching partnerships with supermarket chains and convenience stores around the world, allowing them to sell a limited menu of everyday essentials fear a restaurant platform.
From early March levels grocery and convenience gross bookings increased 117% over the same period, well active storefronts in increased 34%, including Carrefour, one of Europe's largest supermarket chains.
Finally in the next few months, we expect to close our acquisition of corn shop, one of the largest grocery delivery platforms in Latin America with operation with operations in Chile, Mexico, Brazil, as well as Toronto.
Given the expected stickiness of grocery post cobot and a footprint and last time, we look forward to closing this transaction as soon and creating an integrated product across the corner ship labor and labor Eads apps.
While no one could have predicted the swift and intense impact that cobot would've had on our lives in our business I'm incredibly proud of a quick and decisive action. Our team has taken to respond to the ever changing environment.
And now over to Nelson for more details on the numbers.
Yeah.
Thanks to our now onto the GAAP results for Q1, 2020 comparisons year over year, unless otherwise noted.
Our GAAP revenue of 3.5 billion was up 14%.
Cost of revenues, excluding DNA of 1.8 billion decreased to 50% from 54% of revenue in Q1 of 2019.
EPS was a loss of $1.70 and compares to a loss of $2.23. Each one of 2019.
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 global trips of 1.7 billion grew 7%.
The chips were driven primarily by growth in Dietz, particularly in EMEA and Latin America.
Maxis were 103 million up 11%.
As a reminder, our Matthews are calculated as an average during the three months of the quarter and margins heavily impacted by the Pandemics.
Total company gross bookings of 15.8 billion grew 8% were 10% on a constant currency basis.
Adjusted net revenue or NR was 3.3 billion up 19% on a constant currency basis.
Our and our take rate was 20.6% of gross bookings of 180 basis points as both rise in eats improved take rates.
Non-GAAP cost of revenues, excluding DNA decreased to 46% from 50% of ban or.
Insurance and payments as a percent of and our improved quarter over quarter year over year.
Turning now to non-GAAP operating expenses operations and support decreased year over year to 15% from 16% of adjusted net revenue.
Reflecting continued ride support efficiency improvements, partially offset by a mix shift to eats where we're making progress automating customer support but were contact rates remained higher than rights.
Sales and marketing decreased to 26% from 36% of adjusted net revenue versus Q1 2019.
This decrease is primarily due to lower marketing and promotion spend particularly in rights.
R&D remained flat at 15% of adjusted net revenue Ginna increased to 18% from 15% to ban aren't versus year ago quarter.
Quarter over quarter, our spend remained relatively flat, but increased as a percentage of adjusted net revenue due to the topline pressure cobot 19.
Our Q1 2020 total adjusted EBITDA loss of $612 million.
Our 257 million improvement year over year.
Now I'll provide additional detail on or segments.
Rides gross bookings of 10.9 billion declined 3% on a constant currency basis led by the U.S., but due to the cobot 19 impacts taking hold and March offset by positive growth in Latin America in EMEA.
In our 2.5 billion grew 6% on a constant currency basis, the take rate of 22.8%.
Which improve both year over year and quarter over quarter due to rationalization of incentive spend mainly in the U.S.
Importantly, global rights gross bookings and they are not on a constant currency basis, and excluding share right shared rights were growing in the mid 20% and high 20 percents, respectively. During the months of January and February.
The adjusted EBITDA of 581 million were 23.5% of and are in the months January and February rises producing a record 30% adjusted EBITDA margin.
These gross bookings a 4.7 billion grew 54% on a constant currency basis, driven by continued tailwinds from stay at home orders and U.S. and international markets.
You say NR of 527 million up 124% on a constant currency basis due to mix shift towards small and medium size restaurants, driving higher basket sizes, coupled with a courier payment efficiency, mainly in the U.S.
Excluding eats India, which we divested d'amato in January of this year.
Take rate was 11.6%.
This represents a significant hundred 50 basis point improvement quarter on quarter, which puts us well and our path to achieving our 15% long term take rate target.
Importantly, we are confident these take rate improvements are structural improvements.
Its adjusted EBITDA loss was 313 million were negative 59.4% a banner.
Does represent a 50% or $148 million quarter over quarter improvement.
Given this large improvement quarter over quarter, we expect eats adjusted EBIT <unk> dot losses in Q2 to be similar to Q1.
It should be another year over year improvement, despite eats gross bookings likely coming in well above our plan.
Furthermore, we expect adjusted EBITDA margins continue to improve in Q3.
Couple of freight group grew and our two 199 million and adjusted EBITDA loss of 64 million.
Our other bets segment had an RF 30 million and an adjusted EBITDA loss of 63 million.
Of course, given the deal we announced today with line. The vast majority of these losses will move off of RPM out.
Hey, TG is adjusted net EBITDA was a loss of 108 million.
And our Q1 2020, corporate Gionee and platform were indeed, 645 million, which represents the GSK and R&D about allocated to one of our five segments increased 14%.
In terms of liquidity, we ended the quarter with approximately $9 billion in cash and cash equivalents and short term investments with access to over $2 billion from our revolver.
Since then.
Paid 900 million of the 1.5 billion and creaming corner shop commitments for 2020 that we discussed on our March 19 call.
We expect 2020 capex to be in the 550, the $600 million range.
In January and February we produced arrive segment EBITDA margin of 30% of ban on a 22% year over year improvement over Q1.
2009 teams margin of 8% by focusing on efficiency and cost savings across the rides piano tiles.
He needs, we continue to make progress demonstrated by our quarter over quarter segment EBITDA margin improvement at 46% as percentage of and are.
We will continue to make progress towards our long term profitability targets.
Finally, while a lot remains unknown you can expect us to continue to focus on liquidity exercise prudent financial discipline and take actions to maintain our position our strength.
Our goal remains the same returning our growth to business and achieving profitability for all of our stakeholders, which we're now planning to achieve on an adjusted EBITDA basis on a quarterly basis in 2021.
Now I'll open it up to questions.
[laughter].
All right operator can we get started.
Thank you Sir.
Once again for any phone questions Press Star One now my first question comes from Brian Nowak with Morgan Stanley.
For taking my question I have a I have to just the first one dart wanted to kind of pick your brain a little bit on where you think about new business opportunities in the way the business overall can emerge in change post cobot into the 21 totaling about grocery and essential maybe talk to us, but other opportunities you see and other investments need to makes really capitalize on.
On those then the second one just around safety for writers and drivers maybe talk to us or how you think about using technology and innovation to really improve the safety of the rights for everyone. Thanks.
Sure Brian absolutely.
So in general as far as new business goes you know that there is a server silver lining too.
This unbelievably tragic Ur cobot virus, which is the business that we have a up he needs.
And the category in General just look like just looks like it is going to be substantially increased and and somewhat save on multiples.
And we had already signed up and agreements about the majority of corner shop, which has a very big grocery player.
In Latam as well a and so we know the grocery segment. We've got great team from Gore Shopper, who is working on grocery and essentially we're going to bring corner shop in when that deal closes.
And hopefully give the corner shop audience, the significant kind of of exposure that are rides AP and AR each SAP rings on a global basis, we havent closed yet so we don't have specific plans, but you, but you can imagine a the opportunity there so as far as new.
No opportunity goes you know the new opportunities aren't a stretch the big opportunity that we thought he was just got bigger you can see that from the acceleration of our Q1 growth rates, which actually beat our own internal plans and Q2 growth rates are substantially increased and then with grocery we've already store.
Parted with some essential as it relates to eat we've got grocery coming in and then we're developing some new certain some new services such as Hooper connect in over direct where retailers concession packages and also we consent ptv packages as well so when you put this altogether.
Actually the core business and the opportunities in the core business look much bigger.
And we don't have to look far for very substantial continuing growth going forward. That's how we look at it.
And then as far as safety for Rogers and drivers go.
We have been leaders and safety safety has has been an absolute priority at this company.
Ever since I joined we were we were leaders in terms of safety for riders and trackers previously.
And now we're absolutely looking at its a combination of logistics and technology, we're shipping millions of PV and masks cleaning supplies et cetera or to our drivers to make sure that that drive and the second and continuing drugs that are writers take or are safe and they feel safe.
And.
We are looking at technologies such as for example, our selfie technology, where we make sure that the driver who has been who signed up is the actual driver who is driving we can use that technology for example, potentially to make sure that the driver is wearing a mask where appropriate so we're absolutely.
The exploring technology and you need a combination of technology logistics and local know how in order to operate safely at the kind of scale that we do on a global basis. So we absolutely believe we're going to be.
Oh leaders and defining the safety of this platform going forwards.
Great. Thanks.
You're welcome next question.
Thank you. Our next question comes from Justin Post with Bank of America.
Today can you talk about market share trends for rides in your bigger businesses.
Obviously, you Ash, maybe Mexico in London, what you're seeing there are there opportunities for you to take some share here in this environment and then I would travel I know, it's a important topic airport trips can you talk about how important they are just remind us on bookings and then how importantly, our for profitability. Thank you.
Sure in in terms of share dynamics, and then and then Nelson will take the airport question you don't intend to share dynamics, we did see early on.
And this year, we made certain adjustments to our model in California.
To to really solidify our position as a platform.
Rationalizing markets, where you're not number one number to do you have any sense for your competitors that fall into that category the markets, where they're not number one number two to what degree you're seeing or expect to see sort of similar action.
Action out of out of them I, you know, obviously no you're not in their head, but you know to the to the extent that you know using your gotten your your industry knowledge sort of what you what you expect to see on that front and any any sense of timing, but that you might have.
Yeah heat from from a macro standpoint, I would say rationalization both in the rides category and then the food category has been the name of the game. These all of these competitors have been burning money for a long time, we're really unique in the rides category of scale on that were global and ride very very.
Profitable.
Our even our margins were running over 30% as a percentage of <unk> and Jan Fab and I think in each category and the food and the food category you, we're seeing a bunch of consolidation, there's a bunch of consolidation happening on a global basis.
Where bigger players can not only provide better service for restaurants and consumers fucking provide a better service kind of on a on an economic base. So that that a sustainable I do think there's a question which is this food delivery grocery.
Category, just got a lot bigger there's a ton of new customers coming to this category and what was seen with the categories. The the biggest challenge is kind of new customer acquisition, then there's very high frequency very high satisfaction of the product. So we think there's there's just kind of this booster in terms of the category.
My instinct is that the commercial and the capital kind of rationalization is still going to continue.
But it is a big category and big categories that just got bigger tend to attract some capital. So my instinct is you know you'll see similar place from other players the market seemed to like rationalization and I think ultimately the the markets are going to drive long term behavior, but you know the category got bigger and.
And and capital chases the category and certainly growth is at a premium right now so we'll see it's it's hard to be absolutely productive.
Okay. Thanks, <unk> really appreciate if you're welcome.
Or next question comes from Doug and meets with J.P. Morgan.
Church, even question already talked about 40% of U.S., who Canada drivers who costs dispatch to eat in April I'm, not even sure their loyalty as you come out of the crisis and then segments wanted to ask you about your investments in E.T.G., you know what you're thinking.
There during his time thanks.
Yeah dog and and you know the the loyalty both are writers and drivers is is based on the service that we provide them and we want to make sure you know that that our drivers feel safe.
And I do think that in the recovery scenario as these countries open up our platform is going to be an incredibly important platform for people to start earning again. So I think if we bring the volume and we have a structural advantage in that are vault.
With rides is not only going to come back and and you know we don't know exactly how fast it's going to come back, but it's on the comeback trail, but having eats adjust provides a structural advantage and ultimately it's about the service that takes care of them in terms of safety and then it's the ability to earn again during a time when you know the the economic.
Damage to a lot of folks in need has been very very significant and you also remember that we were consistently you know first and for example, providing our drivers with help if they were diagnosed with cove it or they had to shelter home. So I think we've consistently shown leadership.
And and we're there for them and you know, we're not going to stop them from working on any other platform or using or any other platform were and open platform, but I think if were consistent we take care of them and we and we give them an opportunity to earn a I think will be just fine.
As far as R.A.T.G. investments listen I think this is from a long term standpoint, A.T.G. has always been a long term investment.
You could hypothesize that some people are gonna be are gonna feel safer with a car that that is driven by robot than than a person. Our job number one is to make sure that they that they feel safe with a person driving but the fundamental A.T.G. technology, it's relevance the market size hasn't changed.
That said and market like this where capital of the year and we bring discipline to everything that we do we are asking every part of the company that includes 80 g. to make sure that every dollar you spend as a dollar that brings in return and that's going to include the eighties.
Loop as well as other groups.
Great. Thank you.
You bet next question.
Q.
Our next question comes from Eric share them with the U.B.S.
Taking the question maybe a few on.
Your door wanting to get your perspective as more supply continue to the each business, what you're seeing from a competitive dynamic on either driving demand on the user side and how suitable more level playing field supply in some markets is playing out in terms of then market demand and and more could share and then what is it needs the long term.
The ability.
Oh sure Eric in terms of supply we are absolutely improving on the supply front, both on the absolute basis and relative to our competitors as well we've signed up <unk>, we signed up shake Shack, we've got dumping on our plan.
Form as well so there are big brands that are coming onto our platform that that creates more demand and and and the the more choice. We have the more restaurants, we have available per search we see conversion going up so I think on the on the restaurant supply fronts, we are making progress.
We are not satisfied we think that there's a significant progress to be made and what's interesting is we're seeing the kind of acceleration and growth rates that we're seeing in April and it continues if may in may if anything it it's improving despite my belief and I think the teams belief that that that we.
Can do better on the supply on the supply front. So if I were to characterize or each business. We're not fully optimized on supply we're still signing up a ton of restaurants. These restaurants need us and we want to make sure. We're there for them and right now the trends in in terms of supply look very very good now I do think that.
The the big brands on it and the National brands of the global brands are really important elements of of our marketplace. I would makes your folks know that are small and medium restaurants are still account for the the vast majority ever volume and are a big part aren't going to come.
She needs to be a big part of a volume cut going forward. So the big brands are kind of great customer acquisition vehicles, they're terrific food quality, they're safe.
They bring a lot of folks n., but small and medium businesses and restaurants continue to be a significant part of of our business and our growth going forward in terms of the the margins rubbing the margins you've seen the trends and I think we can continue to improve rubbing a margins. This is about.
Generally S.M.D.S have higher margins, we are improving or courier efficiencies.
The more demand we have kind of the more concentration we can have a market. We can batch more couriers couriers kind of Ah carrying more than one.
Well more than one package et cetera, and in general better technology can can improve our revenue margin that's as far as utilization goes as well. So I do think that that take raid improvements that you have seen are going to continue and were quite confident that.
And the only thing I was <unk>.
But the only the only thing I would add it that you can you can see exit nonperforming countries like we did yesterday. This earlier this week and like we didn't India and so we're gonna continue to optimize and you know work hard and our capital allocation model.
And just to just to give folks a little more character on S.M.D.S in R.S.M.B. gross bookings grew with three times the pace of our non S.N.B. business on February to April. So S.M.B. is growing really really quickly and R.S. any self service business group 70 per cent, which is like five times the pace of non S.N.B. busy.
Senses over the same period. So this is S.M.B. structurally one as we're helping a lot of these restaurants stay in business during incredibly difficult time. So it's like we're doing good but it's also structurally good for the business going forward.
Great. Thanks for all the color.
You're welcome that's question.
You are next question comes from March room like with Bernstein.
Taking the question a couple if I may the first you know you share the sat around you know 40% of of drivers being able to move over in support the signal any color in terms of the the demand side and the customers you know how many of those <unk> ride sharing folks you know a adopting and.
<unk> eat and then anything around costs, an acquisition that you could talk about great around any discount offers versus like pre coven level, how much in down demand or using would be would be great. And then for my second question, Okay silly stuff to make that kind of reduction it sounds like a lot of the folks have been in the recruiting customer service Department.
How much that I had town kind of come back as demand comes back and then you know are there any incremental efficiency as you see here with kind of a new way of doing business. Thank you.
Yeah, absolutely as far as demand side, I I don't want to disclosing particulars, but we have been using the rides platform and we're getting more and more effective and using the ride platform to to cross promote into eats you'll you'll see.
See that in some of the designs of our rides Apple, which is there they'll be right up front ride that eats and other categories. For example, grocery could be another category transit could be another category. So on the product side, we're getting much better and I'd say, we are in the early innings of continuing to cross promote different kinds of services.
This is also going to be possible needs again gross or in some of the neighboring services as well. So we have seen substantial pick up a higher and higher percentage of our rise customers are using eats and I think that were generally in the in the early innings there the one except.
And I would tell you is there are certain markets in Europe for example, where restaurants have closed so restaurants supplies will is is a well down so on those markets you don't see as much of the of the cross pollination as far as a cost of acquisition trends, though but we're seeing naturally pretty hopeful trends there's always.
It's a tradeoff between cost of acquisition and then the amount of volume that you can bring in Ah. So you know you're going to keep the same costs acquisition and push volume or you can <unk> or you can optimize for acquisition costs in general we are happy with their cost of acquisition.
We continue to improve our our our our our technology there a tracking there. We still think we have improvement ahead of us and in general we think we can be in a place where we are pushing for volume at the same customer acquisition costs or less.
And be able to improve rubbing the margins and he did margins overall on or each business. It's just where at a very good place to teams are executing well and the technology and the capabilities are getting are getting better and better. If you look at each for each for example monthly active platform <unk> <unk> consumers are.
50 per cent you're on your since Q1 up 19, and I don't think anyone on the team would say that we are doing as well as we can or should on the on the customer acquisition fronts.
<unk> nothing you want to talk about the heck out and how much comes from back and or how much comes back to demand comes back.
They're not I I would be happy to so yes, we did we did make the move and as everybody knows those are tough decisions that have to be made.
We do expect that as business continues to grow I don't think we will you'll see it's adding back at that same level as you know the company's map and very much focus on efficiency and what we call contact with service and we've been seeing good good marks there and so you'll see as continue and then the only thing I'd want to add is that you know we're continue to look across.
<unk> our business in our platform for more efficiencies and so you should make sure that as you got off the call that that you hear that.
I think the deal that you saw today that we did with slime as well is also a good proxy. The reality is the world has changed right and so we don't know when the recovery is gonna be we think we're very well position today, it's incumbent upon us to make sure we come out of this even stronger and better positioned it's not lost upon us we are going.
To take the actions that we think are necessary that we continue to strengthen our our core rides needs businesses and there is nothing if there's no sacred cows and so we are going to look at everything across the whole platform and so that is something that is going on right now.
All right next question.
Thank you are next question comes from Jason Helfstein when Oppenheimer.
I I two questions I guess on eat it looks like you're coming from a lower take rate than your peers I, there's probably some mix issues and we look a consolidated but just talking about what that means that you know you're kind of coming from.
Low to hire and and a lot of them are coming from hired to lower and kind of what that does with your position with the restaurants and then has there been any discussions on as cities try to deal with.
Social distancing, particularly debt 10 cities is there are things that that that you can do to work with them et cetera that that could work out in your favor. Thank you.
So I'll I'll take the <unk> second part of that so in terms of the margins it it's very difficult.
Look across the different companies and compare because there's you know some or many of them are either single geography, or just a few and as you know <unk>. We operate them you know over 50 countries.
So it's very very difficult and so as you know we've been kicking the actions and tore it to improve our each profitability, including the actions. We took earlier this week in Turkey actions in the beginning of there and we took part India business and sold it into the motto and so it is very difficult to do that if you look pure on here in there there are some.
Places in some countries, where we are over index against some of the large chains and so that will tend to drive down to take rates versus they competitor that is more S.M.B., but as you heard from Darren commentary, we're seeing tremendous growth as we continue to build up R.S. and be a businesses.
As well as our customers as well as even some of the smaller higher end businesses that are signing up now as a result of covert 19, and so that really is driving but take great improvement that we're seeing and that we should continue to expect to see into the second and third quarter. We're seeing that we're seeing higher basket sizes, we are taking some operational.
<unk> on Courier efficiency and this will all translated into let's continue to make progress against or longer term eats a target markings are you want to capture cover the other part of the question Yeah, absolutely I think I think as far as social distancing I'm working either with cities or states are countries that don't work, we're going to be responsible we want to be part of the solution.
And and not parlor problem and you've seen that for example, with our up when there was shell term place and so on tried to use <unk>, we'd make sure that they they really needed to use the <unk>. We're now focused much more on P.B.E., making sure that.
Drivers half masks shipping cleaning supplies advising riders on the norms Ah for them to ride as well because we we we want everyone to be safe a rider is wearing masks or encouraging them to wear masks encouraging them to wash hands et cetera. So we're a very big platform.
And as as part of being a big platform, we're going to work with city States.
And and our constituencies to make sure that we are helping educate the public so that we can have a return to the caught up the life that we've all loved but also do so in a responsible way and and we're absolutely going to be part of that solution and as far as transit goes again, you can see some of the partnerships that we're <unk>.
I can win transit agencies, we are going to be there step by step and to be part again of turning these cities back on but making sure that we're we're turning their back on and in a Safeway.
Alright next question.
Thank you earn next question comes from <unk>.
[noise] [noise]. Thanks.
When asked about.
The extent to which this crisis is catalyzed new business new businesses opportunities <unk> in Dar I think you've talked about this a little bit in the past, but the you've got this network built up and the extent of Ah expanding it beyond eats into more it'll packages and you you are doing it for a central services, but other other commercial opportunities in the system.
Catalyst, except breaks out that opportunity for you. Thank you very much yeah, Mark I think in in in these times of crisis. You you have to keeping simple we have an incredible opportunity, it's not a new opportunity, but it just got a lot bigger and it's called eats and we have rides, which is the <unk> the only global player number one and.
Sickly everywhere, though we operate with margin. So we're going to focus on that core because that core is really really strong and we think those two together can work incredibly well there is a really interesting opportunity for over each business to get into a grocery both organically.
And with our acquisition of corner shop, and then with both rides and eats we are going to absolutely work on package delivery because we just think it's it's going to be a much bigger part of of retail in general going forward and we can player. Apart. So the good news is that the growth opportunity is in the core and we are.
<unk> global scale in the core and we have great business leaders, great technical leaders in that core as well and and we're going to focus on that right now.
Okay. Thank you for your welcome. According to our next question comes from <unk>.
Hi, Thanks, I just want it to just get an update on some of the kind of climates markets in any progress you made creek coded and then you know is there any.
Changing how you think about those markets are coming out of out of co then.
There's an update on.
Yeah, we were making a strong progress on on the Clavus markets. You know the Germany was a was a great high like and very growing at triple digits, essentially pre <unk>, Argentina was a very.
Missing market for us that that was that was growing quickly I say that are clavus markets and channel or were growing about 70 per cent on a pre covert basis. There's no reason to think that structurally post cove. It anything's Gonna change I think Germany's got a great job of opening up their market so to speak.
And as these markets open up we're going to open up with them and we're going to do so in a safe way.
Okay. Thank you you're welcome next question. My next question comes from use of squarely with Sun Trust.
Great. Thank you. This is neat Mitchell on for for you. So there you've alluded to this in some of your remarks pictures of you comment maybe more specifically on how this in a new environment changes your positioning with the a T.F.L. Thanks so much.
Oh, Yeah, we we don't think that there's gonna be a significant change with the T.F.L.. We're we're going to have our day in court. We're confident of the changes that we made to to the service. We think that we are setting a bar for safety, we happen setting a bar for safety and I think we're improving.
On our own bar for safety and now with Cove. It we're going to keep upping the ante so to speak and in terms of in terms of safety. We have a great partnership with National Health service to help while people are needed help it's tough to tell as to whether covert is going to do.
The way things, one way or the other but I don't think it's substantially changes.
The relationship and we are confident over position and and you know I think that we'll see we'll we'll have or day in court and and with our chances.
Next question.
Thank you may have a question from John Blackledge with <unk>.
Oh, great I think sent a two questions on eats do you think the level of growth in April is sustainable as we round through the year potentially given people's concerns about eating out in and displayed a looming macro environment and then on grocery you know what the pandemic I'm like mystery demand as humanly been pulled.
Worried a couple of years as as you alluded to Dar how're, you going to going to address a grocery delivery in the U.S., you'll just given existing platforms and and deals they have with March grocers. Thank you.
Yeah. So in terms of the the east growth and it is a sustainable listen it's very difficult to predict what's what's happening in these markets. It certainly does seem to be sustainable over over this period, if anything to trends with eats are getting better and the trends that we described in April we're trends during.
Periods, <unk>, and which some big European markets in terms of restaurants et cetera are close.
So we're optimistic of trends and the category.
And we think that that the capability of the team is only improving as well, we're very happy with the execution that we see so it's a cat or gory do the category just get much bigger yes did did millions of millions of new customers essentially try out the category yes.
And are we and a superior position to be one of those services that they try and then continue to engage with yes. So I think we're in a great position, but I think it'd be foolish to try to predict you know particulars in terms of growth rates, we are optimistic as it relates as it relates to to.
<unk>.
In general on the grocery side corner shop is is is you know our our big play there. We've we've an asset acquisition corner shop is quite focus in Latin America.
You know that we have a very big Ah rides, a business and Latin America. So Latin America is can be not only a big market, but also high margin market as well and I think in the U.S. right now just a category is so big that we think that there's going to be room for more than one player and we have.
I know very big scale in terms of audience were in many of these cities already so we just have the infrastructure to be able to get started in these cities. If we choose to get started any cities in a very low cost way versus someone kind of starting up in the category.
We saw kind of very very strong early signs from grocery just just with <unk> and I do think it's something that can scale and we can be one of the scale players, but we're going to do so on a careful way, we're not going to buy our way into share we're going to earn our way and I think we're in a pretty good position to earn our way.
You're welcome operate it can we have a one more question. Please yes, Sir we have a question from Brian Fitzgerald with Wells Fargo.
Thanks, guys. So my question is is around this to to what degree or you see franchises allocate national advertising budget and expands to yourselves into food delivery industry as a means to advertise shifting budget supporting the medium in the industry case in point for context Mccoy.
Donald requires I think four or 5% of gross sales to be spent an advertising. So that is something that I think would would subsidize subsidize you got the sport you guys. So that's my question Lax.
Yeah, Brian It's a it's a good question I think in general the category. It. It makes a lot of sense I mean, the the the national players are are are smart, they're incredible marketers I mean, they they build these incredible brand and you can't expect them to allocate brand to where the growth is.
So I would absolutely not be surprised to see a mcdonald's or <unk> or other national brands focus their advertising bore on delivery I don't think it's a hard sell right now.
And and I think that it's going to benefit them and it's going to benefit the category as well I do think that for us advertising in general on eats, especially is a pretty interesting category. When I was in the olden days when I was running speedy.
Causing and traveled turned out to be very fast growing category that that was incredibly high margin you've seen leading players like Amazon that have built product search and then build advertising on top of product search as well and I think that we've got the same opportunity with with ease.
Well, we talked about the rabbit in March an opportunity for eats that's really a rabbit in March an opportunity for the pure play and we think that there's an advertising opportunity with each as well just as you see m. caps and supermarkets. You know you couldn't see m. caps end to eat feed for example, so it's early.
But we have seen this play run before.
And we have an excellent engineering team, who can build pretty fast.
And and we're quite optimistic as far as the advertising opportunity inside of the each product and then eventually I might go to the rides products as well.
So with that I think that's it I would like to thank everyone for joining US was extraordinary time. So we appreciate the time and again I do want to think <unk> everyone. At Hoover all all the employees I think this has been very very tough time.
But I think that we we as a company have risen to vacation. There's a lot of hard work ahead of us.
But I know that as a company were more than not for it. So thank you very much for joining we'll talk to you next quarter and stay safe.
That is concludes the conference call you may now disconnect.
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