Q1 2021 Uber Technologies Inc Earnings Call
One more earnings conference call at this time, all participants are in a listen only mode.
After the speaker's presentation, there will be a question and answer session to ask a question. During the session you will need to press star one on your telephone. Please be advised that today's conference is being recorded if you require any further assistance. Please press star zero and I would now like to hand, the conference call virtual speaker today, largely Christian <unk>.
Head of Investor Relations. Please go ahead.
Thank you operator.
Thank you for joining us today and welcome to Uber as first quarter 2021 earnings presentation for.
For the first and since the pandemic began we are pleased to be broadcasting new Cros.
Broadcasting live from Uber and office in San Francisco.
On the call today, we have Uber CEO Dara across Russia, CFO, Nelson and say and Chief legal Officer, Tony <unk>.
During today's call, we will present, both GAAP and non-GAAP financial measures additional disclosures regarding these non-GAAP measures, including a reconciliation of GAAP to non-GAAP measures.
Diluted and the press release supplemental slides and in our filings with the SEC each of which is posted to Investor day Uber Dot com.
As a reminder, these numbers are unaudited and may be subject to change.
Certain statements in this presentation and on this call are forward looking statements such statements can be identified by terms such as believe expect intend and May 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.
And to update any forward looking statements, we make today, except as required by law.
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 described and our most recent annual report on form 10-K for the quarter ended December 31, 2020 and and other filings made the vs.
And when available.
Following prepared remarks today, we will open the call to questions for the remainder of this discussion all first quarter growth rates reflect year over year growth and are on a constant currency basis, unless otherwise noted.
April trends, we will be providing comparisons with April 2019. In addition to year over year trends.
Lastly, we have included a detailed Q1 financial review and our earnings press release, and Nelson will not go over those details again with that let me hand, it over to Dara.
Thanks, Bob and thanks, everyone for joining us today.
Finally seem to like other end of the tunnel.
Vaccination rates rise and infections fall and restrictions lift people quickly breathe, a sigh of relief and start moving again theres.
And there is pent up demand to see family and friends offices restaurants, and bars are reopening and EBIT airports are seeing improved traffic.
So it is important to recognize that the battle is certainly not over cases remains far too high and many places around the world with many tragic consequences.
We will continue to do our part on the ground to help get this virus wherever we can.
The actions, we took last year and our team's hard work. Since then have uniquely positioned us to harness the recovery.
<unk> already begun to fire on all cylinders on a consolidated basis, we have returned to growth with Q1, our best quarter ever.
Our best month ever and last week, our best week ever in terms of growth bookings.
Even as we invested for growth the benefits of scale and rigorous cost management drove an adjusted EBITDA improvement of $253 million year on year and $95 million quarter on quarter.
We continue to have a strong balance sheet with significant liquidity and valuable and growing investments and several leading global mobility delivery and autonomous efforts.
Looking ahead, I'm confident that Uber will benefit from the complementary nature of our two large core opportunities to help people go wherever they want and to get whatever they need.
Just last week, we announced several new products focused on the recovery.
And our book of vaccine appointment at Walgreens, and Youre right, there Paul and the new brands. We're also expanding.
Pending a reserve product Uber X and for airports and on Uber rent product is bringing the magic of Uber car rentals, you cannot rent a car from providers like Avis and Hertz running on <unk> and with our new valet feature someone will drop the car off at your house and pick it up whenever you want.
We are also adding new benefits to eats past new.
New rides benefits to eat fast further differentiating it from the competition.
I'll dive into each of our segments now starting with mobility.
On the mobility recovery started to pick pace pick up pace and March and improved further in April with strong vaccination vaccination rates and several key markets, including the U S. We're optimistic that this trend should accelerate going forward and.
And April mobility, GBS were $31 billion annualized run rate up roughly 280% year on year and 68% recovered versus April of 2019.
U S regional trends continue to improve on those markets with Miami and now back to growth versus 2019, While New York City, New Jersey office in Houston, and Dallas, Atlanta, where all up 70% to 80% recovered versus 2019 GDP levels.
Overall U S. Gross bookings improved 5% month on month in April and were 62% recovered versus April of 2019.
Outside of the U S. We see significant improvement in several markets and APAC, including Australia, and New Zealand, and Taiwan, and Hong Kong, which were all positive versus April 2019.
In EMEA, we saw early signs of improvement after prolonged lockdowns and Q4 and Q1 with EMEA gross bookings up 10% month on month in April and.
In particular, the UK started reopening and April with our business seeing a strong recovery almost instantly improving nearly 60% week on week and the first week of reopening.
And <unk> are now over 80% recover versus 2019.
And contrast, extremely elevated case counts and a renewed lockdowns and India adversely impacted and mobility trends are there.
As writers come back to the platform and we're working hard to make sure that the second and first trip is as magical of ever one of our top priorities is to rebuild the driver base. Our research showed that drivers who left the platform last year, primarily did so for two reasons.
Concerns about safety and concerns about there being enough rider demand.
On the safety front, we're working hard to improve vaccine access for drivers and we've continued to enforce our macro policies and provide free PPE and other supplies that keep both drivers and riders safe.
And with demand currently outstripping supply driver earnings are at historically elevated levels.
Meeting earnings for all online time before tips are around $37, an hour and New York City and.
Philadelphia, $36, an hour and Chicago and $33 an hour and often just to name a few cities.
We know that drivers often work simultaneously on other apps. So their total earnings are likely even higher and other words looking at the more appropriate measure of active time on Uber median earnings are at or above $40, an hour and several U S cities.
And several countries, including the U S will continue to lead and with targeted incentives for new and existing drivers to buildup significant supply, which will enable us to achieve maximum velocity as the recovery plays out.
Now turning to delivery, which continues to surpass our growth expectations.
Q1 growth bookings growth accelerated to roughly 160% year on year and reached a $52 billion annualized run rate in April.
We improved our category position and several major markets, including the U K, Canada, France, Spain, South Africa and Taiwan.
And the U S. Our category position was stable with some improvement and urban markets in recent weeks.
Notably we continued to strengthen our category position in New York City, and suburbs driven by improving restaurant selection.
We continue to broaden our delivery offerings beyond food as consumers become habituated to having anything delivered to their door or new verticals business expanded substantially during the quarter with an annualized <unk> run rate nearly doubling from Q4, and reaching $3 billion and March.
We're seeing improving traction in many markets, including France, UK and U S, Canada, Japan, Chile, Brazil and Mexico.
We signed several key partnerships over the past few months Inc.
<unk> Rite aid and the U S Russell and cash.
Canada, and Groupe casino and France amongst many others.
We also announced an exclusive partnership with Copa and that will expand our selection of convenience and everyday and central items directly from the eats app.
To capitalize on these tailed loans will remain in a period of elevated investment for the delivery business, including leading into carrier growth to serve robust demand and.
Additionally, our profitable markets, which generated over $135 million of EBITDA on just over 3 billion of gross bookings give us additional flexibility to reinvest in growth markets. As a result, we remain on track to reaching EBITDA breakeven for delivery by year end.
Finally, turning to freight with a renewed focus on the freight opportunity and the U S are our team reached an important milestone during the quarter with a business registering its first positive variable contribution quarter, while delivering revenue growth acceleration and 51% as well as EBITDA margin expansion of 23 percentage points year on year.
Sure.
Scale and automation has allowed us to achieve what we believe is industry, leading variable cost per load on.
Our ml and data capabilities have allowed us to tightened pricing and margins on a target route level and we have diversified our product offerings to new channels such as API.
Directly providing shippers and real time pricing.
And our market access product that helps customers quickly and easily source unplanned capacity from the largest digital carrier network all with one tap.
We're confident about Uber freight product market fit and a very large tam opportunity as the business continues to scale. We now have a clear line of sight to EBITDA profitability as well.
To sum up I'm as excited as ever about the opportunity ahead for Hooper, our delivery business continues to grow faster than anyone could have predicted our mobility business is bouncing back and many markets around the world and freight is gaining share while improving margins and because of the actions. We took this past year, we're returning to growth and even stronger more focused.
And ultimately more profitable foundation.
Now I would on Nelson for some details and the financial outlook.
Thanks, Dara I'll provide a high level recap on our performance during the quarter and our balance sheet before closing out with some outlook for Q2 and the rest of the year.
For a detailed financial review of our Q1 results. Please refer to the financial highlights section of our earnings press release.
Overall Q1 performance was better than expectations, we had outlined three months ago, and we are seeing our business trend and the right direction each week.
Continue to execute well despite the slow start to Q1, two and extended Lockdowns and North America and Europe.
And despite mobility gross bookings coming in and roughly flat quarter over quarter and elevated growth investments and delivery our disciplined cost management led to significant total company adjusted EBITDA improvement.
Meaningfully exceeding our prior outlook.
We also made good progress on the post merger integration and we expect to substantially migrate postpaid merchants to the new <unk> platform by mid year.
We remain on track to deliver our expected $200 million and run rate synergies by year end.
One question, we often been asked over the past few weeks is one of those and mobility recovery has come at the expense of delivery demand.
So far on a high level the answer appears to be now.
We're seeing encouraging signs of a continued use and our delivery business even on cities reopen for.
For example, and Sydney, where dining fully reopened more than two months ago.
Every trends remained healthy even as mobility has fully recovered and returned to growth versus 2019 and.
In fact, delivering Sydney continues to be a bigger business for us the mobility.
Similarly, as New York City is partially reopened dining and other services delivery demand has continued to expand.
And general and cities open back up we appear to be retaining our active delivery consumers and their larger basket sizes, even if the frequency of ordering moderate somewhat.
Turning to the balance sheet, we recognized a $1 6 billion gain from our divestiture of our atg business to Aurora during the quarter.
Our Q1, GAAP net loss of $100 million benefited from this gain partially offset by the $600 million U K accrual.
We ended the quarter with approximately $5 7 billion and unrestricted cash cash equivalents and short term investments and have access to over $2 billion from our revolver, providing us with ample liquidity to manage through the recovery ahead.
In addition to our significant cash balance Uber has several valuable minority investments that were recorded on our balance sheet.
At nearly $13 billion at the end of Q1.
Over the past quarter. Some of these companies have taken steps to become publicly traded including grab and Jody and there are press reports, suggesting others may follow and the near future.
And while some of these investments are strategic and <unk> will remain evolve for the foreseeable future others like it will be significant sources of liquidity. We will provide pro act, we will be proactive and maximizing the value from these investments for Uber and our shareholders.
I'll wrap up my comments with a few thoughts around our expectations for Q2 performance and some early views on the second half of 2021.
And April mobile and mobility gross bookings around a $31 billion annualized run rate up roughly 280% from April of last year, and 68% recovered versus April of 2019, we.
We expect the segment's recovery to continue to be driven by improving vaccination rates and the us and several international markets more than offsetting headwinds and markets like India and Brazil.
And with demand continuing to outpace supply, we will be investing to revive the driver based on Q2.
Consequently, we expect mobility take rates declined sequentially and roughly 20% and should also pressure and mobility adjusted EBITDA Q2.
Turning to delivery, where gross bookings around a $52 billion annualized run rate up over 100% in July of 2020.
For the remainder of the year I would remind you that delivery gross bookings year over year comparisons will become tougher and so we continue to face significant forecasting uncertainty and predict and post reopening consumer behavior.
So much on mobility delivered contingency demand trends that are outpacing supply additions.
That said, we expect our improving scale and network efficiencies to drive sequential improvements and delivery EBITDA through the rest of the year, even as we remain in investment mode for the segment.
Q2, corporate G&A and platform R&D should increase to between 450 and $480 million driven by head count investments and and star laid out during Q2, we are leaning in with investments to support the recovery and mobility and growth initiatives and delivered.
On Q2, we expect mobility delivery and total company EBITDA margins to significantly improve and mobility demand continues to recover and the marketplace approaches supply demand balance.
We remain on track to reaching adjusted EBITDA profitability and the second half of the year and with that let's open it up for questions.
At this time as a reminder, if you would like to ask a question. Please press Star then the number one on your telephone keypad new.
Pause for just a moment chicken paws and the Q&A roster.
Your first question comes from the line of Mark Mahaney from ISI and Evercore. Your line is open thanks.
Two questions. Please Dara could you talk about and provide an update on the synergies that you're seeing between the two segments mobility and delivery and how youre tracking that and secondly.
You've got Tony there could we get some comments on how you other response or how you think about the risk related to the comments that labor Secretary, Marty Losch made a week or two ago on that and gig employees and being treated as fulltime employees. Thank you yeah, absolutely as far as the synergies between mobility and delivery, we're seeing very.
And trends I think last time around we talked about 13% of eats.
Our first time heaters coming from mobility.
Whether it's a super App, our CRM notifications et cetera.
And we continue to see those trends even at the eats business continues to get bigger and bigger and what im.
Really curious to see Mark is what happens when mobility actually comes back to kind of pull through and ranked.
Because the audience and the Matthews on the mobility side of the business will increase and.
And and even though eats will be growing as well hopefully we'll continue to see similar trends going forward and for perspective.
The number of first time eaters for example that our mobility business delivers is actually bigger than the number of first time meters that we get out of pay channels for for our delivery business. So as a competitor.
And we basically have all of our pay channels for free coming from our mobility business, which is pretty phenomenal and we think these kinds of synergies can continue what we're now starting to explore and see are similar synergies, although we're a little less mature between Uber eats and for example.
Corner shop, and the markets, where corner shop has launched as well so not only do we see our mobility business driving delivery and eats.
We expect to see delivering E then driving corner shop driving.
Curiously when that deal closes et cetera kind of this chain reaction between businesses. So we're pretty pretty excited about it and by no means do we think we are fully optimized as it relates to this kind of activity.
And you can also expect that as our membership business grows.
While we're trying to do is create more differentiation and our delivery membership will start leading into our mobility membership and we really think we will have the premier local get it within an hour membership.
Model anywhere.
And just a structural advantage that the other players can't.
Match.
Tony do you want to talk.
Your line answer the second question. Please.
So I Havent freight I lost the connection and the second question loans.
Mark can you repeat yourself.
Yes, just Tony just the commentary or reaction to the labor Secretary's comments about.
Independent contractors should be treated as full time employees and just help us think through the risk associated with that or what are the and cases, how long it would take to get some sort of resolution on it on that issue. Thank you.
Sure, Yes, well look I think.
It should surprise no one net the heightened tariff and strategic approach on these issues is similar to <unk>.
M. A bi administrations approach and which is obviously different and the last administration.
And I think that when you look at the makeup of the current administration. It's fair to say that they are individuals who have varying views on new issues theyre not all identical and their outlook and we think that creates space for some meaningful dialogue.
And that the Labor Department has said that they want to engage key companies on this issue and the fact that they said just as late as today that the net planning to offer new regulations for independent contractors and the near future. We think all of that creates.
Sort of a real opportunity for a dialogue that can ultimately lead to a solution that gives the gig workers the protection they deserve while preserving the innovation that gives them the flexibility that they desire.
So we think Theres states here for a conversation and.
And we.
We continue to take on it.
Look for those opportunities to talk about opportunities for.
Bolstering.
And independent work with what those kinds of benefits and protections.
And I think Mike from my perspective, what comes through again, and again and any piece of research talking about antibody is that independent workers will want to stay independent and they do not want to be full time employees.
And that the number one feature as it relates to gig work is flexibility and what we're talking about is taking it to the next level, which is providing flexibility and protections within that the really important dialogue to have.
And and we think that.
If you listen to.
<unk> drivers and couriers and and certainly you listen to voters the answer is pretty clear, which is flexibility and benefits are the answer going forward and we hope to have that conversation.
Okay. Thank you Dara.
Next question.
Your next question comes from the line of Brian Nowak from Morgan Stanley. Your line is open.
Thanks for taking my questions I have two and one for one for Tony and one for Dara, Tony just coming back to the labor discussion and then <unk>.
And now living in California was perhaps 22 situation for a while you made some changes to the U K labor compensation and this past quarter, just talk to us about sort of what you've learned from operating and those two markets when youre thinking through driver liquidity and passing through pricing and just sort of managing a profitable network how scalable growth.
<unk> platforms and those types of options could be.
And then the second one Dara just you talked about sort of the synergies across the platform any update on the number of members our subscribers youre seeing and on the platform now and so on how fast that side of the business is growing.
So.
And I'll answer sure I'll start.
Look I think one other thing that we've learned is that the premise and Dara touched on this and the last.
Last answer the premise that debt.
Owners on these.
And these gaming platforms, particularly drivers.
Preferred independent work for free independence, that's borne out and perhaps 'twenty two you have in California, which is a very blue states.
You have you have on <unk>.
Model that was overwhelmingly approved by the voters and so not only are low there is listening to drivers into earners on these platforms that are changing independent work.
We see that that choice being made over and over again and the U K, where we have do you have sort of a flexible third category that frankly, we would like to see and.
In other jurisdictions.
There, we're finding that it's possible to have a solution, where you can maintain the flexibility that garners repeatedly choose as well as the benefits and protections that people deserve and so one of the things that we've learned is that.
It's a model that.
While you won't have a one size fits all and every single jurisdiction. Because every jurisdiction is very different and you have sort of a patchwork of different.
And different frameworks that you have to deal with the reality is is that these kinds of solutions on a workable solution and they are real.
They are real resolutions two to this issue and so we'd like to be able to see and other states and in other jurisdictions.
Solutions that that draw upon some of the things we've seen in California in the U K and then.
Other places.
And we're able to kind of.
Bolster independent work with these types of benefits protections.
And then on membership our.
And the number of members continues to grow this last quarter, we've been focused more actually on converting a higher percentage of our free trial and membership into paid memberships and we're making really good progress there.
And what we continue to see as it relates to our members is that consistently.
Members, and especially paid members have much higher engagement metrics much higher trips per month than non members.
And you can also see is kind of continuing to increase membership benefits.
In addition to ride benefits for example is our most recent deal with our most recent relationship with growth off.
You can also get go puff.
Deliveries for free as well so right now the focus is.
And free members paid members and really starting to push the differentiation of the membership to continue to drive the increased engagement that we're seeing.
And Mark Thank you Mellissa and let me just jump in on Tony's answer on opportunities. So we did see a slight increase and cost right because of the benefits and and the mobility side, we've been able to pass on.
The regular cost and the rider and again, we haven't seen any impact from a demand perspective on the delivery side, we pass on much of the cost.
And again, we have not seen any impact from a demand perspective, and as you know we've seen this before and places like New York as well so.
And as Tony said, we're going to continue our dialogue.
Yes, clearly our model have pricing power and I think and markets. For example, like the U K, where we're looking for is a level playing field.
And and other like companies to do the right thing and we think on a level playing field, we get the network advantages of scale advantage and the global advantages.
That allow us to continue to be the number one player and most of the areas that we focus on.
Great. Thank you all Youre welcome next question.
Our next question comes from the line of Lloyd Walmsley from Deutsche Bank. Your line is open.
Thanks, I guess, one one for Dara and one for Tony.
Dara Nelson can you guys just help us understand a bit more on kind of driver supply challenges into the recovery. It seem like the food delivery driver supply scaled up really well into the pandemic.
We're having more challenges.
And with fiber supply on the mobility side is that just.
And the pandemic drivers moved into food delivery is it debt free delivery drivers on.
And.
As applicable to unemployment insurance and any I guess anything you can share to give us a sense of where supply is coming back.
We have to wait until early December when the unemployment benefits start to tail off.
Would be helpful and then and then Tony.
Since we have you I'm wondering if you can just give us sort of an update around the European regulatory environment. You guys. I think have made some good progress and markets like Germany.
Other markets like Spain, and Switzerland.
Angie angles to the negative side, what what's the latest on the outlook and in.
And Europe and that the kind of annual EU level.
Around regulation.
Yeah, sure I'll share, our stockpile and we will start with driver supply.
Listen I think that the way that I would describe it is that demand is a fast twitch muscle and.
And supply, especially driver supply slow twitch.
And both during times, and which we see demand increasing at very high rates or decreasing now.
For example, right after the pandemic, we see supply adjustments adjusted just slower.
And the hurdle so to speak to drive people in terms of qualification and regulatory.
And other requirements vehicle right.
The hurdles to becoming a driver generally of a person or higher than their hurdles too.
Being a courier for food so that it's a bit of a heavier lift getting drivers on board resurrecting drivers and as you can imagine and because of the safety concerns.
Of COVID-19, there's a greater hesitation for some drivers to come on board.
To drive other people versus again dry food. So the courier supply adjusted pretty quickly there were really no safety concerns et cetera that said because our eats business is growing so fast and in our.
Growth, even accelerated on top of very high rate last quarter we.
We need to bring on more careers.
Are seeing I think one other advantages that we have and our network is that we have a crop dispatch between drivers who are address driving.
And people and food, which is kind of a network advantage that we have we're actually seeing our drivers drive less food and more people right because the demand for people with higher the earnings opportunities are higher now.
And we are seeing encouraging signs as it relates to more drivers coming back on whether they are new drivers that we're recruiting to the platform or drivers that we're resurrecting and telling them to come back because their earnings opportunities are so high so I do think that.
We are leaning in and we have to lean in but all of the operating metrics that we see are moving and the positive direction and we think that this marketplace will rebalance as it has and the path. It will just take some time and some real focused operational effort and.
And I'm already seeing green shoots as a result of both.
Tony do you want to talk to you.
Sure and look I think moving.
We are actively engaging with policymakers all over the world and in Europe really is at the forefront of those.
<unk> on those efforts and we're really and button.
Those are reminding folks.
And that our position and very much consistent with the ingalls of regulators.
And who we think we want to make sure that.
There is we're getting drivers and protection protection that they that they need and that we're doing that while retaining the flexibility.
And in Europe since were talking as I said before we're talking about many different countries with different legal systems work.
Current forms of employment law, we won't see a one size fits all kind of solution, but what we are finding is that in our engagements. We're.
And we're able to make.
Progress on on having these kinds of conversations and so for instance last quarter, we published a white paper, which called on policymakers and platform companies and social representatives around Europe to come together to set a new standard for platform work, we've been hosting business round table.
<unk> with with numbers senior members of the European governments I participated and won just yesterday.
And so there are lots and lots of efforts that we continue to engage in.
To try to to try to get to a place where we are.
There is there is.
<unk> four and for everyone and a resolution.
Okay.
Okay. Thank you guys question.
Our next question comes from the line of Ross Sandler from Barclays. Your line is open.
And again I just wanted to follow up on the driver supply question and then one on on <unk>.
So are there any other factors that might be holding back.
The supply and decided and safety issues and stimulus and unemployment benefits and.
On a pre pandemic a lot of drivers would be to rent cars or new.
And I used cars.
And were to kind of come online and it seems like both of those are kind of on an economical even at $40 an hour.
You can rent a car. These days so on the other factors like that and are holding back the supply and any color there.
And then on each.
Thank you and the charts on profitable versus unprofitable markets.
<unk> is the biggest function and the difference between those two the.
Timing and the market nature of the competition and the market or is it.
I assume youre, new grocery and convenience offerings and some of those markets and any color on what's driving the difference between the.
Profitable vs unprofitable on each side, thanks, a lot and sure I'll take the first and Nelson can take the second.
In terms of driver supply.
The rough the.
The Big factors are safety and then earnings opportunities.
I think that renting a car or car sourcing.
Relative to the opportunity ahead of ourselves is pretty small and it will be low single digits as it relates to supply and we do have programs to help drivers who want to secure.
Cars get cars, both on the U S and outside of the U S.
The biggest issue is safety and we think that issue is being dealt with as it relates to vaccines.
And then the earnings opportunities are extraordinary so again the trends that we're seeing by drivers.
Drivers and come back exactly as we expected them to.
Our sign ups are up on a week on week basis.
And we do think that as we get into Q3, youre going to see the marketplace to get out and get back into balance and we are certainly putting a lot of focus on making sure. It does so.
I don't see I don't see rental being a problem at all.
Next day.
And I'll probably follow on.
Yes.
Terms of profitability right now two of our top five countries are profitable.
And we have over 12 countries and total that are currently profitable and what I would say that the characteristics are as we do have definitely a strong market position and we have good basket sizes, and we've been gaining momentum and what I would tell you those around the world.
Our business is actually operating and extremely high pace right now and doing really really well and we've really actually getting the leverage that we've talked about on the past on.
Our capital allocation model is working so we've exited a number of countries last year, which we talked about on previous calls and we're actually seeing the benefit because we are getting the scale on the marketplace and that were operating at in terms of the marketplaces, where we're still in investment mode I would say they're highly competitive.
Some other companies are still private and some other theyre all going public now and that actually is beneficial as well, but again, we think we actually have a good plan and yes you are.
Heard and my commentary and Dara commentary as we think about going to the back half of the year. We are confident that our delivery business can achieve profitability.
And by year end.
And then just to add a little bit to what analysis set.
Some of the patterns that we see and profitable vs unprofitable markets.
And more profitable markets, we're able to.
And on average profitable markets have lower incentive spend existing user incentive spend as a percentage of.
Bookings and this is because you kind of build a cohort of very very loyal users and they come back to you out of habit and not necessarily from price early on and use price to really grow your user base.
Second is as your the percentage of existing users is much larger.
To deepen your marketing becomes much more efficient because you don't need to kind of bring on as many new users.
Because your existing users kind of come back again, and again and again, which is terrific.
And then as these businesses scale, we're able to scale overheads.
And we're able to scale variable costs the cost.
Cost per transaction cost of customer.
Customer service et cetera, all of these cost can start scaling so ads and a fifth.
Naturally it's incentives, it's marketing costs and then it's scale in terms of variable and fixed costs that get you to a profitable market. This is pretty consistent and and I think you can see and a chart that we have and the supplemental and both are our profitable markets are getting more profitable.
And our investment markets, we're having to invest a lesson.
Which means that the formula for us to scale Formula is absolutely working it's not linear on every single country, but overall, we know exactly what we've got low due to get this business to profitability.
Your next question comes from the line of Justin Post from Bank of America. Your line is open.
Great. Thanks, a couple questions.
And I just wondering there's a lot of controversy about about labor costs, but as you've had more experience with prop 22, and you've had more time with the UK changes any changes to your long term margin assumptions for.
The rides on mobility business versus a couple years ago or do you think the elasticity and elasticity and market will help support that and any offsets on the other costs related to the increased benefits and then second maybe just on the normal question people are always interested in and market share with competition.
Any update on market share and Latin America, or U K would be really helpful. Thank you.
And I'll start so.
So no we don't we don't see any change in terms of our long term targets.
And there is been some there is price elasticity in there and then as you know and we made those targets we would narrow on a much more efficient business.
And so some of the actions that we took last year some of the execution of our capital allocation model are really allow us to kind of lean in and get the leverage and we're seeing that as the growth continues to come that we can get there and we're seeing that benefit. The COVID-19 has brought in terms of larger basket sizes and as you recall from quarters past the single biggest determination.
It's actually that we're starting to see a little bit early traction on the adds as well. So as you think about getting of the charter profit margins on the delivery side of the business that will be on important part of it.
But again, we do see that we're not walking away from and those margins right now where we're investing right now and in terms of getting back in the post COVID-19 World and so again, we are very optimistic and I think you've heard from our commentary, we're pretty optimistic about where we stand right now.
Yes, just and as far as our category position.
It's actually good new story, and we maintained or improved our category position.
And a bunch of key markets U S U K, Australia, Brazil, and France, I would say the mix Mexico.
<unk> continues to be quite competitive both actually on the mobility and delivery side. So there is a big battle going on there.
We have local battles all the time, when I kind of step out and look at the picture globally, the picture globally for our mobility business and delivery business.
Is really better than it has been and the past two years and radio is improving and fundamentally.
Looking pretty good.
Great. Thanks, Dara Thanks Nelson.
Your line extension.
Next question.
Your next question comes from the line of Doug and then from Jpmorgan. Your line is open.
Thanks, so much just on delivery, we've seen some industry changes in terms of restaurant pricing recently.
And you could talk a little bit about your offering and just how youre thinking about.
Positioning into reopening and then also any comments or expectations around.
Mission caps and potential timing there for anything to ease thanks.
Yeah, absolutely so in terms of restaurant pricing supply.
We continue to lean into restaurant partner acquisition, we now have over 700000.
Partner restaurants on a global basis, and we expect to grow our restaurant supply base really for the next five years at least our penetration into many markets.
And early days.
And clearly I think restaurants are seeing the benefits.
Of having delivery as a core part of their business and even in our reopening scenario.
We think thats a business that includes both walk in and.
And and.
And delivery is.
And just fundamentally better business and I think for US. What's interesting is we have a business our mobility business, that's all about getting people out.
And we think we can establish some pretty interesting relationships with restaurants as it relates to getting them out and dine in and some promotions there and we can continue to have relationships with our restaurant partners on the delivery side.
We watch competition on a local basis as far as marketplace pricing goes we think while everyone's approach is different.
We think our pricing models are quite competitive.
With with other players in the marketplace.
And I do think that we are going to have a bit more of a focus on pickup our pickup business is actually a pretty small portion of our overall volume and we think that building up our pickup opportunity.
As it relates to our restaurant partners is is a pretty big opportunity going forward.
And then as far as and <unk>.
There.
And I think that it's going to differ city by city.
We do think that.
We can adjust the business model, where there are fee caps essentially it forces us to increase delivery fees.
We have repeatedly seen as being a net negative as it relates to demand to our restaurant partners, but from a margin standpoint and from kind of a.
Call of profitability per order standpoint, we can adjust the model.
As it relates to fee caps and markets, where they are fee caps there'll be higher delivery fees, which do hurt demand to restaurants and markets that don't have.
Free cash than the marketplace gets to a balance organically so to speak.
We think the better answers, but the markets take care of themselves.
But where there are free cash we can certainly adjust accordingly.
Okay. Thank you Dara you bet next question.
Your next question comes from the line of Brent Thill from Jefferies. Your line is open.
Hi, Thank you this is John again.
Two questions one on the.
Delivery side.
And when you think about the.
The trends on the growth rates between the core restaurant food versus.
Everything else combined in terms of all the new initiatives.
And then the second question on the mobility and take take rate going down and Q2 and Timna. The fact, though is that meaningful driver supply and Cynthia and was there anything else that you think.
Goodbye and thank you.
So I'll start answering the first question, but on the second question yes.
And as we've said we're leaning in the second quarter, we're leaning into.
Supply both on the driver and our carrier side and so again on the commentary is really around that so yeah.
And as far as the growth the growth rate for food and new verticals, we talked about the new verticals being.
$3 billion run rate and terms of bookings.
Our our overall business is that over $52 billion run rate. So I think you can do the math as to the relative size.
And that business accelerated Q1 over Q4, both overall and if you just separate the food business on a standalone basis. So any way you look at it.
The trends are friend, so to speak and we.
The potential remains enormous.
Thank you that question.
Your next question comes from the line of Tom White from D. A Davidson your line is open.
Great. Thanks for taking my question Theres been a lot of questions on the labor classification issue, but I guess I had a follow up on on delivery and regulation there I.
And I guess Steve.
One area that seems Thompson.
And some increased activity and others and I think Andrew Yang the Mayor and New York.
Calling for you guys.
On the delivery platform to share customer data I guess, maybe my question is just can you kind of characterize share how you think about how food delivery.
Regulation may evolve over the next weakness seems like regulators and starting to kind of pay attention a bit more and make some noise.
Tom I guess, what I would tell you is that we've been regulated on a local basis as it relates to our mobility business from day one.
And.
These are really important dialogue that you have to have with state regulators with Citi regulators.
And where guests and every city we live there.
Money flows are local in nature, right and so we're a local business and.
And I think our experience on the mobility side really prepares us uniquely to make sure that we enter on.
Constructive dialogue on the delivery side, and usually we already have relationships with local government and local regulators to begin with so we welcome the dialogue.
And.
Again, I think that the business model, we want to have a business model that.
Aligns with the needs of cities going forward. So if you look at what we've done on safety and how we have been of late leader as it relates to safety reporting.
If you look at what we've done on sustainability.
And our pledges to essentially be all electric by 2030 and.
Many of our major markets and then 2040 all over the World. If you look at our leaning forward on IC plus right. These are all.
Based on dialogue that we've had with regulators.
And thinking about kind of where the skating to where the puck is going versus where it's been and.
And I think delivery will be the same situation.
It will create a model that not only can thrive short term, but more importantly, it'll create a model that can drive long term and a model that serves communities and service partners.
As well as our shareholders.
Okay. Thank you.
You're welcome next question.
Your next question comes from the line of Jason <unk> from Oppenheimer. Your line is open thanks.
I guess I'll ask two questions one on.
How do you know that.
And kind of the changes you've made in California that have increased pricing hasnt been and drag on demand given that we're still not in normal conditions do you have like cohort data and something that tells you that and then just secondly can you just talk a bit more around grocery.
And kind of will we be talking about that more and kind of 18 to 24 months from now, particularly around the U S and the U K and kind of roll on that business.
Yes, sure I think on.
Jason as far as the.
The drag on demand et cetera, listen, we can't predict exactly what's going to happen and the future and you're absolutely right, which is if if future.
Kind of patterns and significantly differ from the patterns that we observe there may be things will be different.
We are able to tell you when we look at pre post how the California markets have behaved versus let's say non California markets. We don't see any significant difference in terms of trends.
And California versus outside of California, which suggests to us.
That that this isn't going to be a significant kind of economic change as far as growth rates et cetera go and what we have seen consistently with our businesses is that we've got we've got pricing power.
Generally and this is a service and you want a service that is valued by consumers and generally consumers are willing to pay more for.
And we've seen that when we have raised prices and California, both for our mobility business and for our delivery business.
And I think the second question grocery and how we.
I'll be talking about looking at grocery is a.
Potentially significantly larger total addressable market and food.
It is much earlier and the lifecycle development lifecycle as far as percentage of grocery that has gone online and for US I think it's important to know that grocery is a global initiative for us so.
We are going to.
And we're going to be growing grocery and Latin America corner shop, we think can be the unquestioned leader and corner shop continues to gain share versus the competition because of excellent service.
And a very very efficient way.
And the U S. We have a very strong competitor and it's the card and others and I think the U S is going to be a battle that we're going to be on it for some period of time and on.
And we're making really good progress in Europe, and Australia, and a number of other countries on the grocery front. So we expect grocery to be a pretty significant percentage of our business 18 to 24 months ago month for now and more importantly, really five years from now.
Your next question comes from the line of John Blackledge from Cowen and your line is open.
Great. Thank you on two questions first on.
And on driver supply are there any key markets outside of the U S, where you're seeing better driver supply issues or is it more kind of a U S centric issue and then on the delivery efforts and the delivery offering evolves and scales to where the consumer can kind of get anything within an hour how impactful will that be inc.
And rising Kirk Perry Courier utilization rates.
And so as it relates to the <unk>.
Drivers. It is it is a U S issue.
And do see and Mexico.
Driver shortages as well, although that has more to do with vehicles and it has to do with.
Call it issues safety our earnings it's much more on the vehicle side and we're working with vehicle partners to make it easier for drivers to essentially get cars to earn.
But it's really U S and Mexico, the rest of the world is much more in a state of balance so to speak.
And that those two markets.
And then as far as the delivery offering.
Listen, we think right now actually courier utilization is pretty high just because the amount of demand and the marketplace.
But as you look at the eats business growing our delivery as a service business growing grocery growing or adding drizzly into the ecosystem as well all of this is going to drive courier efficiency and courier utilization, which is going to improve our cost per transaction.
<unk>.
And the ability for our drivers and couriers to cross dispatched as needed.
We think gives us even a greater efficiency advantage.
Versus our competition. So we do think that our cost per transaction trends all else being equal.
Are going to improve over a period of time as we drive utilization and.
And.
And our cross dispatches as a bit of a.
And kind of unique.
Unique model that we have that many of our other players many of the other players don't have.
Alright next question.
Your next question will come from the line other peer sugar from New Street. Your line is open.
Good evening. This is Ben haulage standing and can take and Bob covered and all.
And so we just have a question on the introduction of autonomous driving how much progress have you made here to introduce autonomous cars on your platform.
And then what kind of a ton on do you have in mind.
And most advanced experiments and tests at this stage I mentioned, we expect to hear more from you on this front. Thank you.
And then on the autonomous side, we have establish a very deep partnership with Aurora.
Aurora is we think has a leading team and the business.
And the merger of Atg and Aurora, We think can move forward there their efforts pretty considerably.
Aurora is first.
Kind of foray to autonomous is going to be and our trucking segment.
And that obviously creates potential as it relates to relationships with freight.
And then Aurora and trucking is more of a highway type of activity, which we think makes it kind of on earlier entre and easier entre and trying to be being autonomous on us.
100 mile Highway trip is a lot easier, let's say that being autonomous and busy city streets that will be and entry into certain types of rideshare trips.
Let's say are easier and advantage of our being able to dispatch.
Appropriately to a human or to a robot is something thats unique to us and some of the other players and.
And the industry and then we'll go from there.
But we are this is a technology that has to be safe, it's going to take time for this technology to hit the.
The big comp so to speak, but we are absolutely and a position to be able to take advantage of autonomous when it's safe.
Come to market.
Great. Thank you and let's take our last question.
Your final question and then it comes from the line of and Tom are calling from Citi. Your line is open and great.
And thanks, everybody just one quick one for me on the adjusted EBITDA profitability target by year, and I was hoping you could provide a bit more context in terms of the guidance.
Business conditions, you would need.
Can you maybe talk about take rate and whether Opex do you expect that to potentially go down from here or is there room to make some additional investments beyond Q2, and anything you can share in terms of the bridge and would be helpful. Thank you.
We believe we have enough levers at.
Our control in order to deliver against the profitability and the back half of the year.
We are we as we said on the call and we are substantially leaning in on.
And to both supply on the driver on the carrier side.
To make sure we're there, particularly in the U S. As the World continues to open.
We feel really good about where we are we executed flawlessly last year during a very difficult time to position the company to Bureau, where you are today and.
So we know the levers now we believe we have very high degree of confidence and we're going to pull the levers so dara and I and the rest of the management team is committed to pulling the levers we need to make sure we get to profitability and so again.
There is not a bridge per se other than the fact that we know the levers we can pull to get there and we will and.
So we are definitively going to do.
Do what we need to do to get to profitability by the back half of the year.
Alright, Thats very helpful. Thank you.
Alright, well I think that's it. Thank you very much for joining everyone. This quarter, obviously, some some green shoots.
Starting to form and it's great to see.
And are having.
Best quarter ever in terms of bookings I'm looking very much forward to our reporting our best quarter ever in terms of revenue.
And in the near future Thanks for joining everyone.
That concludes today's conference call you may now disconnect.
And then.
Good day.
And.
And.
And yet.