Q2 2021 Uber Technologies Inc Earnings Call
And.
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Good day, and thank you for standing by and welcome to the Uber Q2, 2021 earnings Conference call. At this time all participants are in a listen only mode. After the speaker presentation. There will be a question and answer session to ask a question during the session you'll need to press star 1 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 over to your speaker today, the logic Krishnamurti head of Investor Relations. Please go ahead.
Thank you operator.
And for joining us today and welcome to Uber technologies second quarter 2021earnings presentation.
On the call today, we have Uber CEO of Arcos, Roche, I and CFO and shape.
During today's call, we will use both GAAP and non-GAAP financial measures and additional disclosures regarding these non-GAAP measures, including a reconciliation of GAAP to non-GAAP measures are included in the press release supplemental slides and our filings with the SEC each of which this bullshit investor Uber Dot com.
As a reminder, these numbers on <unk>.
Audited and maybe subject to change certain statements in this presentation and on this call on our forward looking statements such statements can be identified by <unk>, such as believe expect intend and may use.
Should not place undue reliance on forward looking statements.
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, except as required by law from.
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 year ended December 31, and 2020 and and other filings made with the SEC.
And available.
Following prepared remarks, a day, we will publish the prepared remarks on our Investor Relations website, and we will open up the call to questions for the remainder of the discussion all second quarter growth rates reflect year over year growth and are on a constant currency basis, unless otherwise noted for July trends, we will be providing comparisons with <unk>.
By 2019, and addition to year over year trends.
Lastly, we ask you to review our earnings press release for detailed financial review and on Q2, a supplemental slide deck for a number of additional disclosures that provide context on recent business performance with that let me hand, it over to Dara. Thanks apology on our last call with you. We said that we will lean into re ignite.
Driver and carrier growth you've done so aggressively and we made significant progress.
Matching matching and balancing supply and demand market by market at the right times at the right places and at the rate price is a key to our marketplace and we do that better than anyone else and the world.
As a result of our driver focus on investments everything from refresh digital marketing to more attractive incentives to good old fashion and phone calls to folks we haven't seen them on a while monthly active drivers and couriers and the U S organically increased by 420000 from February to July.
And we gained an additional 110000 active carriers from a post mates migration.
In particular, the number of mobility drivers and the U S ended the quarter up 75% year on year on year.
We also made several operational and product improvements to the onboarding process that led to nearly a quarter of new driver signing up to both drive and deliver and we cut courier onboarding time by over 90%.
To see strong earner momentum early in the second half of the year and we've been able to taper our short term incentives as we hit our stride.
The good news is that drivers increasingly want to get back on the road and June 60% of inactive drivers total stay intended to start driving again within a month, that's up from 40% in April and 98% of drivers told us they expect to come back by September.
We're also beginning to see marketplace metrics revert to normalcy and several markets with surge levels and wait times and back to nearly normal and Miami, Atlanta, Dallas, Houston and Phoenix blood.
Blood and major cities like New York, San Francisco, and La demand continues to outpace supply and prices and lead times remained above our comfort levels.
Our our investment and the earn of experience is a fundamental cross disciplinary and long term initiative for our company from.
I'm doubling down on our app quality targeted and personalized reengagement campaigns to completely redesigning, our onboarding flow to make it easier and faster than ever to earn safely.
So rolling out unique programs like free language learning from Rosetta stone or free tuition with ASU on.
And <unk> Super App is unique and the depth and breadth of earnings opportunities, we can offer drivers and couriers globally.
We have a lot of work to do and it's on us to ensure Uber remains the most attractive and rewarding platform for on demand work and the world.
I also want to acknowledge the delta Varian, thanks to the incredible effectiveness. Other vaccines, we continued to see GDP growth and our business from June to July despite the impact of the new variance.
Where markets are recovering our mobility and delivery businesses are emerging stronger together and as of last week, our total gross bookings and New York City, and London and Paris.
Our over 30% higher than July 2019, as mobility has made a nearly full recovery.
Nelson will have more specifics, but we have confidence and our ability to manage through any scenario just as we've done over the past and 500 plus day days.
Our ambition is to help people go anywhere and get anything.
And whether they first came to Uber via rides and eats or freight consumers merchants companies alike are increasingly getting used to do more with Uber.
During the pandemic, we've shown how each of our multiple business lines can provide a hedge against the others, but more exciting is how innovation and our product and brand is driving cross pollination between our customer basis and other words, our businesses do provide a hedge but more importantly, strengthen 1 business construct and the others.
Youre well aware by now that the rides App is acting like a free marketing engine for delivery business will may be less obvious is that delivery is now increasingly driving consumer acquisition for mobility.
Because in many markets, especially suburbs and smaller towns eats are sometimes the first way consumers engage with Uber.
Launched proactive efforts to convert these eats first customers into Uber riders and and Q2 over 20% of mobility and first time riders and the U S and more than 40% of first time riders and the UK, where existing delivery consumers with its contribution and rapidly growing over the last year.
Over time, we expect our growing new verticals business to increasingly benefit from and contribute to our platform.
And already over 3 million consumers, our order and groceries convenience items alcohol on more on ubers app each month and this is before we've even fully addressed the U S opportunity.
Notably consumers acquired through 1 of our new verticals offerings and more than twice as much as consumers acquired through our restaurant delivery offering we're.
And we're beginning to broadly rollout grocery power by corner shop, and the U S. Having doubled our footprint to more than 400 cities on the last few weeks and expect this to be the next pillar of growth for Uber.
Underpinning all of this is our membership program just a year ago, Inc. We began to rollout Uber pass and Ernest and our drive to 30% of delivery GBS and the U S and roughly 25% globally.
Consumers, who regularly engage with both mobility and delivery now accounts for nearly half of our total company gross bookings for these consumers and particular passes and operator, and we see a long runway for increased adoption.
We're also seeing the benefits of cross platform synergies from merchants and other businesses Uber remains the largest global on demand delivery platform outside of China with more than 750000 monthly active merchants on our platform.
And our leadership position continues to growth. We're now the category leader and 8 of our top 10 delivery markets with clear and number 2 positions and the U S and the UK.
We're proud that Uber eats post mates and corner shops has helped many small businesses offset the loss of in store traffic during the Lockdowns.
But as cities and reopen these merchants are discoveries that delivery demand is additive even as in store traffic comes back.
Merchants have increasingly embrace their ads offerings to drive significant demand amplification at a reasonable cost.
Our original goal was to exit this year with $100 million of ads run rate revenue, but we now expect to surpass that goal and to end 2022 with at least $300 million and run rate revenue and high margin hats.
And last mile delivery Uber is increasingly powering first and middle mile logistics with Uber freight.
And notably roughly 50% of our freight volumes come from grocery and consumer staples shippers freight and successfully disrupted the freight brokerage market with our innovative technology and it's not 1 of the largest digital freight brokers globally, excluding China.
We believe there is a large opportunity to be the preferred and to end logistics partner for shippers, 80% of shipper decision makers managed both full truck loads as well as last mile shipping and almost 60% of survey customers have last mile needs with the pending acquisition of transplants, we have the potential to create the first and and digital logistics.
But the 1 day power the movement of goods all the way from point of production to the consumer.
While none of us can predict the macro future of the effects of the Delta Barry and going forward, we continue to see Uber of gaining momentum as we expand our services and footprint and become a bigger part of the daily local habits of millions of consumers earners merchants and shippers all over the world.
We see the path to sustainable and improving EBITDA profitability and the next 6 months, but it is our growth potential over the next 5 to 10 years that has me and the team excited and hungry to Brian.
Now from a mountain.
Thanks, Dara as Dara mentioned, we are of course still seeing impacts from the virus. However.
However on balance we continue to make good progress with total gross bookings growing from June and July.
<unk> gross bookings growth of $39 billion run rate in July with gross bookings up 6% month over month, and 83% recovered versus July 2019.
U S and Canada mobility gross bookings were up 7% month over month, and 76% recovery versus July 2019, while trips are up 9% month over month.
EMEA Latam or nearly fully recovered on a gross bookings basis versus July 2019, while APAC was a mixed bag with New Zealand, Hong Kong, and Japan, and growing vs to July 2019, but India, Australia, and Taiwan impacted by ongoing for new Lockdown.
Delivered gross bookings were at $51 billion run rate in July with growth gross bookings up 4% month over month up 56% year over year and up over 260% versus July of 2019.
Delivery has remained relatively steady since march even if it is reopened.
We are witnessing very healthy trend lines and major markets like Sydney, and New York on Monday, with Paris, and outlier, we are where we have seen some modest pullback.
And next award on M&A.
Our business is a huge amount of organic momentum and we will always aim to have the vast majority of our growth to be organic indeed.
Indeed, our delivery business is organically growth at a greater than 100% compound growth rate over the past 4 years.
And at the same time, we do not hesitate to leverage M&A, where appropriate including both acquisitions and divestitures.
Texas, we divested several assets last year got along with cost rationalization helped to improve our cost base by over $1 billion.
We've also made several attractive acquisition for instance, our acquisition of ethylene has left the market and the middle East turning into some of our most profitable markets operating well above our mobility long term margin target.
More recently, our acquisition of postpaid has helped us establish a number 1 position and a law.
<unk> largest delivery market and the U S.
While allowing us to execute organically 2 established category leadership, and New York City at the same time.
We have now largely completed the integration process and expect to deliver on our synergy targets that we laid out at the time of day acquisition.
Turning to our balance sheet the past several months have been eventful for Uber as equity investment portfolio.
Several of our portfolio companies took steps to become publicly traded entities, including Deedee, Yamato grab Aurora and Jody.
And at the end of Q2, our equity Stakes portfolio was carried at nearly $15 billion.
And for over $7 per Uber share.
As we have previously noted some of these stakes on more strategic and other similar financial with Didi being the clearest example of the latter for us as we are.
Emerged from our post IPO lockup restrictions, we will evaluate somebody's position as long as the market is reflecting a reasonable value for them and.
As we have said previously we don't intend to run on investment firm, but we have sufficient liquidity to ensure that we have the flexibility to maintain those positions with the aim of maximizing value for Uber and our shareholders.
Finally, turning on outlook.
We are very clear on the spring and our mobility marketplace and the U S was not delivering the magical experience we have all take for granted.
And as consumer demand returned faster and drivers as markets open up.
We emphasized that it was not okay, and we would proactively invest to re energize supply.
And as expected these efforts impacted our margin and adjusted EBITDA in Q2.
At the same time, we told investors that we have the levers available to achieve total company quarterly adjusted EBITDA profitability. Later this year, we remain committed to it.
The good news is driver supply has been growing and our marketplace dynamics on improving drivers on our platform are earning more than other alternatives.
Our gross bookings continue to grow and in July our margin is already improving benefiting from our investment and Q2 to accelerate the flywheel.
And July new driver additions on Uber and the U S grew 30% month over month, Thats right, 30% month over month, even as we pull back on incentives and improved our margins.
As our investments taper and we expect mobility, which are so strong leverage in the back half.
And for contact the major markets like Australia, Canada, France, and UAE, where supply has organically recovering without significant investment from Uber on mobility EBITA margin in Q2 exceeded long range targets, ranging from 46% to 67% of revenue.
And the U S. Our take rate and Miami, Atlanta, Dallas, Houston, and Phoenix has nearly reverted to pre COVID-19 levels and July.
We expect our delivery business to continue to improve its bottom line, while growing at scale are.
And our delivery businesses outside the U S and Canada was just shy of breakeven in Q2, while we are consciously leaned into the U S to improve our category position.
We expect to start delivering on our synergy targets and Q3 and deliver additional leverage through improving network efficiencies and lower incentive spend across our global footprint.
We expect freight to continue to grow and manage its investment levels for the balance of the year and we will continue to manage our corporate overhead.
Pre COVID-19, we used to provide guidance around our expected annual gross bookings and adjusted EBITDA, which we believe provides investors with some transparency on our near term goal without being overly focused on quarterly fluctuation.
And with our business emerging from the pandemic. We believe this quarter is the right time to return to providing guidance around near term trends. However, there is still a reasonable amount of uncertainty and the world and as a result, we will provide guidance for Q3 on this call.
With that context for Q3, we expect total company gross bookings to be between 22% and 24 billion.
And total company adjusted EBITDA to be better than the loss of $100 million and for Q4, we expect to achieve total company EBITDA profitability and when.
With that let's open it up for questions.
Thank you as a reminder to ask a question here any day that star 1 on your telephone and we take a.
Question press the pound key.
Please standby, while we compile the Q&A roster.
And first question is from Ross Sandler from Barclays. Your line is open.
Hey, guys. Thanks for all the color on the guidance just a question on 3 Q from the rides business.
It looks like your EBITDA growth.
Swing up above $303.50 million.
So about 5 months or so so how should we think about the take rates and rides and <unk> systemwide, we mentioned a few cities.
And moving pre COVID-19 levels, but how do we think about overall take rate and then what level of worldwide driver incentives are baked into that.
And that EBITDA run rate thanks, a lot.
So Ross as you heard in my prepared comments and we did give some update about what we're seeing in July and.
And you heard us talk mentioned not only of growth, but that margins are improving.
So if margin and take rate stay where they were adjusted in July. So we just hold on and then we have continued to grow our volume as we expect.
We will be comfortably within the ranges that we're talking about there. So we're already seeing that pullback and I think you heard my stat that.
And we increased new drivers on the Uber platform and the U S by 30% between July versus June and.
And as we pull back on incentives because again when we did this we knew what we wanted to build long term sustainable profitability and growth.
As you saw coming out of the pandemic, our marketplace wasn't operating efficiently or functionally and correctly and you heard in my comments. So we invested on the supply side to get our marketplace healthy again, and we're seeing the benefits of that today.
We are able to pull back on incentives. If you just look at where we are in July and you run that forward, we should be able to.
Achieve that kind of range that youre talking about which is why you saw him and put out the guidance on Q3 on the bottom line and also in the and.
Investor deck, there's a chart on that which hopefully to provide some simple ranges.
To help guide in terms of where we're getting to.
All right next question.
Your next question is from Justin Post from Bank of America and your line is open.
Great. Thanks, and there might be a little confusion on the investment levels and Uber versus basically lift and the U S. Could you explain why it might be a little bit different dynamics and the second quarter and why you may have a bigger profitability debit.
And then maybe if you could give you can give us and organic update.
On delivery, maybe maybe ex post nature of some of the acquisitions.
And how you did organically and a quarter. Thank you.
Yes, sure listen we can't speak for for lift, but I think on balance we were super aggressive as it relates.
And 2 driver acquisition levels and when we compare the number of new drivers coming onto the platform quarter on quarter month on month.
And the monthly active drivers directly against at least on numbers that we heard from lift.
Our numbers are higher on a direct direct comparable basis. So I think that if you compare on a numbers to lift again.
Not privy to their numbers.
We invested early and aggressively and we're seeing very positive momentum as a result of that early investment and we've been able to pull back as it relates to incentives and revenue margins and July have come up significantly over Q2, and the momentum that we see and driver and career grew.
<unk> is continuing if not strengthening.
So that gives us a lot of confidence as it relates to Q4 Q3.
In terms of revenue margins take rate and in terms of EBITDA and we think the key to investment that we made was the right investment.
And and it and it puts us in very very good stead as it relates to Q3 and Q4.
As far as East goes the vast majority of the EPS growth is organic.
And so broadly we are seeing monthly active <unk>.
<unk> on a global basis up about 40% on a year on year basis.
We are seeing basket sizes of about 10% on a yearly basis.
Seeing frequency of orders up as well.
So the organic growth rates for Uber eats is well over 50% and most of that is really about continuing to build up audience on a year on year basis.
Obviously happy with the post mates.
The <unk> acquisition in terms of being able to drive synergy value and getting to a number 1 position on la we're number 1 and New York as well.
But it's really about the organic growth and it's about activators, and it's about basket size and its about orders for heater and all of those are running positive.
For Q2, and we think they'll continue to run positive for Q3 and Q4.
Thanks Dara.
And next question.
Your next question is from Brian Nowak from Morgan Stanley. Your line is open.
Great. Thanks for taking my questions I have.
And to the first 1 is uncertain.
There are the point around the investment and the drivers I feel like we pay so much attention and these access incentives, but when youre talking about marketing and onboard costs and background checks and mass vaccination promotion and education can you just help us better understand a little bit how big was the investment to bring on more drivers in the quarter.
And how do we think about that throughout the course of the year. Just if you can sort of think about 2022 and hopefully those costs are not as big of a burden and then secondly on Uber path and I. Appreciate the color on the volume talk to us a little bit more of that areas. You think you've had some success and driving adoption of Uber pass and in your mind still low hanging fruit areas to drive more adoption of that.
Net for riders and the rise of recovery continues.
Yes, so in terms of driver acquisition spend the heaviest driver acquisition spend and incentive spend that we think we will see and we saw was in Q2, we really have to take ash and very quickly because the marketplace was not at a place that we considered healthy.
And we wanted to lean in to get wait times down.
And to get service levels down and all of those metrics and general is for a surge and wait times are moving and the right direction and and a bunch of cities southern cities et cetera, they're actually back to back to normal.
And the vast majority of the spend.
As it relates to driver acquisition is really incentives, it's about putting dollars in front of drivers and our top.
20 cities drivers.
And mobility are making over $40 and active hour.
Including just earnings and tips as well so the good news is we're now and into place.
And where we're able to put those on the pull those investments back.
If you look at July <unk>.
Volume growth will add about $200 million and EBITDA take rate improvements will add about $150 million and EBITDA, which gives us a lot of confidence as it relates to our Q3 numbers.
And we're running positive and these numbers arent theoretical there, but theyre based on actual July numbers.
So I think from that standpoint.
Investments were big but the investments were well worth it and we are on the positive side of the ledger so to speak.
As far as Uber pass goes.
The most important factor for <unk> for Us is.
And what is the retention rate.
And what we're seeing is.
After some optimization and building up the product et cetera, the retention rate for our cohorts that are with us more than 6 months is now 98%.
Retention rate on a month on month basis.
So now that we have really perfected the product drove and the stations et cetera, we can now lean into.
On member growth the vast majority of member growth is going to be organic it's putting the product and front.
Both our riders and drivers we think the mobility business coming back is going to be a big benefit and you've heard us talked about how users who use both mobility and delivery accounts for more than 50% of our gross bookings on a global basis.
So now that we have the retention we can step on the gas in terms of acquisition, but we're really going to take advantage of that 100 million monthly active platform customers and put what is a great product and front of them and we think that will get a significant amount of organic traction there.
Great. Thanks Dara sure next question please.
Your next question is from Mark Mahaney from ISI. Your line is open.
Mark Thanks for the question on the the drivers you mentioned those 2 numbers about the drivers up 75% year over year, John and a couple of hundred thousand from February to July.
And if those drivers can you tell us how many of those are absolutely new drivers to the platform vs.
Lapsed drivers and people, who Didnt drive.
During the Covid crisis and have come back yeah, Mark we can and and the majority of drivers who are coming back to the platform or what we call resurrected drivers were driven with us and the past the number 1 reason why.
They had not.
Drove and is because of safety concerns vaccines, COVID-19 et cetera as vaccination.
Vaccination rates go up.
We are seeing.
The resurrected drivers come back so because of the size and scale of the business, we can reach into our database.
And we're getting real momentum in terms of those reservations coming back so I think all of the.
All the signs are quite positive.
And 1 quick follow up question. Please any comments updated comments on the regulatory outlook and particularly on.
On the state of Massachusetts.
Yes, I think and the state of Massachusetts listened.
We think the right answer.
As our IC plus model right, which is independent contractor with benefits.
Our drivers love. It profit 22 has proven to be incredibly popular with California drivers.
The vast majority of drivers prefer.
Plus over employment full time employment.
And with Massachusetts, we are.
I think that voters in California voted for it because they have driver support I see no reason why voters and Massachusetts are going to be.
Any different we absolutely prefer a legislative outcome, and Massachusetts, but if we can't get there.
We will take it to a vote and based on what happened on California.
We're quite confident.
Okay. Thank you.
Next question.
Your next question is from Doug Anmuth from Jpmorgan. Your line is open.
Thanks for taking the questions I just wanted to clarify on.
Driver supply I think and a few months ago kind of your expectation was.
And that things would kind of returned to normal and the third quarter by the end and the third quarters that.
Kind of still and what Youre expecting here and given your trajectory and the tapering that you've mentioned and then second on profitability is that overall and delivery profit and the fourth quarter and just wanted to clarify there on the <unk>.
Fourth quarter, its total company EBITDA profitability and then even in the third quarter guidance was total company as well and so that includes all aspects of the business.
But if you on my prepared comments I, just talking packet will continue to make progress.
And improvement.
And on delivery.
And more and Atlanta again, and we expect.
EBITDA profitability of our mobility business going to continue and approve and again.
Pretty confident in terms of how we're doing it which is why we put out the guidance for Q3.
And I think if you look and the supplemental slides you also see that our delivery business outside of the U S is and ensure away from EBITDA profitability. So again. This is on a theory, we're executing on it quite effectively.
And and and we're confident and our stance overall profitability and then lastly, you had mentioned something about drivers supply returning and so.
What I would say is that you heard us both made comments in the prepared remarks that again.
And again, we invested heavily in Q2, we're seeing the benefit even in July which we talked about the margins are improving.
We're adding more drivers and we've pulled back on incentives and what I would suggest is that our ability to achieve those numbers is really just based on take rates, where they are on July <unk>.
Forward for the rest of the quarter.
And I do take on drivers of the other thing that I would add is it's not just a question on money and less on short term, we have to lean in as it relates to incentives and driver earnings are definitely high and obviously draw.
Driving is a very flexible way to earn but I would also underlie the operational and the tech improvements that we've made so for example, now.
And we're testing the capability to bring on drivers usually when someone wants to drive a person we have to do background checks et cetera.
And not just on the state that you live and other states as well, where we can on board drivers very quickly to deliver food and as we process all of the regulatory checks that we have to be very careful that we do on the ground and each state. We can then move them over to driving for the mobility.
<unk> as well.
And data has allowed the onboarding flows of CRM campaigns that we are driving.
On the incentive technology has allowed us to move from a period of heavy spend and adding drivers to much.
Less heavy spend so to speak and adding both careers and drivers at the fastest pace that we have.
For the year I mean July looks really good and.
And if August and September or anything like July and we will be and very very good shape.
Yes.
Great. That's helpful. Thank you.
Sure.
Your next question is from.
Your next question is from Brad.
Cash from Jefferies. Your line is open.
Thank you.
Any color just as it relates to pricing trends from the second half and how we should think about that and.
And Darren on the eats business. If you could just comment on the frequency I know you had net.
And on the last call that there is perhaps a slowdown in terms of frequency how are you thinking about that.
Now as you look forward.
Yes, I'll start with the second first which is we actually have not seen on.
On material decrease and frequency as it relates to our delivery business and we think it is just because a higher portion of our delivery customers are using the paas.
So we always thought that could be and offset but we werent sure of the relative offset between past because.
Non members become pass members and they have free trials and <unk>.
Especially if they when they graduate into paid membership and then that 6 month cohort that has a 98% retention.
The number of orders per eater, and riders and Raj provider goes up.
Materially.
So the question for us as well as the.
Positive momentum of membership going too.
Do let's say the negative of cities open up and so far that is the case, so that orders per eater.
Stayed very consistent.
And people are going out which is great.
But we do think that orders per eater, there'll be a tailwind in terms of orders per eater, as we continue to to drive membership.
As far as pricing trends and the second half we are seeing in July and early August we are seeing pricing ease.
It's still up year on year.
The pace of the price increases looks like it's easing as we get into a more normalized supply situation and which we think is a great is a real positive for the marketplace.
Great. Thank you.
Yeah.
Your next question is from Deepak Matthew that on from Wolfe Research. Your line is open.
Hey, guys. Thanks for taking the questions just a couple of months. So first on EBITDA given the high incremental margins on this business below the revenue margin. How much are you reinvesting into the business right now on non food and some of these and other categories and what are the trends in our underlying trends and tons of profitability of the core.
Foods business and then second question just to follow up on the rights take rate and in addition to U S. Growing and you also saw European markets recover and again.
And right now on our second quarter with the impact of drive and incentives is somewhat zone is the 280 basis point sequential decline in take rate predominantly.
Predominantly from U S. Can you give some color on kind of quantifying and by a geographical regions.
Yes, as far as delivery goes we are spending a fair amount as it relates to grocery new verticals et cetera.
Grocery and new verticals accounts for about 5% to 6% of our overall GBS and it's growing at pretty healthy rates.
But we think that we can get to delivery EBITDA profitability.
By the end of the year, including grocery as well so yes, we're leading into those parts of the business.
But really the delivery story for us is as a larger percentage of our delivery customers are repeat customers.
Our the incentives that we have to put into the marketplace. The marketing spend that we have to spend to the marketplace comes down.
Generally in the U S and other markets.
As the marketplace becomes more efficient.
And we get kind of more frequency and the marketplace, we're able to drive the cost per trip down because careers and.
On batch and we can batch 2 or 3 deliveries per carrier.
Time that they have to be on the trip reduces as we add more restaurants into the marketplace et cetera.
So the combination of marketing efficiencies that we get and cost per trip efficiencies that we that we get allow us to continue to invest aggressively and growing our delivery business.
At the same time, improving our margins as well and investing into the grocery business and regarding your question on the take rate Youre right in APAC and Latin America, we're not expecting any take rate changes. If you will so much of the investment was in the U S and Canada and there was actually some in Europe as well and order.
To get drivers back and help build supply.
Got it thank you so much.
Your next question is from John Blackledge from Cowen Your line is open.
Great. Thanks, 2 questions first on the Delta and could you talk about mobility trends in recent weeks and areas, where Delta Varian has spiked and also on delivery trends along the same lines and then on delivery second question, how is Uber and differentiating versus other competitors and grocery and.
Other across different Geos, and and what's kind of the goal on the U S. Given U S. On.
Several scale players law and that.
And that muscle thank you.
And I think as it relates to Delta variant trends, where we have seen shutdowns, we see significant changes as it relates to the power and other business. So for example, if you look at our supplemental deck.
Australia.
And.
Sydney for example.
<unk> city shutdown, we see mobility, obviously take a hit.
We see essentially the opposite happened and the delivery side of the business. That's a hedge that we talked about and even net of the hedge mobility and delivery tends to be up pretty significantly on a year on year basis.
Certainly if we compare to 2019 volumes as well, where we don't see where there arent shutdowns, it's really hard to tell.
It's people still want to go out and.
And there may be slight changes in behavior, but the non material changes in behavior and kind of the underlying growth that we see on the business.
Next over so soon.
Certainly that July trends that we saw relative to June were pretty encouraging.
But.
No 1 can predict what's going to happen with delta going forward, but so far we're hedged and the trends that we're seeing are pretty good.
As it relates to differentiating and delivery.
Listen I think I think the.
The differentiator that we have.
Is the audience and Uber platform right. So we actually were late and the delivery game. We were 1 of the latest players to build ups delivery business. We built it based on that and rebrand the marketplace matching technology that we have the pricing technology routing et cetera, 3 quarters of essentially 2 elements.
What is a ride and.
And what the delivering ultimately what's going to be a grocery 3 quarters of the elements that we're building and our stack our common elements that our engineers are coating.
So we essentially get to have engineers working on common elements.
We got bigger datasets and anyone else.
We're able to train our algorithms over a much larger data points global data points versus our competitors, which allow us to build a matching routing.
Incentives and marketing engine that is more personalized and just has greater capabilities on anyone else at the same time.
We have ops teams on the ground and every single market, we understand the regulatory marketplace. The overheads that we have are much lighter than our competitors. It all translates into cost of customer acquisition is lower lifetime value is higher because of the higher frequency of accounts that we have with our customers and overheads on.
Lower so.
And lower lower cost of customer acquisition, and higher lifetime value lower overheads and greater tech capabilities. That's the differentiator we built eats.
<unk> now.
Number 1 and 8 out of the top 10 markets and.
And we think grocery we're off to a great start internationally in the U S.
And so card is a really strong competitor and I think.
And the U S. We're going to be practical we're going to build out our merchant base and we're going to lean in on the rides and eats audience to buildup grocer and the U S. But it's a bigger audience on anyone else has so we think that's a great asset to have.
Thank you.
Youre welcome.
Your next question is from James Lee Mizuno and your.
Your line is open.
Alright. Thanks for taking my question can you give us an update on competition with BD given their issues with feed.
Regulatory bodies and China are you seeing them any any pull back from that perspective on the international operations.
You guys are competing within South America, and EMEA any update would be helpful. Thanks.
So as you know.
Very recently and quickly so we actually really haven't seen anything material if you will.
Obviously, we compete with them, particularly in some parts of Latin America.
We had a strong second quarter and continued on.
Well as oriented July and we actually haven't seen anything what I would call material changes there is always kind of fluctuations market by market city by city, but nothing and nothing that I could attach to the broader question surrounding duty.
Next question please.
Next question is from Brad Erickson from RBC capital markets. Your line is open.
Hi, there thanks for taking the questions just 1 more on new driver incentives and it's can you just talk about the confidence level that you can continue to taper here I think your main competitor here in the U S.
And theyre going to keep those investment levels fairly high from the foreseeable future and take it I'm just wondering how conservative are your expectations, there and so we look and whats contemplated into the Q4 guide and the profit target and then the second 1 is just can you remind us just what's built and also for that profit target regarding advertising. Thanks.
So there isn't much more from a run rate standpoint on advertising, it's really coming from mobility recovery and so if you're listening to my commentary.
I really did center and the variability is really around the mobility recovery of the continued recovery.
And we.
We did notice that lifted increase some other incentive spend both in June but particularly in July.
And as you heard from our commentary based on the results in July.
And our business is quite strong and our margins have come back and.
And again as I reiterated a few times on this call already as we think about getting to the guidance that we gave you it's really around not increasing our take rate. If you will between now and the end of the quarter. It's just maintaining where they were today and at this point of time and Q3, and then some expected to increase on the volume side. So.
And again obviously.
Obviously, we can't predict the future, but we feel pretty good about on whats going on now and it's happening today and the marketplace, where they are investing as Dara mentioned, we invested early and often to build back on marketplace and you do get the benefits of the flywheel you didn't hear my comments about in July and we added 30% new drivers without really incremental.
Is that incremental <unk> spending a lot more on incentive and so we just got the flywheel going and we're getting the benefits from it and I am not.
Can you comment on what lifted and.
On marketing, we do but again, we feel pretty comfortable where our marketplaces.
And I think the other factor that I would also point out Brad is.
Net incentives was the fastest lever that we could pull but the improvements that we've made in terms of onboarding flow. The CRM campaigns that we're sending to resurrect it drivers we've done a bunch of testing and learning in terms of what incentives work and which ones don't.
And all of that is is resulting in greater efficiency in terms of our being able to add incremental drivers at a lower cost and <unk> being able to hold on to drivers because earnings are really high.
The other factor that I would add is that.
And again based on what we can see our spend versus low spend our base, we went and more aggressively.
So I think that when we say we can taper it's off of a more aggressive base and if theyre putting in incentives is probably off of a lower base. So there may not be that much of a difference but the biggest factor is we now have the machine working and listen and July we pull back incentives and driver acquisition and Courier acquisition.
And look really really strong so all we're giving you is giving you the facts and our capabilities are getting better.
And we're getting smarter about how we're spending and that's what gives us a lot of confidence going into Q3 and Q4.
Great. Thanks sure.
Your next question is from Ed.
And <unk> from Keybanc capital markets. Your line is open.
Hey, guys. Thanks for taking the question I wanted to ask a question about rewards.
And I know you've got continuing to innovate the program I guess, how successful have you been in terms of driving incremental yeah.
Usage, either on the east side or on the right side and need more importantly, getting a consumer to use both sides of the app.
Yes, so on.
On average.
Sure.
<unk> customer.
As the number of trips rides and and.
Food orders per customer on a monthly basis, Inc.
Kris has more than 50% on on <unk>.
<unk> post tax so that occurred and instrumentalities is pretty significant.
We see a lot more crossover.
And if you look at our supplemental slides.
And the percentage of our total gross bookings now coming from mobility and delivery Cross platform users is close to 50% and the U S and the.
And the UK as well.
So the past is really working and the most important factor on the path is that 98% retention rate.
It's a really strong product that's sticky.
And that gives us the confidence to be able to lean in and grow the number of past members and we got.
Got it and do you think that that helps keep the customer loyalty our platform versus shopping or other platforms from a price perspective.
It certainly shows up and the and the orders per month.
It's our belief that it's not purely price.
And we really invest and the customer service they are certainly savings.
But listen this is a well worn path Amazon Prime I think touch.
A bunch of players after the value of high frequency type of interactions.
And we're not inventing and here the good news for US is our past structurally because of the delivery benefits because of the rise benefits now because of the grocery benefits.
Just structurally our past can offer more than any other pass out there and the upside that we can see from frequency is just structurally higher than any other player out there. So we think our passes the upside from it and in terms of our business and the retention just the structure of the different place versus any of our competitors.
Great. Thank you.
Okay.
Your next question is from Tom White of D. A Davidson your line is open.
Okay.
Great Alright, thanks, guys for taking my question.
I was hoping you could comment maybe on your expectation.
We're seeing EBITDA profitable after the fourth quarter and maybe whether you really think you should and I guess, specifically on talking about the growing businesses and grocery and other delivery categories.
And how you're thinking about weighing and investing in.
Long term for any large opportunities versus.
And Canada public equity investors.
I'd like to see some near term profitability.
So Tom on and when we talk about getting the EBITDA profitability in Q4, our expectations that will continue and it will be sustainable and growing.
As we continue.
Move forward into 2022.
So we believe we will have enough to invest along some of those other new verticals and other areas and reinvest back in but we recognize the fact that on 1 of the things. We did if you think about the approach you take this quarter. We invested ahead of builds up our healthy marketplace. So we can vote than average.
To get our margin back a half our business is healthy and growing and profitable as we move towards EBITDA profitability, that's pretty important.
For the company and for Dara from myself that we just sustainably build our business and continue to grow our bottom line as well.
And <unk>.
Mathematically the other factor that I would point to is.
Our mobility business as a 50 plus billion dollars run rate.
Without COVID-19 and and we're seeing on.
And number of markets back above 100% of of.
19 levels at $50 billion.
The mobility margins as a percentage of gross bookings can be 10, plus percent and already is temporary and 12% on a bunch of markets. So the earning power to day without kind of growth on our mobility business is really it's a $5 billion earnings power today delivery business, we have markets that are.
And 5% of gross bookings today. So the earnings power of that business is another $2.5 billion are running overheads.
Call It $2 billion on a run rate basis. So the earnings power of this company is very very significant that allows us to invest and new businesses and allows us to invest in new verticals high capacity vehicles pool rental.
Reserve.
It allows us to invest and grocery et cetera, and because of the scale of our business and because of the membership program et cetera that I talked about we can invest aggressively.
And we can be EBITDA profitable and we expect to increase margins for the foreseeable future.
And.
And a tough way COVID-19 kind of prepared us for this we have to sharpen our kind of operating muscles, but this is not a race day profitability and on Oh My God. What are we going to do this as a race the profitability and just keep growing and growing and growing that is absolutely our goal and I think we got the earnings power to do it.
Great. Thank you Youre.
Youre welcome.
Our next question is from Steven Fox from Fox Advisors. Your line is open.
Hi, Thanks. Good afternoon I was just wondering if you can follow up on a couple of comments that 1 in particular and as well as the comment about being practical when considering category expansion and the U S. It seems like category expansion and has a better return on your investment and you could be aggressive while still protecting profit so any longer term thoughts on how to.
Think of not just <unk>, but also the trends and the acquisition coming in other categories as you invest in the next year. Thank you.
Yes, I think on the long term I just point to overeat look this is not.
Nader theories right. We built we were late in the delivery game, we buildup Uber eats.
Using.
The engineering platform that we built on mobility, putting a bunch of our great product people engineers against it.
Buildup freight organically, we're making a big acquisition, but that's another business that we built.
Grocery and Drizzly are very very close to our delivery business in terms of use cases.
They cover the fast and frequent people walk there.
They're look they're fast they walk grocery fast and they are also frequent use cases as well. So we are going to use the family of apps that we have to essentially cross promote 1 service to the other at the right time targeted to the right person using ml algorithms. They will all have the same identity, though I'll have to say.
Payment characteristics, we'll have fraud, and Jens routing engines pricing interest all of them running against a bigger data set than anyone else can so just if this is a play that we've run a bunch of times and we're very very confident that we can do the same for grocery and other categories as well.
Great and just to clarify you said these new categories of 5% to 6% of delivery bookings bookings on a total company bookings on the clear on that delivery bookings.
Thanks very much.
Next question is from Jason <unk> from Oppenheimer. Your line is open.
Thanks.
2 quick ones..1 just how are you thinking if unemployment benefits are extended would that change your third quarter outlook and then number 2.
I think kind of softbank.
And on your stock has been causing headaches for many any thoughts about how that could get resolved.
Well so first of all in terms of.
Our guidance is really just based on.
What we think is going to happen.
Extent and benefits our extended we will manage it as you know we've made really good strides right now and the current environment and with.
The current plans in place. So now we don't see any changes irrespective of benefits get extended or not we do see benefits in terms of folks coming back to drive.
And the benefits do expire, but thats more of and upside if you will in terms of Softbank its hard for me to comment on top bank.
There we have a good relationship with them, there and investor there's lots of stuff you read about what theyre doing regarding some of their their holdings, particularly given what's going on and China.
I think much of it is done already but again, they don't really call us for advice on how they are going to trade and what theyre going to go do.
But again I think we are.
And we're fine with whatever they end up doing zone.
Thanks.
Your next question is from Richard does non from Brian. Thanks, Paul Your line is open.
Hi, Thanks for taking my question a couple if I may 1st and the markets, where you invest and aggressively and you've seen and driver supply and through did.
Could you see market share gains follow again, either competitors or alternatives and notes and those regions and.
And then secondly in terms of the users that you are adding anyway.
I mentioned, how many of these are new to Uber altogether or just older users reactivated and thank you.
And so in terms of.
The supply question again.
Yes.
Nothing in terms of our regaining our what I would say is our cabinet we call our category position you guys call on market share, it's very healthy and.
Every region of on mobility businesses.
And it's either been stable to where our wealth and Q1 or has improved slightly and every major market and.
Again, whether it's and has to do with investment on bringing and drivers pack or just the competitive nature of the marketplaces or other factors.
And what it is I can't draw conclusions between them between different marketplaces, and the team is actually doing quite well and executing on a given the pandemic and people coming back.
And so what was your second question I'm, sorry, I missed that.
Second question was just on.
The users and nasty growth any way to dimension. How many of these are new users seeking behr altogether.
Our interest reactivating older users yes.
Yes.
Majority of both our driver growth and.
And new user growth tends to come from Resurrection as again, we've got the deepest database that any company has so we can reach and that database and when we reach into that database with essentially CRM campaigns. So it's very very cheap to bring back those resurrected drivers.
Second.
Most significant area of growth is essentially the rides business through R&D eats and and now the each business actually thrown arrives and mixing new customers essentially that don't use the other product and and a third channel is essentially new customers to the platform itself. So it's in that order.
And listen we have active.
We have active initiatives and all 3 and.
And we can always do better, but certainly the momentum that we're seeing is as positive and offering.
Operator, we have time on it thank you.
Sure.
Let's take a look on your last.
Thank you and your last question is from Youssef Squali from Kenneth Securities. Your line is open.
Great. Thank you very much I have 1 question for Dara and 1 question for Nelson Dara.
Can you maybe speak to the driver supply drivers.
Driver supply on.
Yes.
And net federal employment assets recently versus those that did not how much of maybe pullback that you're seeing maybe at least partially driven by that and.
And then Nelson with profitability and couple of quarters.
And now literally around the corner can you, maybe revisit and long term margins of the business across both rides and eats that you've shared with us pre COVID-19 and arguably obviously.
Youre and much much better financial situation with all cost savings et cetera, obviously excellent assuring extra freight.
Area sales investments that can maybe just provide some color on that that'd be great.
First, though we aren't updating any of our long term margin per day.
And we want to get through the pandemic and come out and then we understand that it is something that investors want and so we will address that.
And shortly after I think Dara gave you at a very high level from that.
And as he went through it and he used as a percentage of <unk> and <unk>, 10%.
Gross bookings for mobility, and 5% for delivery and so I can't suggest that's not a good guidepost.
But again, we will formally take a look at it as we get through the pandemic, but we wanted to do is just make sure we navigate on the recovery that's going on particularly in terms of creating equilibrium on a marketplace, which is what we've been able to do and through Q2 and starting to see the benefits in Q3.
And on the use of <unk>.
To your question on driver incentives.
We have been leaning into driver incentives broadly and Q2, we have been able to pull back from driver incentives broadly and Q3, and we have been able to continue to acquire and resurrect new drivers broadly and July even as we pull back incentives just because of the.
Machinery and the targeting is working so much better in states that have ended.
And our marketplace balance and general.
And is in a much healthier condition and <unk>.
Rates have not and the UI.
There is an additional factor that's coming in and the Delta very it now which may throw things off but it does seem to be a positive to us. We don't know if it's because of the UI or other factors.
It seems positive.
And our.
Driving kind of driver.
Incentive efficiency improvements has happened and states, where you are and as ended as well as states where you all continues.
Okay. Thank you both.
You bet, we can happen okay, alright. Thank you everyone for joining us and lot of hard work from the team and Q2.
And we see we see some.
Pretty positive signals that as it relates to Q3 and Q4. So thanks very much for joining us.
This concludes today's conference call. Thank you for participating you may now disconnect.
Yes.
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