Q3 2021 Uber Technologies Inc Earnings Call
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[noise] [noise] [noise], sorry about that we've also rugs [laughter]. We've survived certain statements in this presentation on this call are forward looking statement that statements can be identified but.
Such as believe expect and then in 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 to update any forward looking statements, we make the day, except as required by law for more information about <unk>.
Does that may cause actual them with your actual results would differ materially from forward looking statements. Please refer to the press release, we issued today as well as risks and uncertainties described in our most recent annual report on Form 10-K for the year ended December 30th 2020, and then other filings made the D seven avail.
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Following prepared remarks today, we will publish the prepared remarks, and an investor relations website and they will open the call to questions.
For the remainder of the of the discussion all third quarter growth rates reflect your over your growth and are on a constant currency basis, unless otherwise noted for October trance, we will be providing comparisons with October 20th 19. In addition to your over your trends.
Lastly.
We ask you to review our earnings press release for detailed Q3 financial review and our Q3 supplemental slides deck for a number of additional disclosures that provide context on recent business performance with that let me hand, it over to Dara.
Thanks Party.
The last few quarters, we focused on achieving two things first we work hard to get Uber firing on all cylinders again, dropping recovery for mobility continued growth for delivery and scaling or momentum with free cell.
Secondly, we've been disciplined and our execution to ensure growth, it's sustainably profitable and that we live up to her commitment to shareholders.
5% since January and more than 20% since June <unk>.
As a result of incidence of surge pricing has fallen by nearly half and wait times are now below the magic five minute Mark on average we.
We did this while meaningfully reducing incentive levels and at the same time driver earnings remain near all time highs due to increased utilization.
We've also continued to grow the number of carriers on eats in the U S with active careers up 80% since January and 25% since June.
In other words, not only are we approaching our supply demand balance for mobility in the U S. We've done so while nearly doubling our delivery courier base from its low in Q1.
All in all our monthly active driver and carrier base in the U S has grown by nearly 640000 since January.
Against the backdrop of historic labor shortages and an abundance of choice for workers is a strong endorsement of Uber as value and the value of independent flexible work.
In a world where flexibility has increasingly become non negotiable for workers across the economy, We believe Uber will be an even more attractive option going forward.
We've now shifted to hyper targeted driver growth campaigns geared towards particular markets all the way down to specific neighborhoods in times of day.
We're also focused on tech improvements that increase sign up rates, combining our onboarding process across mobility and delivery. So individuals can sign up for both simultaneously and can start delivering while they're waiting to be approved to drive.
This is a unique advantage available only to Uber, which has resulted in a 20% to 40% increase in carrier and driver activation rates, we expect to roll out this feature as widely as possible in the coming months.
And some non U S markets like the UK and Brazil that driver basis back to roughly the same size as it was pre COVID-19, but it's still hasnt kept up with very strong demand, which has grown past 2019 levels.
That said, we're comfortable that the bulk of our recruitment spending is behind us and that by taking learnings from the U S and applying them abroad, we can be much more efficient and effective in our approach.
Now a bit on demand recovery.
After a period of soft demand driven by the Delta variant. The mobility recovered has reignited with mobility gross bookings expanding 18% over September over September and October period.
While several markets around the world, including U K, Brazil, Germany, Spain, Taiwan, and Hong Kong are up against 2019, we hit another milestone last week, our global mobility business posted its first few days of growth versus 2019.
In fact, this year's Halloween weekend Eclipse 2019, demonstrating consumer's excitement to get out and move again, we believe volumes returned to traveling outside of holiday periods, but the underlying trend line continues to get better and better.
Notably airports are beginning to show meaningful activity with with U S Airport trips up more than 20% and business airport trips growing nearly 60% over the past two months, we're innovating into this demand with a series of product updates geared towards airports, including the ability to book a car with Uber reserve up to 30 days in advance.
With built in flight tracking. So you are right is ready for you whether you're early delayed or hopefully all time.
Meanwhile, we've continued to see sustained consumer engagement on delivery lending further supports our belief that increased demand for all types of fast delivery is structural and will grow for the foreseeable future over.
Over the past two months delivery gross bookings have grown 8% despite reopening as around the world.
While delivery saw some summer seasonality in parts of Europe trends have stabilized and even return to modest growth in those markets, even as cities got moving again delivery gross bookings posted yet another best week ever last week and.
In fact, we set a new best week ever for weekly totally company gross bookings and seven of the last eight weeks and October was our best month in our 12 year history. Thanks to the work of all of the Cooper team members.
And the bookings already 40% larger than they were in October 2019.
It is important to note that we've been investing in these growth opportunities for years in some cases. So we are not running here from a standing start.
Our delivery business is even less penetrated and although there will be some moderation in growth compared to the last 18 months. We expect continued strong growth in the years ahead from both our core restaurant delivery business and our emerging new verticals business.
Our cities reopen we're seeing evidence that delivery complements dining at third party food delivery has continued to grow even as seated dining trends are fully recovered to 2019 levels as.
As the largest food delivery platform outside of China, with a leading position in seven of our top countries and second position in virtually all the rest. We believe that we are best positioned to tap into this opportunity.
Outside food delivery, where increasingly tapping into consumers' growing appetite for the <unk> on demand delivery of while everything today.
Today, we're focused on addressing grocery convenience and alcohol through our marketplace bolstered by the addition of corner shop, and most recently drizzly through the Uber platform.
In addition, with Uber direct we're working with retailers to fulfill demand from their own channels and a white label product that uses our delivery tech.
Value to all of our stakeholders.
Now over to analysis.
Police consistently noted throughout the year that H, one will be a period of investing for recovery and growth after which we would demonstrate strong operating leverage nature too.
In Q3, we delivered on our commitment to turn adjusted EBITDA profitable for the end of 2021.
Our mobility business returned to healthy adjusted EBITDA margins. Despite the significant ongoing headwinds of the pandemic, while delivery approached breakeven occur.
Cross our markets, we continue to see very healthy profitability trends that bolster our confidence in the long term earnings potential for our business.
For mobility 18 of our top 20 markets were adjusted EBITDA profitable in the U S and Canada are adjusted EBITDA margins expand it's more than 6% of gross bookings and importantly, and four of our top 10 markets, we're operating above 10% EBITDA margin.
For delivery or international and U S and Canada businesses were both operating near breakeven in Q3.
In addition, the court Ubereats restaurant delivery business was adjusted EBITDA profitable during the quarter and were you reinvest at all of that profitability in more to build a foundation for our new vertical business.
We expect to continue to reinvest the vast majority of EBIT, we've reached profits into new verticals expansion in queue for as well. We are confident that we will see strong returns on these investments over time.
It is important to emphasize the strong execution that underpins. These results as several transitory headwinds continue to impact our business, including foot food delivery Commission caps in the U S and Canada incremental costs of worker classification in the UK and higher than normal normal driver incentives spend in some markets.
For context food delivery commission caps in UK worker cost together represented 150 to 200 million dollar drag to Q3 EBITDA.
Turning to our balance sheet and liquidity position, we continue to maintain a strong liquidity position and in the quarter with $6.5 billion in cash and cash equivalents in our equity Stakes remarked at $13.1 billion.
<unk>, a relatively immaterial impact total company gross bookings and adjusted EBITDA with that let's open it up for questions.
At this time I would like to remind everyone in order to ask a question press star followed by the number one on your telephone keypad, we'll pause for just a moment to compile.
Our Q&A roster.
Your first question comes from Brian Nowak from Morgan Stanley. Your line is open.
Thanks for taking my question.
The first one Dara curious as to hear about what you've learned about pricing elasticity on rideshare served throughout the pandemic and the recovery and pricing and how should we think about the right incremental margin potential as we sort of go forward and you sort of balance profitability with those five.
Key areas of investment.
Then the second one it sounds like there is an update to Uber pass coming just any numbers at all you can help us understand where you are now with the incise what type of uptick do you see in volume or frequency or stickiness with any stats on Uber pass right now thanks.
Yeah, absolutely Brian.
I think as far as pricing goes.
Listen this has been to some extent a giant.
Reising experiment.
I wanted to get into.
But we're seeing the value of our products show through and.
Even with prices being on average in the U S. For example, 20% up year on year.
We're seeing that as cities reopen people start using the product and then you have a product a lot in terms of use cases weekend is actually.
Now greater than what it was pre pandemic.
At airports, obviously because of the traveler coming back SaaS, but like every single use cases coming back as expected there were no surprises and I think it shows the pricing power of our service.
And the fact that it's an everyday need and just part of both now urban and suburban life as well.
We do think that.
That based on the supply trends that we've seen in supply trends are definitely getting better.
We do think that pricing will ease a bit from the up 20%.
In Q4.
But I think that will result in even healthier trip volume as well.
Ryan the other thing I want to jump in there that as you know because.
We get a commission on that as pricing increases it's been beneficial.
But I think ours right over time, the long term things just making sure we have health in our marketplace.
I think as far as Uber pass goes I don't want to take the Thunder away from the team who has done a bunch of work membership now we got over 6 million members globally. It accounts for more than 20% of our gross bookings, we think all of those numbers can increase pretty significantly.
Continue to see really good engagement from from members on the east side each members.
Their trips per month increased by over 50%.
Members versus non members even basket sizes are higher basket sizes are up versus nonmembers, an average of 10%.
When you look at kind of the potential of membership because we are launching and upon in markets all over I would point to one market Taiwan.
Were members account for greater than 50% of gross bookings. So we absolutely believe we can get there.
Members now in Taiwan are eating with US 15 times per month, which is three ex non members. So that's the kind of engagement that you can start getting with a service that becomes an everyday part of your use case and I think we're just scratching the surface here we're very.
Probably isn't unencumbered out there.
We think that we have a very very good chance of being the non food leader outside of the U S and in the U S. Because of the power of the platform, we can over a long period of time.
Lip over especially our members from delivering from eating with us from moving with us.
And then getting grocery delivered with us as well. So we think it's a huge opportunity of the grocery markets as these are.
Multibillion slash Chilean Tam.
And because of our brand.
Because of our ubiquitous presence around the globe and our membership.
Product, we think we can penetrate into this opportunity with much much less capital than anyone else.
Our next question your next.
<unk> comes from the line of Ross Sandler with Barclays. Your line is open.
Hello onto your question Hey, guys.
So Halloween comments pretty interesting thats historically, one of the biggest isn't the biggest to ride hail days of the year or weekend. So.
Where do you stand on rides map seizures between 19 and.
1.1 point I would make is that we have come back from the pandemic faster than almost any other mode of transportation, despite higher pricing, which goes to the earlier comment I made about the utility of our product and the pricing power that we've had.
Now, we don't necessarily want that to be a permanent fixture, but I do think with the increased cost of labor and frankly inflation and the increased cost of everything.
I do think that prices are going to be up on a year on year basis, and as a marketplace. We get to take up that sort of unit economics. You could argue will be improved. We are then actively investing and of their products that are structurally lower cost. So we will we are launch.
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And share.
Cher pool product we.
We have been investing for years and a high capacity product, which is looking more and more attractive as it relates on a unit economic basis, where that can bring the price significantly lower.
We think that's a product that we can sell to enterprise, which is pretty cool as well and then on a global basis, we're making investments in two wheelers three wheelers. For example, so for example in Brazil, two wheelers are just a home run hit.
Because again they provide an alternative at a lower cost is a great opportunity for drivers and they don't have to buy a car. They have to have a motorbike. So I think the push to lower cost is going to be more of a structural product push including for example are offering transit on our app.
And I think as it relates to pricing inflation is hitting and every single product and transportation is is one of those products. The only other thing I want to add is because you didn't ask about the times a day. So on a global basis I think you've heard in our comments that were about 85% recovered in October and so we're workday, which define.
Our release.
Believes in it just talks about a change in some fees that now come out become part of cost of revenue versus below the line and so that does have some impact and it is actually spelled out in our release.
I think just the other really cool thing about our AD platform is that we're also building an AD product and our mobility app.
So obviously it is.
It's a very very big audience as you know our mobility maps. These are actually bigger than our delivery map CS and it's really it's a differentiated offering that we can offer to our partners.
Who as you know obviously, they're very happy about home delivery of food, but they want people coming to their restaurants, they want people coming to their stores and we have an audience.
That.
That is a premium audience and can be quite a targeted audience that we can offer to these advertisers in a very differentiated product from.
Any other player out there.
Alright next question.
Your next question comes from the line of Mark Mahaney with Evercore ISI your.
Your line is open.
Hi, Mark.
Hey, Thanks two.
Two things one comment on the synergies between the two business delivery and mobility bolt on.
The driver side and on the.
And on the on the consumer side any update there and then just on the driver incentives I think that peak quarter was Q2, just talk about where and maybe you mentioned this earlier, but just an update on where those driver incentives what happened to them Q2 to Q3 and is the outlook that youre at a point now where those will steadily continue to decline under most market circumstance.
Thanks, a lot.
So let me take the second one the second question first right and so this is really about take rate and so.
As you think about it.
And the U S. Now mobility continues to be a very significant customer acquisition tool for for eats So now quarter of U S. First time eaters are coming.
From Ah rides business, which is pretty extraordinary for perspective, that's more new users than we get from Google Apple.
Facebook Instagram from all of these paid entities combined.
So it's free.
We have tested that because it's consumers actually like this super App that that we're building.
And the numbers are significant and increasing and then on the other side. What's interesting is that 20% of U S. Mobility first trips are coming from eaters. So now that we have a very very big delivery business, we're able to now cross platform into whether it's offers.
Or on the App or off App, we're able to promote into our mobility business that number for the UK. For example, it's 40% I'll repeat it 40% of UK first trip mobility users actually came.
From each were eighth users, which is pretty extraordinary. So we just have this cross kind of pollen innovation of users that's pretty extraordinary and listen in any one year, it's not going to make a giant different in the business, but it's a calm counting of his advantage of us.
Sensually free traffic for both our mobility until the delivery business that over a period of five to seven years.
And if you think that the momentum that we're seeing in October is going to continue into the queue for as well. So it's a combination of seasonality and reopening in Oregon, a very very strong track.
As far as the integration goes every integration is different.
Postmates does not fully integrated into the Hoover stack.
So on the front end it.
<unk> that is distinctive fun different in terms of the brand on the back and it's running on all of the same machinery, which has allowed us to.
Get some great synergies and Postmates for example for the quarter was EBITDA positive.
As a result of.
The product synergy that we drove.
As it relates to corner shop corner shop has a huge presence in Latin America. So.
Two theaters.
And they don't make sense from a regulatory standpoint that they're there we think illegal and we will challenge them appropriately.
But I do think that as far as our plans go.
We're not counting on on regulatory relief there.
Thank you for your question sure.
Sure.
Your next question comes from the line of Deepak <unk> from Wolfe Research. Your line is open.
Great. Thanks for taking the question. So the first one I think you noted that EMEA and Latam have almost fully recovered on mobility business. In October can you give some color on the marketplace dynamics in these regions between pricing and volumes also I mean, clearly not all the use cases in these regions have probably fully recovered, but wondering where you see.
The incremental usage.
Or whether markets are not open I'd say generally Europe has opened up faster than the U S. Another factor in Europe, that's a bit different than the U S is that the driver supply.
Is more inelastic and that a higher percentage of drivers in Europe tend to drive more than 30 hours or more than 40 hours. So during the pandemic supply didn't go down as much.
So that when demand came back you already had let's say excess supply in the market to take up the slack what we're seeing now in a lot of European markets as that demand is like higher than pre pandemic and so we think that the ability for us to grow supply beyond pre pandemic in Europe is <unk>.
Take a little bit more time, because the markets tend to be a bit more regulated.
And the shift doesn't just doesn't happen quite as quickly and part of Q4 is leaning a little bit into those markets.
Just on the results that we've seen in the U S and frankly kind of the learnings in the U S, which have been really really significant really great work by the teams other factor that I would point to in Europe is different from the U S. As far as the use cases go not that different but airports haven't come back quite as fast in Europe as the U S Airport trips.
We don't see any reason why that won't normalize, but it's just it's just a factor in there.
I think if you look at the Latam markets.
Super strong markets generally with a Latam markets.
We are growing our driver supply base and building our relationship with drivers who use the platform and making this a truly truly great platform to earn on flexibly earn on is it is a strategic imperative for.
For the company.
As we grow the use cases, the mobility use cases with the new product that I talked about with the pool product in the high capacity vehicle product and the enterprise high capacity vehicle products in two wheelers and three wheelers. We just think we're going to attract a broader segment of earners onto the platform along with delivery.
And we are now learning more and through experimentation and data understanding what the situations are where we can encourage drivers to deliver food and what are the occasions, where we can.
Careers.
Move people around as well so.
We're going to see more earners on our platform.
For years and years to come and we are finally getting the right muscle in terms of promoting cross platform usage, which is going to lead to higher utilization on our platform.
In terms of time of day and in terms of driver utilization structurally that'll be an advantage over over the other players. So we want to be that platform that is.
It is kind of the one stop shop for.
<unk> earners.
That they keep coming back to for for a long period of time.
As far as new verticals as a percentage of delivery bookings, it's in the 6% to 7% range at this point.
And obviously, we want to break into double digits next year and the years beyond.
We're very very early in the growth curve, we are in investment mode.
But I'd say, we're in prudent investment mode and again, we have the advantage of having audience.
And it's about cross promoting to our audience be got it right from Reits to eats we're getting it right from <unk> and we're going to get it right in terms of east to new verticals.
I think that is it.
Thank you everyone for joining us on the call huge thank you to team Uber.
And getting to EBITDA profitability.
And I am addressing the team you've heard it from me. Many many times. This is just one step.
And the growth and development of our company, but a big thank you to the team.
Ladies and gentlemen. This concludes today's conference call you may now disconnect.
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