Q3 2024 Uber Technologies Inc Earnings Call
Press Release, V Issue Today, as well as the Resonance of the D-Section, described in our most recent form 10K and in other filings made with the SEC.
Our underlying platform continues to strengthen more than $7 8 million people now drive deliver chocolate Uber, earning more than $18 billion during the quarter more than 25 million people are now Hooper when members up 70% year on year.
Our advertising business grew nearly 80% year on year and our autonomous strategy is working as our <unk> partners are clearly understanding the significant value Uber can bring to their deployment plans.
Speaker Change: The team for another great quarter, and before we go to Q&A I'd like to hand, it over to Prashant to briefly reiterate our capital allocation approach.
Prashant: Thank you Dara.
Prashant: Let me add my welcome to our third quarter earnings call I wanted to jump in quickly with an update on our share repurchase program as well as a reminder of the capital allocation framework that we presented at the Investor update back in February.
Prashant: Our capital allocation priorities remain unchanged responsibly investing in future growth and returning capital to shareholders on.
Prashant: On the growth front, we believe we still have a huge amount of organic opportunity in front of us, including our fast growing portfolio of new products, which are now cooking at $20 billion of annual GB.
Prashant: With geographic expansion, especially into less densely populated markets and lastly, with increasing user frequency, including through our membership effort.
Prashant: On capital returns, we plan to steadily increase our share repo in the coming quarters, specifically, we intend to work our way towards a durable share count reduction in 2025.
Prashant: Now to quickly touch on M&A, we remain extraordinarily disciplined and I want to emphasize that all opportunities are reviewed with a rigorous of value creation mindset and ubers bar for M&A has never been higher.
Prashant: <unk> has said the best deal is not having to do a deal at all and we are in that enviable position today.
Prashant: So we are excited to continue on our exceptional path of organic growth, while sticking to our firm commitment to you our shareholder capital returns.
Prashant: With that let me hand, it back to depot to open the call for questions.
Yes.
Speaker Change: Sara can we have the first question please.
Sara: Thank you. Your first question comes from the line of Eric Sheridan with Goldman Sachs. Your line is open.
Eric Sheridan: Thanks, so much for the commentary, especially around the capital allocation policy I wanted to come back to the concept you introduced in the letter around less dense markets could you go a little bit deeper in both the opportunity set but also some of the operational dynamics of building supply as well as stimulating demand and less debt.
Eric Sheridan: <unk> markets and how we should be thinking about that scaling in the years ahead. Thanks, so much.
Speaker Change: Yes, Erika we think it's a terrific opportunity and frankly, sometimes we.
Kick ourselves for not recognizing it properly earlier.
<unk> started as a company in the middle of Big cities, and our biggest cities Paolo New York et cetera.
Speaker Change: <unk> continued to be the largest source of demand, but continuously we are.
Speaker Change: Seen that our growth outside of the core.
Speaker Change: The boroughs of New York, now extending into the suburbs or in secondary and tertiary cities.
Speaker Change: Has been higher than.
Speaker Change: Then the core itself almost accidentally and this is true for mobility and delivery as well.
Speaker Change: And really for us.
Speaker Change: The start of our focus on less dense areas started with delivery.
Speaker Change: In the U S, especially if you look at non core cities et cetera at 60%, 70% of the market. So the majority of the market. There generally it is growing faster that city centers as well. So we really started focusing on improving selection in those areas and then like you said then building out the liquidity.
Speaker Change: That's necessary in terms of both demand and supply careers.
Speaker Change: Making sure that those carriers are busy.
Speaker Change: And that kind of cycle that positive cycle of investing in supply and demand together, increasing liquidity getting better ETA'S getting better service level starts to accelerate and add to itself and we're starting to see that now in delivery, but not just in the U S. We've extended.
And at this focus in the UK, Australia really all over the World. We're looking at the density by quartile of all of the areas that we deliver two or all the areas that we are giving mobility services to people too and we are actively investing in those less dense areas.
Speaker Change: And we think the opportunity set there is very very significant both in mobility and delivery. So we.
Speaker Change: We think it's early days.
Speaker Change: But it is a focus of both mobility and delivery and I think it will be a tail wind to our core business in terms of grow.
Speaker Change: Over the next two to three years and hopefully even more than that great.
Speaker Change: Great. Thank you.
Speaker Change: You're welcome next question.
Speaker Change: Your next question comes from the line of Brian Nowak with Morgan Stanley. Your line is open.
Brian Nowak: Great. Thanks for taking my questions I have two the first of all I wanted to just sort of drilling a little bit more to the U S mobility bookings trends there or have you sort of look at how the business has trended since your investor update are there any areas, where you're sort of <unk>.
Brian Nowak: Exceeded or come in a little shy versus where you thought the U S rides business would be growing and is there any change in sort of your outlook for U S rides contribution to growth over the over the tenure of the of the outlook that you gave at the Investor update that's the first one on U S rides and the second one just on Phoenix and sort of.
Arizona around Whammo any anything you can share on sort of early signs of incremental volume to Uber from the <unk> partnership in that market. Thanks.
Speaker Change: Sure absolutely so in terms of our U S mobility growth the U S.
Speaker Change: Generally has.
Speaker Change: It has been kind of the gift that keeps on giving it's our largest market little less than 50% of our GBS, but more than 50% of our profitability. So the business continues to.
Speaker Change: Grow and thrive.
Speaker Change: We are seeing in the U S. A couple of trends one is that we've been very public in terms of the increase the substantial increase in commercial insurance.
Speaker Change: Costs.
Speaker Change: Really that have happened over the past two years.
Speaker Change: And as we have passed on those increases in costs, especially in.
Speaker Change: States, where insurance costs are very very high New Jersey or California.
Speaker Change: As we pass on those costs, we've seen the.
Speaker Change: Kind of the typical elasticity from consumers, which is Suvs as price goes up.
Speaker Change: The transaction growth slowed down a bit and that elasticity is usually a one for one it's no different than what we've seen and actually we've seen our competitor.
Speaker Change: Do the same as well.
Speaker Change: We are seeing weekday growth stronger than we can growth as well. So people are definitely getting back to back to work I think like the weekend party hours, maybe consumers are a little more price sensitive in terms of whether they choose to go out or not but weekday is very strong and Uber for business, especially is very very strong overall.
Speaker Change: Up over 50% Im not sure with the U S number is but it's really strong both in terms of selling to enterprises selling to health selling to transit systems as well.
Speaker Change: That is definitely a bright spot for our business as well.
And then we're not really seeing any.
Speaker Change: Signs of consumers trading down like our share product is growing very quickly as match rates continued to increase.
Speaker Change: We're investing in newer product like Uber teens to kind of bring in this new demographic into our system.
Speaker Change: And then shuttles into our system as well so overall.
Speaker Change: We're quite optimistic in terms of how the U S market is developing but those insurance cost increases are definitely resulting in the kinds of slowdowns in transactions that we expected based on elasticity experimentation that we've done in the past I think the good news is that while the insurance cost will continue.
Speaker Change: To go up we expect them to go up at a lower rate so to speak both because the market is normalizing and because we're taking a lot of action in terms of safer route safer drivers encouraging drivers to drive more safely to try to get those insurance costs down, but thats kind of a slow moving target so to speak.
Speaker Change: So pretty optimistic in general in terms of the U S market overall going forward.
Speaker Change: And then to your second question in terms of autonomous and Instrumentality.
Speaker Change: Arizona Phoenix at this point, Brian it's really too soon to tell.
Speaker Change: We have.
Speaker Change: Relatively modest number of vehicles out there we know that the experience with <unk> is absolutely terrific. It's a delightful experience.
Speaker Change: Riders are rating their whammo driver at very very high levels.
Speaker Change: And so we love the experience that is bringing forth I think the real test is going to be the expansion of our partnership and it's a significant expansion with way Moe.
Speaker Change: And Austin and Atlanta, where.
Speaker Change: We're starting next year youre going to get <unk> in the hundreds.
In those markets and I think then we will see whether there is incremental.
Speaker Change: As it relates to autonomous or not but we're pretty optimistic where we sit and I will remind you too that we've got 14 different partnerships.
Speaker Change: Not only are we expanding with <unk> that we're really happy about but you will see expansions with many of our other autonomous partners and domestic and international markets on the <unk> side.
Speaker Change: Great. Thanks, Dara Alright, Brian next question. Please.
Speaker Change: Our next question comes from Doug Anmuth with Jpmorgan. Your line is open.
Doug Anmuth: Thanks for taking the questions I'm going to stick with.
Doug Anmuth: Sorry could you just talk more about your goals here and doing fleet ups in an EV world and some of the ways that youll be able to drive some greater efficiencies for.
Doug Anmuth: Tech providers and then.
Maybe you could just talk about San Francisco, a little bit perhaps any impact that you see in that market from <unk> and is there anything notable to call out on volume frequency or loyalty in San Francisco. Thanks, Yes.
Speaker Change: Yes, definitely so generally in terms of fleet ops.
Speaker Change: Background of three offices, we have been partnering and working with fleets and building up our fleet operations.
Speaker Change: Kind of practices for years and years.
Speaker Change: Typically we have about 15% of our global mobility supply hours come from fleet and this is supply that's dedicated to us so they tend to work longer hours.
Speaker Change: We're kind of multiple shifts in terms of drivers and the supply is dedicated to us which is which is terrific.
Speaker Change: We work with these fleets in many countries and the U S and Europe as well in Spain. For example in many other countries as well so fleet operations, it's something that we built in for example, we have a special tools for fleets to be able to manage our fleet to be able to drive high utilization of their of their cars based on demand et cetera.
Speaker Change: And so we're really extending this practice.
Speaker Change: To the <unk> space.
Speaker Change: Housing charging cleaning cars can be expensive and we think just like there are advantages to a platform a global platform being demand.
Speaker Change: To drive the utilization of these suites. We think there is also an advantage to a global player establishing fleet operations to take care of.
Speaker Change: The local complex logistics that happens in a more efficient way.
Speaker Change: And we think more cost effective way.
Speaker Change: For our partners as well so it's just another way in which we want to be kind of the best demand and operational local operation platform for <unk> out there.
Speaker Change: We're really excited to get started with Raimo and hopefully we can expand from there.
Speaker Change: Terms of San Francisco.
We see the way most on the streets here.
Speaker Change: All the time.
Speaker Change: And.
Speaker Change: In the in the areas, where <unk> operates we do see them.
Speaker Change: Have category position in the high single digits or low double digits.
Speaker Change: We arent seeing any effect in terms of.
Speaker Change: Our consumers Walmart or the other the prices generally at a bit of a premium to exit is more of a call. It a comfort electric type of a price out there and it's a great product and we've been competing with Lyft and.
Speaker Change: Yes.
Speaker Change: We've talked about trips at the Q4 level I think in the prepared remarks to be similar to what we saw in Q3.
Speaker Change: With a little bit of deceleration driven by less year over year pricing impact and that's sort of what we're seeing down the <unk> lines as well so again.
Speaker Change: You should expect trip activity for Q4 to be sort of in line with what we saw in Q3 with a little bit less benefit from pricing both.
Speaker Change: You don't see as much year on year increase from insurance in Q4 as well as on the delivery side you don't see the.
Speaker Change: Some of the benefits of the efforts, we're making to drive affordability impacting basket size. So overall, we still feel this is a this is a large business that continues to grow at a very good rate.
Speaker Change: And I would say that think of mobility growing sort of in the in the low 20% range on a constant currency basis.
Speaker Change: In Q4, and then EBITDA margin probably flattish sequentially.
Speaker Change: Great. Thank you.
Speaker Change: Next question.
Speaker Change: Your next question is from Mark Mahaney with Evercore. Your line is open.
Mark Mahaney: Okay, I'll, just double click two things on the insurance costs. So Dara just talk about.
Mark Mahaney: Are those where are those in international markets is that primarily a U S market problem in specific state problem or is there.
Mark Mahaney: Is that a is that a global challenge rising insurance costs and then.
Speaker Change: Our principal has been unchanged on this we pass along insurance cost increases and we pass along insurance cost decreases so as we make progress on insurance Youll see us continue to pass those benefits on to our riders.
Speaker Change: Let me, let me pass off to Dara to take your question on advertising.
Dara: So advertising, we're obviously very very pleased with the growth of our advertising business.
Speaker Change: We've always said that in delivery it can get to 2% plus of gross bookings were in the mid 1%. So we're right in between 1% and 2% at this point.
Dara: So we're making good progress there and if I were to generally split our advertising business into kind of four different categories. One is the CPC kind of bidding for placement for small businesses that business continues to progress really really well.
Dara: We're able to increase the number of modest sizable impressions per user session.
Dara: So kind of increasing the AD load, a little bit with little or no penalty to the user experience because the ads are really targeted.
Dara: We're showing high quality restaurant, a high quality choices to users as well.
Dara: Our kind of SMB small medium business CPC business continues to grow at very very high rates.
Dara: Our penetration with enterprise is generally a little bit lower than SMB advertisers, but that is growing quickly as well.
Dara: So very pleased with how the AD team and tech teams are delivering.
Dara: And we think we are midway along this journey.
Dara: And have plenty of room for growth ahead of us in all three areas, whether it's CTC or sponsored listings or mobility solutions.
Dara: Thank you very much.
Speaker Change: Welcome next question.
Speaker Change: The next question is from Ron Josey with Citi. Your line is open.
Ron Josey: Great. Thanks for taking the question, maybe Don I wanted to stick on the delivery side, a little bit here and understand just whats driving the map season frequencies I think we said in the letter a map six 2% to $50 million in the quarter frequency reached all time highs and so I just want to understand on the delivery can you talk about just a new map seats coming on for restaurant.
Ron Josey: Or has that evolved a little bit more to newer verticals, new verticals, just given the investments and awareness around grocery in and pretty much everything that Hooper has to offer I guess that's question number one and question number two on frequency overall $25 million number one members globally teen trips up 40% would just love to hear your thoughts on just other initiatives on driving <unk>.
Ron Josey: Frequency across the platform. So one time delivery to use an overall frequency. Thank you.
Speaker Change: Yeah, absolutely so on delivery listen we're pleased with the results Thats another quarter, a 17% growth in terms of gross bookings.
Speaker Change: The Massey side in terms of audience first of all delivery is a big category I think the growth in the category continues to surprise, many maybe including ourselves.
Speaker Change: And it is the main mine Uber eats business that is bringing on the new audience I would say significantly assisted by mobility as well.
Speaker Change: Two vertical or new market, what makes an acquisition a better path in your mind and you know.
Speaker Change: Where does further expansion and diversification of the Uber platform two adjacent opportunities fit in your priorities set right now considering the transition that is happening around the core business with autonomous vehicles. Thank you.
Speaker Change: Thanks, Nicole we're going to we're going to do this in two parts I'm just going to do a refresher on how we are thinking about capital allocation to give everyone. The opportunity to make sure that I'll, let dara kind of talk about how we do those tradeoffs between when partnership makes sense. So just as a reminder to everyone and I said this at the start of the call.
Speaker Change: Our number one priority is responsible organic investments aligned with our growth strategy focused on what's going to drive free cash flow. We've got plenty of opportunity ahead of us we've talked about on the mobility side things like Halo bowls on delivery, we have our groceries in our direct business and then we have the terrific.
Speaker Change: <unk> <unk> platform, which sort of spans both products.
Speaker Change: It back in February. We also said liquidity was important to us when we had a goal of getting to investment grade we actually got there much faster than we were expecting in Q3 of this year, we hit <unk>.
Speaker Change: She is a great accomplishment for us and now it really allows us to focus on unruly the return of that excess capital to shareholders. So we will continue to selectively evaluate M&A, but it's a really high bar and it's going to have to be both strategic value and financially accretive I think food Panda is a terrific example of how.
Speaker Change: We think about that where it was a clear win both strategically where Taiwan is such a great market for Uber eats given its high frequency and great membership coverage and then financially the deal is very accretive with the likelihood that we'll get an incremental $150 million in EBITA pretty shortly after we close so beyond that.
Speaker Change: Local logistics and pricing and matching capability, that's where we'll look to act.
Speaker Change: And first typically we like to build things organically, we built a ton of businesses each was built organically here.
Speaker Change: Building organically as part of the DNA of this company and then if we see something really interesting we will look at acquisitions, but again like push off that we will be very disciplined in terms of those acquisitions.
Speaker Change: Does the bar for return on investment is quite high at our shop right now.
Speaker Change: Thank you I appreciate it.
Speaker Change: Very welcome next question.
Speaker Change: Next question is from Ross Sandler with Barclays. Your line is open.
Ross Sandler: Hey, guys just going back to the autonomous.
Ross Sandler: Questions.
Ross Sandler: So I guess on the win win partnership.
Ross Sandler: Why only two cities one on something much broader or is that an option in the future and then.
Ross Sandler: You guys are an investor in wave could you talk about how you see the second tier of the robo taxi market behind <unk> and Tesla evolving.
Ross Sandler: When do you see that next wave of.
Ross Sandler: Companies and fleets conceivably being on the road and on Uber specifically thanks.
Speaker Change: Yes, Ross in terms of the two cities.
Speaker Change: Really what you want to get is the proper liquidity.
Speaker Change: In our city anytime that you launch.
Speaker Change: Whether they stay that way.
Speaker Change: And then in terms of direct.
Speaker Change: We continue to invest aggressively in.
Speaker Change: Direct actually you see the partners partnerships with Darden and some of the partnerships that we have are exclusive and some are not exclusive it really depends its hard to generalize. There are some players who are who want multiple partners I think one of the benefits that we bring in the direct business that we are global in nature. So one.
Speaker Change: Partner is especially global brands can partner with us and we can integrate into there.
Speaker Change: Tech ecosystem, and we can deliver for them in New York, and we can deliver for them.
Speaker Change: In any internationally in Tokyo as well and there are very few there is no one else who really have the global scope that we do.
Speaker Change: But as it relates to direct we're actively increasing our engineering head count there and continuing to sell.
Speaker Change: Signed up more partnerships and also deepen our capabilities in terms of the services that we offer our partnerships. It's one of the fastest growing parts of our business.
Speaker Change: And we think the extension of direct beyond just same day delivery into kind of more fundamental parts of the fulfillment ecosystem has a real potential opportunity for us going forward.
Speaker Change: Alright, Thank you very much.
Speaker Change: I think that's it. Thank you everyone for joining a huge thank you to the <unk> team for all of the efforts that.