Operator:

Thank you and welcome to the Uber Q2 2024 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer session. If you would like to ask a question during this time, please press star, one on your telephone keypad. I would now like to turn the conference over to Deepa Subramanian, Vice President, Investor Relations and Corporate Finance. Please go ahead.

Dara Khosrowshahi:

Thanks Deepa. Q2 was another record quarter for Uber and further demonstrated our ability to deliver profitable growth at scale. Gross bookings grew 21% on a constant currency basis, consistent with trip growth. Our audience expanded 14% while frequency grew 6%, supported by 7.4 million drivers and couriers globally. At the same time, adjusted EBITDA grew 71% year-on-year and we generated record quarterly GAAP operating income. These are super strong results that we’re proud of, but I also understand there are two big questions out there that I want to address before we head into Q&A. First, the strength of the consumer and how Uber will perform in a recession. Based on what we’re seeing today, the Uber consumer is in great shape. Our audience is bigger than ever and using our services more frequently than ever. While our consumers tend to be higher income, we’re not seeing any softness or trading down across any income cohort. Were the current macroeconomic fears to materialize, we’re confident that Uber can perform well because of the countercyclical nature of our platform. On the mobility side, more driver supply brings down prices for riders and improves reliability, and on the delivery side, merchants are investing in performance channels like ours for growth, improving selection and affordability for consumers. In fact, in Q2 the number of first-time consumers on Uber Eats in the U.S. was higher than at any point over the past five quarters. It’s clear that delivery is much more habitual than many assumed, made even more so by our Uber One membership, which now covers 50% of delivery gross bookings. We’ll continue to drive consistent top line growth while expanding GAAP operating income. Our track record of making and then exceeding our commitments should give investors confidence that we’ve built the capital discipline and operational muscle to perform well in any scenario. Second, autonomous - put simply, Uber is uniquely positioned to offer tremendous value for AV players looking to deploy their technology at scale. While the operation of a ride hail network may seem simple, our technology obscures a huge amount of complexity. We support roughly one million trips per hour and our average ETA globally is approximately four minutes. That’s possible because of marketplace tech that makes over 10 million predictions per second, and more mundanely, we handled more than 25 million lost items in just last year alone. We also know that a key factor in AV commercialization will be asset utilization. AV players will need to ensure that their expensive assets are being used as close to 24 hours a day as possible while also managing the daily and weekly peaks and valleys of ride hail activity. Uber can provide enormous demand without AV players needing to invest capital towards acquiring customers or building the marketplace tech that delivers reliability at the standard that consumers have come to expect. That’s all to say that Uber will be an indispensable partner for AV players of all sorts. We’re in late stage discussions with additional global AV players to join our platform and will have more announcements in the coming weeks and months. Thanks to the Uber team for another great quarter. With that, Operator, let’s open the call for questions.

Brian Nowak:

Thanks for taking my questions. I have two, the first one is on AV. Dara, I appreciate the color, and even the extra color in the press release. My question is, is there any more detail on what you’re seeing in Arizona around incrementality of rides from the partnership? How do we think about sort of the relative unit economics, and philosophically, what is your strategy of reinvesting dollars to sort of drive more AV growth versus delivering profitability? Then the second one on mobility specifically, can you talk to us just a little bit on what you’re seeing on mobility MAPC versus frequency growth drivers, just [indiscernible] or break apart what’s driving that growth in the quarter for mobility? Thanks.

Prashanth Mahendra-Rajah:

I will, thanks Dara. I think, Brian, your question was on mobility growth, so maybe I’ll start with just restating how we did for Q2 and our outlook for Q3. For Q2, the results that we printed, if you do it at a constant currency, very strong at 27% year-over-year growth. For Q3, we’re looking for sort of a repeat in that mid-20s range, again on a constant currency basis. But when you dig into why do we have such confidence in the mobility business, I would take you back to the framework we talked about in February, that mobility over the three years that we gave you should be growing at the mid-teens or better, and that’s coming from a couple items. On the user side, we still believe that we have a pretty massive TAM that we can go after. We’re continuing to drive product innovation, and we talked about a couple of those at Go Get earlier this year, and we’re continuing to find new demographics in areas to continue to expand in. Maybe one data point on TAM that I think is helpful for folks is our monthly penetration of consumers, and we define that as folks who are over 18 years, is less than 20% across our top 10 countries, so a lot of room to run there. Another key driver will be frequency, which I think folks understand to be how our monthly active--how many times our monthly actives engage with the platform. We are launching new products, continuing to improve reliability so that when you call for an Uber, we’re able to get you one at a time that you’re looking for, and of course the benefits of membership. Only about half of our riders take one to two trips per month, so again plenty of upside there to continue to drive this as a more frequent daily use case.

Brian Nowak:

Great, thank you both.

Operator:

Your next question comes from the line of Doug Anmuth with JP Morgan. Your line is open.

Dara Khosrowshahi:

Yes, absolutely Doug. I’ll start with BYD. The electrification of our fleet is an incredibly important initiative for us. We are--if you look at Uber, Uber drivers are switching over to electric at five times the speed that normal drivers are, and if there’s any driver that you want to switch over to EVs, it’s an Uber driver because Uber drivers also drive around five times the miles of a regular driver as well, so it’s a very targeted segment that we’re going after and we’re hoping that governments can help us go after as well. The number one reason why some drivers hesitate to move over to EVs is affordability, and the fact is that BYD, when you look at cost and quality, BYD is really second to none in terms of any manufacturer out there. We’re very, very excited with the partnership. We are--we believe we’re going to bring over 100,000 new BYD EVs onto the Uber platform across some of our most important global markets out there, and we’ve always talked about climate being a team sport, we are going to be leaders in terms of climate change, and having BYD as a partner is just terrific to see. More recently, BYD has committed to very, very significant investments in the AV space, and judging from what they have accomplished in the EV space, I would not--I would make a bet on them in AV as well. But the investment that they’re making in AV is in the billions and we’re very much looking forward to partnering with them on both EVs and AVs. Prashanth?

Dara Khosrowshahi:

Just one very encouraging trend on grocery and retail is that ad spend on grocery and retail has more than tripled on a year-on-year basis - obviously that’s very high margin product, and we are continuing to expand our CPG product now into a bunch of new countries, so the momentum there is terrific to see.

Eric Sheridan:

Thanks so much for taking the questions. Maybe two, if I could, coming back to the delivery business. Building on the last set of comments, how do you think about the potential longer term for increased utility, increased frequency as you layer more supply into the delivery network, and what you continue to learn about the relationship of evolving the experience for consumers and what it means for platform growth over a longer period of time? Then also on the delivery side, we’ve seen a lot of market consolidation and market rationalization in some of the countries around the globe. How do you think about the asset portfolio on delivery and your current marketing positioning against some of those industry dynamics you’re seeing on the capital side? Thanks so much.

Prashanth Mahendra-Rajah:

Eric, as someone who’s been in the business coming up now on my one-year anniversary soon, I’m surprised--I was surprised to learn how sticky the food delivery business is. It is very habitual, and we’ve got great data that shows that stickiness is improving. I think I looked back at five, six quarters of data, and it gets better every quarter in terms of either retention, so there’s clearly the trajectory to follow what we’re seeing in mobility.

Dara Khosrowshahi:

You’re welcome. Next question?

Justin Post:

Thank you. I wonder if you could revisit the consumer downturn scenario. What would you expect to happen for mobility if we do have a recession or a bigger downturn as far as maybe trade down or looking for lower priced rides, the impact on bookings and profitability? Then Prashanth, maybe you could talk about--it looks like you’ve turned the corner on independent contract deals in Massachusetts and other areas. What happens to your cost when you sign those deals, and can you cover it with higher fees? What are the business model impacts of signing those deals? Thank you.

Prashanth Mahendra-Rajah:

Yes, I will. Justin, maybe I’ll also just start by reminding folks that we have three different broad models on how we go to market in our operating framework for folks. We have the traditional independent contractor, which is how most people think of Uber, and that is the model that the company was largely built on. Then over time, we’ve adapted to now the IC-plus model, which is what you referred to for Massachusetts, and that’s where we enter into agreements to provide some level of benefits, and then there are still some countries that we use a fleet model, where an independent company sort of handles the actual execution on the ground, and we serve as feeding them the global--or the in-country demand or the in-city demand. Specifically in Massachusetts, we reached a deal with the Attorney General that settled on a set of standards for earners that includes how we measure or how we define time on the platform, certain healthcare, family and medical leave benefits as well. As a consequence for that, the Attorney General dropped their action against Uber and we’re no longer in pursuit of a ballot issue in Massachusetts, like we had very successfully done in California. The consequence of that is we will factor that into our operating model in Massachusetts, but as we’ve said back in February at our investor day, we still have plenty of runway to focus on operational costs, so while this will be built into the cost structure that we push to the market, we continue to believe that there is plenty of runway ahead for us to continue to drive down our operating costs through the support costs and payments and a variety of other measures, that we continue to sort of grind out those basis points that will continue to make Uber an affordable option for all.

Dara Khosrowshahi:

You’re welcome. Next question, Operator?

Nikhil Devnani:

Hi, thanks for taking my question. Dara, I wanted to ask a two-parter on autonomous vehicles. First, can you help us understand how much of the ride share demand takes place during peak hours, in mornings and evenings? I would imagine that utilization math around the peak is really at the core of your value prop to partners. Then second, the partnership model makes a lot of sense to us for both sides, but there is a world where providers choose not to partner, they choose to compete more directly, so my second question is around, I guess, what the Plan B is for Uber in the event the leading players choose not to extend partnerships or engage in partnerships? How do you navigate that scenario? Thank you.

Nikhil Devnani:

Thanks Dara.

Operator:

Your next question comes from the line of John Colatuoni with Jefferies. Your line is open.

Dara Khosrowshahi:

John, in terms of mobility frequency, while we’re not going to disclose specifically what frequency looks like, I would say that when we look at lower cost products, when you look at UberX Share, hailables, two-wheelers, three-wheelers, the frequency of some of the newer products is significantly higher than the frequency of, call it the X product, etc. When you look at the overall frequency numbers for both mobility and delivery, they’re up on a year-on-year basis. It is absolutely helped by multi-product usage, it is absolutely helped by membership as well, so whether you look at cohorts, whether you look at new customers, high income, low income, the frequency numbers for us in both mobility and delivery are very, very constructive. You want to talk about ads, Prashanth?

Dara Khosrowshahi:

Then just on the sponsored listings part of the business, the growth continues pretty significantly. We’re a bit over 1% of delivery gross bookings through advertising, we had a target of 2%-plus. We think that target is certainly achievable, and actually for grocery and retail, we think that the number can be well over 2% based on what we see in terms of competitors, what we see in terms of what Amazon is doing. The focus for us with sponsored listings right now is increasing the number of monetizable impressions per user session through introducing new ad formats and placements, and really increasing the monetization of search in a smart way that doesn’t hurt the core consumer experience, so we have holdout to make sure that advertising is a complement to our eater experience and at the same time is a targeted way for merchants to reach their audience. If you think about sponsored listings, sponsored listings tend to improve audience for a particular merchant, and then merchant-funded offers, because of the price nature of those offers, tends to improve conversion as well. For Uber profitability, the sponsored listings business is more profitable for Uber but we think merchant-funded offers are a very important strategic part of our drive to improve the affordability of the overall marketplace, and increasingly we’re working with merchants to be able to move money from sponsored listings to merchant-funded offers in a back and forth and a targeted way to achieve what their goals are. The team is doing a great job. We continue to invest in our sales team, and the technical teams continue to ship some pretty impressive product out there.

John Colatuoni:

Thank you both.

Operator:

Your next question comes from the line of Ross Sandler with Barclays. Your line is open.

Dara Khosrowshahi:

Yes, absolutely. For mobility ads, we haven’t introduced a target in terms of the percentage of gross bookings. We are very, very sensitive to the fact that people come to Uber looking for a ride first, and to the extent that we introduce them to some of the premium brands that are advertising with us, we want to make sure that that experience is an excellent experience for the rider and also an excellent experience for the advertiser. It’s resulting in some very strong ad engagement from riders - click-through rates are over 2.5% compared to industry averages that are less than 1%, so I think for us, the focus is more on quality versus quantity, and I think that we’ll continue that focus going forward. The contribution of advertising is very, very positive in terms of newer ad formats that we are introducing, improving targeting capabilities, and then also investments in measurement and attribution for our ad partners, so we’re very, very happy with the progress here, but I don’t want to put a percent target because the experience of the rider comes first. In terms of Instacart and the trends there, we’re very encouraged by the trends there. We talked about Instacart baskets being 20% higher than our base basket sizes, and we’re seeing the demand come from a lot of suburban markets - you know, it kind of matches the Instacart geographic penetration, so we do think that the incrementality of the volume from Instacart is quite strong, and I’d say so far the partnership has been an excellent one.

Dara Khosrowshahi:

Yes, let’s do it.

Mark Mahaney:

Okay, thanks. Two questions please. On the TAM comment, Prashanth, that you made earlier, I think you said in your top 10 markets, less than 20% penetration. My recall is that about a year ago, you’d said it was a little under 10%, so you’ve had nice growth there. Are there particular markets where you could--like, what are you lead markets, like how high have you seen that penetration go? I assume that you’re going to be able to go higher than 20%, but any clues you’ve seen in the markets that you’ve been in, that tell you how high that could go would be helpful. Then could you also talk overall about subsidies and incentives for drivers and consumers and where those are now, and is this something that’s kind of a flat line expense going forward? Is there more leverage as a percentage of bookings, or even in absolute dollars, how do you think about those incentives and subsidies going forward? Thanks a lot.

Mark Mahaney:

Thank you Prashanth.

Dara Khosrowshahi:

Yes, thank you very much everyone for joining the call, and a huge thank you to the team at Uber. Prashanth and I and Deepa get to talk to investors about all the accomplishments and the consistent execution of the team, but it’s actually the teams on the ground, the technical teams who deliver in good markets, bad markets, uncertain markets, and we certainly wouldn’t have the kind of execution that we’ve had without everyone at Team Uber contributing, so big thank you to Team Uber.

Dara Khosrowshahi:

Awesome. We’ll talk to you next quarter. Thank you again.

Operator:

Thank you for standing by. My name is Sarah, and I will be your conference operator today. At this time, I would like to welcome everyone to the Uber Q1 2024 Earnings Conference Call.

Deepa Subramanian:

Thank you, operator. Good morning, and thank you for joining us today, and welcome to Uber's First Quarter 2024 Earnings Presentation. On the call today, we have Uber's CEO, Dara Khosrowshahi; and CFO, Prashanth Mahendra-Rajah.

Dara Khosrowshahi:

Thanks, Deepa. Our results this quarter once again demonstrate our ability to deliver consistent, profitable growth at scale. Uber is off to a solid start in 2024 with trips up 21% year-on-year, consistent with our gross bookings growth rate on a constant currency basis. Our audience expanded by 15%, while frequency grew 6%, underpinned by 7.1 million drivers and couriers on our platform. At the same time, record adjusted EBITDA of $1.4 billion grew 82% year-over-year, and we generated $4.2 billion of free cash flow over the last trailing -- over the trailing 12 months.

Justin Post:

I guess, Dara, a lot of press on Tesla and robotaxi efforts lately. How are you thinking about AV impact on Uber and potential for new competition?

Dara Khosrowshahi:

Prashanth, you want to talk to the second question first...

Operator:

Your next question comes from the line of Brian Nowak with Morgan Stanley.

Operator:

Your next question comes from the line of Doug Anmuth with JPMorgan.

Operator:

Your next question comes from the line of Eric Sheridan with Goldman Sachs.

Dara Khosrowshahi:

Yes, Eric, in terms of our strategy for Uber One internationally, it's largely the same as our strategy domestically and globally. It's a global product. We see penetration of Uber One consistently increasing in the U.S., Canada and internationally. Members are now generating 32% of Mobility and Delivery gross bookings, which are nicely up year-over-year. It's over 45% in Delivery gross bookings, where generally kind of were -- more highly penetrated. And I'll remind folks that members spend 3.4x as much as nonmembers per month. So it is a great vehicle for us to drive adoption and drive really attachment with our various services as well.

Nikhil Devnani:

Dara, I wanted to ask about U.S. rideshare growth. First, is it keeping pace with your mid-20s growth overall for the business? And then second, can you talk a bit more about where the growth is coming from? Obviously, the service is not new anymore. So it feels like it's more frequency led but is there still a healthy supply -- or healthy funnel, sorry, of new customer acquisition that you're still finding maybe it's suburbs or smaller cities or new demos, however you want to frame it. But just your overall thoughts on how this growth sustains would be very helpful.

Operator:

Your next question comes from the line of Ross Sandler with Barclays.

Mark Stephen Mahaney:

Two questions, please. I think in the prepared remarks, you talked about delivery, MAPC growth accelerating in markets like the U.S. Can you go into the -- why MAPC growth accelerated for you? And then secondly, in Delivery, grocery and retail delivery, can you talk about what impact that's having on segment margins or what the unit economics are there -- are like there? Or yes, how much of a drag or when do you see a path to profitability? And maybe it's already there for those 2 segments, but just talk about the impact of those 2 segments on the Delivery's overall profitability.

Prashanth Mahendra-Rajah:

Yes. I'll take the last part of that. So we remain very positive on grocery and retail. The business growth remains quite strong. GBs are up about 40% on a constant currency basis. Once again, 40%, so very strong top line there. And despite that very strong growth, we were still able to expand our Delivery EBITDA margins by about 20% sequentially, and that was partly contributed to by improvement in the profitability of the grocery business. So it is still not where we want it to be. It's still not at a positive EBITDA margin, but it is improving both year-over-year and sequentially, and we feel very good about the path we have to getting to profitability on grocery.

James Lee:

Two here on Delivery. Can you guys give us an update on maybe the European gig economy regulation, maybe what policy we should pay attention to, and how should we think about implication of labor costs? And maybe on the U.S. side, can we get a sense of the impact of minimum wage in Seattle and New York on GB and EBITDA? And how do you guys plan to mitigate impact going forward?

Prashanth Mahendra-Rajah:

Okay. Before Dara wraps it up, I wanted to remind everyone next week is our annual Uber GO-GET. This is our event which showcases new products and features across both the Mobility and Delivery. Obviously, we're not going to get ahead of the announcements, but our theme is togetherness. And in addition to the product piece, we've got a great fireside chat with Dara and Maria Shriver. This will be in New York. So if any of you are looking to get out of the office, please reach out to Deepa and we can see what space we have.

Dara Khosrowshahi:

I like it. My CFO is upselling. And thank you, everyone, for joining us on the call, and a huge thank you for the Uber teams. There's a ton of work that goes into all of the new products that we're launching, into the products that we'll be talking about in GO-GET, and into delivering the kind of growth and profitability that we've seen from Uber over the past couple of years. So a big thank you for the team for continuing to deliver this quarter.

Operator:

This concludes today's conference call. Thank you for joining. You may now disconnect your lines.

Operator:

Good morning. My name is Krista, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Uber Fourth Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. I would now like to turn the conference over to Alex Wang, Head of Investor Relations. Alex, you may begin your conference.

Dara Khosrowshahi:

Thanks, Alex. Q4 was a standout quarter to cap off a standout year. Trip growth of 24% year-on-year outpaced gross bookings growth for the fourth quarter in a row, powered by strong audience trends and record engagement as consumer activity remained healthy all-around the world. At the same time adjusted EBITDA of $1.3 billion exceeded our Q4 outlook with GAAP operating income of $652 million. Looking back, 2023 was an inflection point for Uber providing -- proving that we can continue to generate strong profitable growth at scale. These results in our Q1 outlook demonstrate that we're starting 2024 with tremendous momentum and reliable execution. I'm energized by the pace of innovation I'm seeing across the company and I'm looking forward to another exciting year ahead. And now here's Prashanth.

Operator:

[Operator Instructions] Your first question comes from the line of Doug Anmuth from JP Morgan. Please go ahead.

Dara Khosrowshahi:

Yes, great question, Doug. So, I think for us, the good news is that, the strategy remains largely the same. If I were to broaden in terms of Mobility, first and foremost, it's about making certain that our supply position, the number of drivers that we have on the road and engagement of those drivers continues to be healthy because that is what drives overall marketplace health. And you can never forget about the basics. The number of drivers we have on the platform was up 30% year-on-year. With engagement, average -- engagement also being up 10%. So we still drivers of the heart of the business. And as long as we've got drivers who are earning as they are, for example, in the US $33 per utilized hour and staying on the platform for longer that platform stays healthy. We have more people coming in. At the same time we're augmenting that base platform with a number of new initiatives that we've got in place, newer products. This thesis are you for be enterprise business that's actually showing nice strength early in the year. Reserve for folks who are willing to pay more for better reliability for those travel locations. For example, low cost product as well and then taxis and two-wheelers and three-wheelers. So you've got a base business that's growing at fast rates. Typically, gaining category position against many competitors. And then, augmented by some of these faster-growing products. In delivery it's very similar, which is, adding more restaurants, making sure the reliability of services is excellent. You've seen that business actually accelerate its growth from 16% topline to 17%, while significantly increasing margins as well. And that's augmented by new services such as grocery, which is now $7 billion run-rate and growing at very healthy rates. And then advertising, which we told you would be a $1 billion run-rate business next year, which is going to surpass that. We're already at a $900 million plus run-rate just in Q4 of this year. So again, strong base business, augmented by these new exciting businesses that add both top-line and margin as well. And then all of it is going to be undergirded by the power of the platform. First and foremost that their technology platform, all of the algos we have that are matching drivers to riders or matching couriers to go pick up something at a grocery store and deliver to home on time. So it's a technical platform that's doing all the matching, routing driven by AI. And then other factors like our membership program, which is up to 19 million members. And then, of course, cross-selling across the platform, which continues to increase Uber users who buy across platform, let's say, if they are taking UberX and order on Uber Eats will on average order three times more than those who don't. So I think as we look forward, it's more of the same and increasing the scale of each of these efforts, because as you can see we're growing faster than competition on a global basis. We continue to improve margins. And now that we're profitable, that creates other possibilities as well. So I think that's what we're, kind of, if next year is the same as this year just with bigger numbers, I'll be happy.

Dara Khosrowshahi:

You're welcome.

Eric Sheridan:

Thanks so much for taking the question. Maybe following up on Doug's broader question and spreading it out around the globe. Curious if there were any geographic areas, you wanted to call out exiting 2024 and looking into 2024, where you see elements of either improved market share position or elements of driving the utility around Uber One and linking more Mobility activity with more delivery activity that we should keep an eye on as we move deeper into 2024. Thanks so much.

Eric Sheridan:

Thank you.

Operator:

Your next question comes from the line of Brian Nowak from Morgan Stanley. Please go ahead.

Dara Khosrowshahi:

Yes, absolutely. I like your phraseology there. Listen, I think in terms of frequency, I know there's a bunch of sexy stuff that people talk about, but the most important factor in terms of frequency is being a service that is reliable and predictable every single day for every single occasion. So for Mobility, it's making sure that ETAs are at constructive levels, making sure that surge typically has less than, let's say 20% of sessions, and both of those are moving in the right direction and especially in Q1, they are moving in the right direction. And then for Delivery, Jeff, taking out any errors in terms of you're missing a drink et cetera, making sure that if we make a delivery promise of 25 minutes, we deliver in 25 minutes. So I think those are the basics. Now, the advantage or one of the advantages that we have is the platform, which is, as we see our users engage with more than one product, those users tend to come back more often and tend to stick around for longer. So we have now a team that is essentially using AI algorithms, and there are a number of promotions that we -- that we have lined-up. So if you are going to work, if we know that you're committing to work for breakfast, we may have a promotion for you to up a coffee at Starbucks. If you're coming home from work and we know it's around 6:30, and that's when you order dinner, we may say why don't you order a pizza, it'll be home for your family, by the time you get there. All of these occasions, there are different occasions that we can target the right person with the right offer at the right price. All of that now is algorithmically driven. And it's pretty powerful because it's gone from, I'd say like programing, a third of the time, let's throw this promotion and a third of the time let's do another promotion. As it turns algorithmic, as it becomes much more targeted and personalized, the part of the platform increases. And that generally just mathematically moves frequency the right direction. The last point that I would make is, again, membership too is just a tailwind for us for frequency. We got 19 million members, up significantly on a year-on-year basis. Members buy more, they stay longer and just mathematically members will account for higher percentage of gross bookings, which means a higher percentage of customers are going to stick around for longer, and transact more frequently. Prashanth, you want to take the second question?

Operator:

Your next question comes from the line of Ross Sandler from Barclays. Please go ahead.

Prashanth Mahendra-Rajah:

Yes, good morning, Ross. I'm going to take that question. So before I jump into incremental margins, maybe I'll just take a minute to talk about, as we go forward, we'd like to focus really on EBIT dollar growth. Given the power of the platform, the leverage that we're generating off of our revenue growth where we're pretty excited about the absolute EBIT dollar growth we're going to be able to generate over the coming quarters. And we think that's a better metric for us because it allows us to really share with you a better proxy for our ability to generate cash flow. Having said that, I do want to talk specifically to incremental margin. So you're referring to that in Q4, incremental margins grew sequentially for the Mobility business. And as a reminder, that can bounce around a little bit based on mix and also based on the investment decisions that we make. So I wouldn't put too much focus on continued expansion of incremental margins. We feel very comfortable that the overall incremental margins for Uber are going to continue to be something that is going to pull the overall profitability of the company up. But remember that, we will always be making investments in areas that -- such as our growth bets that you referred to, whether it be Hailables or in new geographies that are going to put some pressure on that. But overall look for continued growth in EBITDA margins. But probably a little less acceleration in incremental margins.

Justin Post:

Great, thanks. I'll ask a couple of things, we got a ton of questions on. First, just on Mobility pricing and ability to drive growth. Where do you think you are on that, mostly for UberX. And how do you see pricing in 2024 and do you see that maybe as a headwind for growth or any issues with that? And then second on insurance, can you just confirm, one month is in higher rates are in the March guidance and how you're thinking about maybe the step up in 2Q if anything we need to think about. Thank you.

Prashanth Mahendra-Rajah:

Not really, but I'll take that question. Yes, so as a reminder, maybe we'll say that -- remember, that we provide automotive liability insurance on behalf of our drivers. So it's a benefit we provide to them and in turn we build that in to our pricing. Certainly this is a Space that has been facing significant cost pressure, you're going to be seeing similar inputs from or outputs from both the personal and the commercial auto insurance companies. As a data point, we'd say -- we'd point you to the latest CPI Print, which had motor vehicle insurance up 20% year-over-year. So in this more inflationary environment, we are taking a number of steps to actively manage our cost. First, I'd call out that we can use the data that we have access to in the technology environment to really drive safety technology. And that includes things that we've talked about before, like reducing left turns, giving alerts to drivers when they are approaching challenging intersections, enabling both audio and video recording during trips so that there can be evidence of liability, which can be helpful to us. In addition, we have an excellent risk management program. We are -- we have a good partnership with our carriers, and we maintain these relationships over a longer-term. But what is helpful there as well is, we have our own captive insurance company. And that allows us to retain more risk, where necessary, particularly in harder insurance pricing markets when it could it be for a particular geography or locality. And then lastly on the regulatory side, we've got a really strong policy team that is working on a reform -- on reforms state-by-state. So we've seen some good progress, positive legislation in Florida, in Virginia and Georgia, working on some other states as well. And we're also active in a number of states, including California. You might have seen that -- you might have seen some activity on this in the last couple of weeks where we see an opportunity to really educate the new legislatures given there's a fairly high level of turnover, that's expected at the state level, 40 or so seats that are going to open up. And we've indicated that we're willing to put as much as $30 million into our Uber innovation pack, which is really focused on helping to identify business-friendly legislatures for the California State. Wrapping up at the kind of -- at the overall 2024 level, I would say that the insurance cost per trip for the US, that's certainly going to be a headwind. We've got these multiple cost mitigation efforts that we're going to continue to factor. And really, Justin, to your question, all of that is priced into the guide. So you should expect all that to be reflected in the outlook we're giving.

Mark Mahaney:

Yeah, thanks. Let me ask two questions, please. On the advertising revenue growth that's been better than maybe we all thought a year or two ago, what do you think have been the biggest kind of growth surprises. What parts of the -- all advertising platforms that you have done the best for you. And then in terms of Uber One, you got 19 million users. It's a really good number. I know it's a product that kind of like Prime over time can have more -- not more -- not just bells and whistles, but more really great features and functionality added to it. Can you just give a sense of what some of those new incremental features and functionality would be that consumers would really appreciate? Thank you.

Prashanth Mahendra-Rajah:

And maybe just to wrap it up, just put some numbers out there so that you have -- again, 19 million members across the 25 countries that Dara mentioned. And again, I want to go back to the data he pointed out earlier, about 45% of our Delivery gross bookings is coming from members. So it is definitely driving the frequency, which is elemental to the growth algorithm.

Operator:

Your next question comes from the line of Ron Josey from Citi. Please go ahead.

Dara Khosrowshahi:

Yes, absolutely. As far as grocery and retail goes, we're very happy with the progress there. Like you said, $7 billion of gross bookings. And really the focus that we have now on grocery and retail is upsell to the Uber Eats customer. Our grocery and retail business is now fully native. We have sunset the Cornershop app all over the world. We certainly haven't sunset that team, that team is now actually leading many parts of our grocery and retail business. But the upsell is about showing at the right occasions grocery too and eat or so for example, after you've completed the order, maybe, you want a bottle of wine from a nearby liquor store or you want some dessert et cetera, it's those occasions that can introduce in a very natural way the Uber Eats customer to grocery and retail. And then what we'll look to do after that is promote, there is a supermarket around the corner, do you want to do a top-up shop or do you want to do your weekly shop on that supermarket as well. So, it’s a lot of basic tackling, including getting more retailers onboard. And steadily we're increasing the number of eaters who also order grocery and retail, it's now up to 14%. And that is a percentage that you will continue to see move up throughout the year. So that's essentially what we're doing again, we expect big things from grocery and retail. Prashanth, do you want to talk about kind of the investment philosophy there. And then we'll go to Uber team.

Dara Khosrowshahi:

On teams, as a parent of team, I can tell you that Uber team has one of our all-time kind of favorite new product out there, obviously, the parent has to invite the team to use the product. We continue to expand in a number of markets. And one thing that's very interesting in terms of teen is that, we're actually seeing the frequency of use of teams, I guess it shouldn't be a surprise, be just as high as the frequency of adult. So, once teens get their hands on the product and is a very safe product, they use it every day to get around. And I think the reason why parents really love the product is, they are the ones that are inviting their teens to the product, they can rest assure that only the best drivers that are on the platform who have been there the longest, who have the best ratings can pick up a teen, there is automatic pin dispatch to make sure that you -- your teen gets in the right car, that sometimes is a worry. You can track your teen automatically to make sure when they get picked up, know when they get dropped off. And you as a parent can directly contact that driver, just in case you have any questions that the car stops and you're worried about et cetera. So the out-of-the-box tech that comes with teen, which is really an amalgamation of a number of safety innovations that we've led on in the industry, make it a product that has been an absolute hit. And I think we're pretty comfortable that once those teens turn into grownups, Uber is going to be their first choice for Mobility. So this is a product that today is a product that is looking great in terms of frequency and customer satisfaction. But it's also a product that's designed to -- for growth, not just today, but tomorrow.

Deepak Mathivanan:

Great, thanks for taking the question. Dara, upfront fares has been live in the US for a few quarters now and has definitely been a huge factor in 2023. Can you talk about the opportunities to expand this into more international markets and also perhaps integrate it with a wider range of Mobility products beyond UberX in 2024. And then just a follow-up on the grocery side. What are some of the key product initiatives for 2024 for building out the grocery vertical. And do you see opportunities to accelerate product build out and maybe even retail partnerships through acquisitions? Thanks so much.

Operator:

That concludes our question-and-answer session. I will now turn it back to management for closing remarks.

Operator:

This concludes today's conference call. Thank you for your participation. And you may now disconnect.

Operator:

Good morning. My name is Briana and I will be your conference operator today. At this time, I'd like to welcome you to Uber's Q3 2023 Earnings Conference Call. Please note that this call is being recorded. All participants are in listen-only mode. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. I will now turn today's call over to Alax Wang, Head of Investor Relations. Please go ahead.

Dara Khosrowshahi:

Thanks Alax. Q3 marked another very strong quarter for Uber. Year-on-year trip growth accelerated to 25% from 22% in Q2, outpacing gross bookings growth for the third quarter in a row. Trip growth was powered by strong audience and frequency trends as consumer activity remains robust heading into our busiest period of the year. Notably, monthly trips per MAPC continue to steadily increase matching our all-time high. At the same time, adjusted EBITDA exceeded our Q3 outlook and our adjusted EBITDA margin exceeded 3% for the first time. Simply put, the growth flywheel we built, coupled with rigorous cost discipline, is enabling us to generate strong leverage. We're exiting the year with tremendous momentum and reliable execution. Our Q3 results and Q4 outlook demonstrate that Uber continues to drive profitable growth at scale. We remain focused on scaling GAAP operating income and free cash flow, while also making disciplined investments appropriately fund growth initiatives that will deliver long-term, sustainable financial value. Finally, I want to recognize and thank Nelson for his immense contributions to the company and his partnership with me over the past five years. Looking ahead, I'm thrilled to welcome Prashanth as our new CFO starting tomorrow, and I'm confident that he'll continue to build upon the great foundation that Nelson has built. With that, let's open the call to questions.

Ross Sandler:

Hey Dara. Just a couple of questions on the Mobility business. Could you just flesh out a little bit more in detail what the drivers of the acceleration in Mobility gross bookings were third quarter? And as we look out over the next few years, what do you see as the biggest drivers of sustainable mobility gross bookings growth now that we've caught up with the pre-pandemic trip volume and frequency, what do you see for UberX versus the new areas? Thanks a lot.

Ross Sandler:

Thank you.

Operator:

Our next question comes from Brian Nowak with Morgan Stanley. Please go ahead.

Dara Khosrowshahi:

Yes, absolutely, Brian. So I think on the ML front, it's actually hard to say where ML can improve because it's pretty much in every part of our business. Like we've been developing and using machine learning for many, many years now. Just a couple of examples might be like earner on-boarding, right? You take that for granted. But actually, now what we're using is we're using machine learning technology to like Computer Vision to essentially allow the machines to recognize documents more to reliably, transcribe them accurately so that your on-boarding experience and the time to onboard could be reduced drastically, errors can be reduced as well. So, essentially, machines can read these documents better than humans can. That's one example. On the productivity front, we're rolling out GitHub Copilot for software developers. We have already seen, because of investments that we've made in our tooling, our average software developer is much more productive now than they were two years ago, and we think that GitHub Copilot will improve productivity and hopefully will also reduce mistakes on the platform as well. So, they will have ML algorithms debug developer code before that code kind of is tested, et cetera. So, we think that's -- that can increase the productivity of our business as well. We're pretty excited about conversational support. So, these are large language-based tools that essentially help our customer service agents. They will go through customer history that get details about the particular issue that the customer might be calling about or chatting about, and we'll be giving recommendations on what to do based on our policies all around the world. Humans have to kind of go through all these kinds of policies. Now, machines do, they give humans a recommendation. And eventually, then machines are going to be talking with our customers on the front line as well. And then on the delivery marketplace and the mobility marketplace, we've been using advanced machine learning algos for routing, for matching, for pricing, all of these algos generally improve on a year-on-year basis and accrue hundreds of millions of dollars of either incremental bookings that call it VC neutral or an improved chain algorithms to reduce, let's say, cost per transaction on the delivery space. So, these are just some of the areas where ML is working out. And listen, for us, ML is a powerful technology, period. But because we're the largest player in the world, we are gathering more data for more customers across a wider range of behaviors than anybody else. So, we think in a world where ML becomes more important Uber becomes competitively stronger, so to speak, because of the set of data that we have that's really unmatched and unrivaled, including customers who are engaging both in the mobility and the delivery marketplace. So, it's pretty powerful. In terms of the other use cases that we're seeing, listen, Uber for Business is something that's very, very promising. We continue to penetrate into the corporate space. It's great to see companies now get their travelers on the road again and we definitely saw an uptake there. But with Uber for Business, we're also looking at verticals like health and transit as well that are very, very healthy and hold a ton of promise. For me, travel is something that's very much in my heart because of my old Expedia days. And we've talked about travel being a very, very strong kind of signal for Uber and travelers typically using Uber because of our global footprint, kind of perspective here. In 2022, nearly 700 million trips globally were taken by consumer that's out of their primary city, which is pretty amazing. And every quarter, about 20% of our users took a domestic trip outside of their primary cities. So our users, they're high-income earners, they tend to travel a lot and that becomes a good segment for us to target. We've done so in the UK where we're quite optimistic about our travel business in the UK and some of the early signals that we see, for example, in the UK, you can book trains and buses, 60% of train and coach users and 25% of our flight users are now repeat users on Uber as well. So they try the product because we have a big audience. But more importantly, they're coming back to the product, which is great. So we got multiple avenues for growth and travel and business are just one amongst many honestly.

Dara Khosrowshahi:

Yeah. Next question.

Eric Sheridan:

Thanks so much. And first, thanks to Nelson for all the insights and conversations over the years. Thanks. I wish you best going forward. Maybe Dara, I think two bigger picture ones for you. One on Uber One. As it continues to scale globally and the base of subscribers continues to build, what are some of the early learnings that have now translated into scale about how you're thinking about bringing that subscription to market more globally than in the early years and what that might mean for the business in the years ahead? That's number one. And then on driver supply. We were in a very different position a year ago where you were using a lot of incentives on driver supply. As we come out of that period and things have normalized, how are you thinking about optimizing driver supply for efficiency cost, maybe even insurance? So we should be thinking about that as an initiative going forward? Thanks so much.

Operator:

Our next question comes from Ron Josey with Citi. Your line is open.

Dara Khosrowshahi:

Yes, absolutely. So these products are definitely creating demand, and they create demand in different ways. So for example, Hailables or taxi product, if you look at the number, the percentage of new customers coming in from Hailables, it's about twice the percentage of gross bookings that taxi represents. That's because in a bunch of markets, actually, the only way we can penetrate into those markets is through taxi. Japan, as an example. We have a very, very small, high-end peer-to-peer business. But we're going in partnering with taxis in Japan. We actually just joined the taxi association in Japan as well. And those taxies essentially our brand-new supply introduced us to a whole new audience in Japan. And actually, the tourists coming into Japan as well kind of supports the local economy. So that's an entirely new audience. That's true in many parts of Argentina, in Turkey, where these new business models essentially are bringing new audience. The other one that I will point out to are low-cost products. So if you look at UberX Share, for example. It is taking some trips away from our UberX business do see kind of lower income move to UberX Share faster. So we think that's providing them relief based on kind of the economic hardships and all the inflation that we're seeing there. So we're absolutely seeing a higher penetration of UberX Share for lower-income consumers, but it's also introducing us to a new audience as well. Same thing in Moto. These are two-wheelers in Latin America, and again, newer lower income audience that previously could afford Uber, now can afford Uber as well. So, all of these either drive audience or frequency or both. And obviously, they're strategic in terms of our long-term growth formula.

Dara Khosrowshahi:

You’re welcome. Next question.

Doug Anmuth :

Thanks for taking the question. One for Dara and one for Nelson. Dara, what do you view as some of the primary compounding advantages you're currently achieving just across operational best practices? And where do you see the biggest opportunities going forward? And Nelson, you've improved profit significantly over the past year, incremental margin is now running at about 9% in 3Q. How are you thinking about key investments in hiring into 2024? Thanks.

Nelson Chai:

So Doug, in terms of our ability to balance growth and profitability, as you know, since we have public, Dara and I have been talking about our capital allocation process, we laid out our three-year targets last year. And if you look at the performance of the company, we've been in line with the top line and overachieved at the bottom every single quarter. And if you look at the guidance, again, it's very, very, very constructive, if you think about it. You heard Dara talk a lot about where the business is going and some of the growth, our mobility business, the gross bookings were up 30% in Q3. And that's why we're continuing to invest in the businesses. So if you think about it, where we are today on both delivering the bottom line, but investing for the future, we're starting to see some of these new growth initiatives scale, new mobility products, $9 billion gross bookings run rate, new verticals are at a $6 billion gross bookings run rate. So we're delivering the bottom line. We're delivering free cash flow. We've delivered GAAP operating income, as we've talked about over the past three years, while driving a lot of top line growth. And so the business is in terrific shape as you think about how we're going into 2424 and beyond. And again, we are balancing our capital allocation model. We probably do a little optimized to make sure we deliver on the bottom, but we are able to fund certain growth initiatives. So we have a lot of confidence in terms of where we are. And as you heard from Dara's commentary on all the growth vectors we have, we're pretty bullish about where the company has had it.

Nelson Chai:

You bet. Next question.

Benjamin Black:

Great. Thanks for taking the question. You, obviously, got a nice regulatory win in New York last week, but we still have the DOL on the EU platform directive, Prop. 22 in California. So it’d be great, if you can give us a lay of the land on the registry front? And do you feel comfortable operating in any employment classification outcome? And then just quickly, there are clearly concerns around the crisis in the Middle East. We've heard from other travel companies. Could you help size your exposure there? And have you seen any impact to demand since the conflict began? Thank you.

Benjamin Black:

Great. Thanks so much.

Operator:

Our next question comes from Ken Gawrelski with Wells Fargo. Please go ahead.

Dara Khosrowshahi:

Yes. So in general, listen, we've been looking for pockets of consumer spending weakness across our platforms, both our mobility platform and delivery platform. We read the news. We watch CNBC just like anyone else. And frankly, we haven't found it. I think part of the reason is that when you look at consumer spend, one of the US consumer is incredibly strong. And two, I think within the consumer spend bucket, if you look at spend on services versus spend on retail, spend on services is still not back to where pre-pandemic spend was. So we do think that there -- the tailwind that we've seen in terms of spend on services continues, it could continue going forward. It's very difficult to predict. And what we have seen with Uber is that Uber is a local type of product. So I do think that consumers during periods of elevated perceived risk, they sometimes pull back on higher, call it, higher spend product, whether it's renovating their house or booking a big vacation during uncertain times that they may not, but they'll treat themselves to break food Sushi delivered to them or they still go out to restaurants. They still go see their friends. So I think the local nature of our business makes us relatively resistant to macro uncertainty because it's usually the big, the large price product that get priced out first. In terms of active driver growth, we are -- active driver growth is absolutely growing faster at this point than trips. We generally want to keep take rate as low as possible because we think that's the right thing to do long-term and kind of is the -- allows us to compound for a much longer time period. Now incentives are of our take rate. And as we said, incentive spend has been down pretty substantially on a year-on-year basis. And so that is a tailwind on our take rate -- but otherwise, what we want to do is to maximize long-term free cash flow growth, maximize long-term earnings per share at the lowest take rate that we can because it drives us to be more efficient as a business going forward. So we try not to kind of push take rate opportunistically, because the cycle is going to move the other way and when it moves the other way, it's really going to hurt if you're not structured with a low cost base.

Dara Khosrowshahi:

You’re welcome. Next question?

Michael Morton:

Hi, thank you for the question. Wanted to talk a little bit about the new growth opportunities in mobility. In the past Dara, you've spoken about aspiration for reserve penetration of like total airport trips. And I'd love to know if we're seeing the product in the market for some time now. How you see this opportunity, how large it could get reserves as a percentage of airport bookings? And then looking outside of travel and airport bookings, maybe the impact you think reserve could have on the other aspects of the mobility business? And then just a second question, a quick one. On your advertising product, you've really made a lot of progress since rolling this out. And I would love to learn some more about how you believe your offering meets the needs from large enterprises. It seems like there's a lot of demand for the large sophisticated enterprises, but they are more demanding when it comes to advertising solutions and the product has historically been overweight to kind of SMBs. So, any update there would be great as well. Thank you so much.

Michael Morton:

Thank you.

Operator:

Our next question comes from Mark Mahaney with Evercore. Please go ahead.

Nelson Chai :

So in terms of the headcount, yes, Mark, we do believe that we can continue to move forward with flat or very small incremental headcount. And so that's what we are planning as we go forward. As you know, we've pretty -- we've had pretty steadfast since 2019 in terms of where the headcount has been. And we continue to get that operating leverage, and you're seeing in the bottom line. And so the team is pushing hard to try to maintain that discipline because, again, we continue to try to deliver. While we're investing, by the way, in the growth that you heard Dara outlined before, so we certainly can. In terms of capital returns, so as you know, I'm handing the ton over to my able new partner over here, who's going to -- who's kind of stepping in tomorrow as CFO. So it's certainly one of the first priorities that he and Dara are going to walk through. He's fortunate because he's getting a business that's in great shape, as you know. As you know, we are now eligible for S&P inclusion. And so it's really a matter from a corporate action perspective of an opportunity. We're well on our way to investment grade as well. So he'll get that benefit as well. And so he also understands the fact that capital return is something that's come up from investors. We've been pretty workmanlike in terms of two years ago, we talked about getting the EBITDA profitability. Last year, we talked about getting to free cash flow. This year, we talked about getting to GAAP operating income at some point. And as you know, especially based on where our projections are, will be GAAP operating income for the full year. And so we know next year capital return will be a big question. And I know if you look at his background, he has a lot of experience in terms of doing it. You know the forms, whether it's buybacks or dividends, I think that you will look at the full suite and has a lot of experience in his past life doing it. So I'm confident that when he addresses investors in February, which I believe will be the next time that he'll be ready to at least give a perspective on that for investors.

Nelson Chai:

Thank you very much, Mark.

Dara Khosrowshahi:

All right. Thank you, everyone, for joining us in this quarter. Huge thanks to the Uber team who keeps delivering with flatter down headcount, which is pretty amazing. They're working pretty hard. Thank you to our partners, our restaurant partners, earners without whom we wouldn't be able to deliver any of these services. And then a big thank you again, we said it before, but I'll say it again to Nelson, who has been an incredible partner on this journey. I think Nelson was saving the best for last, and this is definitely the best. So thank you, Nelson, for everything you've contributed to the company. We wouldn't be here without you.

Dara Khosrowshahi:

All right. Thank you, everyone. Thank you, Nelson.

Operator:

Hello, and welcome to Uber Q2 '23 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] I will now turn the conference over to Alax Wang, Head of Investor Relations. Please go ahead.

Dara Khosrowshahi:

Thanks, Alax. For most of our history, profitable wasn't the first thing that came up when you asked someone about Uber. In fact, many observers over the years boldly claimed that we would never make any money. And I understood why they felt that way; the easy availability of capital over the past decade obscured the pure -- the poor unit economics of many businesses. But we knew they were wrong about Uber as did many of our investors who backed us over the years. We reached two important milestones this quarter, which demonstrates the significant transformation we've undergone towards profitable growth

Brian Nowak:

Great. Thanks for taking my questions. I have two. The first one just on multi-year Mobility bookings growth. Dara, can you just sort of talk us through how we should be thinking through the key drivers of driving single-digit versus double-digit multi-year ride bookings? Is it users? Is it frequency? Is it pricing? How -- what is sort of the [math or the] (ph) schematic that we should be thinking through to sort of keep that growing double digits? And then, the second one, throughout the quarter, I know you did some interviews and podcasts around improving matching and conversion of the network. I'd be curious to hear about how you're using large language models now to better analyze the network? And how do you think about the potential to use them going forward, even drive higher matching across the overall network?

Brian Nowak:

Great. Thanks, Dara.

Operator:

Your next question comes from the line of Justin Post with Bank of America. Please go ahead.

Dara Khosrowshahi:

Yes, absolutely. So, when we look at the Delivery business, we're actually quite pleased with the trends there. Last quarter, we grew at about 12% constant currency, that accelerated to 14% constant currency. This quarter, certainly New Verticals was a help. But we continue to drive higher frequency as a higher percentage of our bookings come from our members, as we improve the service, as we improve the average delivery times to our consumer as well, and generally basket sizes are positive there. So again, you break down the growth in terms of audience, frequency and price, and all of those are positive factors in terms of our Delivery business. And going forward, we expect growth consistent with what we saw this quarter or accelerating even from this quarter as well, depending on the marketplace, the competitive position and how things shake out. But generally, we're quite confident of Delivery top-line growth going forward. And we think the penetration in these markets is very low. So, in many of our developed markets there, significant markets there, we've wired up anywhere from 20% of restaurants to, call it, 40% of restaurants in a particular market. So, if you think about just all of the inventory out there, these restaurants are in the marketplace. They've got loyal clients. They're servicing their local communities. And we think as we wire them up, then naturally more people want delivery, because it's another way of staying connected, it's another way of getting great food whenever you want on a on-demand basis. So, we think that with the very early penetration into the total restaurant in our major markets being, call it, a range of 20% to 40%, we've got a long, long runway ahead of us. In terms of AVs, it's very, very early, and we are quite excited about the partnership with Waymo. We think they are best-of-breed in terms of their technical capabilities and their ambition to build in this business. It really is too soon to tell at this point what the economics are going to look like. We're quite focused on building out the product and really working with Waymo and our other autonomous partners, because we do think we'll have a -- we're developing a portfolio partners out there to have essentially a routing layer between when demand comes into the network to be able to determine on a real-time basis whether or not we should route that demand to a person or to one of our autonomous partners, including Waymo or others, Aurora in trucking, for example. We have many delivery partners out there. That dynamic routing system should allow us to deliver a great service for the eater or the rider or the shipper, and at the same time, shift demand towards the autonomous player, but it's demand that they can serve as well. The pickup is really close to you, the drop off is really close to you, the O&D fit, the capabilities that you built out. So, we're at the very, very early stages of building that technology, and we think we'll continue to build on our partnerships, whether it's Waymo or [Serve] (ph) or Aurora or Motional or Nuro or Volvo or Cartken. There are many, many players out there, and we really want to build and support a large autonomous ecosystem.

Dara Khosrowshahi:

Next question? You're welcome.

Mark Mahaney:

Okay. Thanks. One on Uber One. And could you talk about the kind of product innovations that you're currently working on? Are you thinking about for next year or two to take that adoption of that to a higher level? I know you're rolling it out into more international markets. Can you talk about maybe is there a lead market where the Uber One in North America where the Uber One penetration is of users, so we could think about where that could go globally? And then briefly, on the Mobility revenue take rate, it looks like it was a record high 29.3%. Is that sustainable? Is that -- was there a reason to think that, that just kind of continues to move higher because of operational efficiencies? Thank you very much.

Nelson Chai:

Yes. So, first of all, Mark, you have -- if you -- the reported take rate was 29.3%. But if you adjust for the U.K. merchant model change, which happened a year ago, the underlying take rate was actually 21.1%. It's actually down versus Q1. So, on the underlying basis, the take rate decreased by 30 basis points, if you actually boil through it all. And it's largely because we made some supply investments in some international markets, particularly LatAm and APAC.

Mark Mahaney:

Thank you, Dara. Thank you, Nelson.

Nelson Chai:

Thanks.

Operator:

Your next question comes from the line of Ross Sandler with Barclays. Please go ahead.

Nelson Chai:

So, Ross, I'll take the first one on Mobility profitability. And so, as you know, we continue to march up the margin expansion, and we have over the previous quarters. We'll continue to do it. It may not be a straight line march, it will continue -- because there are sometimes where we'll make offensive investments in some either new products or new geographies. There're also going to be quarters where if you think about our profitability margin, we might invest a little bit more in drivers, but sometimes insurance pops up as well as some other consumer incentives. But as you know, we are committed to continuing to march the Mobility profile up. It's really simple in terms of we are really levering our fixed cost base. As you know, we're really focused hard on both containing our fixed cost, getting leverage on all the variable cost items, including insurance. And then, what we're doing is we are seeing some adoption of some really good new products like Reserve in some of these other areas. And so, that -- what that really results in is margin expansion. And so -- and you should expect that the company will continue to maintain that kind of cost discipline margin expansion. Yes, there will be some markets where we have to continue to build on the expansions, particularly in some of the big growth markets like Germany and some other markets out there, but you should expect over time that those margins will continue to march-up like they have been over the past period of time.

Operator:

Your next question comes from the line of Doug Anmuth with JPMorgan. Please go ahead.

Dara Khosrowshahi:

Absolutely. So, in terms of upfront fares, it's a process in terms of expansion, and we're very, very happy generally with our direction there. The most important factor is getting the upfront destination for the drivers so that they know they have all the information that they need in order to accept that trip or not accept that trip. It's driving cancellations, driver cancellations, which are, I think, the single worst experience for a rider when you ask for an Uber, the driver accepts. You've been waiting for four minutes or five minutes, and then the driver cancels, that's a very, very negative experience, because you have to start the cycle all over again. Cancels are down significantly because, again, the drivers who accept your trip accept it knowing much, much more. So from that standpoint, we see upfront prices as being a significant positive for the consumer experience. There are still things that we have to figure out. So, for example, the upfront price and why we're offering a particular upfront price to a driver is something that we still have to work on. Whether -- sometimes we will provide a higher upfront price if the driver has a long pickup time, so has to drive for 10 minutes for a pickup, instead of two minutes for a pickup. We work that into the upfront price, but I don't feel like we're transparent enough in communicating that to the driver. We also have opportunities to improve our pricing in upfront pricing. So, for example, if you take a trip to a place where the suburbs where you're less likely to have a ride back or you're more likely to deadhead back, to work that into the upfront price in an algorithmic way. So we're getting a lot of visibility into driver acceptance rate or non-acceptance rate, and we are using that to power algorithms to more smartly price a trip. And then, what we really have to do is communicate why we're pricing a trip at a certain price more effectively to drivers. So, we're very, very optimistic. The marketplace metrics when we look at ETAs, when we look at conversion rates and driver cancels are all moving in the right direction. And it's about building better algos and improving our pricing going forward, and that's something that is core to, let's say, the skill set of our marketplace team. In terms of UberX Share, we are quite positive in terms of the momentum for UberX Share. We are now expanding X in terms of the markets that we're in. We're now in over 50 markets. In New York, I'm taking this call from New York, we do 100,000 weekly UberX trips every single week. So that product is expanding, and we are showing match rates of over 40% in certain cities in Vancouver or in Toronto, which is incredibly promising in terms of UberX Share being able to drive efficiency in terms of kind of distance efficiency that then we can translate to the consumer. The more data we get about routes and about which routes we have a high probability of matching and which routes we don't have a high probability of matching, we can improve our pricing. So, for example, 30% of trips now are covered by what we call hot routes. A hot route is an upfront discount versus a post-match discount based on the likelihood of matching. So, I would say it's early, but the more combinations we have, the more matches we have in terms of the marketplace, the stronger X Share product becomes. Our U.S. competitor, our significant U.S. competitor, Lyft, is out of that market. So, we think to some extent, this is a great opportunity for us to build out liquidity in shared trips. And it lowers prices for consumers, which is great. And it, obviously, lowers our environmental footprint and reduces congestion in cities as well, which we think, long term, is a very, very good reason to continue to invest in the product.

Dara Khosrowshahi:

All right. Thank you. Next question?

Eric Sheridan:

Thanks for taking the question. Maybe a multi-parter on the advertising initiatives. As they continue to scale, what are some of your key learnings with respect the type of advertiser, the different industry verticals that are most attractive to coming in and allocating ad budget across your ad impressions? And how do you see the scaling of ad impressions, whether measured by top of the funnel, bottom of the funnel, sort of brand versus conversion advertising? And how they might scale, given the differences of engagement between the Mobility business and the Delivery business and the different consumer behavior you might see on those platforms? Thanks.

Eric Sheridan:

Great. Thanks for all the color, Dara.

Operator:

Your next question comes from the line of Deepak Mathivanan with Wolfe Research. Please go ahead.

Dara Khosrowshahi:

Absolutely. So, in terms of Uber One, we're less focused on profitability generally as we are in driving engagement and retention of the Uber One product. So, Uber One members are profitable, but our profit margins from Uber One members are generally lower because we're delivering on discounts, let's say, delivery discounts are again cashback on their rides. But their lifetime value is significantly higher because members spent 4 times the amount of non-members on a monthly basis and member retention is about 50% greater than non-member retention. So, at this point, we're not really focused on driving member margins. We want to essentially deepen the penetration of members as a percentage of total gross bookings, both across delivery and mobility. Good news is that these members are profitable. I would say we will get to focusing on profitability a year or two years from now, because right now, it's much more about engagement and the general experience. In terms of New Verticals and the categories, the first new vertical category that we penetrated was the convenience category. This is a small shopping cart, $20, $30. And obviously, we have a bunch of convenience merchants out there. We're now much more focused on grocery. These are large basket sizes, appointment viewing, coming back every week. So, our grocery penetration continues to increase, especially as we add new grocers into the New Verticals family. The Uber audience, we've got the largest audience of any platform out there, and we're finding that with our New Verticals partners. 90%-plus of the traffic that they see from Uber is unique and differentiated from their own proprietary traffic or whatever partner that they have before us. So, it's a huge new audience that comes in that is helping us penetrate into the grocery category that we're very excited about. The newest area of New Verticals that we're pretty excited about are also add-ons now. So, these are in circumstances where we see you order from a restaurant and we know that we have other merchants close to that restaurant, especially -- and that courier essentially can go and pick up your food at the restaurant and then go pick up the add-on. We offer those add-ons to you. So, depending on the circumstance, it might be an add-on from a 7-Eleven, it might be wine from a liquor store or for me, which was -- this was my experience last week, it was ice cream, and great ice cream from a small shop nearby. Those add-ons really are an entree into sort of New Verticals world. And what we're seeing is as people order add-ons, one is this incremental volume into the platform, same couriers picking up the two packages, so it's pretty easy and quite delightful for the consumer. But at the same time, it introduces a consumer into this new family of products which now is responsible for the highest percentage of our audience ordering New Verticals on Eats, which is about 13%. We think we have a long way to go there on New Verticals. From a profitability standpoint, we have a couple of countries that are already profitable in New Verticals. But overall, we're losing money on the overall portfolio. But you can see in our overall Delivery business, we're able to significantly improve margins as we take the scale of the business that we're achieving, the cost control of the business, reducing cost per transaction as the marketplace gets more liquid, we can invest some of that money into New Verticals and at the same time, we can increase overall margin. So right now, we think we have a pretty good balance there, and we don't expect that to change.

Dara Khosrowshahi:

All right. Can we have the next question? You're welcome.

Nikhil Devnani:

Hi. Thank you for taking my questions. Dara, helpful to hear the comments on frequency and mobility and see the slide on engagement by ride type. When you look at that slide, it seems like clearly greater usage amongst kind of the lower-cost rides. So, do you feel that you need to bring the overall cost of the service down to keep driving frequency higher? Or do you think that just the new ride types and supply improvements can kind of get you there even if prices are going up with inflation? And then maybe a second question on profitability. Incremental margins keep beating. When you think about this business beyond '24, is there any reason we shouldn't be holding you to that 7% or better framework still? Or is that something we can continue to anchor to? Thank you, both.

Dara Khosrowshahi:

Yes. Nikhil, in terms of your, the frequency question, in typical Uber fashion, I'd say we want both, in that, one, generally, as we find that -- as we increase the choice, the various ways of transportation to consumers regardless of whether it's low cost or high cost, we drive engagement. The average customer who uses more than one product on Uber spent significantly more than the customer who, let's say, only orders UberX. So, I think that there's one set of activities that we have, which is just get you to buy multiple products, whether it's multiple Mobility products or combination of Mobility, Delivery products, that drives engagement and frequency on the platform. The second area that we have is membership. And just mathematically, as we increase the number of members that we have as we increase membership retention and higher gross bookings penetration of members on the platform, members book more. They spend 4 times more. And the frequency is significantly higher. So, mathematically, we will just get higher frequency as well. And then, the third for us is low cost. And if you look at our low-cost product, high-capacity vehicles, Moto, which are 2-wheelers, UberX Share, all of those products have very high frequency. They become a part of everyday life for people. Often they become the primary source of commute for some of our audience and, therefore, we do think that low cost can be a significant differentiator but a significant driver of increasing frequency around the globe. But I think it's all the above. And that's why we're quite confident that we can keep increasing audience and frequency and price, to some extent, on a comparable product to product basis over a long period of time.

Dara Khosrowshahi:

You're welcome. Next question?

Lloyd Walmsley:

Thanks. Two questions, if I can. First, just looking at kind of your leverage ratio, it looks like it will be set to fall under 3 time post next quarter based on the guide. Is that a magic number or is there a magic number for you all or ratings agencies after which you can actually start to return capital? How should we be thinking about that? And then second one, can you just give us your updated thoughts on the competitive dynamics in the U.S. rideshare market? With competitor prices changing, any impact on share or unit economics to flag out? And then, there have been some reports on reduced booking fees of late. Anything to that or how should we think about that? Is that play into this competitive dynamic in the U.S. market? Thanks.

Dara Khosrowshahi:

And then in terms of share and booking fees, first of all, on the booking fees, I think there is some kind of a report from [Yipit] (ph). I think it was in terms of booking fees. That data from what we can tell is inaccurate. So, we have updated booking fees and generally rebalanced booking fees based on our insurance costs. Our booking fees cover a number of areas, but insurance costs are a significant portion of that. And we've taken booking fees up in certain markets. For example, Los Angeles, where due to the tort environment and certain abuses, we think of these tort lawyers insurance costs are significantly higher than they are pretty much anywhere else in the country. We increased booking fees. And then in certain other markets, where we have seen effective tort reform, et cetera, Georgia or Virginia, we're able to take prices down for consumers, which is exactly what you want, which puts a higher percentage of, let's say, the earnings in driver pockets, which is terrific. So that was a rebalancing and certainly wasn't as material as the report that we saw. I wouldn't expect any significant movement from that rebalancing. It's just -- it kind of creates more efficiency in the marketplace because we're reflecting the true cost of a trip versus averaging over significant volumes nationwide. So, we think kind of the deaveraging of our platform generally for these costs is able to drive higher marketplace throughput at the right efficiency, which is a goal of that rebalancing. In terms of our share, listen, Lyft is -- was not competitive in terms of pricing. Nine to 12 months ago, they've taken some tough actions, and they are competitive in pricing now. Generally, our pricing is quite comparable to Lyft. And that has resulted in a, I'd say, constructive competitive marketplace. Our category position in terms of gross bookings share continues to be at or close to all-time highs. But we have a competitor there who is a tough competitor, who now is competing effectively. And we think the U.S. is going to be a two-player market for some periods to come.

Dara Khosrowshahi:

Thank you very much.

Dara Khosrowshahi:

All right. Everyone, thank you very much for joining us, and a big, huge thank you to the Uber team and specially Nelson for taking us from -- through some big ups and big downs and to our first-ever profitable quarter in terms of GAAP operating income. Nelson and I get to talk about it, but it's the result of the work of thousands of employees here at Uber, who are the true heroes. So hopefully, more to come, lots of challenges ahead of us, but thank you to the team and a big thank you to Nelson.

Operator:

Good morning and welcome to Uber Technologies, Inc.’s Q1 2023 Earnings Conference Call. All participants are in a listen-only mode. After the speakers' presentation, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the call over to Balaji Krishnamurthy, Head of Investor Relations. Thank you. Please go ahead.

Dara Khosrowshahi:

Thanks, Balaji. Uber is off to a strong start in 2023, with gross bookings up 22% year-on-year at constant currency. Trips outpaced gross bookings growth and accelerated to 24% growth from 19% last quarter. Adjusted EBITDA of 761 million, exceeding the high end of our guidance, and we delivered incremental adjusted EBITDA margin of 12% and record free cash flow of 549 million. Over the past two years, we’ve consistently delivered results that have exceeded both investor expectations and our own internal plans. Even as we performed well, we're acutely aware that expectations have only continued to increase for scale platforms, blackouts. We're working to accelerate our path to GAAP net income by optimizing our entire P&L every single line item. Despite any macroeconomic uncertainty, I'm more confident than ever in our prospects and remain committed to best-of-breed cash flow growth. The Uber platform has never been stronger, our own expectations have never been higher, and we’re excited to leave no doubt as to the scope of our ambitions for exceptionally profitable growth. With that, let's open up the call for questions.

Doug Anmuth:

Thanks so much for taking the questions. Dara, good EBITDA upside the 549 million in free cash flow and talking about GAAP operating income this year, I think headcount is flat-to-down this year. Do you believe you need to tighten up the cost structure anymore and how do you balance those considerations with product and growth? And then secondly, just in terms of AI, you talked about improvements on ETAs and onboarding, what are some of the other ways you envision AI driving the consumer experience for Uber?

Doug Anmuth:

Thank you, Dara.

Operator:

Our next question comes from Ross Sandler from Barclays. Please go ahead. Your line is open.

Nelson Chai:

Yes. So as Dara mentioned, we optimize our marketplace in order to both make sure that we are driving and overachieving against the guidance that we put out on the bottom line. But certainly, we also want to try to allocate and drive growth on the top line as well. And so right now, things are working quite well if you look at both top line, as well as the bottom line growth in the quarter. And so, I would say it's a combination of both. So, we leaned in a lot, as you know last year in terms of bringing drivers back. And so the marketplace is much more healthy from a supply perspective. So, periodically, we will put in some more incentive to continue to drive demand. And again, what I would say is that we work very hard at balancing our marketplace because it's not just delivering the EBITDA and the free cash flow that we're promising, but we are trying to continue to grow the company at scale. And so, you saw that our gross bookings were up 22% on a constant basis and the mobility business even higher. And so, as we go into next year, what's actually exciting about is our trip growth is actually accelerating faster. And again, for us, that's our marketplace working. And so again, you'll see us continue to toggle back between the two and our focal point really is on continuing to drive our company at scale on the top line and overdeliver against our commitments on the bottom.

Nelson Chai:

Yeah. So, what Dara is referencing is the business model change in the UK that happened last March. And so, you're seeing that overlap, which so that – that was the – with our point of that.

Operator:

Our next question comes from Brian Nowak from Morgan Stanley. Please go ahead. Your line is open.

Dara Khosrowshahi:

Yeah, Brian. In terms of the mobility cohorts, which are positive, kind of on a year-on-year basis and then the newer cohorts are actually even more healthy in terms of trip frequency. It comes really from the amalgamation of all of the work that we are doing on the platform. Supplies is strong, ETAs are coming down, surge came down from Q4 to Q1 and that's resulting in higher conversion rates in terms of how many sessions does a does a rider have and do they convert on that on that session. So, the quality of the marketplace is clearly having effect, but at the same time, we're innovating and we're adding a ton of new products and choices for the router as well. Reserve is an example. I talked about 20% now of our airport drop-off being reserve trips. And what we're finding is that, Reserve has a combination of riders who used to use our on-demand marketplace, now using Reserve to make sure that they're, kind of guaranteed availability or guaranteed a much higher reliability. But it's also bringing new riders into the system as well that are, you know, it's a use case travel is a strong used case with high average fares as well. So, I think it's a combination of marketplace health and innovation around new used cases that is driving the frequency that we are seeing. In terms of delivery, as far as the growth there and the acceleration drivers, one is just that we had Omicron comps earlier in the year. So, if you look at January, delivery volumes were a bit lighter just because of comps, and then we saw acceleration going into February and March and we expect strong growth for the balance of the year. And the other factor in terms of delivery is again the customer cohort data is actually quite healthy. Earner [eater retention] [ph] has improved significantly. So eaters are staying with the platform. Frequency is up and a higher percentage of our eaters and riders, but especially eaters are members. And as you know, members spend 4x than the non-members do. So, all of that is adding up to continued healthy growth for the platform, both in on the mobility side and on the Eats side as well.

Dara Khosrowshahi:

You're welcome. Next question.

Eric Sheridan:

Maybe following up on that with two on the delivery side of the equation. Dara, you called out in the letter improving your category position in large markets, can you give us a little bit better sense of what you see as the key investments to improve category position are? And how investors should think about the growth output or the yield from those investments looking out over the medium to long-term? And then second with respect to the delivery business, how should we think about market share dynamics broadly in the delivery business versus where you see yourself as the best positioned to compete where there's an overlap between the Uber One subscription and the mobility business where that might put you on a competitive footing that's different then markets where that may not be as prevalent? Thank you.

Eric Sheridan:

Great. Thank you.

Operator:

Our next question comes from Justin Post from Bank of America. Please go ahead. Your line is open.

Nelson Chai:

Okay. So, I'll handle the first half of it. So again, when we put out the targets last year, our expectation was to at least achieve them on the top line, but over deliver on the bottom. And we're five quarters into putting out a 12-month plan. And I think history shows that we've overachieved every quarter and we intend to continue to do so. So again, if you if you take the Q2 trajectory, which is actually what you're referencing, we don't stop there. Right? So, we're continuing to invest, actually, in our marketplace and continue to grow the marketplace. And we actually are optimizing every single line of the P&L, and we're seeing those benefits. And so, last year we talked a lot about the cost per trip benefits we're getting on delivery. This year, you heard us talk a little bit about our RNA and some of the benefits we can have there. And these are big dollars. And so, the platform really is operating quite well. And so, like, what we're doing is, we work with our teams and work with our product, our tech folks to make sure we're just optimizing the platform. So, to be able to grow 22% constant currency at our scale year-over-year, it's hard, right? It's tremendous what we're doing here and be able to deliver the incremental. So, I think what you should think through is more about where we think we're going to end up next year, understanding that we think we'll continue to outpace on the bottom line. And you heard the commentary about we think we were 12% incremental margins in Q1. Right now if you look at the midpoint of the guidance, it's 10%. So, our expectation is that we'll continue to do better and importantly generate a lot of free cash flow that we think is going to ramp in the coming quarters. So, while we're not touching upon new guidance for 2024 or the out years, hopefully, we're building track record to show you that, you know, the company is really operating at high level right now.

Nelson Chai:

So think about our GBs are up 22% on a constant basis just to go back to that. And our EBITDA is up 4x year-over-year. And so again, I think that we really are pulling all the levers to make sure we deliver top and bottom line growth. And so again, I think we're both very confident that we'll continue to do that in the coming quarters.

Dara Khosrowshahi :

Thank you. Next question.

Lloyd Walmsley:

Thanks a lot. Two, if I can. First, just kind of continuing on the last question. I appreciate the color on Hailables and the new formats. I guess on that international side of the medium-term growth what is the update – the latest update on some of the markets you flagged at the Analyst Day, like South Korea, Spain, and Germany. And then second one, following up on some of the earlier delivery questions, like – how much do you think of the benefit you guys are seeing in terms of market share as a function of product improvements versus maybe more discipline across the competitive landscape, just with the rising cost of capital you flagged, I think, Japan in particular. But like anything – do you feel like those are also part of the benefit and like where are we in seeing the benefit of just a more rational competitive landscape? Thanks.

Nelson Chai:

Yes. So on the delivery, so yes, you're partially correct. I think the rationalization of the marketplace is driven by the higher cost of capital. As you know, we've led in terms of trying to drive companies towards profitability. And frankly, for me, companies need to make free cash flow. And so we've led from the front on that. And certainly, everybody has had to follow given where the market is right now. And so we are seeing the benefit of having a bigger and, frankly, a more efficient platform. And it's allowing us to really make progress in certain marketplaces like most of Asia and particularly the U.K. are big call outs in the first quarter. And importantly, what's important now is that right now, if you look at our top 20 delivery markets, so overall on delivery, we're generating 2% EBITDA margin. We're profitable in 15 of our top 20 and actually 6 of our top 20 markets today in the first quarter already above our long-term targets. So, we're growing our market – our category position. We're gaining. We're growing at the top line, and we're delivering on the bottom line. I think that's just a good formula. But certainly, the overall cost of capital increases and what's going on in the broader role has helped when you have the broadest and the most efficient platform and one where we have the benefit of going across platform.

Dara Khosrowshahi:

Thank you. Next question.

Mark Mahaney:

Thanks. I wanted to ask about two questions on the advertising side, what traction you're seeing for advertising on the mobility side? And then in terms of the Uber One program in the prepared comments, you talked about seeing really nice traction, record high levels in North America. Could you talk about in the rest of the world? And also, kind of the what – if there are product development areas you want to lean into to make the Uber One program even more attractive? Thank you.

Mark Mahaney:

Okay. Thank you.

Operator:

Our next question comes from Deepak Mathivanan from Wolfe Research. Please go ahead. Your line is open.

Nelson Chai:

So I'll go first and Dara can answer the competitive question second. So certainly, if you think about what we did in the first quarter, right, 22% constant currency and even 19% reported across our business is extremely strong, especially given some of the headwinds on freight. And if you just think about what we're doing in terms of the forecast in Q2. So, we expect our core mobility and delivery businesses growth bookings to grow 18% to 22%, depending on where you are on the guidance on a constant currency basis. So as we said, we are committed and we are able because we have been so efficient in terms of operating the business and getting the leverage, and we've been mindful about our costs to be able to invest back in some of the products that you've heard Dara talked about already today. And so, we are seeing some of that meaningful benefit as we think about going into 2024. And so again, we are trying to do both which is continue to invest in products that we think will enable us to deliver against the top line. But importantly, we expect to continue to do what we've been doing, which is over deliver against the bottom and generate a very, very strong free cash flow in the coming quarters. And so again, I would just say that we spend a lot of time on capital allocation inside the company. And right now, the formula is working quite well because we're able to do both as well as, again, invest in new geographies and invest in new products. And I think you should just expect that to continue.

Operator:

Our next question comes from John Colantuoni from Jefferies. Please go ahead. Your line is open.

Dara Khosrowshahi:

No, go ahead. Go ahead. Ask your second question.

Dara Khosrowshahi:

Yes, absolutely. So, I think on the first one, Nelson will take the second one. In terms of frequency of cohorts, we think it's exactly what you talked about, which is it's a product set. If you look at our product set today versus 2019, the breadth of product that we have available to our mobility riders is significantly higher than it was, whether it's reserve or reimagined x share, et cetera, there are just more opportunities for someone to use our product. And that's resulting in higher frequency, kind of on a year-on-year basis. But if you look at each cohort, the 2021 cohort, their frequency increases, as well as we have healthy pricing, healthy availability, and then newer products available for them. Also remember that our membership program, we think over a period of time, it's just mathematically going to drive higher frequency across the business, it will have a higher impact because the incrementality generally is higher for delivery than mobility, but it should also show up in mobility as well. So, these are very, very strong, as you know, kind of frequency numbers. They're only getting better. And we think as we continue to innovate around new products, we should be able to have industry-leading frequency, especially since we are able to bring in users on a rise platform or each platform and cross-sell them in a way that no one else can. Nelson, do you want to talk freight?

Dara Khosrowshahi:

I think just one other note going back to frequency to add. One of the reasons why we're quite optimistic about our frequency on the mobility side is, if you look at the 2019 cohort, actually Uber pool, which was a high frequency, but extremely low-margin product, negative margin product for us was a much more significant part of the portfolio than UberX shares now. We are now launching Uber share within the right way with economics that work. We are aligning incentives between the rider and the driver and ourselves in terms of pricing as well. So, as we expand UberX share as consumers experience it, and we're seeing strong signal there. We think that could be an additional tailwind for frequency going forward in addition to general experience and the membership program. Next question.

Ron Josey:

Great. Thanks for taking the question. I wanted to ask a little bit more about Uber One, just given it now accounts for 27% of gross bookings. Talk to us at a little bit more about the programs just to drive continued adoption of Uber One. And then in the letter, as it relates to delivery, there was talk about investments around grocery, convenience, just newer verticals within delivery, would love to hear the progress there as well. Thank you very much.

Balaji Krishnamurthy:

Let's wrap it up there. Thank you, everyone, for joining.

Operator:

This concludes today's conference call. Thank you for your participation. You may now disconnect.

Balaji Krishnamurthy :

Thank you, Angela. Thank you for joining us today and welcome to Uber's fourth quarter 2022 presentation. On the call today we have Uber CEO, Dara Khosrowshahi and CFO, Nelson Chai. During today's call, we will present both GAAP and non-GAAP financial measures. Additional disclosures regarding these non-GAAP measures, including the reconciliation of GAAP to non-GAAP measures are included in the press release supplemental slides and our filings with the SEC, each of which is posted to investor.uber.com. As a reminder, these numbers are unaudited and may be subject to change. Certain statements in this presentation and on this call are forward-looking statement. Such statements can be identified but such as believe, expect, intend and may, and you should not place undue reliance on forward-looking statement. Actual results may differ materially from these forward-looking statement and we do not undertake any obligation to update any forward-looking statement we make today, except as required by law. For more information about factors that may cause actual results to differ materially from forward-looking statement, please refer to the press release the issue today as well as risks and uncertainties described in our most recent annual report on Form 10-K for the year ended December 31, 2021, and in other filings made for the SEC went public. We published our quarterly earnings press release, prepared remarks and supplemental slides to our Investor Relations website earlier today. And we ask you to review those documents if you haven't already. We will open the call to questions following brief opening remarks from Dara. With that, let me hand it over to Dara.

A - Balaji Krishnamurthy :

Angela, please queue up the questions.

Eric Sheridan :

Thanks so much. Maybe two questions, if I could. Dara, as you think forward to 2023 and you sort of aligned an array of products between Delivery and Mobility, how should we be thinking about Uber One as a subscription product? And elements of either leaning in behind growth and pushing adoption of the product to create a wider moat around the collection of assets you have versus maybe just letting virality build around the subscription product. How do we think about active versus passive approach to driving the subscription element of the business? And then obviously, one of the more recurring themes during earnings season has been elements of continued efficiency and cost cutting within organizations. You guys have laid out an incremental margin strategy, but how should we be thinking about your broader views on efficiency inside the organization, especially with respect to some of the corporate costs inside the company's cost structure? Thanks so much.

Nelson Chai :

Sure. So Eric, for us, as you probably recall, our call to action moment was actually in 2020. And if you recall back then, our Mobility business was over 85% of the company's gross bookings. And as we sat here in April of 2020, that business was down 80%. So as you recall, we acted pretty decisively during that time, we took over $1 billion of costs out of our infrastructure. We shuttered down a bunch of businesses. And unfortunately, we did have to let go over 20% of our headcount. So we've been really focused on efficiency since then. I think you've heard us lay out our plans, and I think Dara mentioned on CNBC, in 2021, we wanted to really push hard for EBITDA profitability, and again, we achieved that metric in 2021. Last year, we talked about being free cash flow positive at some point in the year. And again, we achieved that metric. And now, we're talking about being GAAP operating profit at some point later in the year. And we expect to continue to achieve that metric. Now we've done this -- and you mentioned incremental margins, we've done this because we focused efficiently on cost, and we've been laser-focused on it. So our headcount will largely be relatively flat this year. And even if you go back to the build that the many companies had over the past few years, we've grown our headcount about 10%, excluding the Freight business, over the period of time. And our gross bookings went from $62 billion in 2019 to $115 billion last year. So just think about that growth and efficiency. Where we've hired heads has been in some areas of tax, selectively, as well as some sales folks on the Delivery business. And you can see that it's certainly been beneficial. So our goal is really to drive the incremental margins we laid out last year at Investor Day. I think we've overachieved against all of the metrics on the profitability side. And again, as Dara mentioned, the year started off quite well, which is why you saw us raise guidance for the first quarter. And we're going to just continue to leverage our cost base, which is driving the incremental margins that you're seeing the throughput on.

Balaji Krishnamurthy :

Next question?

Brian Nowak :

Thanks for taking my questions. I have two. The first one on frequency and engagement on the platform. You've made really good progress. Now you're, I think, 5.4 trips per month versus about 5 last year, but still below I think the peak levels Dara used to talk about in 2019. I guess the question on frequency is, where have you made the most progress, sort of getting that frequency per rider up? And how do you think about the key drivers throughout '23 to sort of get that back to 2019 levels and beyond? And then the second one is on the incremental margins. The Delivery incremental margins continue to deliver above your Analyst Day targets. Anything we should think about that are sort of one timish in nature or different competitive dynamics as to why the incremental margin in Delivery shouldn't stay at these elevated levels as we go throughout 2023? Thanks.

Dara Khosrowshahi :

And then in terms of the frequency of trips, there are really four factors that I would point to. First of all, we just talked about our membership program. As we increase the number of members in our member base and the coverage of members who tend to buy more, who tend to buy more frequently, just mathematically, you're going to drive frequency up. Second for us is the power of the platform. We are constantly cross-promoting between Mobility and Delivery, and essentially sending free or cheaper traffic from one platform to the other in a personalized targeted way as well. And so you should expect more opportunities for us to upsell and cross-sell in an intelligent way driven by AI and machine learning. The third is the breadth of the product that we offer. So for example, with Mobility, with Reserve and low cost, Reserve has been a huge shift for us. And we estimate that 50% of Reserve trips are actually incremental, they wouldn't have happened otherwise. The other 50% are upsell, so to speak. They are more profitable than on-demand trips. Grocery is another example of new products that we are adding on at higher selection, driving higher frequency as well. And then last and certainly not least is the reopening, right? The shift of spend from products to services is benefiting us. So there is a tailwind in terms of people getting out, people shopping more, people going out to dinner more, et cetera, and that is helping our business as well. So it's really membership, platform, new products, and then the macro environment that's helping frequency. And we expect to see that frequency, that 5.4%, continue to increase over a period of time. And there's no reason that I see why we shouldn't hit or exceed our all-time highs over a period of time.

Balaji Krishnamurthy :

You're welcome. Next question?

Ross Sandler :

Hey, guys. Just a question about the upfront fare and upfront destination technology that you shipped. So you noted in the letter that you saw about a 4% increase in conversion. So I guess just some context around that. How does this innovation compared to others that you've shipped in the past in terms of like magnitude of overall impact? And as you look forward over the next couple of years, do you see other technology updates that -- in the future, that could be as impactful as what you've done with upfront? Thanks a lot.

Balaji Krishnamurthy :

Next question?

Mark Mahaney :

Thanks. Two questions, please. You talk about the impact of these newer Mobility products. Which of those, in particular, would you single out as having the most impact? And then just talk about the timing of rolling out upfront fairs and destinations globally. Thank you.

Balaji Krishnamurthy :

Next question, please?

Justin Post :

Yeah, thanks for taking my question. Maybe one for Dara and one for Nelson. On the outlook for '24, I think there's been some headwinds from FX and some other things. Any updates on that, and maybe some of the puts and takes as you think about that, that you gave last year? And then, Nelson, a couple of the cost issues maybe in the quarter. The New York minimum driver fee changes and insurance costs, maybe you could cover those and how you're thinking about the potential impact in '23. Thanks.

Dara Khosrowshahi :

And just I realized that I neglected to answer Mark's second question in terms of the rollout of upfront fares and destinations. It is -- this is a very complex product that we're rolling out, and we have to make sure that our models are properly trained. So we are in the middle of a rollout in the UK, and we'll continue to roll them out across major markets where appropriate. I would expect that upfront fare and destination will be rolled out in all of our markets globally by the end of the year, in markets in which we can roll it out. Depending on regulatory issues, et cetera, we may not be able to roll it out in various countries. But I would expect a full rollout by the end of this year in markets where it's appropriate.

Operator:

Your next question comes from the line of Doug Anmuth with JPMorgan.

Nelson Chai :

No. So look at it, we're focused on delivering the incremental margins that we laid out. We certainly have delivered way above what we've been talking about long term. We expect to continue to try to deliver against the 7% total company, and we're going to continue to look for efficiencies across. And so what I try to do there is let you know that some of them were very deliberate actions that we took in terms of making sure that we are running and the marketplaces are running more efficiently regarding incentives. Some of it is just tech that we deployed. And we deployed the tech in the first half of last year, and we really saw those benefits on the cost per trip. And then again, we've talked about some new business things. And so Ads is the easiest example, where we've seen that continue to grow. So the Ads business, we continue to -- expect to continue to grow and accelerate the growth, and so we'll see the benefits in the margins. I think we'll continue to run an efficient marketplace. And so yeah, I think you should expect that we'll continue to drive margins in those businesses. But remember, we also spend time trying to invest back in. So we've invested and we've talked about it. There's some growth markets like Japan that we've invested in. And again, we now are number in Japan from a category position perspective. So we try to manage -- we're going to balance both the growth as well as the margin and the profitability. And I don't want to be too prescriptive in terms of exactly how -- what we're doing.

Doug Anmuth :

Thank you both.

Operator:

Your next question comes from the line of Deepak Mathivanan with Wolfe Research.

Dara Khosrowshahi :

Yeah. I'll start on the user trends and then Nelson can talk SPC. The reason for the U.S. trailing is really the West Coast. So if you look at the U.S., it's really a tale of two coasts. If you look at a Miami or a New York and an Atlanta or off the coast, in Austin, Houston, et cetera, most of the U.S. is at pre-COVID levels. Canada, for example, our neighbors in the North, are above 2019 levels as well. But it really is the San Franciscos, Seattles, Portlands, Los Angeleses of our country on the West Coast that are trailing and are off the pace that we see pretty much everywhere else in the world. So I wouldn't generalize the U.S. Kind of non-West Coast looks great. The West Coast is recovering. And we talked about in January, we are having, on a daily basis in Mobility in the U.S., trips approach pre-COVID levels as well. So all the trends are moving in the right direction, but the West Coast is definitely leaving the U.S. behind the recoveries on a global basis.

Deepak Mathivanan :

That’s very helpful. Thank you both.

Lloyd Walmsley :

Thanks. Two, if I can. First, just on Uber One. You talked about a strong pickup in spend and clearly like a nice LTV that covers CAC pretty quickly. But once you're through that kind of start-up cost, what would contributions look like for Uber One members versus like a non-member? And how much of a trade-off is the margin for the profit dollars in that plan? And then secondly, do you think the driver supply is benefiting at all yet from slower economic growth? And to the extent we're seeing some of that or eventually see that, how do you think about pricing and take rate on the Mobility side, if you get better and better supply? Thanks.

Lloyd Walmsley :

Okay, thank you.

Operator:

Next question comes from a line of Ron Josey with Citi.

Dara Khosrowshahi :

Well, I think that overall in the category, the Delivery category has been pretty resilient post-pandemic, certainly more so than a lot of other categories that that benefit from the pandemic. That said, we are growing faster than the category generally, if you look at us globally. Certainly in Europe, we are seeing many of our competitors pull back significantly from what we're unhealthy spend levels in the past, that didn't make any sense. They may sense in terms of top line, but they certainly didn't make sense in terms of bottom line. And for us in Delivery, we're benefiting from the power of the platform, very cheap audience, from our Rides business. Remember, we get more new eaters, from our rides app than we do from Google and Facebook and Instagram, combined at about a quarter of a cost. So that is a very significant structural advantage that is assisting our Delivery business. You've got our membership business, that again, is adding higher frequency higher spend more retention as well. We're the only player out there that has membership, both on Mobility with Mobility and Delivery benefits as well. And then you've seen our tech, which is optimization around cost per transaction, and then an ad business that we're building that is starting to scale. So the combination of all of those four factors, I think, is allowing us to outgrow the category, which generally has been more resilient than other categories as well. And I wouldn't expect anything to change going forward. We do think that we should continue to outgrow the category in Delivery going forward based on the environment that we're seeing.

Balaji Krishnamurthy :

Thanks, next question?

John Colantuoni:

Hi, thanks for taking my questions. So Mobility continues to deliver impressive bookings growth. Maybe if you could just help give us a sense for how shared gains are playing into that versus broader recovery in category usage as you have moved further past the pandemic. And assuming you are seeing some share shifts, are you starting to see evidence that the investments you've made in driver supply technology and Uber One are allowing you to leverage your network effect and in driving sort of a permanent competitive advantage that could drive ongoing share shifts in certain markets? And then second question about freight. Bookings in EBITDA for freight were a bit behind our expectations, but you could just discuss how it compared to your own expectations in the fourth quarter, and some puts and takes of what drove could have driven that delta relative to your own expectations. Thanks.

Nelson Chai :

Sure, regarding the freight. So yes, we're watching the same trends you are. Yes, we wish the freight numbers were better in the fourth quarter. But as you know, there's a little bit of a cyclical nature to what's going on more broadly in the industry. The business continues to do well, and so as we bought the Transplace business in December of 2021. We spent a fair amount of last year integrating the business and Transplace Tupelo business continues to be resilient with everything going on. And what we've seen as our Uber Freight -- historically Uber Freight business has done a very good job using the brand and our tech, our shared tech to really drive out and build out its presence, particularly with what I'd call national brands, where we need to spend some more time is really focused on some of the small and midsized shippers. And so we're doing that right now. And we've made some organizational tweaks. We do expect that you'll see us getting some traction there, but the overwhelming cycle that's going on right now more broadly on the freight industry is going to continue to impact our business. And so that business will continue to lag likely versus where we would have hoped. And certainly versus a year ago where it was a much different dynamic more broadly in freight business in this country.

Operator:

Your last question comes from the line of Nikhil Devnani with Bernstein.

Nelson Chai :

So I'll start on the first one and Dara can handle the second half of it. So again, we're focused on really delivering and balancing our growth and our efficiency. So that's been our path. And I talked about when we took our big call to action in 2020. So as a company, we've been focused on growth and efficiency. We recognize that we put out targets last year. And our goal is to make sure we achieve or overachieve against them, which I believe we have, if you think about the last six quarters. And so there are times when we might take some incremental dollars and spend back in a specific marketplace. And that would there'd be strategic reasons why we would do it. There might be some situations where we pull back and so we have a capital allocation framework that we've had now for the past few years. And it's what's working well is what I would say. And so I don't want to say, could we actually get very, superefficient in the quarter? Maybe. Would we likely not? We still think there's a lot of growth. And so our goal is to really think about as our set kind of where the path's is going and making sure that we are investing behind those growth levers, so we can deliver the kind of top line growth we're doing. And delivering -- over delivering against the bottom line which we have been doing.

Nikhil Devnani :

Appreciate the color. Thanks.

Operator:

Ladies and gentlemen, this concludes today's conference call. You may now disconnect.

Operator:

Ladies and gentlemen, thank you for standing by. My name is Brent, and I will be your conference operator today. At this time, I would like to welcome everyone to the Uber Third Quarter 2022 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. It is now my pleasure to turn today's conference over to Mr. Balaji Krishnamurthy. Sir, please go ahead.

Dara Khosrowshahi:

Thanks, Balaji. Uber delivered yet another strong quarter with gross bookings up 32% year-on-year, EBITDA of $516 million, an all-time high and well above our guidance range and solid free cash flow of $358 million. Despite the uncertain global economic environment and considerable foreign exchange headwinds, we again issued Q4 EBITDA guidance that shows strong incremental progression and remain confident in our ability to deliver healthy top and bottom line growth with strong free cash flow generation. Underlying this performance are several trends that represent tailwinds for us. Cities are reopening; travel is booming and more broadly, a continued shift of consumer spending from retail back to services. We've seen these trends continue into the fourth quarter with October tracking to be our best month ever for mobility and total company gross bookings. With over $1 billion in adjusted EBITDA of $693 million in free cash flow so far this year, we've demonstrated how our global scale and unique advantages of our platform are combining to generate meaningful profits and we're confident in our ability to build on this momentum. With that, let's open the call to questions.

Brian Nowak:

Thanks for taking my questions. I have two. The first one, Dara, you mentioned the fourth quarter bookings trends. The guidance seems really solid, particularly given the backdrop. Just kind of curious, are you seeing any changes in consumer behavior or trade down or differences in what your income cohorts, how they're acting across rides, eats, U.S., Europe? Just any sign at all of weakening within the consumer of your MAPCs. That's the first one. And then the second one maybe a bigger picture one. I think if we break apart the rides business a little bit between high-frequency users and the lower frequency users, there's still a lot of MAPCs, who are pretty infrequent users, a few times a month. Can you just talk to us about sort of philosophically the next few years that the key strategy is to get those lower-frequency users using the platform three, four, five more times per month? Thanks.

Brian Nowak:

Great. Thanks, Dara.

Operator:

Your next question comes from the line of Eric Sheridan with Goldman Sachs. Your line is open.

Dara Khosrowshahi:

Yes, absolutely. So as it relates to the Department of Labor rulemaking, first thing I would tell you is it effectively returns us to the framework during Obama's presidency, which was a framework in which we grew significantly. And it doesn't reclassify any workers, doesn't include NAV's D-Test. So when we look at the rule making, we believe that it will provide for stability going forward. And really the focus that we have ourselves is working on a state-by-state level, right? Prop 22 in California passed with 58% of the votes in a very, very liberal state. I think everybody recognizes that value of the flexibility of independent contractors, earnings levels are very robust. And I think the dialogue that we're having on a state level, really our goal and we are finding that the dialogue is a robust dialogue on a state level about preserving flexibility, having robust earners and then also providing some protections appropriate for independent contractors is the right way forward. We continue to have dialogue. And I would say the trend is in our favor at this point, but it is the road is going to be bumpy and for us the nature of work is always going to be a big issue that we have a responsibility to shape going forward in dialogue, obviously, with local governments. When we look at delivery, again, we don't see any signs one way or the other of consumer weakness at this point. It's something that we're watching out for us. Basket sizes are up, frequency is stable. About 10% of our eaters on a monthly basis now are using our grocery product as well. So we are driving higher engagement there. And Uber One membership continues to penetrate at higher rates within our delivery segment. So you see the growth rate of delivery. It continues to be stable, et cetera, a little bit this quarter. And I think for Q4, we expect it to be stable to up a little bit as well. At this point, we're not seeing weakness. We're definitely watching out for it.

Operator:

Your next question is from the line of Justin Post with Bank of America. Your line is open.

Dara Khosrowshahi:

Yes. So I think if you look at delivery growth, our growth accelerated a little bit this last quarter. North America volumes remained very healthy. So North America, gross bookings grew 19%. And then in Europe, actually, we saw a slight acceleration in terms of gross bookings on a constant currency basis as well. And so I think on delivery, it's all steady on the front. The growth rate is driven based on adding in new eaters. And obviously, we have a source, a significant source, of new eaters coming in from the mobility side. Our mobility business provides as many new eaters to our eats service, Google, Facebook, TikTok combined at about q quarter of cost and it's also about merchant apps. So we are now at an all-time high in terms of the number of merchants on the platform. And the number of merchants are it's about 870,000 merchants on the platform, up about 11% year-on-year. So again, that number of merchants, that growth of merchants mirrors our gross bookings growth as well. Gross bookings growth being a little bit higher. So with Eats, it's about demand and supply, and we're adding new eaters and we're adding new merchants, which is really driving the growth of the business along with the frequency that we see with Uber One. Nelson, you want to talk about overhead?

Justin Post:

Great. Thanks, Dara. Thanks, Nelson.

Operator:

Your next question is from the line of Doug Anmuth with J.P. Morgan. Your line is open.

Dara Khosrowshahi:

Sure. I will take the first and Nelson will take the second. Listen, up front fairs and destinations are a big positive as it as it relates to driver satisfaction. Drivers, now on a global basis, were at 2019 highs. If you look at the U.S., the number of drivers that we have is now about 80% recovered versus 2019. But the number of drivers we have is up 37%. And what we're seeing is that driver churn is down almost 20% versus where it was historically. So drivers are much more engaged on the platform. We've talked about driver earnings being $36 an hour on average in the U.S. as well. And the driver engagement, in other words, how many hours are our drivers driving on average is up 16% on a year-on-year basis. So the robust earnings, the continued flexibility and the additional information that you get in terms of upfront destinations, that is combining for very, very healthy supply trends. We can still add more drivers into the marketplace, and we're busy doing so. But the trends that we see are very healthy and the competitive trends that we see in terms of driver engagement on our platform and driver preference for our platform remain very, very high. So, the product team has really worked to improve the driver experience from onboarding, to the upfront destinations, to our customer service, to a bunch of safety innovations that we're driving as well. So there is a lot of innovation going on, on the driver front, and it's definitely showing in terms of their preference for our platform.

Balaji Krishnamurthy:

Next question.

Operator:

Your next question is from the line of Ross Sandler with Barclays. Your line is open.

Nelson Chai:

So, we talk about 10%, and that's the number we've kind of talked as a guide. I would say it's across the board. So, what we're seeing is we are getting leverage because

Balaji Krishnamurthy :

All right. Next question, please.

Lloyd Walmsley:

Thanks. Two if I can. First just given all the questions around macro, are there enough levers in the business on the cost side in kind of rationalizing competition such that you're confident in the 2024 EBITDA targets, kind of regardless of macro? And then second one somewhat related, Lyft recently retired their energy surcharge and added a new charge to pass along higher insurance costs. Do you think a similar course of action might make sense for Uber? And what could that mean for the P&L? Thanks.

Dara Khosrowshahi:

And Lloyd, just add to that, right now the focus of the business is really to improve our supply situation. And that's kind of where we're waiting some of our investments. Earnings from our earners on a global basis were $10.8 billion, up 25% all-time high on a global basis. And our job is to run a lean operation where we can deliver as much earnings as possible to our drivers and couriers on a global basis, and also obviously be responsible to our investors. So right now, exactly as Nelson said, we like where we are and we're going to focus on our own strategy versus some of our competitors’ strategy.

Balaji Krishnamurthy :

You are welcome. Next question.

Deepak Mathivanan:

Great. Thanks for taking the questions. So a couple ones. First, can you unpack the Eats’ incremental margins in 3Q? It's continuing to be very strong, even as you kind of calmed through the investment period last year. Can you elaborate the factors driving cost per trip down? Is it more sort of like a batching and changing with scale that's happening on the platform or are there any other linked factors? And then second question, Dara, maybe can you talk about some of the kind of counter cyclical elements, potentially helping driver supply with macro becoming weaker across the world in certain countries? Are you starting to see sort of like the driver supply and ours being helped by weakening macro in certain regions?

Dara Khosrowshahi:

Deepak, in terms of driver supply that is getting healthier across the board on a global basis. I think there are a couple factors. One is we lean into driver supply. So driver incentives while they are easing continue to be at high levels. We are investing billions of dollars in driver incentives to bring drivers on board. Second, is we have invested significantly in our onboarding flows, auto fetching documents as opposed to your having to take pictures of your documents, improving the conversion of driver signups to actually drivers getting onboarded and making that first trip as well. There is a ton of tech work that has gone into those onboarding flows. And then I do think the macro environment does seem to be helping combine with the solid earnings that we're seeing. Right? Average driver in the U.S. making $36 per engaged hour, those are very, very healthy earnings levels; and in the U.S. at least over 70% of our drivers who are coming on-board now said that inflation did play a role in their decision to sign up, right? It helps them afford their groceries, be more comfortable in an environment where real wages are fairly weak as it relates to the inflationary environment. So we do think the macro environment is helping, although I do think that the investments that we made both in technology and behind driver incentives are also a pretty important factor as well.

Operator:

Your next question is from the line of Mark Mahaney with Evercore ISI. Your line is open.

Dara Khosrowshahi:

Sure. Absolutely. So Mark, the one thing that I would stress is we think Uber One is already there. Like we're always trying to improve the product as well, but remember, this is a – this is a very young product. We're still launching markets, so we're now in eight markets and it is the only product out there we price competitively with other players who are – who are offering delivery only benefits. And we are offering delivery benefits that are just as strong as their competition and discounts ranging from 5% to 10% on the mobility side, which is a far superior proposition especially as markets are opening up as well. So we're confident with the product as we have it, to be able to go from 10 million to 20 million to the 30 million that you put out there. The product is already there. Now we are going to invest in experiential benefits. Do you get priority pickup in airports? Do you get priority matching for example during an event? Those are definitely benefits that we are going to experiment with, but Uber One as is, is the best membership product out there on a global basis. And obviously with the audience that we have, we have a mobility audience and a delivery audience and a grocery audience that we can put – that we can push Uber One in terms of a marketing audience. We think that 20 million, 30 million on a matter of time. In terms of surge and ETAs, they are coming down. Generally I would say surge levels now are running as a high-20s to 30% range. We're more comfortable with range, call it in the teens. ETAs on average are running call it six minutes and we are more comfortable in the five-minute range. What it takes to get to those levels is simply continued investment and supply. And we are seeing our supply improve and generally supply hours are growing at very healthy rates, which is a function of new drivers on-boarding but then the average driver who's on-boarded being engaged at a higher level than they were last year. So as we improve the supply demand balance of the marketplaces and we're well on our way, we think we'll get surge levels below 20% and ETAs closer to five minutes, the – directionally we're confident where we're going.

Balaji Krishnamurthy:

You're welcome. Next question.

Ron Josey:

Great. Thanks for taking the question. Maybe Dara, I wanted to follow-up on a question earlier on Upfront Fares and Destination. And I think in the past you recently you talked about just variables that go into pricing more so than just time and distance. So can you talk to us a little bit more about just the variables on the algorithm besides time and distance on Upfront Fairs? And then we haven't talked much about advertising here, but $350 million run-rate charging $1 billion by 2024, a bunch of launch at this quarter. Talk to us about what's needed from a tools and maybe verticals or sales force perspective to get to that $1 billion? Thank you.

Ron Josey:

Thank you, Dara.

Operator:

Your next question is from the line of John Blackledge with Cowen. Your line is open.

Dara Khosrowshahi:

Sure. In terms of our category position and mobility and delivery, we operate all around the world, but if I were to generalize on mobility, our category position is very strong. We are at close to if not at all time highs in U.S., Australia, the UK particularly is very, very strong with us – strong for us as far as category position goes. And then on the delivery side we have improved our category position quarter-on-quarter and either we've been stable or improving our category position across 75-plus percent of our gross booking space, and in the last month we believe that's only improved. So we are in a position now because of the scale of the business, because of the global nature of the business and the power of the platform where mobility is pushing, is sending consumers to delivery and vice versa, we're able to gain category position and improve margins pretty significantly, which is great. Second question?

John Blackledge:

Thank you.

Operator:

Your final question comes from the line of Jason Helfstein with Oppenheimer. Your line is open.

Dara Khosrowshahi:

Yes. So I think in terms of those users it's really the platform, so we are now offering mobility promos, for example, to delivery users who either have churned or mobility users who've never used mobility before. And we're seeing really great promise in terms of delivery actually being able to cross promote and drive mobility use cases as well. And then Uber One is the other product that we have. Obviously the lead benefit for Uber One is free delivery, discounts on your delivery as well but the mobility benefits are benefits that we can promote in Europe and other markets. And when you look at UK for example, a much higher percentage of our mobility business is let's say in London, while the delivery business is not just in London, but is in a number of other cities, the Manchester, Liverpool, Newcastle et cetera of the world as well. So we think the power of cross promotion, we started with mobility really promoting delivery. So we think delivery promoting mobility back is absolutely a potential that we have that we're very early in terms of developing.

Dara Khosrowshahi:

All right. Well thank you everyone for joining. We are very, very happy to deliver another healthy quarter of strong top line growth and strong bottom line growth as well. Nelson, Balaji and I get to talk about it but there are thousands of Uber employees who are doing the hard work on the ground. So special thank you to them and then of course our earners with whom we won't be here talking to you. Look forward to talking to you next quarter.

Operator:

Ladies and gentlemen, thank you for standing by. My name is Brent, and I will be your conference operator today. At this time, I'd like to welcome everyone to the Uber Second Quarter 2022 Earnings Conference Call. [Operator Instructions]. It's now my pleasure to turn today's call over to Mr. Balaji Krishnamurthy, Head of Investor Relations. Please go ahead.

Dara Khosrowshahi:

Thanks, Balaji. Uber delivered another strong quarter with gross bookings and an annualized run rate of $116 billion, an all-time high; EBITDA of $364 million, another all-time high and well above our guidance range; and positive free cash flow for the first time ever of $382 million. Despite the uncertain global economic environment and considerable foreign exchange headwinds, we've issued Q3 EBITDA guidance that shows strong incremental progression, and we remain confident in our ability to deliver healthy top and bottom line growth, strong margin improvement and yes, free cash flow, all the while continuing to responsibly invest in technical innovation, earner satisfaction and durable long-term growth. As I've said before, we continue to benefit from a secular increase in the on-demand transportation of people and things as well as a shift back from retail spend to services spend, and we continue -- and we intend to continue capitalizing on these growth tailwinds in a profitable manner. With that, let's open the call to questions.

Ross Sandler:

Just two questions. First, Dara, how would you characterize like the overall operating environment today versus pre-pandemic? You seem to be gaining category share, and a lot of the smaller competitors from private markets are retrenching, even some of your larger competitors are struggling a bit. So is life getting easier for Uber to be successful? That would be the first question. And then the second question, Nelson, the 3Q guide assumes another solid incremental margin. Can you just flesh out where that's coming from? Is that just fixed cost leverage that you expect to see over time? Or are you seeing more markets kind of reach that top 20 above target margin level that you had talked about at the Analyst Day?

Dara Khosrowshahi:

All right. And Ross, as far as the operating environment goes, listen, no one wishes for a tough economic environment or elevated inflation that's affecting so many of us including Uber drivers. But at the same time, from a competitive standpoint, there's no question that this operating environment is stronger for us. The -- we are able to, in this environment, I think, show our capital discipline, as you've seen in terms of the margin increase and free cash flow generation as well. At the same time, because of our scale and because we've been making these investments for years, we are able to continue to invest in our new vertical business and relaunching UberX Share and investing in hailable, et cetera. So we also continue to invest in top line so that our top line growth continues to be durable. And in a different environment, the platform advantages that we brought, the scale advantages, the global advantages that we brought to some extent sometimes were kind of outshouted by just higher spend by competitors. So in an environment where capital discipline becomes more important, I think the larger players, and we are the largest players, the most diversified players, and we're definitely more diversified than anyone else as far as the kinds of businesses that we are and our global footprint. And then the players who have true platform advantages, which, again, as Uber, really start coming to the fore. So when we look at the competitive environment, this is the strongest we felt competitively globally since Nelson and I have probably started here. And hopefully, the overall environment will get better and the competitive environment will continue as is.

Douglas Anmuth:

Dara, there's obviously been a lot of discussion about increased incentives in the market, but it seems like you've been able to improve the driver experience and exercise discipline on incentives. So hope you could talk more about how you're doing that. And then, Nelson, perhaps you can just talk about some of the interplay here in driving the free cash flow above EBITDA in 2Q and just how you're thinking about the relationship of the two over the next couple of years.

Nelson Chai:

Doug, on the question on cash flow. So if you recall back on Investor Day, I made the commentary that free cash flow trails adjusted EBITDA by about $1 billion annually. So I'm not updating the number for you, but I would say that we do expect that we will outperform as you see just the EBITDA margin as a percentage of gross booking improved, so that obviously helps in terms of what flows through the bottom line. We are spending time in terms of looking a little bit more at our working capital and managing it. And then again, it is important to note, it's not a direct correlation from EBITDA to cash flow because there are different financial statements, but cash flow is very much more of an annual thing. So you pay out bonuses in Q1 as an example. You get the benefit of [accrued] (ph) bonus in the rest of the quarters. So you'll see us continue to do it. I do expect that we'll do better than the $1 billion target. Free cash flow is actually a GAAP number, as you will. So it's not like adjusted in and out. And so again, we will continue to update this over time when it makes sense, but we're really proud. And we knew we would get there because think about all the steps we took during the pandemic if you think about all the platform moves now to be asset light. Additionally, the other thing is we were doing some build-out on real estate like Mission Bay and some of the years past. So most of that stuff is behind us now. And so as you think about the business and the current operating platform, this should be a really, really strong cash flow generator, which I think you probably heard from Dara and myself over the past couple of months.

Brian Nowak:

So I have a couple of questions. Dara and Nelson, I wanted -- can you just update us a little bit on sort of where are you in the U.S. when it comes to average rider wait times versus where you have been in the past versus where you targeted to be? Anything on sort of conversion rate? Your riders go on in search and actually book a trip, how are those metrics? Anything on supply as well, I'd be curious to hear? And the new update on Uber, Uber One, 10 million users helpful? What are we seeing in terms of frequency and spend per user on the Uber One user base?

Brian Nowak:

Membership.

Operator:

Your next question comes from the line of Mark Mahaney with Evercore ISI.

Dara Khosrowshahi:

I'll do the first one, and Nelson will do the second one. In terms of mobility markets that are still lagging, really the only ones that I would point out are in the U.S. San Francisco, Los Angeles, Seattle are lagging nationwide recovery. Mark, if you can get more people in San Francisco, that would help. I think it's got -- it has to do with some of these cities opened up, people going to work, et cetera. But otherwise, the recovery for us has been pretty broad, and we've been very pleased in terms of the recovery on a global basis. When we look at use cases now, the travel use case is back very, very strongly. Uber for Business, our managed business has doubled on a year-on-year basis as well. So companies are starting to travel as well, so the recovery is pretty broad. But there are a couple of cities, especially West Coast cities in the U.S. where the recovery is still trailing. But when we look overall, everything is getting better, Mark, and we expect trends to continue to improve as we go back into the second half. Nelson, you want to talk to inflation?

Dara Khosrowshahi:

And to some extent, we could be seeing evidence where it's helping us and that it's a very significant consideration base for drivers coming on to the system. Over 70% of drivers say inflation has played a part in their decision to come on to the platform.

Justin Post:

A couple maybe just for Nelson. First, on the margin improvement, obviously, a big focus in the quarter. We're just wondering if you've pulled forward some of your margin improvement, or are there really changes versus your $5 billion outlook? Are you trending above that in some areas? And then the second question on delivery, I think we were looking for acceleration in the second half. Has that changed? And is that something that behavior is changing just because of the economy?

Dara Khosrowshahi:

I think just one other factor for delivery in the second half is obviously foreign exchange. That has moved against us since their last guidance. And when you look at the delivery business in the U.S., for example, Uber Eats grew 25%. Overall, in the U.S., we grew 21%. So some of the slowdown in terms of delivery growth comes from foreign exchange, and it's in a number of those European markets where we do see some of our competitors pulling back as well. But when we look overall our delivery business, that team is really executing and especially executing on the bottom line improvement.

Eric Sheridan:

Maybe two topics. On Uber for Business, nice growth there. Any sense you can give us on some of the funnel of activity you're seeing broadly around Uber for Business and how that might be able to capitalize on either a return to work or return to business travel as you look out over the next 12 to 18 months? And then second, with Eats, you've invested a lot in diversification of the platform into new categories around convenience and grocery and alcohol. Can you talk about how that wider diversification of categories has maybe changed some of the velocity you've seen of shopping or changed some of the LTV of the users of Uber Eats?

Operator:

Your next question is from the line of Lloyd Walmsley with UBS.

Nelson Chai:

So Lloyd, yes, we did add the statement in there about 2024. Yes, we feel really good about how the business is operating today. Yes, we can't control the macro world. And so I don't really want to give you a GB guidance for delivery for next year. But the business continues to grow well, and we are making investments. And again, we're not through the close recovery, number one. Number two, the business continues to grow well, and so we have a lot of ramp left. And so Mac and the team feel really confident in terms of our ability to grow next year. And so again, we feel really good about our competitive position and how the business is operating today and the trends down the road because the platform is operating quite well. But what I would say in terms of delivery, it's really all of the above. So I would say that we're working really hard, and that you heard in my earlier comment about the fact that our revenue margins are improving because the team, and we've worked through a lot in terms of improving just our courier efficiency or the cost per transaction, we've worked on all the different lines to try to find more efficiency, and we are doing a better job, if you will, about capital allocation in terms of promotion. And yes, you do get the benefit of the fact that some of the private competitors have gone away and some of the public competitors are getting the joke, and I understand now that a durable company has to make money. And so I think that is all positive if you think about it in terms of the margin structure and the profitability of our delivery business down the road. And so -- and yes, we continue to ramp up our ads business, and that's going quite well. So it's all of the above. And so I think we talked about it a lot on Investor Day, and we'll continue to execute our plan or over execute our plan, if you will.

Lloyd Walmsley:

It seems to be working.

Operator:

Your next question is from Deepak Mathivanan with Wolfe Research.

Nelson Chai:

Sure. So I'll answer the first one -- the second question first on the take rate. So yes, it was down in the quarter. As you know, we don't really focus on take rate. We give it to you because you guys focus on it, and it's more of an annual thing. The 2 big things was the surcharge definitely had an impact, and so that was probably 100 basis points. And then the other one is really just less surge. So you've heard us talk about the fact that we've invested in our marketplace. The health of our marketplace is better now. And so when there's less surge, it actually impacts the take rate. And so the combination of both was really what happened in the quarter. I don't know -- I don't think that you should think about a big shift in terms of take rates going forward. I think where we are historically make sense. But again, that's really just what happened in the quarter.

Operator:

Your next question comes from the line of James Lee with Mizuho.

Dara Khosrowshahi:

Sure, absolutely. So as far as Massachusetts goes, listen, we're constantly in dialogue with legislature, with labor representatives often in the U.S. in many states as well. The polling as it related to ballot showed us clearly winning. And the reason for that is that voters know what drivers want, and drivers want the flexibility of independent contractor status along with benefits as well. And that's what we call this IC+ model, which is independent plus benefits, whether those benefits include minimum earnings or some kind of health care or accident insurance, et cetera. Those benefits are benefits that we then negotiate on a local basis, on a state-to-state basis. And we are absolutely happy and open to get to a negotiated settlement if we get there. If we don't get there, we're confident we'll take our next shot at the ballot, and we're confident in our chances. But the most important thing is that this new model, this IC+ model, is overwhelmingly what drivers want. In California, drivers are very, very happy about the outcomes there. In Washington, we got through a good negotiated outcome as well. And we continue to have dialogue all across the U.S. In terms of the U.K., we are having -- at this point, I believe that our competitors are properly charging VAT as we have been as it pertains to the model. So we're on a level playing field there. But we think as far as worker designation, there's still more work to do, worker designation again. It looks like the IC+ model that we talked about, we stepped up. And designated drivers in the U.K. as workers, we think it's the right thing to do. It's also good for business because it makes driving for Uber more attractive. And we need more drivers in the U.K. So it makes a heck of a lot of sense. We think it is inevitable that our competitors will have to do the same. This is a ruling that came straight from the Supreme Court, and we think it's the law of the land. And it's a matter of time before our competitors come into play. I will also say that the U.K. business remains healthy. U.K. margins are solidly profitable. Our competitive share in the U.K. is as strong as it's been. So the U.K. business continues to operate well. And at the U.K., it's really actually more about the rider experience. We need more drivers out there, and that's really the focus. It's about making sure that the marketplace is balanced. And I think the regulatory situation and the competitive situation are definitely headed in the right direction.

Bradley Erickson:

Just a follow-up on the mobility side. You mentioned the driver incentives continuing to come down, certainly it seems like the labor environment flipped and what is starting to be a tailwind for you. So I guess, first, do you see those incentives continuing to fall? And then secondarily, what effect, if any, do you see any of that having on pricing here going forward? Are there any other levers you're looking to pull on pricing given any recent tendencies riders are showing elasticity-wise?

Dara Khosrowshahi:

And Brad, the other thing that I would remind you of is that we don't manage incentives and our revenue margins as an output metric. We're really managing for gross bookings growth, the marketplace experience, ETA surge and then ultimately, EBITDA margins, of course. And the EBITDA margin guidance that we gave you for Q3 shows very, very healthy margins going forward. And the revenue margin number that we get to, it's almost like it's an output, it's an accidental output because we're managing to a bunch of other metrics. And a lot of what happens in revenue margin is algorithmic by nature, and it's designed to balance the marketplace while delivering strong incremental profitability for shareholders as well. So we consider incentives and revenue margins a tool. But right now, the trend as it relates to that tool continue to be positive. We are looking forward to Q4 in September, back to school. We're going to have a lot of demand, so we are preparing ourselves for that increase in demand. And so we are going to continue being in the marketplace to make sure that drivers come on to the platform, stay on the platform because Q4 is going to be a great quarter for us, and it's going to be a great quarter for them as well. All right. With that, thank you for joining the call, and a big thank you to the Uber teams. Nelson and I get to talk about this stuff, but it's as a result of a lot of hard work from our teams globally. So a big thank you from Nelson and I to the Uber teams, lots of work ahead of us. I appreciate you joining the call, and we'll talk to you next quarter.

Operator:

Good morning. My name is Emma, and I will be your conference operator today. At this time, I would like to welcome everyone to the Uber First Quarter 2022 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. Mr. Balaji Krishnamurthy, Head of Investor Relations, you may begin your conference.

Dara Khosrowshahi:

Thanks, Balaji. We delivered a very strong quarter across the Board with record results on the top and bottom line. After two years of persistent and sometimes unpredictable impacts across our business, our Q1 results resoundingly affirm that we are on a strong path emerging out of the pandemic. Our focus on profitable growth, product innovation and operational excellence over the last two years has set us apart from the pack. Our Mobility team is demonstrating phenomenal execution, growing both demand and supply faster than competitors and rapidly innovating to rollout new accretive offerings all while delivering record margins despite the macro turbulence that we all see. Delivery is continuing to surprise us positively as demand has remained resilient in a reopening world and we expect topline growth and profitability to expand through 2022. Finally, Freight reached its first profitable quarter as well. We are keenly aware that the market is placing a high value on companies generating and expanding profits as interest rates rise. We are leading the industry in this respect. Our focus over the past two years on profitable growth has resulted in the strong top and bottom lines that we delivered in Q1. We are confident that our leadership position, our global scale and our innovation and platform advantages will allow us to deliver significant profitability and durable growth as investors rightly expect from globally scaled technology platforms. We are committed to taking all necessary actions to continue to deliver industry-leading margins and free cash flow generation, along with a disciplined capital allocation strategy. We’ve never been more optimistic about our prospects, and we are determined to execute as a team to bring that optimism to fruition. With that, let's go to questions.

Brian Nowak:

Great. Thanks for taking the questions. I have two. The first one, sort of on users and on drivers. I was wondering, Dara, in the past, you've shared stats about some of your cross-platform adoption, 17% of users in the past, et cetera. Any updates on what you're seeing on cross-platform adoption for your users and drivers, and just some of the benefits of your multi-product offering integration you are seeing from that is the first one. And the second one, just a comment about the expected acceleration in delivery in the back half. Anything you call out there on what you're seeing on user growth cohort, or anything sort of gives you confidence in the ability to continue to accelerate the delivery business through a potentially weaker consumer? Thanks.

Brian Nowak:

And then question on back half for delivery?

Brian Nowak:

Great. Thanks, Dara.

Operator:

Your next question comes from the line of Doug Anmuth with JPMorgan. Your line is now open.

Dara Khosrowshahi:

Yes, absolutely. As far as upfront destination, one of the most significant complaints that we get from our earners and our drivers is that they don't know where the upfront destination is. And if you go back to the origins of this business and how pricing was built, pricing originally was based on time and distance. And that comes from, let's say, the taxi days. But the fact is that based on the destination, the value of a ride, which may take the same amount of time and distance for a driver maybe very different based on the destination. So if you're going from the airport into Central San Francisco and you're going to get a ride as soon as you drop the person off, that's a pretty valuable ride. If you carry a passenger, same time and distance, into the outskirts of the neighborhood and then have to drive back empty for, let's say, 30 or 40 minutes, that's not a ride that's particularly valuable to an earner. And if you're purely wasting your charges on time and distance, essentially those two rides are priced equally. We think that's a bug in our system, and it certainly does not serve the best interest of the earners. So now with our new system, we display the full information of the ride, especially what the destination is. Our algorithms are then able to take signal, let's say, the trip out to the outskirts where the drivers have to come back empty, we will then price up that trip so that the earner trip earns the fair value of that fair, and also knows exactly what they're accepting or not accepting. That also improves the consumer experience because cancellation rates, once drivers understand what the destination is go down as well. There's a huge amount of technology that has to go into developing this kind of a system because essentially the pricing systems have to get signal based on earner behavior in order to hone in the pricing to truly price kind of that trip based on the market clearing price that earners are willing to accept that trip with, so there's a huge amount of ML data work that goes into that system, but we think it's fundamentally a better way, and the feedback that we're getting from our driver partners has been quite positive. It's a big change that I'll tell you, and there's a lot of debugging going on, there's a lot of algorithmic works to make sure that the earner experience is as great as it is, but we're very, very optimistic about this fundamental change. Last thing I'll say about this is, this is one of those invisible or not so invisible benefits of the platform. This is actually how delivery has been pricing their trips for some period of time. Delivery companies show upfront where you pick something up, they show an upfront fare. It's exactly like introducing upfront fare to Uber riders and our being a multi-platform, multi-product business allows us to take learnings from one side of a business, apply it to the other, and instead of kind of starting from scratch, we've already – we're adolescence now using all open knowledge from our delivery business and passing it on to the mobility business. So lots of advantages having a single marketplace team, a single technology team, thinking about the best of both worlds and constantly applying learnings for one to the other. And then as far as UberX Share, we're super excited about the business. I think with Share, we're looking to resolve a fundamental issue that the older pool model had, which is the interest of the rider and the interest of Uber were misaligned, right, which is the rider would ask for a pool trip, hoping not to be batched and Uber obviously would want that trip to be matched in order to achieve the economics that we expect. With UberX Share, there's an upfront discount. And when you are matched with another rider, you get a higher discount on your trip. So all of a sudden interests are aligned in this kind of system and we're very, very encouraged by the early signal that we're seeing and we're looking to launch UberX Share at about 15 markets in the next quarter, and we will continue to expand from there. So both upfront fare and UberX Share are areas that we're quite excited about and areas where there's a lot of innovation going in for the teams.

Dara Khosrowshahi:

You're welcome. Next question? Your next question comes from the line of Eric Sheridan with Goldman Sachs. Your line is now open.

Dara Khosrowshahi:

Sure. I think in the U.S. on the earner side, and again, we don't necessarily look at earners now as couriers or drivers because increasingly we want earners to earn, however they want to on a particular day. They may want to stay in their little neighborhood and that accrues more to delivering food because typically you stay within a certain radius or they may want to make more money and right now earnings for drivers, for example, who drive more than 20 hours on our platform in the last quarter were $39, including tips. So earnings are super, super high, which is great for earners. On the courier side, I wouldn't say that there's a huge amount of competition in that, we've got plenty of couriers and from what we can tell our competitors do as well, it's a very flexible way to earn, which our earners appreciate. So we have seen the number of active couriers globally up 34% on a year-on-year basis and in the U.S. and Canada up 79% year-on-year. So we're in very good shape there and actually a fair amount of the year-on-year increase in take rates, call it, true take rates that you're seeing in the delivery business is because we've been able to drive cost per transaction down as a result of higher efficiency in our marketplace because we have plenty of couriers. And as we get more density in our marketplace, essentially the distances that we have to carry food and go pick up food, et cetera, come reduce and our algorithms in terms of routing and batching continue to optimize and get better and better and better. That is essentially upside as it relates to net revenue. And it really doesn't cost anything. It just costs engineering time to achieve which is time that we have. And then as far as the super app versus multi app consumer experience, the way that we're doing it is on the consumer side, we're looking to get the best of both worlds. Think about it in the same way that Facebook has a family of apps. They've got Facebook and Instagram and WhatsApp, and they're kind of loosely coupled. Same thing with Google, they got Google and Google Maps and Google Mail. Again, they're coupled, you have one identity, one payments, et cetera. We're looking to achieve the same thing, multiple apps, whether it's Uber, Uber Eats or Cornershop, your identity is the same drizzly, your sign ups are same, we treat you the same way your customer experiences is consistently excellent. You've got the Uber One membership that flows across all those apps to save you on delivery fees. And at the same time within each app, we're constantly cross promoting one platform to the other. On rides, we're cross promoting each. We're actually super excited. We're starting to cross promote rides on our Eats app. And frankly, weren't sure if it's going to work. We now see signal that it's working. Actually, we're able to resurrect riders back into the reopening through the Uber Eats app, which is something that we're super excited about. So all the apps talk to each other, cross promote each other. We use machine learning algorithms to figure out what is the best promotion to put in front of the right person at the right occasion. And you can imagine, lunchtime, the promo, maybe different than drinks time, for example. On the backend, as it relates to earners, we are a single super app. And essentially you sign-up to earn on Uber and more and more, we will offer you different opportunities to earn based on what we know about your profile, based on time of day, based on where you are and based on what the opportunities are. And we think that's a very, very significant structural advantage over other players in our industry, none of which has a super app model.

Dara Khosrowshahi:

You bet. Next question?

Justin Post:

Great. Thank you. I guess, just given the challenges at Lyft, they talked about on driver incentives. Can you talk about the mobility supply-demand dynamics and how you're going to manage what hopes to be a pretty robust opening over the next six months? And then when you look at your prepared remarks, some interesting stuff on regulatory and new use cases. Just want to see if you feel like you're kind of getting over the hump here on regulatory, if there's real progress there, and why you've kind of decided now to expand some use cases to car rentals and travel. Does that kind of signal that the core business is now kind of on a positive trajectory? Thank you.

Justin Post:

Great. Thank you.

Operator:

Your next question comes from the line of Mark Mahaney with Evercore. Your line is now open.

Dara Khosrowshahi:

Yes. I'll start the second one, first, which is, we're absolutely seeing MAPC growth continue to accelerate post-Omicron. So for example, while MAPC growth for the quarter was or MAPCs were $115 million, up 17% for the quarter. In March, they were up at $120 million, up 20% on a year-on-year basis. So we're seeing MAPC growth accelerate and we expect to see that acceleration build into April and the balance of Q2. We absolutely see the reopening as a very, very big MAPC driver, especially on the mobility side, so expect MAPC to continue to grow and if anything to accelerate into the second quarter. As far as our advertising business goes, continued strength there, we essentially more than tripled the business on a year-on-year basis. And we are very much on track to hit the targets that we laid out during Investor Day.

Dara Khosrowshahi:

You're welcome. Next question?

Lloyd Walmsley:

Thanks. Two, if I can. Just first, can you talk about the UK Mobility business and where that is on kind of the path back to profitability under the worker classification and VAT charges? Can the UK, do you think, get back to prior levels of profitability? And where are we on that journey? And then the second one, in the script, you talked about now expecting to be free cash flow positive for the full-year. Any update on how you think about the potential for capital return given your cash position and kind of where the shares are trading? Anything you could share that would be great.

Dara Khosrowshahi:

Yes. And I think as far as the UK goes, let's say, we make tremendous progress in the UK. We move to the worker model. We're now compliant with merchant status. And we've recently been granted a private hire vehicle operator license for 30 months, which is terrific. Our relationship with the City is second to none, and we're committed to Citycon's goal of electrifying our fleet by 2025 in London, a real leader in environmental impact and something that we're firmly behind. We absolutely believe that it is a condition for every operator's license to move to merchant. We have not seen some of our competitors do so, but the TfL has been very, very clear that they will enforce those rules. So we just think a level playfield is just a matter of time. And the ones that are ignoring the law are either accruing liability, they're going to pay for it sooner or later one way or the other. We can't tell you the timing, but it is going to happen. As it relates to our business on the ground, our CIPD position is very strong. So we're very confident as it relates to our category position and our business has returned to solid profitability. Now we see profitability in the UK, healthy and improving into the balance of the year.

Dara Khosrowshahi:

You're welcome. Next question?

Ross Sandler:

Hey, guys. Just two kind of big picture questions. First is on the delivery side. So on convenience and grocery, I think there's a debate whether 3P delivery or these new dark store concepts are a better business model. So how do you view that? I know most of your businesses started in 3P, but would it make sense to build out 1P grocery or convenience eventually? And then second question is on the taxi partnerships. So I think you said you want every taxi on the planet on Uber by 2025. Can you just talk about how those partnerships might impact the unit economics in rides? Thanks a lot.

Operator:

Your next question comes from the line of Deepak Mathivanan with Wolfe Research. Your line is now open.

Dara Khosrowshahi:

Yes, absolutely. As far as gaining share versus our competition, I'll tell you gaining share isn't a priority for us right now. It's happening naturally in some of the reopenings and it could be because of a mixed shift, for example, travel, the travel category is growing at very, very significant rates, and we tend to skew high on the travel category or the Uber for business category. So we are observing some share gain in the U.S. and frankly, in most countries around the world, we're observing these kinds of share gains. And it maybe that the kind of consumer that's an Uber consumer is higher end, travels a lot, travels for business, et cetera, is coming to the platform pretty quickly, and obviously we're a beneficiary of that. Our focus is on profitable growth and I think we're able to achieve profitable, call it, durable growth while gaining share versus our competitors because of the power of the platform. And so it's kind of naturally happening. It's not something that we have to lean into, and we're a lot less focused on, let's say, our competitors or competitors share as we are the opportunity to grow the business durably to add on new segments, such as taxi or hail-ables, two-wheelers, three-wheelers or lower cost product, whether it's high capacity vehicles, et cetera, that's really the focus and the share will take care of itself, although it has been taken care of itself. And we're quite constructive in terms of share gains. As far as the delivery reopening impact and frequency, listen, when you look at our delivery business, MAPCs were up 4% year-on-year, basket sizes were up 3% year-on-year, frequency was up 4% year-on-year. So all of the core metrics that drive the business are positive and because of our innovation, as it relates to bringing more earners on to the platform and then the density of the network driving cost for transaction down, we're able to improve the margins of the delivery business. So we're happy with the trends that we see, and we think that our frequency is going to also be assisted by our cross-platform usage and a higher penetration of Uber One members into our gross booking space. We are the penetration of Uber One members is still low generally for us and low compared to some of our competitors. And we see higher frequency with Uber One members. So we think that's a natural tailwind that can maybe combat some of the headwinds that some folks are seeing in the reopening.

Dara Khosrowshahi:

Well, by the way, one note, I didn't answer, and I want to answer all questions. I didn't answer the question on taxi margins. So as it relates to taxi margins, first of all, margins differ by geography. So for example, in the U.S., the deals that we've done with the taxi companies should be at quite attractive margins that are consistent with the rest of our business. In some markets, let's say, in Japan or some developing markets, our taxi margins are lower, but we've consistently seen – we're able to start at lower margins and then increase margins over a period of time. So when we think about the growth of our mobility business and the 10% incremental EBITDA margins that we are looking to deliver, our core products, let's say, Uber Eats, X, or Reserve or Black, those will tend to deliver higher than 10% incremental margins. We'll use some of those, the incremental above 10% to invest in products such as taxi, three-wheelers, two-wheelers, et cetera in order to drive what I would call durable growth, MAPC growth, et cetera. And we're constantly balancing the two and hopefully you've seen as it relates to our execution over the past couple quarters and years that we have our hands on all the different levers in order to deliver very, very healthy topline growth and the kind of profitability that investors are especially looking for nowadays. All right. Next question?

James Lee:

Great. Thanks for taking my questions. Just a follow-up on regulatory update here. And maybe, Dara, can you talk about maybe the ongoing conversation with the New York State, given your recent wins in Washington and also pretty strong ongoing support from drivers in Massachusetts. Did these victory can help you move the conversation along? And also what are the key friction you're looking to resolve? Thanks.

James Lee:

Thanks so much.

Balaji Krishnamurthy:

Take the last question, operator.

Operator:

Our last question today comes from the line of John Blackledge with Cowen. Your line is now open.

Nelson Chai:

So our rides business has actually fully recovered versus where we were in pre-pandemic levels. And in fact, even on a trip basis, we're more than 95% recovery globally. We still have some room in the U.S. We're still in the high-70s in terms of recovery there, but we've really seen all use cases come back, including airport travel, pretty much in line with pre-pandemic levels. So we were seeing a very, very strong reopening on the mobility side.

Nelson Chai:

As far as delivery goes, new verticals ARRs were continued to be higher than $4 billion. And we're seeing very, very strong growth there. We're also integrating the new verticals experience in a native way on Uber Eats, and we're seeing really, really promising early signal there. And when you look as of March, less than 10% of users who completed a delivery trip on Uber in the last month ordered new verticals. So there's huge opportunity there. That number is up 400 basis points year-on-year, but we think that the potential of essentially upselling new verticals opportunities to our eaters is very, very young, and there's a ton of upside left there.

Balaji Krishnamurthy:

All right. Great. We can wrap up there.

Operator:

This concludes today's conference call. Thank you for attending. You may now disconnect.

Operator:

Ladies and gentlemen, thank you for standing by. My name is Brent, and I will be your conference operator today. At this time, I would like to welcome everyone to the Uber Q4 2021 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] Thank you I would now like to turn the call over to Mr. Balaji Krishnamurthy, Head of Investor Relations. Please go ahead.

Dara Khosrowshahi:

Thanks, Balaji. We had a strong quarter to close out 2021 on a high note. Our results continued to demonstrate both how eager people are to move around their cities as restrictions ease up, and how Delivery has become an important day -- important part of their daily lives. Gross bookings of $25.9 billion came in at the high end of our guidance range, with MAPCs of 118 million, reaching an all-time high. Continued strong execution by our team delivered $86 million of adjusted EBITDA, nicely above our guidance range. In Q4, we continued to see strong recovery in our Mobility business. December gross bookings nearly recovered to 2019 levels and approached a $50 billion annual run rate in the first few weeks of the month. Meanwhile, Delivery volumes stayed strong as we continue to improve the profitability profile of that business. Delivery reported its first adjusted EBITDA profit, including for the first time in the U.S., even as Uber Eats became the fastest-growing delivery player in America. Uber Freight closed the transformative acquisition with Transplace during the quarter, it's never been clear that our supply chains are in dire need of technical innovation. And along with Transplace, Uber Freight, now at $1 billion quarterly run rate, is well positioned to bring digital native change to the enormous logistics ecosystem. Looking back at 2021, we had a great year. I can't say when exactly as I predicted, but our teams have shown an incredible ability to remain agile and manage through change effectively. Despite COVID and all of its unpredictability, we now have reported our second adjusted EBITDA profitable quarter, and we expect to generate significant and improvement profitability in 2022. Of course, COVID remains a part of our lives. We started to see some impact of the Omicron wave late in December. The silver lining is that the impacts are becoming more muted as we learn to live with the virus. Lockdowns are less strict and vaccines are available across the world. Omicron also arrived at a time of year when we usually see seasonal declines. Toll on Mobility gross bookings decreased 21% from December to January, that's only about 10 points worse than what we typically see at this time of year. On a trips basis, the decline was even more muted, down just 15% month-on-month, with pricing coming down meaningfully as marketplace balance improved. It appears that the Omicron impact on our Mobility business has come and gone relatively quickly, even faster than the global case counts. We're beginning to see several major economies in Europe relaxing COVID restrictions, including the U.K., the Netherlands, Denmark and Norway, with more countries expected to take similar actions soon. In the last two weeks, the Mobility recovery has rapidly resumed with both trips and gross bookings recovering and Mobility gross bookings last week up 25% month-on-month. I'll quickly touch on driver supply, which continues to improve. We made steady progress through product innovation, more targeted marketing and on-the-ground operational refinements to onboard more drivers and couriers faster. Nearly 325,000 people started to work on Uber in the quarter, bringing our total global active earner base to 4.4 million people, the largest it's been since the second quarter of 2020. One important call-out is that while the Omicron wave acted as a temporary deterrent to demand, supply has been much more stable. As a result, surge and wait times have improved to their lowest level in the year. Recent internal research has shown that Uber is by far the preferred choice amongst drivers, and we're confident that our marketplace will be more, not less balanced going forward. Turning now to Delivery, which exceeded our expectations and performed better than we typically in January, likely in part to Omicron. This relative overperformance has moderated just as the Mobility trends have improved. Overall trends continue to be very healthy, and there's no question now that Delivery's here stay, both in food and other verticals. Delivery reached an important milestone in Q4, generating $25 million in segment adjusted EBITDA and marking the first profitable quarter of many to come. And as I said on our last call with you, we view the turn to EBITDA profitability as a big moment, but ultimately just a step along the way. It's creating a self-sustaining and incredibly valuable business. With this milestone accomplished, delivery is well positioned to self-fund growth in grocery, retail and local commerce, and let me underscore, we expect significant EBITDA profit generation even after those investments. Finally, it's worth spending a few minutes on a couple of our growth initiatives across the Company. Our advertising business ended the year with around $225 million in run rate revenue, well above the $100 million target we laid out earlier this year. While much of the attention has sponsor listing for Uber Eats, we have a road map to build a much broader business, including in Mobility. We also closed the acquisition of Drizly during the quarter, which will be a nice addition to our advertising efforts. Our new verticals businesses, which includes grocery, alcohol, convenience and other non-restaurant efforts, grew nearly 10% quarter-on-quarter in Q4 on an organic basis, reaching a best month ever in December. We continue to make progress in improving non-restaurant merchant selection in the U.S. And as a result, the U.S. grew at 3x the rate of our global new verticals business during the quarter. Internationally, we continue to have a strong lead in grocery and other verticals. We're working to build on that lead with new quick commerce offerings, and we're intentionally taking a partner-led approach here with encouraging signs of adoption. For example, in France, Carrefour Sprint stores have represented nearly 20% of new verticals, orders in Paris and with significantly higher per store productivity than other new verticals merchants in market. Uber for Business also reached a milestone during the quarter with managed U4B gross bookings, surpassing its previous high from 2019 with well over $1 billion in annual run rate GBs. Over the next few years, U4B's enterprise offerings, which importantly spans both mobility and delivery, will significantly outpace our consumer business and become a meaningful contributor to growth and profitability. Before I hand it over to Nelson, plug for everyone to tune into our Investor Day tomorrow morning, which you can live stream on our website. Over the past few quarters, we've talked a lot about the power of the platform and the potential for Uber's complementary services to contribute to lower cost of acquisition and higher lifetime value. We're looking forward to discussing our strategy, our plans for each of our business and the growing advantage of our platform in a lot more detail tomorrow. Uber is emerging from the pandemic stronger than ever. As long as we execute on the opportunities in well positioned to deliver strong, profitable growth with significant expansion in profitability and cash flow generation over the coming quarters and years. Now, over to Nelson.

Operator:

[Operator Instructions] Your first question comes from the line of Doug Anmuth with JPMorgan. Your line is open.

Dara Khosrowshahi:

Yes, absolutely, Doug. So as it relates to drivers and couriers, first factor that we're seeing that's really encouraging is that the onboarding rate and onboarding conversion rates are happening much more successfully. This is because we essentially onboard earners and then we give them work opportunities rather than onboarding them either as a driver or as a courier. And as a result, earners can start earning much faster on our platform. So we're seeing a lot of positive input into the platform. It's also great because earners is going to earn during a period when everyone is trying to get back on their feet without as much government help as we have previously. So it works out for everyone, and it definitely helps out for our marketplace. While we haven't done the specific analysis of like how many earners do we need on a GB basis, it's my strong instinct that our marketplace has gotten more efficient. This is because we are now across dispatching between driving people and driving things that creates higher utilization for earners and makes for a more efficient marketplace. We're also seeing, on the Delivery side, as the marketplace grows and essentially densifies -- we got more restaurants on the marketplace. We have more consumers ordering. And as a result, the average length of the delivery is coming down so that you essentially delivering is becoming more efficient from a network perspective. So network efficiency is up. The efficiency essentially relies -- the efficiency results in earners being busy, a higher percentage of the time when they're looking for opportunities. And as you can see, kind of the marketplace metrics are coming down in terms of surge, in terms of ETAs and delivery times are first rate. So the efficiency trends that we're seeing are quite encouraging. As far as Uber One goes, it's very early. And last quarter, we talked about members around the world. And the early signal that we're seeing for Uber One is very encouraging. It's a consumer value proposition that's quite compelling because pricing is equal to the pricing of our competition but our content is better, right? It's just a content in terms of free delivery and discounts on rise and the discounts on rides in a world that is increasingly opening, thank God, is going to become more and more valuable. So we believe we have a content advantage over competition that is going to show up over time and is going to compound upon itself.

Eric Sheridan:

I know we're going to talk more longer term tomorrow, but just maybe taking a step back on some of the shorter-term dynamics. In terms of the Mobility business, we talked with one of your competitors last night about the dynamic of product mix and geo mix in the U.S. Can you give us a little bit of color on what you're seeing globally from geo mix and open versus closed environment or product mix like airport rides versus business roads or elements of that in terms of how that might be driving elements of December into January? And how should we think about that as the quarter evolves.

Operator:

Your next question comes from the line of Justin Post with Bank of America. Your line is open.

Nelson Chai:

So first of all, I think if you remember, Justin, when we did the Q3 call, we actually highlighted that it was going to be the fact. And a lot of it just had to do with marketplaces opening and closing because of the pandemic. And so we knew when we talked to you that places like Australia were going to open, and then we are going to lean in. I think you heard in my prepared remarks, if you actually backed out for some of that, we would have seen the incremental margins that we've talked about, and there is a little bit of seasonality. But again, what I would say is that our goal is to make sure that -- we continue to overachieve both on the top line, but as well as on the bottom line and the profitability, expanding the margins. And so we did that, and we knew we did that. And so because of that, we will take opportunities at some point to continue to build supply. We are entering this year, as you heard in our comments, and probably our best supply situation we've had since the pandemic started and certainly in 2020. One -- and so again, we think that will be beneficial as we go into 2022. You'll hear us talk a little bit more about it. But yes, I think that you should -- we believe that we will see good margin expansion as we think about 2022.

Operator:

Your next question comes from the line of Brian Nowak with Morgan Stanley. Your line is open.

Dara Khosrowshahi:

Sure. Absolutely. As far as the first question in the U.S. goes, I'd say it's just -- it's core execution. None of this is wizardry. Our selection in the U.S. is improving. Our selection in suburbs is getting much better, still not where it needs to be, but it's getting much better. I talked about cost per trip coming down, which allows us to reinvest in the top line, whether it's in marketing or its incentives. Membership as a percentage of our gross bookings is increasing, so we're getting more frequency coming through the system. And something that we'll talk more about tomorrow is that the cross-platform activity across both mobility and delivery continues to increase. That is chiefly, at this point, benefiting the delivery business. It's an attribute that is completely unique to Uber and it is becoming more of a factor. So there's like these three kind of eaters that are coming through the system that aren't available to our competitors. New eaters as a percentage of our total gross bookings every quarter is actually pretty small because we have a really big base of eaters who are loyal to us who keep coming back. But when you have new eaters quarter after quarter after quarter, it starts compounding. And we believe that we're starting to see the effects of that compounding happened last quarter and certainly this quarter, and we hope that it will continue. If it doesn't, we're not doing our jobs.

Operator:

Your next question comes from the line of Ross Sandler with Barclays. Your line is open.

Balaji Krishnamurthy:

Ross, you're coming through very muffled. But if you don't mind repeating the question, we'll try and get your response.

Dara Khosrowshahi:

Ross, so the ad business we talked about hitting a $225 million run rate in Q4, well above our targets. The momentum in the business is great. Keep in mind that that is the vast majority of that is delivery, and we are building out ad products that run across mobility and delivery and grocery Drizly is going to be a part of our ad operations. For example, Drizly advertising as a percentage of gross bookings is about 8% which is pretty significant. That's not in the numbers that we write you out on because Drizly has been part of our numbers partial in Q4. But with the mix of higher grocery, higher alcohol you should expect that to be essentially upside in terms of our advertising revenue and the growth ahead.

Operator:

Your next question comes from the line of Lloyd Walmsley with UBS. Your line is open.

Dara Khosrowshahi:

Yes, absolutely. We want driver retention trends very closely. And obviously, in January, with the Omicron wave, we wanted to make sure the demand came down. We were watching the number of drivers on the platform, the number of suppliers, et cetera. And what we've seen are pretty encouraging signs that drivers have stayed on the platform. In general, I would tell you that demand in the platform, both in terms of mobility and delivery is a fast twitch muscle. It moves much faster. In supply, earner supply on a platform, it's a slow switch muscle. It will respond but it will respond more slowly than demand, so to speak. Now that we're seeing the Omicron bounce back, we're pretty confident that our supply situation is looking good right now, and it's going to look good for the balance of the year, but it's always something that we're watching. And generally, retention rates are quite good. We are actively looking to sign up drivers, a higher percentage of drivers to work across platform. And whereas our algorithms previously were, I'd say, more highly tuned towards Mobility-only or Delivery-only. Our algorithms are now being tuned to the Uber marketplace. And so our cross-dispatching in a much more fluid elegant way, and that's only going to improve. These are, I would say, relatively early iterations, and you should expect to see more cross-platform activity, both on the consumer side but also on the earner side. And again, we'll have a lot more to say about that tomorrow at Investor Day.

Operator:

Your next question comes from the line of Brad Erickson with RBC Capital Markets. Your line is open.

Nelson Chai:

So again, I think, as Dara mentioned earlier, so the 5% is incremental margins as we continue to grow the business. We're not optimizing for that number. We're optimizing to grow our gross bookings and to grow our bottom line, our adjusted EBITDA and that is really just an output. Obviously, one we watch and how you guys spend a lot of time watching it. And so again, I'm really just trying to get some direction. We'll address a little bit more of the mid- to medium-term kind of modeling, if you will, tomorrow. But again, we do expect that we will -- the incremental margin will be around 5% for our Delivery business.

Operator:

Your next question comes from the line of Deepak Mathivanan with Wolfe Research. Your line is open.

Nelson Chai:

So first of all, in terms of your question on the drivers part, that is an annual number. And so there may be some quarter-to-quarter fluctuations because you're right. It's Omicron -- COVID if has actually shown us anything, we expect the unexpected. And so we are highly confident we'll be able to manage that on an annual basis. There may be a quarter here or there. And in terms of your question about our ability to do it, yes, we optimize our marketplace every single day across our 10,000 markets. And as you can tell from our -- what we achieved in Q4, we've gotten pretty good at it, particularly as the Mobility business has come back post-pandemic. And so, we feel pretty good about where we sit today. And so again, we're highly confident. If you look at the past a couple of quarters in terms of our ability to generate the 10% incremental margin on the mobility side.

Jason Helfstein:

Did we answer all of your questions?

Operator:

Your next question comes from James Lee with The Mizuho Group. Your line is open.

Dara Khosrowshahi:

Yes, absolutely. I think on the U.K. license, we're in construction -- constructive dialogue with TFL. I'd say our relationship with the City of London is better than it's ever been. About 10% of our kilometers now in London or EV or clean and we're looking to drive that up very actively in partnership with the city. So that relationship has really changed, and we're very hopeful that we get the license renewal, but we never take anything for granted. So we'll see, although we're pretty confident of our position. The worker reclassification that we underwent in the U.K. was the right thing to do. There isn't a level playing field yet. We believe there should be a level playing field. We're paying it for financially now because our earners in the U.K. are workers are getting lots of benefits that are competition essentially doesn't have to pay. But sometimes the right thing to do is expensive. And in this case, in the U.K., it's expensive. But we think with time, there will be a level playing field there's no question about it. The only question is when it happens. And I think like long term, short term, being a good citizen, being a good company on the ground sometimes hurts financially. The long term, you get gains. We want to be in the U.K. We want to be in London for the next 10, 15, 20 years and that means doing the right thing, and I think we are in the U.K. It will resolve itself. I can't tell you when. I think as far as California goes, it's running through the process. We're very confident of our position, but I don't really have anything to share one way or the other.

Jason Helfstein:

I'm just going to ask one. Just when you think about Uber Pass and specifically restaurants and delivery, are there any deficits in capabilities or coverage in major markets versus your largest competitors and kind of how you think about that?

Operator:

Your next question comes from the line of Edward Yruma with KeyBanc Capital Markets. Your line is open.

Nelson Chai:

Well, so as you know, we are right now primarily doing partnerships. And so we have a wonderful partnership with Carrefour in France as well. And we have a partnership with Gopuff here in the U.S. We are doing a little bit of testing on our own mainly because we do -- there's a couple of places in Taiwan and Japan where we're doing some testing. We want to understand the whole value prop and the different parts of the value chain. I guess our view is that we definitely want to care about making sure that we have a good product delivered to our consumers. There is a lot of private capital at it. I do think over time that there will be some normalization between the private and the public markets, if you will. And so what I would say is you'll hear tomorrow, we are going after this new vertical space. We're doing it with primarily a partnership approach. And I think we are leveraging both our capabilities and trying to maintain more of an asset-light model, which I think will be beneficial

Balaji Krishnamurthy:

Operator, we'll take one last question.

John Blackledge:

Two questions. First, what were other delivery verticals outside of Eats as a percent of delivery gross bookings in the fourth quarter? And then second, with the Car Next Door acquisition, could you discuss kind of the rationale? And do you expect to enter additional markets with that type of offering?

Nelson Chai:

Yes. So right in the fourth quarter, new verticals approached about a $4 billion run rate. And so if you think about it, in Q4, we were a $54 billion run rate for the total Delivery marketplace. So it's pretty simple math.

Operator:

Ladies and gentlemen, thank you for your participation. This concludes today's conference call. You may now disconnect.

Operator:

Hello. My name is Brent, and I will be your conference operator today. At this time, I would like to welcome everyone to the Uber Q3 2021 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, we'll conduct a question-and-answer session. [Operator Instructions] Thank you. I would now like to turn today's call over to Mr. Balaji Krishnamurthy, Head of Investor Relations. Please go ahead, sir.

Dara Khosrowshahi:

Thanks, Balaji. Over the last few quarters, we've focused on achieving two things. First, we've worked hard to get Uber firing on all cylinders again, driving recovery for Mobility, continued growth for Delivery and scaling our momentum with freight. Second, we've been disciplined in our execution to ensure growth is sustainably profitable, and that we live up to our commitment to shareholders. Our results this quarter demonstrate the incredible progress we've made against these objectives. Reaching total company adjusted EBITDA profitability is an important milestone. And one that's even more impressive when you consider where we were as a company just 18 months ago. In Q3, our mobile - our Mobility business delivered margins consistent with 2019 highs. Meanwhile, our global Delivery business nearly reached breakeven. In the US and Canada, our multiquarter investment cycle and strong execution by our Delivery team resulted in us, both gaining category's share and improving profitability with adjusted EBITDA growing more than $130 million quarter-on-quarter to approach breakeven. Today's profitability milestone is an important step, but it's just a step. When it comes to delivering on our mission and building a generational company, we know that profitability is a means, not an end. We remain focused on generating positive free cash flow, while also making disciplined investments to appropriately fund growth initiatives that will carry us into the future. Uber is at the center of multiple massive opportunities and Mobility, Delivery and Logistics and our platform is stronger than ever before. I want to take a minute to update you on our driver and courier recruitment efforts before turning to demand recovery, and then a bit on our long-term growth plans. When we first saw demand beginning to outstrip supply in Q2, we made a conscious decision to invest fast and to invest aggressively in attracting drivers back to Uber with a focus on the US. The results are clear, we've seen 10 consecutive weeks of active driver growth in the US, resulting in a far better rider experience. The number of active drivers is up more than 65% since January, and more than 20% since June. As a result, the incidence of surge pricing has fallen by nearly half and wait times are now below the magic 5 minute mark on average. We did this while meaningfully reducing incentive levels and at the same time, driver earnings remained near all-time highs due to increased utilization. We've also continued to grow the number of couriers on Eats in the US with active couriers up 80% since January and 25% since June. In other words, not only are we approaching our supply and demand balance for Mobility in the US, we've done so while nearly doubling our Delivery courier base from its low in Q1. All-in-all, our monthly active driver and courier base in the US has grown by nearly 640,000 since January. Against a backdrop of historic labor shortages and an abundance of choice for workers is a strong endorsement of Uber's 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 and times of day. We're also focused on tech improvements that increase signup 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 courier and driver activation rates. We expect to roll out this feature as widely as possible in the coming months. In some non-US markets like the UK and Brazil, the driver base is back to roughly the same size as it was pre-COVID. But it still hasn't 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 US 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 recovery has reignited with Mobility gross bookings expanding 18% over September - over the September and October period. While several markets around the world, including UK, 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 eclipsed 2019, demonstrating consumers' excitement to get out and move again. We believe volumes will return to trend line outside of holiday periods, but the underlying trend line continues to get better and better. Notably, airports are beginning to show meaningful activity. With US 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 your ride is ready for you whether you're early, delayed or hopefully on time. Meanwhile, we've continued to see sustained consumer engagement on Delivery, lending further support to our belief that increased demand for all types of fast delivery is structural and will grow for the foreseeable future. Over the past two months, Delivery gross bookings have grown 8% despite reopenings 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. In fact, we set a new best week ever for weekly totally company gross bookings in seven of the last eight weeks, and October was our best month in our 12-year history, thanks to the work of all of Uber team members. Looking ahead, it's our goal to grow both our top line and our bottom line and healthy, consistent and sustainable rates. That means being flawless in our execution and disciplined with our capital allocation for the large opportunities in front of us across Mobility, Delivery and Freight. Our Mobility team is raring to go. While the team has appropriately managed cost through the crisis. Our Mobility team has been seeding growth opportunities in five areas, low cost product, category expansion, hailables, enterprise and further geographic expansion. We believe that the underlying growth characteristics of on-demand Mobility and our growth bets can sustain double-digit growth for multiple years, while creating more opportunities for drivers. On low cost, we've begun to test a reimagined Shared Rides product with a focus on safety. Uber Reserve is a great expansion of our category from on-demand to advanced booking and is now live in 68 countries and is already tracking well ahead of our expectations. We're bringing more traditional street-hail modes like taxis and motorbikes onto Uber, allowing us to expand into new geos, offer another choice to riders and generate more demand for drivers. On Enterprise, we've begun to roll out an employee shuttle product using Uber's tech that our B2B sales team can plug into our corporate discussions. It's a very cool product, it's already rolled out for Uber. And our geographic expansion continues with growth markets like Germany and Spain showing real momentum and the bookings already 40% larger than they were in October 2019. It's 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. As cities reopen, we're seeing evidence that Delivery complements dine-in, as third-party food Delivery has continued to grow even a seated dining trends have fully recovered to 2019 levels. As the largest Food Delivery platform outside of China, with the leading position in seven of our top countries and a second position in virtually all the rest, we believe that we are best positioned to tap into this opportunity. Outside Food Delivery, we're increasingly tapping into consumers' growing appetite for the on-demand delivery of, well, everything. Today, we're focused on addressing grocery, convenience and alcohol through our marketplace, bolstered by the addition of Cornershop and most recently Drizly to the Uber platform. In addition, with Uber Direct, we're working with retailers to fulfill demand from their own channels in a white-label product that uses our Delivery tech. All of our consumer initiatives will be underpinned by our membership program. We built a good foundation with Uber Pass and Eats Pass, and recently announced a strong partnership with Hulu and Aeroplan, while further deepening our engagement with American Express. Our team has been hard at work on the next evolution of our membership plan and stay tuned for more news on that in the coming months. Lastly, with Freight. We see a massive opportunity to disrupt the freight brokerage industry with our technology, which now connects more than 1 million carriers to shippers. This year, we've seen a record number of newly authorized carriers entering the market of 3x versus the end of 2020, as more drivers are choosing to become owner-operators. As one of the leading choices for these new carriers. Freight's total carrier base has grown almost 50% over last year. We're also looking forward to closing our acquisition of Transplace in Q4 as we move towards a vision of connecting first, mid and last-mile logistics across the Uber platform. It was a great quarter, and one that should put to rest the many questions we've gotten, not always unfairly, about whether the unit economics of this business work. The answer is a resounding yes. But as I've said to the team, now the real work begins. Looking ahead, as we've done in the past, we'll continue to make investments that will set us up to succeed in the next frontiers of opportunity and deliver exceptional value to all of our stakeholders. Now, over to Nelson.

Operator:

[Operator Instructions] Your first question comes from Brian Nowak from Morgan Stanley. Your line is open.

Dara Khosrowshahi:

Yeah, absolutely, Brian. So I think as far as pricing goes, listen, this has been, to some extent, a giant pricing experiment that no one wanted to get into. But we're seeing the value of our products show through and you know even with prices being on average in the US, for example, 20% up year-on-year, we're seeing that as cities reopen, people start using the product, and they use their product a lot. In terms of use cases, you know, weekend is actually now at greater than what it was pre-pandemic. And airports, obviously, because the travel there is coming back fast. But like every single use case is coming back as expected, there are 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 you know, both now, urban and suburban life as well. We do think that based on the supply trends that we've seen and 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'll result in even healthier trip volume as well.

Dara Khosrowshahi:

And I think as far as Uber Pass goes, I don't want to take the thunder away from the team who's done a bunch of work. You know, 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. We continue to see really good engagement from members on the Eats side Eats members, their trips per month increased by over 50%. Members versus non-members, even basket sizes are higher, basket sizes are up versus non-members, in average of 10%. When you look at kind of the potential of membership, because we are launching in and a ton of markets all over, I would point to one market, Taiwan, where members account for greater than 50% of gross bookings. So we absolutely believe we can get there. And members now in Taiwan are eating with us 15 times per month, which is 3x 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, very early in our development here. And remember, that we have the best membership content so to speak, than anyone has, because our membership will offer not only food, not only grocery and alcohol, but is also going to offer Mobility as well. It's a structural advantage that others just don't have access to and I think one that we're going to press.

Dara Khosrowshahi:

You're welcome. Next question, please.

Eric Sheridan:

Thanks so much for taking the question. Maybe following up on the point you made answering Brian's question. Can we just get a better sense of what you're seeing early days in terms of the opportunity set versus the addressable market in non-Food Delivery in the US and how we should be thinking about the sizing and cadence of those investments going forward when you measure them against the opportunity? Thanks so much.

Operator:

Your next question comes from the line of Ross Sandler with Barclays. Your line is open.

Ross Sandler:

Only two questions here. Hey, guys. The Halloween comment's pretty interesting. That's historically one of the biggest, if not the biggest Friday update of the year or weekend. So, I guess, where do you stand on the rides MAPCs versus 2019? And is it just the frequency lower for some of these work and commute day parts? Could you talk about how far off those day parts or those trips are those categories from 2019 peak levels? And then the second question is, if we step back and kind of look at the original bull case for ride hailing, it was that you know, prices would come down to low enough level where consumers start to shift trips over to ride hail and away from public transportation or car ownership. And right now these price is pretty hard to see not playing out. So how do we get back to that? And if we do see much lower prices a few years out, you know, how confident are you that you can maintain the strong level of unit economics you're seeing right now? Thanks a lot.