Uber Technologies, Inc. (UBER) Earnings Call Transcript & Summary

I'm with Dara Khosrowshahi, who's the CEO of Uber Technologies. It's a company you would all know. It's active in 63 countries. It has more than 22,000 employees. Dara himself was previously the CEO of Expedia. He's still a Board Director there. He's also a director at Catalyst.org, which is a global, not-for-profit, working-to-build workplaces that work for women. He was previously on the Board of the New York Times Company. Dara, it is great to see you today, and thanks for coming on.

Thank you for having me. Pleasure to be here.

Dara, it's great to be with you today. I'm just going to start off the interview by making the point that sometimes Uber can be a lightning rod, for want of a better word, and that Uberization is not always a complementary term, but it is no doubt a glimpse of the future of work. And -- so where do you see yourself standing in this -- the talk around corporate purpose, stakeholder capitalism? Where are you on that?

Well, I think that one of the main reasons why I joined the company was to associate Uberization with positive rather than some of the negative that you see out there. I mean from our standpoint, for us, Uber is about innovation. It's about opportunity and movement in a completely flexible way when you want it, if you want to earn or if you want to move as well. So we believe that people within this company absolutely believe that Uber is and can be a force for good, but that takes work. It takes communication. It takes growing the right way. And I think as far our stakeholder capitalism, that's just part of growing the right way and doing the right thing. And to us, and to me, it's about building for the long term. And if you are building for the long term, obviously, you've got to take care of your shareholders, that is a very important role of any company and any CEO. But you also want to make sure that you're taking care of your stakeholders, your employees, for us, the earners on our platform, our customers, our riders and very, very importantly, the local governments that we work with. We are a deeply, deeply local company. We care about this kind of the societies that we serve in and the cities that we serve in. And that connection with our local community is a deeper connection than you see with most technology companies. You constantly have to take the trade-offs, and you have to take input from all of our constituencies in order to make the right decisions day to day to day.

I want to break it down, this entry then to -- into 3 parts: environmental, social and governance somewhat, obviously. Just on the environmental side, you've said you want Uber to be part of the solution to address climate change. Let's drill down into that a little bit with -- around congestion, for example. Do you feel that Uber helps to ease congestion, put people off public transport? What's your thinking there?

Well, so I think that, first of all, for us, what we're trying to move past is the era of car ownership, right? Uber is about the sharing of these assets, right? Cars are utilized 5% of the time, they've taken an enormous amount of space talking about congestion within cities. In a deeper car share kind of an environment, you are going to actually open up public space in terms of parking, in terms of roadways, et cetera, as you make the transition from car ownership to sharing. That said, as you get more choices, as it relates to transportation, each kind of method of transportation is going to get its fair share. And certainly, Uber and car sharing and car hailing has grown pretty significantly over the last couple of years. And what we're trying to do now is actually partner up with public transportation. And you see, for example, in many of the cities that we serve in London or New York, we actually have public transit right on the Uber app. In Denver, actually, not only do you have the public transit choices on the Uber app, we go so far as actually providing the ticketing as well all the way through to essentially create a transit experience that is as delightful as an Uber experience that everyone is accustomed to as well. So ultimately, what we want to be is, we want to be able to offer consumers all of the choices going from point A to B, and we want to be a complementary solution with public transport, providing them services like UberWAV, UberPOOL, et cetera. Obviously, with COVID, our getting more than one person into a car on a shared ride is complex, and we have to take into account healthcare concerns. But we actually do think that with safety first in mind, we can be part of the congestion solution, and we can be a complementary service to the transit networks out there.

Just turning to emissions. Do you have a time line for setting targets on absolute greenhouse gas emissions? I'm thinking of this country, in particular.

Yes, we are so -- we will have a time line where we are, at this point, inventorying all of our emissions internally. And we have internally talked about setting targets as far as the greenhouse emissions. Some of the services that we're building are very much aligned to green transportation, such as in Europe, UberGREEN that we have launched in a number of cities. So stay tuned, you're going to see some targets coming out from us.

And they will be communicated to investors?

They'll be communicated to investors, to stakeholders, to governments, absolutely. And I do think that this is part of the responsible choice for growth. Investors, of course, they are interested in returns. But I do think that investors, especially in this new world, are interested in returns from responsible capitalism.

The -- does Uber plan to report against the TCFD, the Task Force for the Climate-related Financial Disclosures (sic) [ Task Force on Climate-related Financial Disclosures ]?

So we haven't yet announced any specific plans there. My team is actually having discussions with them. And listen, they're asking the right questions at TCFD. We believe they're asking the right questions. They're looking for information on governments, strategy, risk management, metrics and targets. And we think that this is a good way to think about material ESG issues. So our 2020 ESG report is going to leverage our recommendations of the Sustainable Accounting Standards Board's on a number of issues. And I think the SASB, like TCFD, is a reporting framework that's targeted for investor use. So our Deputy General, Corporate Secretary sits on SASB's adviser group for technology, and we're actively involved in the standards development. So I would consider us working on a parallel track. And I think a lot of the questions that both groups are asking are pretty similar. And I think the goals are going to be pretty similar as well.

Just moving to the social aspect really of ESG, which is a very interesting area. You've spoken of Uber as one of the world's largest platforms for work, but it's also, as you said, hyper local. That's an interesting dynamic there. Just wondered if you could talk very generally about the response of the company to the COVID pandemic and the -- kind of the role of the company there.

Yes, absolutely. I mean the COVID pandemic is obviously global pandemic, but it is -- the response has to be local. And as you know, every single country is affected differently. City by city, every single city is affected differently as well. And we are -- from a global standpoint, every single local team is putting efforts into keeping cities moving safely. We're providing free rides for healthcare workers and free responders, wherever we can. We're donating meals to vulnerable populations. We're finding ways to support small businesses that are struggling. Restaurants, for example, really the delivery has become a life-sustaining part of their business. And we're doing our part, for example, black-owned enterprises and restaurants, giving them free delivery for really the balance of the year as an example of how we're going out there and responding locally in every single market. We want to be there. Again, we're a global technology company. We're in over 10,000 cities. But for global technology companies, we've got our feet on the ground, and that means being there for every single city that we operate in.

The drivers as employees is a -- that debate, where is that at? I'm thinking of AB5, Assembly Bill 5, that whole story and the future really of app-based work. What's -- what does the future hold there?

Well, I think that the crux of the debate, we believe, is about protections and employment protections and social protections. We believe that work should be about work, first of all, that it should be about the person. It used to be that in the old style of work, it was you would join a company and you joined a company for life. Now I think people are, if you join a company, you do a tour of duty, you stay for 3 years, 5 years, 7 years, et cetera. We think that there's another generation of work which is you can work on one project or another project, you can go from types of work, job to job, company to company, if you desire to do so. And if you price flexibility versus, let's say, predictability, sticking with one job or one role. But we think that this flexibility, especially in the U.S. based on the laws that we have here, comes at the cost of a safety net, minimum earnings, healthcare coverage, et cetera. And what we're after is actually this third way, which is someone who wants to -- whether you want to work or don't work, you can define your own hours, if you want to go on vacation, you don't have to ask anyone to go on vacation. But also having the same kind of safety net that comes with a full time job. We think that's the better solution. And there's no reason why there should be, let's say, the haves and the have-nots, that's -- full-time employees have protections. And if you are not a full-time employee, you don't have protections. We're coming out with a very specific framework in California as it relates to AB5, which is the best of both worlds. You retain flexibility, and you also gain the benefits from the social protections that I think now we are concluding as a company and as a society, these are basic human rights.

The company is facing a range of material social factors, passenger safety, competitive behavior, customer privacy, request for data. I understand from law enforcement, it's quite a big issue. How does the company address all of this? And how would we report against that to investors?

Well, we -- ever since I joined the company, actually, safety has been a top priority at the company. It is -- when we put out our annual priorities as a company, we communicate them to the whole company, to all employees, safety has always been one of our top priorities. The definition of safety has changed. The work that we did as it related to safety was very much about women feeling safe with an Uber, whether they're a driver or a rider. We went out there, and we worked with a number of stakeholders to define the norms, how we would measure ourselves. And we believe that you can't get better unless you actually understand and measure yourself and then see how you progress. So we were the first company out there to go out and introduce a fulsome safety measurement system, working with stakeholders and we graded ourselves. And the fact is that while we are getting better -- while we were getting better year-on-year and we continue to get better, we're not where we needed to be. And we're open about it, and we will continue to work with our stakeholders to get better. As it relates to COVID now, the safety concerns are health related, which is completely understandable. And we, again, have led the way, for example, now -- actually before it was safe to get out there, we were running advertisements and saying that don't take an Uber. It's very unusual for a company to actually go out there and say, "Hey, if you're -- if you want to use our product, make sure that you need to travel before you get out of the house", so to speak. We put that front and center, which is highly unusual for a company. Now that cities are opening up again. We are making sure that our drivers are wearing masks. We have technology, selfie technology that actually confirms that they're wearing masks, but they can't take a picture of themselves like this, for example. It is top technology. And again, we have a checklist for riders, again, making sure that everyone is safe as they get out to the streets. We spent -- we committed $30 million to buying masks for people, and cleaning supplies. So we're doing everything that we can to be part of a responsible solution and helping cities get going again.

I want to turn to governance, Dara. So Uber's now a publicly-listed company, just had its first AGM. And you've acknowledged that the company didn't get everything right in the start-up phase, the famous Uber hustle. So what's the overall message to institutional investors about how the company is governed now?

Well, I think that we're putting the Uber hustle to good use now, right? It was -- there's nothing wrong, so to speak, with hustle. You want to be an entrepreneurial company. You want to be an innovative company. You want to keep building, but we make sure that, that hustle is within a culture where our top norm in that culture is we do the right thing. So we're going to hustle to do the right thing. And we have the right governance framework around that hustle and innovation as well. We have an independent Chairman, Ron Sugar, who has come in. He's got decades of leadership experience. And until 2019, was the Chairman and CEO of Northrop Grumman. He's on the Director Board, such as Apple and Chevron, so he understands corporate governance. We have a very high-quality Board that is diverse, comes from all kinds of backgrounds. We have kind of a 1 share, 1 vote structure as well. So we are moving forward to establish the right governance frameworks. The right cultural frameworks where the employees who are working day-to-day understand the direction that they're going in and are free to innovate, but they're innovating in the name of doing the right thing always. And that culture extends to the very top.

What sort of engagement have you had with investors so far? What kind of topics come up?

Well, we have been engaging with our investors, really, even before our IPO. This was -- our going public was a very, very big step. We had to make sure that we understood what investors are looking for as to prepare ourselves for the IPO. And we have continued to communicate with our shareholders because they're one of the most important stakeholders out there. So we've had meetings with, my guess is, about 75% of top 100 shareholders, various members. I've met with them, Nelson -- IR -- even Ron Sugar have participated in engagement because we don't think that institution should only be heard -- their voices should only be heard through IR or through the CFO or CEO, we think having these multiple channels open is incredibly important. And the discussions that we have range from a variety of topics, from growth rate to capital allocation, to the margin structure of the company, to executive compensation, risk management, ESG sustainability and culture as well. I think more and more of our institutions now are interested in the culture transformation that we've gone through and where we believe we stand. And what I would tell them is that the minute you think you're done with culture -- with your cultural transformation, you probably got the wrong culture. So it is always a work in process. And we want to be pretty open about it. We want to be open with all of our stakeholders, starting with our employees and continuing to our shareholders, governments that we work with, local agencies as well. Transparency is something that I believe in, both internally and externally, and you see it in the communications that we have with our institutions.

Just following up, Dara, there was a question at the AGM, I think, from the New York State Retirement Fund (sic) [ New York State Common Retirement Fund ] about a sustainability report. Can you give us an update on where that's at?

Yes. We -- we're absolutely working on it. And we have committed to publishing a sustainability report in 2020. In April, we actually hired our first Head of ESG, and she is now working with a cross-functional team to finalize a formal ESG materiality assessment. And once that's complete, our team's going to focus on developing the narrative, getting data together on the issues that really matter the most to our businesses and stakeholders. So it will be a fulsome report as was our safety report. And between safety reporting, diversity reporting and ESG, we think we're being quite responsible. And we'll be transparent along the range of factors that are important to our stakeholders.

I want to move on to the tax now. There was also a question at the AGM recently about taxation in the, I think, new world reality was the comment following the pandemic, which referenced your base in Amsterdam. Is further scrutiny on tax something that you welcome?

Well, listen, I think scrutiny on tax is appropriate. This is -- I think that every company is responsible to make sure that they are structured the right way for their shareholders, but I do think that scrutiny on those structures as it relates to the societies in which you operate, is perfectly appropriate. And again, we are very much connected to the markets that we work in. Now one of the different things about Uber than other technology companies is that the money flows, the majority of the money flows within Uber stay within a city in which we operate or even the country that we operate, right? Usually, 75%, 80% of the revenue that comes in flows from people living in a city to people staying in that city. So I think the money flows, et cetera, for us are very local. And as a result, I think the scrutiny is perfectly appropriate. We do have an Amsterdam office, that is one of our largest offices. It is our largest office in Europe. There is a great employee base, talent base there, its operations, its strategy, its technology as well. And we're very aware that there's a new global tax environment, and we make sure that we work with all the various bodies and authorities as it relates to that new environment. For example, we've been in discussion with the OECD on a global multilateral tax initiative around Pillar 1 and Pillar 2 taxes. And we support that work that is being undertaken. And we think that essentially, we're going to be on good stead, and that this kind of a look into our structure is appropriate, and we like where we stand.

You've said you won't shy away from making short-term financial sacrifices where you see the long-term benefits. How does that play out when you mention that to investors?

Well, I think that the right kind of investors, there's a -- I think it's a Warren Buffett's saying that you get the kind of investors that you deserve. And with Uber, we are going after a huge market segment, right? We're going after transportation, local transportation of people and things. People with our mobility business and things with Uber Eats and now its expansion into adjacent categories such as essentials and groceries. And I tell you, Uber Eats is, for example, the first example of the kind of long-term thinking and investments that we have been making. When I was out on a road show from IPO, I'll be frank, there were some investors who were saying, "We see a clear path to profitability on the Rides business. Why are you investing as much as you are in Eats?" And we've been investing over $1 billion annually over the past 2 years with Uber Eats to really build that business because the total addressable market is so large. And there were questions about it, and there were certain short-term investors who didn't like the investment short term. But as we have moved forward into this year, our Uber Eats business is one of our fastest-growing segments. It's a terrific diversification and protection, so to speak, as some of these societies have closed down, some of the cities have closed down. And for us, it's another way for us to benefit small businesses and help small businesses survive this incredibly difficult environment. So seeing those long-term bets pay off, we think is a strong consideration and strong evidence that long-term thinking actually does work as long as there's short- and medium-term execution behind it. We'll continue to be a long-term company. I will tell you that you've got to execute in the short and medium term in order to deserve the long term, and we want to keep ourselves accountable for all of that.

I've got to ask you, where is Uber in the -- in 5 years' time?

Oh, god, where are we? We will continue to be global. We will be profitable. And I'll take it back to what you said at the beginning of this conversation. I believe that in 5 years, when people talk about the Uberization of work, they will associate it very much with a positive factor of people being empowered, people having the flexibility to work how they want to, when they want to, where they want to, having the kinds of protections that all of us should be [ affording ].

Dara, thank you so much.

Thank you for having me. Really appreciate it.