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

All right. We're going to get started. Thank you, everybody, for joining us. It's bright and early out here in the West Coast. So I would love the 5:00 a.m. fireside chat, California time. I'm well caffeinated. We're super excited to have Nelson Chai from Uber joining us. This is second year in a row that Uber has attended our conference, and we really appreciate that.

So Nelson, just to kick things off, I thought we'd start with -- and no pressure, by the way, the stock price is at all-time high in advance of this interview right here. So just to kind of level set things. But let's start with the recent ATG news. So obviously, you're deconsolidating some of those losses. But any other merits to why you went with Aurora? And does this open Uber up to partnering with other companies on autonomous? Just kind of walk us through the thought process on that transaction?

Yes, sure. So I guess what I would do is I would say, first of all, this has been an incredible year, I think for all of us. And so hopefully, everybody at home is safe and healthy. And then the good news is it looks like there's some help in sight as vaccines start rolling out. Obviously, an incredible year for our company as well. Those that have followed us in our public path, we are confident about being profitable this year. In -- if you look at our February year-to-date numbers, we are doing quite well. Our Rides business was really operating at a huge clip and then COVID hit. And so we had started a year ago talking about capital allocation models with our investors. You'd seen some activity we had. When COVID hit and our Rides business was adversely impacted, we, as a team, actually have spent a fair amount of time architecting a number of different things we wanted to look at across our business. And I think you've seen a lot of the actions we've taken. You saw, in the second quarter, how we took cost cuts and reduced our fixed cost by about $1 billion on a run rate basis. You saw how we announced shutting down some unprofitable markets in which we are operating. You saw that we took something like our JUMP business, which are bikes and scooters, and we sold them to Lime and have an ongoing interest. We actually bought Postmates, and we closed the deal probably faster than anybody would have anticipated. And so we think that, that was an important move as we think about consolidation and the global chest match on food, which I'm sure you'll get to. And importantly, we also thought through the rest of the business. We made -- we took money on our freight business and think we can get external funding to fund that growth business to get towards profitability. And this is all about how are we going to continue to build our business out. Over time, when I was on the road, 18 months ago, taking Uber public, there are lots of questions about, "Hey, you have a really good rides business, what are all these other bets?" 18 months later, and you're seeing the growth of food delivery now, it's pretty clear now that we have 2 very strong core businesses, our Mobility business, which we believe will rebound as part of the COVID recovery. And our Delivery business, which is largely Uber Eats today, where today, we are the largest food delivery business outside of China. Us as well as DoorDash, had a great IPO offering yesterday. We both gained during this time, and we think we both have momentum. And so we think that as we sit today with these 2 core businesses. And then we had to make decisions on some other businesses, including autonomous. Our team has made really, really good progress over time. What they're trying to solve is extremely difficult. As you think about building the computers to really think through all the things we as drivers just do innately. And as somebody who spent some time out there. And literally, if you looked in every single of these cars we're building, they are little mini-data centers. And so if you thought through the capital and the investment to get towards what they call level 5, which is a car driving the way we would drive, drive it as a driver. If you've heard our commentary over time, which was we did not want to build autonomous cars, that wasn't the ultimate end game. The ultimate end game is to make sure when autonomous cars come, they are on our network. We believe because of the amount of capital involved that -- and we do believe that Ridesharing will be the best first use case when cars are available, that we will be able to work with any autonomous provider to make sure they're on our car. As we thought about it, we wanted to make sure that we were involved in the process, and we think that this deal allows us to do it. Dara has known Chris Urmson for a long period of time. We did talk to some other folks as well. It was a good pairing of the great work that our team has done with where Chris and his team are. It is something we've worked on for a little bit of time as we thought through having an independent autonomous venture. And if you think through being a public company and going through these quarterly calls, if you think through and you look on our P&L in terms of the $400 million to $500 million a year of investment. And the hardest question I would get asked in these kinds of meetings, whether with the analyst or investors, when is it going to get here? The real answer is, I don't know. And I think anybody who's asked me that during an investor call is known that I just don't know. I think that they have a very, very good plan. I think as you heard Chris' commentary, when we announced the deal that they think that we have a team that will be able to compete with the best out there in terms of the path for autonomous. And so we're very optimistic. We're very happy that we're doing this. As you know, Dara is going to join the Board of Aurora. And so his time is valuable. And so we're vested in terms of the development of autonomous. We're just not going to do it on our P&L. And so we think this is actually a great deal. I think if this and then you saw us announce Elevate, we're going to emerge into Joby. This is kind of the end of a lot of the big steps that we had planned for the year. I think if you look at where the company started the year, if you look at the impact that COVID has had on the Rides business globally, I would -- I think that we're really confident about how we're ending the year, how we're walking out of it. Yes, I think you mentioned the stock price. So we're pleased with where the stock price is. We did a convert in the marketplace earlier this week, which was incredible, right? So we used a $53 reference price and the conversion price of $80, and so it was 7.9x oversubscribed. So again, this is -- you've heard people -- me say, but I've -- in my 2 -- almost 2.5 years here, you definitely are feeling like the wind is a little bit behind us now. And we're looking forward to getting to '21. We're looking to get past COVID. Our teams are operating quite well, both Mack and the folks on the mobility side and particularly Pierre on the delivery side of the team. And so we're looking forward to the future. And then the ATG deal will continue. We're a large investor in the deal. We'll continue to be involved in the process, but we think it makes more sense for them to pursue autonomy independently.

That's great. That's a good summary. So just jumping in on Pierre's business on the delivery side. With DoorDash going out yesterday and looking at their financials finally, they're growing about GMV 250% if you strip out some of the deconsolidation you guys did, you're at around 145 or so. So I guess, how can you close that gap? What about your Eats business other than the obvious geography differences explains that gap? And yes...

So look at -- first of all, I would say congratulations to Tony and to Pierre and the team. We know them pretty well. There are a lot of ex Uber alums there. They've done a great job building a really good business. And so it was great to see the public world, and the investor base applaud them. So we -- and if you've listened to myself or Dara, anybody talk, it's been nothing, but they've done a really good job executing the business. There are a couple of things they did that we think were advantaged and certainly advantaged as you think about COVID. So we were a little bit focused early on in terms of building our business off of our Uber Rides platform. So we were focused on logistics and efficiency and speed and tended to be in the bigger cities. They went after selection, and they went into the suburbs. And as you know, a lot of people left the cities like yourself, Ross. And so they probably are in Lake Taha where you are. And so they've obviously taken a little bit of that tailwind, and you've seen that in terms of their growth. If you actually look in the U.S., DoorDash and Uber Eats have been the 2 growers in the U.S. as what we think is we're very happy they have gone public, we're happy that it's increased the attention, if you will, in terms of the public markets and all of our competitors. As you think through the global map, the 3 players that really play globally are us, Just Eat, and Delivery Hero. And then you have Meituan in China, and you have DoorDash in the U.S. and we think over time, and you've heard us talk about it, that, that will continue -- we think there'll continue to be movement, there'll continue to be some consolidation. And we like our positioning based on what we're doing, and you've heard us during some of the calls, specific to them, we think that they've obviously taken advantage as more people have moved to the suburbs. They've taken advantage of the fact that I live in the suburbs, and my wife and I would never order food delivery, and now people like us in the suburbs of New York are doing it. Our sense, we believe, over time, the long-term tailwinds for all of us is the fact that if Ross you and I are opening a restaurant today, we wouldn't just think about the in dining room space, we wouldn't just think about people picking up, you'd have to think about delivery to maximize it. And we might even think about where the location was to have outdoor dining. And so I think those things are going to stay. I guess the real question for us and for them and the ones that people ask is what happens after the vaccine hits? How much growth did you pull forward? And what does that mean? And so we think fundamentally that people will -- who try our service or theirs stay. And so we're very bullish long term. And so again, we have a lot of respect for what they've done. We're very confident in terms of our plan and what we're doing. And I think you've met Pierre and the team and they're doing a really good job now. I'll let you comment on the stock, that's what you do. But as a company, as a competitor, we have a lot of respect for what they've done. And we say well done in terms of getting out. We do welcome the fact that they will be public now. And I think that puts a little bit of transparency on a lot of different things. And as you see about a lot of these tech companies going public, we were differentiated in terms of the fact that our governance is a little different than many of them. Airbnb is going, DoorDash is going, and they still have founder control. We'll see over time as they continue to evolve. They're now a big business and a leader in a very big category in the U.S. and that comes with different responsibilities. And so as they continue to build out from a corporate perspective, we welcome them, and we're glad they're actually public. And so I think that's great.

Now that Postmates is closed and given where your stock, the rest of the food delivery stocks are trading, it looks like you guys picked that one up on a pretty nice bargain compared to those multiples. So -- and you put out the 8-K showing that December at least is about an 8% to 10% bump in gross bookings to your Eats business. So just how do we think about that in 2021? Is that about the right contribution to think about? And you've talked about $200 million in synergies, I think Postmates cost structure is much, much larger than that. So like what's kind of the plan now that we're closed in terms of integrating and could the synergies be potentially greater than that?

Yes. So as I mentioned earlier, so we are very pleased to get through the regulatory process and happy to welcome Postmates onto the Uber team. As you know, we'll continue to operate the app. As you know, Ross, particularly in some parts of the country like Los Angeles, they're a beloved brand. And so there are some things that Bastian and the team have done there that we can learn from. And so I think it's important as you think through how you continue to navigate to just think that you can learn from others, and so they did a very good job in terms of their brand positioning in certain marketplaces. They did a good job in courier efficiency. We'll continue to learn from it, but we will use kind of our back-end on the technology side. So when you talk about synergies, we're pretty confident we'll be able to achieve the synergies and likely overachieve. You guys and investors have heard me before, I mean, I don't say things that we don't deliver against. And so we'll deliver against the synergies. And so we're less concerned about that. We want to make sure that we are able to onboard and integrate the business from an operational perspective. I think that's most important. And again, we think that over time, there'll be 2 clear winners in most of these big markets because they're big markets, as you know. We think it will be us and DoorDash in the U.S. and just like it will be us and somebody else in the other markets we're in as well. And so we're excited about the path forward with the Postmates. In terms of what people pay or don't pay, I mean, over time, I think there are points in time when people make those assessments, but I think over time, hopefully, our stock will continue to grow, and it will look like a really good move we made in terms of playing the broader chessboard. And hopefully, we made good moves over time. So...

As we think about just 2021 and you -- all you guys are benefiting from COVID, it's going to kind of hit the tougher comp as we move through next year, as the reopening happens. And then we just look at like level of competition? I think one thing we heard often on the DoorDash Roadshow was, what is Uber and Postmates combined going to do in '21? What's Just Eat and Grub combined going to do in '21? So do you guys view this as kind of like, all right, you got Miami, you've got the Southwest United States kind of make your business more efficient? Or is it time to like go after other markets where DoorDash might have been sitting there alone?

So look, I don't know what Tony and Prabir were saying on the road show, but I think both of us would agree that we're still early innings in terms of where we are, in terms of having food delivered and broader commerce deliver. I think we're very well situated at Uber in terms of take advantage of this over time. So I think the pie will continue to grow. Do I think we will gain competitively? Yes, I do. And so, a, I think as some people move back into the cities, I assume you're going to leave Taho at some point and come back to the real world. We're pretty big in the cities. And then additionally, we'll continue to edge out. And so I just think that you'll see more competition over time. We have a lot of respect for both those guys as well as the Grub folks, so we'll continue to compete well. But we're pretty confident in our ability to do so. The team is working quite well. We feel really good going into next year. We had a lot of execution that happened in 2020. We think we did a really good job of it, and as we move into next year, we think we will. There are questions about what happens in the world recovery? So does it mean that we're going to be able to grow the 130-plus percent that you'd mentioned? Certainly, that will come down a little bit because you start going over comps. But don't forget, we have a large Rides business that has really been impacted by COVID and that is coming on. And so we know that. And so we actually like our positioning on both fronts. And then longer term, once things normalize, there are 2 big growing categories where we're leading or leader globally. And so again, we certainly like the way the company is positioned today.

Yes. I agree with that. And one more before we go to Rides, one thing that came up in light of the S-1 for DoorDash was they've had a lot of success with the subscription product. And you guys have talked about your subscription offering and how you could tie Eats and Rides and even the micromobility together and do something that's really differentiated in the category. So where are we on that? And what's the vision for your subscription offering?

Well, so our Eats Pass and Uber Pass collectively are live in about 7 countries currently. We have a lot of new launches planned. In the U.S., paid members represent already, and again, as -- like you said, I mean, there's something newer for us, represent 10% to 15% of our delivery map fees and nearly 20% of delivery GB. So we've seen a lot of increase in our order frequency and double-digit into the basket size of pass members. We do believe, over time, we'll be able to leverage people who are either riders or eaters over time. And so again, we are very optimistic about our path forward. And I look, my kids, they subscribe to Netflix and Amazon Prime and this and that. And so when you turn on our Smart TV, it's like, who's paying for all this stuff? And so my sense is that you'll see people have passes on us and them, a lot of the eaters and then they'll leverage.

Got it. Okay. So if we shift over to the Mobility side. Lyft recently put out their November update, volumes are down 50 for them, a little bit more of a West Coast SKU for their business than yours. But I guess, just, where are we? Is that sound about right in terms of where we're at today? And as we look forward into the quarters throughout '21, I know you're not going to talk about guidance here or anything, but the business when it was in the growth phase with kind of compound at single digit, high single-digit quarter-on-quarter growth for a number of years, as this kind of reopening and vaccination process starts to happen, is that the kind of cadence we should think about starting in like the month throughout 2Q and 3Q next year? Any color there?

Yes. So look, I think we're going to get some lift, if you will, L-I-F-T, as the vaccine rolls out. And so we're hopeful that the FDA passes it, for instance, in the U.S. So people can start getting the vaccine, I heard in some cases, maybe even this weekend. I think in terms of the guidance, I think that's largely correct. What we've seen around the world is, in certain countries, in certain regions of the world like in Asia, where things have come back and continue to rebound, places like Latin America that have had second waves, but that business continues to rebound. And places like -- there are some places in Brazil where actually we're up year-over-year. I think in Europe, we are seeing good rebound, but with the second wave, you should have expect as more lockdowns hit in, that obviously impacted us. And then the U.S. is a little bit of a tale of different coasts because the West Coast has really been slow to recover. Places like New York has actually done a little bit -- has recovered a little quicker. Part of that is just a little bit of substitution, we think, with mass transit, as you think about how people are getting around. But again, I think it continues to be slower. What it means for us is, as you know, because we're the global leader in the 60-plus countries where we operate today. We have good diversity of where we are. We also have -- we actually have a good signal. So we can see what's going on. And so we're confident when they come back, we'll be able to grow at the types of levels you talked about. I think what it means for us is there might be some choppiness as you look at our numbers because if the U.S. is a little slower to recover and other parts of the world are faster, it may impact things like our take rates in suburbs because they all differ. In the U.S., we have a higher take rate than in other parts of the world. But short of that, I mean, we're looking forward to the business coming back. Our sense of it is, it'll take a little bit more time because even if vaccines are rolled out during the first quarter, it's not clear when people are going back to work, right? And so I think that at least through the first 2 quarters, they'll be somewhat muted. And so what we've seen today is that even in places where we're getting more recovery, the definition of commute has changed. So in the past, it might have been a 2-hour window in the morning, you're seeing rides spread out across the course of the day. And then obviously, the big question that people ask is what about airport travel, which I think Ross is about 15% of our gross bookings pre COVID, I think that will take a little bit more time. I think there's more leisure travel that will probably come back first. I think business travel will take a little bit more time. And it's just like if you and I wanted to meet today, neither one of us can host the other in their office. And so I think it's going to be a little bit of time before we start seeing that. And then the real question over time is how much has COVID changed longer-term work trends? And what I mean by that is, are people going to only go to the office 4 days a week versus 5? Or are people going to not do that extra meeting or not fly out for the one meeting? We'll see over time. But again, we're -- we think we're pretty well positioned to capture the COVID recovery.

Got it. Okay. I just wanted to bounce around a little bit and hit on Prop 22 and cost. You guys have said like modest flow through, you're going to pass on 5% price increases wherever appropriate. And I think we've looked at driver earnings across a lot of different states and cities, and you're already pretty well above minimum wage thresholds in a lot of these places. But I guess, if you look at Prop 22 impact just for California, how do you assess the Rideshare business versus Mobility versus Delivery, DoorDash pointed out in their S-1 that yes, Prop 22 is going to be a pretty material uptick for them in terms of cost. And I guess, that could be because of tip netting or other issues like that. But how do you see the impact on both sides of the fence for your business?

Well, so first of all, I think more -- the most important point on Prop 22 is just the referendum on our work model. And as you know, as leader for all of the other gig companies that use contractors, we've been upfront about this third wave, which is the independent contractor plus model that we do in Europe today where we can provide some benefits and other things. Yes, in our Mobility business, you've heard us talk in the past about a roughly 5% increase. On Delivery, it could be a little bit more as a percentage. It just has to do with the way the math works out. But we do think it is right over time, and it's something that Dara has been upfront, putting editorial out, I think, in August. And so we've been upfront doing it. Importantly, it really gives us a platform to go work with others. Because, as you know, the laws are state by state. And there's no national law about being able to provide independent contractors benefits. And so we are hoping to continue to leverage this more broadly in terms of making sure that there are earner protections out there because we think it's important as you think about all of our businesses, and more importantly, the earners.

Got it. Okay. I think we're out of time. So we're going to stop there just to keep you on time with your various meetings that you've got today. But again, Nelson, thanks a lot for attending. You guys have done a great job, and you've always been good at Barclays. So we'd love to have you back. And on behalf of my team and everybody at Barclays just want to thank Uber for coming this year.

Thank you, everybody. Ross, thank you very much. Stay safe. Hope you have a nice holiday season. Take care.

Sure. Bye.