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

All right. Good morning. Thanks, everybody, for joining. My name is Lloyd Walmsley. I'm the Internet analyst here at UBS. And we are thrilled to be hosting a fireside chat with Dara Khosrowshahi, CEO of Uber. I don't think Dara needs much of an introduction. We all have known him over the years. And Dara it's great to have you. Thanks for doing this.

You're making me feel old Lloyd, but thank you. Happy to do it.

Well, great. Well, look, let's kick off with what seems to be one of the top questions on every Uber investors' mind as we move past this profitability milestone. How do you and Nelson think about growth versus profitability? There is some perception of a shift in strategy and with an increased debate, post the last earnings call, maybe you can set the record straight on whether the individual segments will run profitably going forward? Or where you could dip back into losses for any of the segments, post profitability?

Yes. I think that there's been -- while there's been a perception, maybe a shift, maybe there's just been a difference in terms of what we talk about, right? Our getting to profitability is a point along a path for us, and it certainly isn't the end. And Nelson and my goal is to build a company that can compound top line rates at very, very attractive rates and continue to improve margins over a period of time. You've seen those long-term compounders and margin increasers, and the greats of the world, the Googles, the Facebooks, the Microsofts of the world, and we aspire for no less. I think the good news for us is that the -- this incredibly difficult period that we've gone through as it relates to the virus, et cetera, has been difficult for a lot of companies, but it has also set us up and allowed us to strategically move the business to be much tighter on costs, much more efficient. And that has allowed us to get to profitability, but the same effects are going to allow us going forward, not just to grow but to grow profitably. And if you heard Nelson and I talk about growth, part of it is we're now thinking about growth, which is great. But part of it is also, while we have been shifting to -- more profitably as a company, we've also been quietly in the background, investing in growth levers, new geographies, hailables, grocery, new verticals for a delivery business, et cetera, even as the business has gone more profitable. So when we look forward to 2022, and we're finalizing our plans there, as it relates to the mobility business, we talked about kind of a long-term margins for the mobility business, about 10% of gross bookings. We're going to update those margins in February. But as we look forward to 2022, we think that on an incremental basis, we will be able to grow at or around or long-term margins as it relates to mobility, even as we invest in some of these new areas, even as we invest in hailables and low-cost products, et cetera, because that's just part of our portfolio. And as it relates to a delivery business, delivery outside of grocery has already gone into a profitable space. We probably delivered incremental margins year-on-year in delivery, a little bit below our long-term margins that we put forward in delivery, which is about 5% of gross bookings. And I think looking ahead to 2022, we think we can not only invest in, again, these growth areas, grocery, new verticals, direct, et cetera, but also deliver incremental margins as it relates to delivery at or above our long-term margins. And I think what's going on there is that there are some really powerful profit drivers in our delivery business that we can reinvest in growth and deliver bottom line margins, too, and a couple that I will go through and there are kind of 4 big ones. One is as the market densifies, as the business gets bigger, the market gets denser, we get smarter, and we're really focusing on marketplace technology as it relates to routing and pricing and matching on the delivery side. We're absolutely the best in the world in mobility, and we're really turning a bunch of those ML engineers and data scientists over to augment what was already a great delivery team. We're able to reduce cost per transaction, which essentially gets net revenue margins up and it's essentially for free. It's faster delivery times, more efficient carriers, et cetera. So as the network densifies, cost per transaction comes down. Second factor for us is our ad business is well ahead of plans, close to 100% profit margins in terms of incremental margins coming from an ad business. That is quite profitable and growing its scale now and it's going to continue to grow into next year. The third is, as we get more and more cohorts of repeat customers in our delivery business, and as a percentage, I'd say, of repeat customers versus new customers gets higher, repeat customers are just structurally more profitable, especially repeat customers who are members and a higher percentage of our repeat customers are our members. So there's a structural profitability that comes into the portfolio as the business grows. And then the fourth that I've talked about a couple of times is essentially the free low-cost traffic that comes from our mobility business to our delivery business. This is the power of the platform. That is only getting bigger as the mobility business comes back, and again, is a very, very large and strategic low-cost channel that's available to us that isn't available to any of the competitors. So all 4 of those effects are compounding to drive structural profit growth that really doesn't come with a tradeoff, there's no trade-off of -- if my network gets denser and more efficient, there's no trade-off there. It's like building the ads business, there's no real trade-off there as cohorts get mature, there's no trade-off there. And the free traffic coming from mobility is not net cannibalistic, so there's no trade-off there. Those allow me to invest in the business aggressively in grocery, and they allow me improved margins. And at the same time, if you look at both our mobility and delivery business from a category position from a category position basis like in the U.S., we're in better stead than we have been for years. So that puts us in a pretty confident spot going forward, certainly as it relates to margin, while being able to lean into growth as well.

Wow, that's great to hear. So yes, since April, we've seen kind of the share price impacted by some combination of investor apathy and a big selling shareholder, yet you bought stock yourself. So what do you think investors are misunderstanding or overlooking?

Well, I -- you talked about my being around for a while, so maybe I'm old fashioned, but I believe in putting your money where your mouth is. And I think as a company operationally, we've just never been in a better position as a company. A little perspective for me was I was thinking about our IPO. We IPO-ed at $45 a share, our stock is probably close to 20% below those levels. And we're still -- we're not fully recovered from the pandemic, right? While -- at the same time, last week was our best week ever in terms of overall gross bookings as a company. Our run rate is now close to 40% above where it was at our IPO. Mobility had its best week in terms of COVID recovery this last week. Delivery had its best week as well. So all of the trends are actually quite positive. And then when you look at -- our top line is 40% bigger, our delivery business is 3.5x larger than it was at IPO. So it's gone from what was a promise to a business that is truly a scale global business as well. And I think our run rate EBITDA losses when we went IPO were about $2 billion, and obviously, we've hit the profitability mark and we're in a position to drive incremental margins at or around our long-term model. So when I put it all together, it's a pretty good set of facts. And the market moves aside one way or the other, short term and/or environmental [ moves ], I think that there's zero debate that the business has been significantly, significantly better positioned than it was at IPO. And so I decided to put my money where our mouth is, and it was the best place that I could find for an investment, so I went ahead.

All right. It's a great signal. So Uber holds significant stakes in nonstrategic assets. We've heard some investors make the case that the longer you hold the stakes, you're implicitly making the case that they're more attractive than using freed up capital to buy Uber stock already at a 15% discount where you were purchasing it. How do you and the Board think about active balance sheet management setting aside the broader questions of ongoing capital return?

Yes. So I think capital -- the management -- capital management is a part -- is a core part of any management's job. And Nelson and I intend to do it well. I do think that you should keep in mind that most of our stakes have gone public pretty recently, most of those public offerings have lockups attached to them. So there is no implicit statement if we are locked up. I think over the long term, you're absolutely correct, which is we are going to ascertain the value of our equity stakes. Some of them, I think we will hold for strategic value. Many of them, for example, is our Didi stake. We don't believe it's strategic, they're a competitor. China is a pretty difficult environment with very little transparency. So those kinds of stakes will look to monetize smartly over a period of time. I think the good news for us is, we're at a point where we're profitable, we'll get to free cash flow generation. We don't need to be in a hurry, but there's no question in my mind that those stakes aren't reflecting, let's say, their true value inside our balance sheet and we will look to have them reflect their true value, whether it's monetizing them or monetizing and buying back shares or some other iteration there. Nelson is a CFO who has deep, deep Wall Street experience, and he's quite connected, but we'll look to monetize value there. Our interests there are aligned with our shareholders.

So assuming mobility recovers as expected and delivery can kind of fund itself internally, you will soon be in a position of substantial free cash flow generation. So at that point, what is the capital allocation framework in that free cash flow generation mode? And how should investors view M&A versus return of capital?

Yes. I think, first of all, we would -- we want to make sure that from a balance sheet standpoint and from a free cash flow generation standpoint, we're always in a very, very safe spot. During the -- I remember, like early weeks, post-pandemic, we were able to confidently communicate to our employees first and our investors that, "Hey, we're going to be fine," like we can take an 80% down market as it relates to mobility, and we're going to be fine because we have a really strong balance sheet. What's different now is the delivery business is as big as the mobility business. So even in that situation, which I don't think will be a reality, but the business is much more balanced and the delivery business is driving incremental margins. So like we fundamentally look different now. We're much more of an all-weather company. That said, we want to make sure we have a very strong balance sheet and liquidity first. Then I think as far as free cash flow generation, we will look to maximize long-term -- kind of long-term investor returns. Anytime we pay cash for an acquisition, we compare that to paying cash for a company that we know very well, which is called Uber. And right now, I think Uber is deeply undervalued. That's a personal belief, and you saw me act on that personal belief. So I think the hurdle rate for any acquisition, whether in stock or in cash, because I can always use my cash to buy back my stock, at this point, would have to be very, very high. We are always looking in the market for opportunities. But right now, the hurdle is unusually high. And therefore, when I look ahead to 2022, all things being equal, I think there'll be less activity going forward than there was, let's say, in the past couple of years.

So yes, I wanted to talk a little bit about the kind of the culture and morale. One of the things we hear from Uber skeptics is that the pace of innovation has slowed, that it's overly reliant on M&A. There's this market perception that Uber is being outexecuted by focused competitors. How do you respond?

Well, I think I always -- I prefer facts over narratives. And so I tend to respond with the facts. I think a couple of things to keep in perspective. First of all, I don't think there has been any company out there, I'm happy to be misquoted or be wrong, that has organically built a business that is now literally larger than the base business that it came in on, right? Our mobility business, when I was -- when I first came in, was 85%, 90% of our gross bookings. Our delivery business, we bought Postmates, but 90% of our delivery gross bookings has been built organically and our delivery business is literally bigger than our mobility business, all having built -- being built organically. You have like Facebooks of the world make great acquisitions like Instagram or WhatsApp. So those have been acquisitions, same thing. Google, YouTube has been a huge success, but those have been acquisitions. This has been entirely organically. And I haven't seen any of our competitors in our space build actually a leader -- and remember, we are the biggest delivery company outside of China -- build a leader in any of the, let's say, newer fields that we're in. We've actually done it. Now we're doing it again with Uber Freight. So we're going to do it a second time. We're very well positioned to do it a second time. And by the way, we're really well positioned to deal with new verticals and grocery as well. So until I see someone actually build organically the way we built organically, I'm going to view statements like that as just narrative looking for a cause, I guess, and not based on any kind of facts. When you look at M&A, again, I'd just like point you to the numbers. I think DoorDash recently announced an $8 billion acquisition and a single acquisition in the delivery space of what's a relatively small player, I think their run rate was about 2.5x in a bunch of small countries. We spent all of our acquisitions in the mobility and delivery space, have been about $8 billion. And we brought in Careem, which is a leader in the Middle East, which has a population as big as all of Southeast Asia. We brought in Postmates, which is -- was a really strategic deal in the U.S. and gets us a really strong position in the West Coast as it relates to U.S., which is the biggest and most profitable market in the world. And we brought on Cornershop, which is essentially the Instacart of Latin America, gets us a great team. That team is now leading grocery, et cetera, and it's going to be the anchor for our building, what we think is going to be the biggest grocery business in the world as well. So if we're guilty, we're guilty of going in early, we're guilty of going in big and strategic, and I'll take that anytime. But I do think that we've organically built in a way that no one else has built. I think we've been strategic about our deals. And I think going forward, we now have a footprint both in terms of geography and in terms of strategy that we're very happy and that we can continue to build organically. And then the last thing I would tell you as far as execution goes, our CP in the U.S. is higher than it's been probably in the last 3 years. Our CP in mobility, in delivery, we're gaining CP against our competitor, and we are adding margin and we are investing in new businesses as well. So I think the execution on the ground is something that we can be proud of, but never satisfied with.

Absolutely. So I wanted to ask a little bit of questions on regulation before we dive into the segments. Can you lay out for us what you expect the path forward in the EU to look like, post the proposal that came out last week? And how should we think about incremental costs coming out of this regulation?

Yes. So I think that as far as the EU goes, this is the beginning of essentially a process where the EU consults with the states, and there's a ton of dialogue, and we've already had dialogue with the EU before anything is finalized, and these regulations usually are finalized on a state-by-state level. I think the good news from our standpoint is that our delivery partners, whether they're couriers, drivers, et cetera, overwhelmingly want to be ICs. They -- everyone knows about the labor shortage all over the world. They can get a job if they want to get a job, but they want a job with flexibility, earnings opportunities with flexibility. And we have been quite willing to say where we want -- we are championing the IC+ model. This looks a lot like the worker model as it relates in the U.K., for example, where you retain flexibility, but then you have certain protections, whether they could be minimum earnings or they could be other benefits, pension benefits, et cetera. I think that, that model in the end is going to win. And I think that dialogue with regulators will make that apparent on the ground. And this is a long process, multiyear process, where on the ground, you talk to regulators. And ultimately, it's about what couriers and drivers want, couriers and drivers want flexibility. Now that said, I do think that to the extent that models flip over, let's say, to an employee model. So for example, in Spain, Spain has a fleet employment model where we work through fleet partners who employ drivers, we can still make that business work, Spain business is up close to 40% on a year-on-year basis and Spain EBITDA margins are very close to our overall long-term margins as well. So I think for us, the fight for IC+, we can essentially, as an entity, we can make any model work. We really can because our marketplace is incredibly flexible. There's a lot of demand for our technology, our service, our brand, our safety, our reliability. So any model can work economically for us. This is about what our drivers want and what couriers want, and they want flexibility. So we would very much prefer it because they prefer it. But ultimately, even with Spain, we've proven that a fleet employment model works, and it not only works, it grows and it grows at margins that are close to our long-term margins.

Yes. That makes sense. And my small sample size of one, doing some driving for Uber, it was so easy, it was lucrative. I could see how it would apply to a lot of people on a temporary basis who would want that independence. It really made sense to me taking a...

The majority of drivers and couriers, they're not doing this full time. They're doing it as a supplement. And every single one of them has a different story. Like I've talked to one who is caring for a grandma, who is caring for her daughter. I've talked to a gentleman who's caring for his dad or a student or like Randy Clark, who tweets all the time and he's getting his degree, et cetera. Everyone has a different story. But what's common is they want and need flexibility as it relates to earning and gig work has that benefit. Earnings are really, really good now. And if countries believe that we should also include benefits like Prop 22 benefits, we're willing to lean in there because ultimately, it will attract more drivers and couriers to gig work, which we think is good.

Yes. And then looking at the U.K., how does the recent U.K. High Court decision impact you? Does it change the competitive landscape for you in the U.K. or the city of London? And then where are you guys in the HMRC process on that?

Yes, sure. In terms of the U.K., the most important thing is the High Court ruling very clearly impacts the whole industry, not just Uber, right? So every operator in London is now going to need to make the changes that the Court made clear that they need to make. We are doing the same and we will abide by the ruling over as quickly as possible. And we think the great thing is it levels the playing field, and we are very, very confident in our competitive position in a level playing field.

Got it. So wanted to jump more into the platform and the business. You've talked at length about how the subscription could be a long-term growth driver. What are you seeing on the subscription side? And how should we think about that offering growing?

Yes. I think as it relates to the platform, I do want to talk a little bit about the platform strategically, and that subscription isn't the only thing, right? So with platform, the way we think about platform is customer acquisition, customer retention and cost in general. Those are the 3 big sections as it relates to platform. On the customer acquisition side, we've talked about this, but I'll howl at it again, which is the platform allowed us -- allows us to acquire customers at much lower rates, and we're now acquiring -- our Uber Eats business is acquiring customers, first-time eaters and multiples of the number of customers that we bring in from Google and Facebook and Snapchat and Pinterest, et cetera, multiples of the numbers of those customers at far lower cost. And it's a structural advantage that our each business has that no other delivery business in the world has, whether they're a local competitor or a global competitor. And now our Eats business is now starting to move traffic to our Rides business. And we're running the same playbook as it relates to Uber Eats for grocery and new verticals as well. We know how to do it. It takes iteration, like it was -- this is not something that you launch in day 1. It has taken significant iteration and tuning to -- in order to not cannibalize your base business, but then provide this very big scale kind of free traffic generator for the growth there. And that's learnings that we're going to take to other verticals as well. The same applies for CRM channels, et cetera. So it's not just the app surfaces but it's also CRM channels that we're using to communicate to our users, cross-promote, et cetera, and [ share ] users. That's about acquisition. That's a very significant structural advantage that we have over other players. On the retention front, what we found is that users who use multiple services tend to retain at longer rates. We want to lock in that retention, essentially with the membership product. Over 20% of our either gross bookings come from members, member frequency in terms of buying is 50-plus percent higher, and that number is increasing over nonmembers, so you start driving lock-in and frequency. Basket sizes are 10% higher. So there's an early cost to bringing in a member because of the benefits, but then the retention and lifetime value is significant. And our membership, we think has better content than any other membership program with now Uber One, which includes discounts as it relates to the mobility business as well. It's very early, but we're seeing really good signal as it relates to Uber One, because people are like, "Oh, my god, this is awesome." And the timing is perfect because the world is finally opening up again as well. And then on the cost side, 75% of our engineers work on common components, and a common area now where we are making really, really good progress, people talk about super-app as it relates to riders, we are building the super-app now as it relates to earners. And if you look at our earner onboarding flow, it's gone from what you would say would match competitors, which is do you want to drive someone, do you want to deliver, do you want to be a shopper, et cetera, now to what we call modular onboarding, which is, start giving us your information, identity, license, et cetera, vehicle information, do you have a bike, do you have a car, et cetera. And as you give us more information, we will qualify you for jobs in essentially a serial manner, which usually means you'll be able to deliver for Eats first, and then you will, as we qualify you more in terms of background checks and other factors, insurance, et cetera, we will qualify you to drive as well. That has very significantly increased driver onboarding success and courier onboarding success, which has allowed us to be able to lean into supply in a way that doesn't penalize margins because we're able to bring in supply at a much stronger flow than we ever had before. So membership is a part of our platform strategy. But I do want to make sure that you realize that the platform strategy is much, much bigger than membership.

Yes. So we've seen companies like Didi and Grab expand into finance and payments as part of their super-app strategy. Do you think there's an appetite for that outside of Asia? Where do you see some opportunity?

So I do think that we see opportunity on the payments front, I'd say, first as it's earner facing. Well, we're at, call it, a $100 billion run rate in terms of bookings, the vast majority of those dollars are going to go be paid to earners. And essentially, those dollars are in the app, the earner app. And we believe that we can offer, I think, through partners because there's plenty of fintech companies out there that are building all kinds of wonderful functionality, more benefits for earners as it relates to how far their dollars can go. Right now, earnings, let's say, revenue for earners are quite high, which is great. But we want -- we actually want to improve their profit statement. Can they get discounts on gas, can they get discounts, can they have a break and get discounts on coffee, can they get discounts on car repair, can we give them the ability to go from a combustion car to an electric car, can we give them discounts on leases as we are with the Hertz, Tesla partnership, et cetera. Really for us, financial services are going to be aimed at deepening our relationship with earners and also allowing earners to not just have a really great revenue statement, but improve their P&L through discounts and alliances that we're building because we bring so much volume to these various service providers. I think on the consumer side, consumer fintech, et cetera, I don't see us doing that near term. I think it's a really interesting opportunity. But I think great companies say no to really good opportunities just because there are better opportunities out there. And for now, I think consumer fintech is going to wait. It's really [ earner ] fintech designed to drive loyalty and designed to drive their P&L that we're going to lean into.

So hopping into mobility, starting with some near-term questions, markets have been pretty volatile on the Omicron concerns. What sort of impact have you all seen across your business from that?

So we've seen some local impacts. But from a global basis, the -- our overall mobility business continues to get closer to pre-pandemic levels. We're starting to inch up to call it like the 90% mark. We're not quite there. Last week was our best week post pandemic as it relates to mobility. And I think the good news is, again, we are a global business, that comes with some complexity, but it really means that we have a very, very diversified portfolio. And if you step back and think is the world getting better at handling COVID, is the world getting better at -- even in an Omicron situation, I think the answer is yes. The science that we have, the meds that we have, et cetera, are pretty remarkable. So if the world is getting better, Uber is going to get better. And then I would again point to the delivery business as well. The good news is the mobility business is getting better, even in what is a variable environment right now or uncertain environment. Our mobility business continues to get better, but also our delivery business is a scale and is driving margins at scale, too. So I think from a portfolio standpoint, we're very, very comfortable with where we stand.

So on the third quarter call, you mentioned that in the U.S. for 4Q, you'll see take rate improvements due to the tapering off of driver incentives. But you also said we'll see take rate dilution at the total company level as you lean into supply internationally on top of kind of the seasonally lower 4Q take rate. Do you still see this is the case? Or does Omicron have to kind of result in more [ incentives ]?

Yes, I think we're pretty late in the quarter. And again, based on the trends that we've seen were constructive as it relates to margins in general. And if anything, we talked about the volumes, the volume trends are quite constructive. And I think if anything, as it relates to our Q4 guidance, we're pretty confident that we're going to come in, in kind of the top half of that guidance versus in the middle in terms of all the activity that we've taken and in terms of all the trends that we're seeing.

So looking beyond 4Q, there's been a lot of commentary on mobility being even more profitable post-pandemic at a lower run rate on gross bookings versus pre-pandemic. How should we think of margins going forward, given Nelson's recent comment on tilting back to growth, some noise around driver supply and kind of this risk that regulatory overhang could structurally increase cost?

Yes. I think that the point that I will make is, first of all, regulations have been a part of our business before I joined Uber, right? It's been a constant as it relates to the business. We have, I think, a lot of the regulatory changes have been constructive. We view Prop 22, constructive, huge win for us. And obviously, we're hoping that kind of a driver forward regulation expands in the U.S., drivers love Prop 22. Workers in the U.K. is similar. It's an IC+ kind of model. And we have adjusted our model essentially and improved margins, even with these kinds of regulatory changes. So I don't see that changing going forward. And I think I mentioned at the beginning of the call that we think actually incremental margins as it relates to the mobility business in '22 are going to be closer to our long-term growth rate, which if you do a bit of math means that there's upside on the margin going forward. I think the point that I made and Nelson had made is we're also able to lean into growth drivers. And these include newer countries, where we continue to penetrate into. This is Germany and Spain and hopefully, Italy or Argentina, Turkey, et cetera, Japan, South Korea. Those are growth drivers that we're leading in -- that we're going to lean into. Hailables is another growth driver, wiring up the taxis of the world, low cost and shared is another growth driver. And then some newer products like reserve, et cetera, or more segmentation drivers that actually deliver higher service levels and consumer satisfaction but are positive on a margin basis that then we can deliver to the bottom line. So I think the tilt to growth is we're finally past -- almost past the coronavirus, and we're looking not only to drive incremental margins but also incremental growth. And we have been investing in these areas. Again, another one I'd call is low-cost and high-capacity vehicles, we've been working on high-capacity vehicles for the last 3 to 4 years and are looking forward for investors to see some of that as we highlight not just profits but long-term growth.

How important is it to bring prices to the consumer back down to pre-pandemic levels, even if not all the way down, given cost inflation with like cars, gas? Are there use cases that aren't addressable at current price points? And what is the revenue maximizing trade-off between volume and price?

Yes. So I think that -- first of all, the most important factor that we're looking at is service levels and price. And a lot of consumers, actually there's a very interesting trade-off between time and price that they make, and there's a different trade-off and time and price depending on individuals. But generally, surge levels across the country are now coming down. They're significantly lower than they were previously. So from that standpoint, unexpected higher prices is getting much better as supply continues to improve. ETAs nationwide are now down below the magic 5-minute mark now, which is great. We're going to keep driving them lower. In New York, they are like less than 3 minutes, for example, as well. So ETAs are coming down as well. That said, there's no question we're in an inflationary environment. I'd say the inflationary environment is true of transportation, right? It's like you can't buy cars, you can't buy used cars, gas is more expensive, et cetera. So I do think the base price of anything transportation is going to increase and that includes Uber. And what we've seen is there are still lots and lots of demand for Uber because of the convenience, because of the safety, because of our always-on nature, et cetera. At the same time, I do think it's important for us to invest in lower cost product, which is why we have brought back shared rides, we continue to invest in two-wheelers and three-wheelers and we're looking to improve our supply in terms of busy wiring up every single taxi in the world as well. So anyone can get from point A to point B, including transit, including e-scooters, et cetera. Most of those growth areas, whether scooters or transit or hailables or share or high-capacity vehicles tend to be structurally lower cost than, call it, mainline UberX. We're working on both. Got to make sure surge comes down, got to make sure ETAs come down as it relates to X, it will move up with inflation and consumers are willing to pay. And by the way, higher prices generally are structurally better for our profit margins, even though we're actively making sure that prices are no higher than they should be. And then we're working on strategic portfolio of strategic lower-priced product, I think in a way that at least I don't see any of our competitors doing. So I think we should have an advantage there.

Can all of these new products drive growth faster, say, in the second half of '22 and in '23? Can they -- can you grow faster than kind of where bookings were growing pre-pandemic, I think it was 24% [ ex FX ]?

Yes. I think these -- the new products are growing at multiples, those kinds of rates. Another one that I will give an example for that is a very large factor for us is enterprise, U4B. We have a structural advantage in that we can sell both food services and mobility services now into enterprises, unique. Some enterprises, if employees want to stay home, want to get them free lunches, et cetera, we can do that for you. And again, it's one account, and it's Uber, it's one identity, one payment system, et cetera. So it's incredibly, incredibly convenient. And we are looking to increase our enterprise business, for example, multiples of where it is now over the next couple of years. So hailables, taxis, enterprise, low cost, these are all efforts that are going to grow 50-plus percent over the next couple of years as we first innovate into them and then lean into them as well.

So shifting over to the delivery side, with so much capital flowing into fast fulfillment, grocery, convenience, the competitive landscape is changing pretty quickly. How long do you think it takes for competitive intensity to normalize? And what gives Uber the right to win here?

So I think on fast convenience, listen, it's a super interesting product, and we're engaged in fast convenience through partnership with a lot of players, the Gopuffs of the world, Carrefour in France, many other retailers were engaged in fast convenience because they see the convenience factor as well. And then certain markets like Taiwan were setting up around stores just to understand the experience and optimize experience and help our partners build an experience, which we think is best of breed. We have not elected kind of globally to go put our own stores out there. We don't think it's the best use of capital. And we think we can achieve what's really important, which is that customer delight through fast convenience through partnership, and we will bring what we're really good at, which is mass audience, global audience, great brand, great service and very fast service, along with partners who will plug into us as it relates to their inventory APIs and delivery APIs. So we think it can be a win-win through a partnership, but it's certainly something that we're looking for. It's my personal belief that the capital flowing in right now is getting to the point of being uneconomical, which is why we're not putting in huge amounts of capital there. We prefer to partner. But these markets always, they -- I think you're seeing it now, which is the high-revenue promises in 10 years, I think markets are valuing at relatively lower multiples than they were, when is it all going to kind of flush out, who knows. But we think our strategy is a sound one, certainly compared to everything else that we can be doing and the focus that we want to put in terms of building out mobility, building on mobility, the opportunity we have in freight and then building the platform on top of it all.

So TAM in last-mile delivery, particularly ex the U.S., has been something investors have grappled with. In countries where Eats is the dominant food delivery service, can these new verticals be meaningful contributors?

So the grocery TAM is higher than food TAM generally, if you go country by country. So I think the ultimate TAM is for grocery and new verticals is larger than food TAM. And the penetration of grocery now globally versus food is about 50% of food penetration. So we think the opportunity is -- we built a delivery business that's as big as the mobility business. Our goal is to build a grocery and new vertical business that's as big as our food business over the next few years. We think we have the best team in the business, and we have a team that's with Cornershop obsessed over the details here and the details as it relates to grocery are myriad. How do you make the picking and packing, replacements of product, predictions in terms of whether a retailer is carrying a product or not because sometimes some of these retailers don't have live inventory, shopper systems, et cetera. These are all features and customer delight features that Cornershop has already built that then we can put on top of the Uber stack which we think allows us to get to that TAM on a global basis faster than any of our competitors with a service that truly is a delightful service as it relates to platform engagement. So we're pretty bullish on it. I do think that as it relates to grocery new verticals, what you'll find is doing is net be more aggressive outside of the U.S. to some extent. And then in the U.S., really focus our strategies on some anchor retailers like the Albertsons of the world or Costco in Texas, et cetera. We're really going to be retail partner focused in the U.S.

So if we look back at 2020, it looked like delivery had OpEx of about $4.8 billion. That's expected to be about $8.5 billion this year, 78% growth. TheStreet's modeling a sharp detail in OpEx for the next year, but by the sounds of it, it sounds like you're tilting towards growth, which could be an incremental OpEx. So...

Okay. It looks like we lost Lloyd. I was just... [Technical Difficulty] Hey, everyone, I think we've lost Lloyd, but I think he was asking about incremental margins for mobility. And I just want to answer that question before we say goodbye, which is one of the confusing circumstances as it relates to mobility when you look at the numbers, is that we are changing accounting methods in some countries where we essentially were the merchant of record. When we're the merchant of record, essentially, we recognize bookings as revenue. Lloyd, I was answering your delivery question. Lloyd, I was answering your delivery question.

Great. Great. Sorry about this.

So as it relates to delivery, what's actually happening is it's accounting, which is as we change our model to become a local player in certain markets, we become merchant of record in that market, which means we recognize gross bookings as revenue. It's partially responsible for some of our revenue margin take rate increases on a year-on-year basis. And we recognize courier costs as operating costs. So the majority of the operating cost increase that you see is actually because of our recognition of courier costs as costs instead of contra revenue. If you normalize for all that on a year-on-year basis, with bookings up about 90%, operating costs are up about 65%, which is 200-plus basis points of margin improvement. So you should continue to expect those trends to continue. And the 4 kind of I'd say, big mega trends that you're seeing in terms of delivery is better CPT as a result of kind of our marketplace efficiency and our logistics capability is getting better and densifying the network. Our ads business adding pure margin to the business. The cohorts of repeat customers getting bigger along with membership as a percentage of new customers and then continued free low-cost customers coming in from the mobility side. All of those are margin kind of increases. We're reinvesting some of that to grow. We're reinvesting some of that to gain CP like we are in the U.S. now in the second half of the year. And that, because of those 4 entities, we have room to improve margins, and as it relates to next year, continue investing in grocery while delivering incremental margins at or above our long-term margins. So we think we're in a really, really good place. The delivery business is at a particularly good place, both in terms of growth and bottom line, at this point.

Well, Dara, sorry for the technical difficulties. This has been great. I think we're out of time. Thank you for doing this. It sounds like things are in a much better place than I think a lot of investors had feared. So it's great to have you air all this out. Thanks a lot for being here.

Thank you very much for having me. Appreciate it. Bye.

All right. Thanks, everyone, for joining.