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

So in the interest of time, we're going to get going. It's my pleasure to welcome back to Communacopia, Dara Khosrowshahi, CEO of Uber.

Thank you so much.

Always great to sit down, always a lot to talk about. But I'm going to turn the floor over to you first because I feel like we have to start every year at the same spot. There's always a lot going on with the company. So we're always trying to move the platform and the product forward every 12 months. So bring us up to speed, what has been the top of your agenda in terms of moving this company forward and aligning strategic priorities with where the consumer-facing products are going right now?

So I think the good news for us is that our strategy has stayed fairly consistent over the past couple of years and to some extent, because it's working. I mean our mission is still to allow people to go anywhere, get anything and reinvent kind of on-demand transportation in cities. And if you look at our strategy, kind of how we execute on the strategy. There are a couple of important elements that really drive a very specific kind of growth platform for us. Number one, I think that the interest in on-demand everything, transportation, delivery of food, now deliver grocery and retail, et cetera, it continues to grow and be a tailwind for growth. And within that category, we're still very focused on improving selection, having more cars, having every single restaurant available to you, improving quality, improving reliability and reducing price as we scale. All of those, like we are still not, in our opinion, as good as we can be and improving reliability, improving improving quality. Continues to kind of drive a tailwind in this on-demand industry? So that's table stakes that we keep focusing on. Number 2 for us is that we're focused on a number of growth levers. And the 2 that I would point out for us is, one is growth into smart markets. Uber has always been kind of a big city service. And what we're reserving with our sparse markets is that, one, they're very, very large. And we can grow into those markets profitably and at scale. And in the core markets in which we operate, about 50% of the eligible population already use Uber one way or the other. They either use Uber or Uber Eats. In these smarse markets, that number is 10%. So we have a huge kind of opportunity to penetrate into these sparse markets and the -- and those sparse markets are now growing 1.5x faster than the core markets. And that is we are -- I'd say, we've been focused now on sparse markets, both the mobility and delivery in every single country that we operate in really for 2 years. So that growth lever for us has a number of years to go. That can kind of growth lever that we're quite focused on is what we call the barbell strategy, which is we're developing a set of higher-margin products, whether it's Uber for Business or it's black or now Black lane which is part of our family or priority delivery or advertising, and we're using the excess margins of those businesses to drive low-cost products. to run promotions on grocery to get more people on grocery to drive 2-wheelers and 3-wheeler growth in developing markets. and the low-cost products tend to bring in a number of new customers that we upsell into the higher cost products to drive margin. So our margin strategy and our new customer strategy are high complementary. When you combine that with on-demand growth, when you combine that with sports markets growth, you get a pretty powerful kind of growth formula that we have. Once we get the consumers in we want to drive engagement, and that's membership, and that's cross platform. Membership members spend 3x more than nonmembers, cross-platform players, and that's unique to us, spend 3x more than non-cross-platform players. You're getting in a bunch of new customers and you're embedding those consumers into the ecosystem, driving frequency. And then within all that, we continue to introduce new products, whether it's Taxi, which continues to scale at very, very high levels. or again, it's grocery and retail. Those new products are entirely new growth drivers for us. Autonomous is a huge opportunity, both in mobility and delivery. And then, of course, everyone is talking about the potential of AI to allow companies to grow faster at scale and drive both margin and quality as well. So that's kind of -- that strategy, that operational strategy, that growth strategy is something that we've been -- it's a playbook that we've been running over the last 2 or 3 years. We have been able to grow our top line over 20% for the past 4 quarters and we made not to do it while increasing margins as well. So hopefully, we'll keep it going for a while.

Okay. All right. So it's my job to make sure we double-click on all of that in the next 28 minutes. Let's start with the subscription offering. You've seen a lot of growth out of Uber One. You referenced the activity level difference once someone becomes Uber One subscriber. Talk to us a little bit about the growth potential on Uber One -- and what you're seeing in terms of different geographies of the world and how Uber bone might traject in different parts of the world.

Yes, definitely. So for a bit of a baseline on Uber One, we have now over 50 million members, Uber One members. We think it is by far the best membership program out there because structurally, you can get more out of Uber One, right? You've got more content as it relates to the membership because you get not only free delivery and discounts on service fees and discounts generally, but you're also getting discounts on mobility as well, upgrades, et cetera. So structurally, it is the better product out there. It's a little bit like Netflix, you pay a monthly fee, and they can provide the most content. We've got more content than anyone else as far as our membership goes. 50 million members, more than 50 million members, growing 50% year-on-year, and now it's responsible for about 50% of our bookings. We believe we have still significant room to run as it relates to membership growth. And there are a number of markets where membership is closer to the 60% level in terms of overall gross bookings. And so one lever of membership is just continuing to grow the member role, so to speak, and members, like I said, spend 3x more than nonmembers. But membership for us is also it's not only offensive, but it's also defensive. What we see in markets, for example, where competitors may start a price war. And it still happens. We've got a big portfolio, so we're able to take on those price wars appropriately. What we see in our category position with members is member category position stays very, very consistent, while nonmember category position where consumers are more price sensitive, let's say, less loyal, potentially go down. Members are kind of they stay, they're kind of locked in to the ecosystem. The other focus that we have with membership is to just make the membership benefits richer. So that may be hooking up loyalty programs like Delta loyalty programs or Marriott loyalty programs with our ecosystem. It might be Amex benefits, which are pretty incredible as it relates to membership as well. And then it also includes enriching the program, especially as it relates to mobility benefits, whether it's free upgrades or priority dispatch in airports during busy times. We still think that the membership itself is something that we can improve on. So when we look at membership, it's like new member growth is increasing, membership retention is -- continues to improve. Members are twice as likely to be cross-platform as nonmembers, so really plays into platform strategy, and it's also kind of a defensive moat during periods when competitors kind of want to attack our category position, it turns out that it's very, very solid as it relates to category position.

Okay. You introduced the concept earlier of multiproduct. You continue to layer new experiences in front of your consumers. What have you learned as you've layered those experiences in? And how does it sort of manifest in the way in which you could continue to compound growth by continuing to find ways to partner across broader ecosystems and be a hub of bringing those experiences to your consumer business?

Yes, absolutely. So, first thing I would say about multiproduct is that it's actually pretty hard to develop multiproduct, right? We've been a multiproduct company for some period of time. But I'd say we've really scaled the platform strategy and quite successfully in the past 5 years. And the reason for that is that -- again, multiplatform consumer spend 3x more than non-multi-platform consumers. It's a unique benefit that we have on a global basis in most of the markets in which we operate. Our competitors don't have a product. And every time you are promoting, let's say, mobility, user to use delivery, you theoretically could be underoptimizing the mobility experience. And so, if you get too aggressive about cross-platform promo, you're going to take away from the core mobility experience. So it becomes very, very important for us to build out occasions for cross-platform -- for cross-platform promotions that feel natural and fuel value add to our consumers. So it might be, Eric, if you're flying to -- we know that you are going to a new city for us to introduce and you're going to your hotel for us to introduce room service by Uber Eats as a benefit and we might run a promotion there. That is, of course, from Uber's perspective, we're upselling you into food, which is great. But from your perspective, you may be getting a deal, you may be getting a promotion and it's kind of nice to know that there's room service available at that hotel. So those are the kinds of targeting opportunities and I'd say that there isn't one lever that is driving the predominance of our cross-platform usage. There are 10 to 15 different kinds of levers where we're targeting the right consumer at the right time -- at the right time based on the right context with the right offer to get them to try one of our other products. And once they try those other products, they tend to be very, very sticky. Spend increases, retention increases as well. With AI and larger models, we're able to get much more context regarding the consumer. So we will be able to create much richer, highly, more highly targeted experiences to drive cross platform. The last thing I would say about cross-platform, and this is actually something relatively new for us is, what we're finding is that, especially as it relates to variable marketing spend we're able to increasingly bring consumers in, not based on there being a mobility consumer or a delivery consumer, Uber Eats consumer, but just being an Uber consumer, right, which is as a higher and higher percentage of our consumers become members as a higher and higher percentage of our consumers shop cross platform, that creates higher lifetime economics for us. And that allows us to spend more to go out and acquire consumers than a competitor could. A competitor who's mobility only or is delivery only structurally can't pay as much as we can and at the same time, we'll still have the same ROI as it relates to advertising as well. So that's actually what we call like platform acquisition as opposed to mobility acquisition, delivery acquisition, is something that is relatively new in our skill set and it's turned out to be quite promising.

Okay. Understood. You always have a unique view of what's going on in the consumer landscape. There's been a bit of a debate both about the current state of the consumer and the future state of the consumer at this conference over the last 2.5 days. What are you seeing in your own products and your own ecosystem about consumer demand? And are you seeing any differences between U.S. versus other market scope?

Yes. It's -- honestly, it's a little bit boring, which is more of the same for us. We obviously have a very broad audience of consumers. We track very closely consumer behavior, frequency continues to increase both for especially membership continues to drive frequency for us. But we don't see consumers trading down. Growth for a lower income consumer cohorts is just as strong as growth for us in higher consumer income cohorts and mobility business in the U.S. has accelerated since late last year. So at this point, the consumer for us remains robust, and we don't see any signal of that changing.

Okay. You announced a restructuring recently. Not just about the restructuring, but talk a little bit about the dynamic inside the company to both create operating efficiencies but also find ways in which to invest in growth initiatives for the long term and striking the right balance between those 2 frameworks.

Yes. We announced the restructuring about 10% of our full-time staff. It's always honestly difficult internally, but it's a discipline that companies -- all companies have to make sure that they retain. And for us, it was about organizational structure, organizational discipline and speed. We look to reduce the layers between myself and kind of the doers at the company. We look to reduce the number of what I call micro teams. You want experienced managers who are running teams of 7 to 15 people usually and the number of micro teams that we have had and a micro team might be a manager who is managing 1 or 2 or 3 people had increased, we think inappropriately. And we wanted to really drive faster decision-making, so generally have more doers versus managers. So we undertook this restructuring. I always believe that the right time to do these is from a position of strength versus weakness some companies kind of wait. We don't believe in waiting. And then obviously, there are real tailwinds as it relates to productivity, whether it's AI or general productivity technology as well, which we thought was an opportunity. So we decided to kind of drive discipline and efficiency as it related to our organization. And we're going to take the savings there and essentially reinvest it back in the business lowering prices, improving selection and continuing to invest in our growth program, so to speak, using some of the savings that we're funding.