Uber Technologies, Inc.

My name is Jeric and I will be your conference operator today. At this time, I would like to welcome everyone to the Uber Q2 2019 earnings conference call. All lines will be placed on mute to prevent any background noise. After this speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star then one on your telephone keypad. If you would like to withdraw your question, please press the found key. It is now my pleasure to turn today's program over to Mr. Kent Schofield. Sir, the floor is yours.

Thank you, Operator. Thank you for joining us today, and welcome to Uber Technology's Q2 2019 earnings presentation. On the call today, we have Dara Khosrowshahi, CEO, Nelson Che, CFO, and this is Ken Scofield, Head of Investor Relations. During today's call, we will present both GAAP and non-GAAP financial measures. Additional disclosures regarding these non-GAAP measures, including a reconciliation of GAAP to non-GAAP measures, is included in the press release, supplemental slides, and on filings with SEC. each of which is posted to investor.uber.com. I'll remind you that these numbers are unaudited and may be subject to change. Certain statements in this presentation and on this call may be deemed to be forward-looking statements. Such statements can be identified by terms such as believe, expect, intend, and may. You should not place undue reliance on forward-looking statements. Actual results may differ materially from these forward-looking statements, and we do not undertake any obligation to update any forward-looking statements we make today. For more information about factors that may cause actual results to differ materially from forward-looking statements, please refer to the press release we issued today, as well as risks and uncertainties included in the sections under the captions Risk Factors and Management Discussion and Analysis of Financial Condition and Results of Operations. and our final prospectus filed with the SEC in connection with our IPO on May 13, 2019, as well as our first quarter form 10Q that was filed on June 4, 2019. Following prepared remarks today, we will open the call to questions. With that, let me hand it over to Dara.

Thanks, Kent. We're proud of the progress we made in Q2 2019 towards becoming the platform of choice for the movement of people empowering local commerce all around the world. During the quarter, we continued to produce strong growth in gross bookings across all of our platform offerings, with overall growth of 37% year-on-year at constant currency, producing a $63 billion annual run rate. Adjusted net revenue, or ANR, was $2.9 billion, up 12% year-on-year, excluding a driver appreciation award, non-cash, made in connection with our IPO, and on a constant currency basis, A&R accelerated nicely, up 26%, powered by strongly monthly active platform consumers, or MAPC growth, of 30%. Our MAPC growth has continued into the second half of the year, and we're proud to announce that we passed 100 million MAPCs in the month of June. Note that we expect A&R growth to continue to accelerate beyond the 30% mark in constant currency during the back half of the year as we continue to grow MAPCs, increased multi-offering users, improved take rates sequentially, and with the help of easier comps in the prior year periods. Our Q2 2019 adjusted EBITDA loss came in at $656 million, a big improvement versus Q1, and handily beating our own internal plan due to strong execution of our teams across the businesses. The competitive environment and our position in the ride-sharing space continues to be stable to improve. We will take some of that improvement to continue to lean into our e-business, where we see plenty of competition and significant capital investment, but incredible potential. While you often have to make tradeoffs in life, we believe that we can continue to invest aggressively in growth while driving efficiencies from scale by building great tech to improve effectiveness and from good old-fashioned focus on the bottom line. Our much-improved core platform contributions of $220 million in Q2 was driven by increased focus on product, service, tech, and brand differentiation in the U.S. and Latin America ride-sharing categories, a more effective deployment of incentives, greater efficiency in shared rides, and a focus on higher-margin products. Our shared ride teams are focusing more of their energy and tech capabilities in driving shared ride efficiency rather than simply discounting for volume. This is resulting in a mixed shift into more profitable UberX volumes. We'll continue to innovate in the shared ride space with exciting new products such as non-stop shared rides, much more sophisticated pricing algorithms, and some pretty interesting innovations coming up in the second half of the year. We're also ramping up our emphasis on consumer segmentation. Uber Rewards, which you'll recall became available to 100% of U.S. rides and eats consumers in March, has seen great momentum. Enrolled users are about twice as likely to use both rides and eats than unenrolled users. Uber Rewards is just one part of a broader suite of loyalty products, including Uber Cash, our Uber-branded credit cards, and ongoing experimentation with subscription products in rides and eats. Uber Comfort, our new premium economy offering, has been a hit and continues to roll out globally. And our Uber for Business solution suite grew quite strongly at 60% on a year-on-year basis. Finally, our Uber Health platform that helps improve access to healthcare organizations grew at over 400% year-on-year this quarter. Now moving to Eats, Q2 2019 massive growth of over 140% helped drive 98% year-on-year gross bookings growth at constant currency to 3.4 billion, while our take rate improved 240 basis points over our Q1 take rate. We made significant progress in expanding restaurant selection with over 315,000 restaurant partners now on the platform at the end of the quarter. We launched several Eats product features during the quarter, including pilots to test subscription pricing strategies with our most engaged users. We continue to work on improving restaurant onboarding efficiency by reducing friction, including point of sale integration through partnerships such as OLO and custom integration via our own APIs. And lastly, we enabled even more ways for restaurants to engage Eats customers through new options like dine-in, pick-up, and the ability to use their own delivery personnel. We continue to be the number one or number two player in the online food delivery category in multiple geographies, including the U.S., Japan, France, Mexico, Australia, and New Zealand. And in the back half of 2019, we'll continue to invest in our most strategic eats markets, lean in on co-marketing programs with partners such as McDonald's and Starbucks, and accelerate our innovation and restaurant selection engine. We continue to invest and innovate in our other best segments, growing Q2 growth bookings by 160% year-on-year at constant currency to $132 million. Uber Freight continued to see impressive growth and great progress in Q2 despite soft market conditions. And Nemo trips grew triple digits quarter-on-quarter as we launched in 11 new markets, including Paris and Berlin, which have quickly become two of our best-performing cities. Finally, in our advanced technologies group, we unveiled our first production car capable of self-driving, with Volvo's newest XC90 SUV. Direct from the factory, the platform is designed with a chassis ready to integrate into ATG's self-driving system. And now on to Nelson for some more details on the numbers.

Thanks, Lara. So in Q2, our gap revenue was $3.2 billion, up 14% year-over-year. Our gap cost of revenue, excluding DNA, of $1.7 billion increased from 55% from 48% of revenue in Q2 of 2018. GAAP EPS was a loss of $4.72, which was impacted by a $3.9 billion stock-based compensation charge due to restricted stock units that affected as part of our IPO, and compares to a loss of $2.01 in Q2 of 2018. For the remainder of the call, unless otherwise noted, I will discuss key operational metrics as well as non-GAAP financial measures, excluding pro forma adjustments, such as our $299 million driver appreciation award, and the $3.9 billion stock-based compensation charge, both related to the IPO. First, our total company global chips of $1.7 billion grew 35% year-over-year. Growth was driven principally by international growth and rise in needs. MAPCs grew 30% year-over-year to $99 million. We continue to see strong new MAPC additions to the platform via Uber Eats and Nemo. Total company gross bookings grew 31% to $15.8 billion, and on a constant currency basis, grew 37% year-over-year. Continued solid growth and ride-sharing growth bookings growth across all our regions, led by the U.S. and Latin America. Each gross booking growth was driven by strong year-over-year growth in U.S. and Canada and APAC, despite the significant amount of capital that is poured into the space. Adjusted net revenue, or ANR, excluding the Driver Appreciation Award, was $3.2 billion, which was up 26% on a constant currency basis. Core platform ANR, excluding the driver appreciation award, was $3 billion, or up 22% on a constant currency basis. Core ride-sharing ANR was up 17% year-over-year, and ETH ANR was up 56% year-over-year. And they were up 20% and 60% year-over-year, respectively, on a constant currency basis. Our core platform ANR, as a percentage of gross bookings, was 19% versus 21% in Q2 of 2018, primarily due to ETH, which has a lower take rate than ride-sharing, growing as a larger percentage of the core mix, and a year-over-year increase in use of ride-sharing incentives, particularly in the U.S. and Latin America. We did increase our core and our take rate to 19% versus 18% in Q1 this year, reflecting more favorable economic conditions in the U.S. ride-sharing industry and improved share ride efficiency. And a new service fee structure in Uber Eats in the U.S., which was launched at the end of Q1, which drove the significant quarter-over-quarter take-ret improvement to 10.2% from 7.8%. Non-GAAP cost of revenues, excluding DNA, increased to 47% from 43% of ANR and was flat with Q2 2018 at 9% as a percentage of gross bookings. Cost of revenue was flat as a percentage of gross bookings as improvements in insurance and payment costs were offset by an increase in cost of revenues due to Freight's and NEMO's gross or merchant model, where freight partner payments and NEMO's scooter hardware and field costs are included in our cost of revenue. Now, turning to non-GAAP operating expenses. Operations and support increased to 14% from 13% on an adjusted net revenue and remained flat at 2.9% of gross bookings since the second quarter of last year, reflecting each higher support contact rates, offsetting efficiencies and ride support. Sales and marketing increased 31% to 31% from 26% of ANR and increased to 6.2% from 5.7% of gross buttons versus the second quarter of 2018. This increase was primarily due to increased consumer promotions as well as increased advertising and marketing headcount. However, promotion spends was down quarter over quarter, particularly in the U.S., which helped drive the sequential improvement in the second quarter of 2019 from the first quarter of 2019. In July, we put in place a more centralized structure for our global marketing team in an effort to quickly and efficiently build a more consistent external brand narrative across audiences, products, and regions. As part of this, we made the difficult decision to let go around 400 marketing personnel, about 1.5% of our total headcount. Now on to core platform contribution margin. As a reminder, our core platform contribution margin as a percentage of core platform ANR and demonstrates the margin that we generate at the direct expenses related to our ride sharing and Uber Eats businesses. What does not include is indirect unallocated R&D and G&A expenses, including ATG and other technology programs and our other debt segments. Our core platform contribution margin in Q2 was 8% as a percentage of ANR. While this is down versus the year ago, strong execution against our internal plans, improvements in shared rides efficiency, and improved dynamics in certain markets led to an impressive 1,200 basis point improvement quarter over quarter versus the first quarter of this year. R&D remained flat at 14% ANR and decreased to 2.9% from 3% of growth bookings in the second quarter of 2018. G&A decreased to 14% from 15% of ANR and decreased to 2.8% from 3.3% of growth bookings in the second quarter of last year. While we continue to invest in the system, and infrastructure needed to be a public company, we are seeing leverage across our platform. In Q2 2019, adjusted EBITDA loss was $656 million. We handily beat our internal EBITDA plan due to strong execution of our teams across the business. We know we have a lot more work to do here, and we continue to focus on balancing investment and profitability improvements. In terms of liquidity, we ended the quarter with approximately $11.7 billion in unrestricted cash and cash equivalents. and $13.7 billion in both restricted and unrestricted cash and cash equivalents. We received $1 billion in aggregate proceeds from the Toyota Denso SoftBank in July of 2019, so this will be reflected on our Q3 2019 balance sheet. Now I will wrap up by providing guidance and comments for the first time as a public company. The 2019 gross bookings week saw constant currency growth, of 31% to 35% year-over-year, which translates to an estimated range of $65 to $67 billion. Based on June month end rates, our constant currency growth represents about $64 to $66 billion in reported gross bookings. We continue to see the ride share market remain stable for the balance year and monitor closely the competitive dynamics. The EATS market will continue to be competitive as competitors have raised funds to invest in growth in its fast-growing category. We will continue to invest, including in the fourth quarter of 2019 when seasonal career costs increase, and expect to see continued strong growth for the balance of the year. As a reminder, competitive intensity for our platform most directly impacts take rates and sales and marketing expense. That being said, we expect adjusted net revenue growth rates to improve in the back half of the year. For 2019 adjusted EBITDA, we expect a loss of a range between 3.2 and 3 billion dollars. As we are a newly public company, we're also providing additional guidance. For Q3 2019 stock-based compensation, we expect an expense of $450 to $500 million. And we expect our Q3 2019 basic and diluted weighted average share count to be 1.7 to 1.725 billion shares. This full-year EBITDA guidance reflects continued investments in EATS, OtherBets, ATG, and our infrastructure. We believe the profitability of the rides business will prove out. In fact, in the second quarter, if we take our rides contribution and deduct all of the corporate overhead, which includes the unallocated expenses and tech supporting the entire company, excluding ATG, the loss would have been approximately $100 million in the quarter. Now back over to Dara for the wrap-up of the call.

Thank you very much, Nelson. We're pleased with our progress this quarter. We hope to deliver more for you. And with that, let's open up for questions.

Great. Thanks, Dara. Operator, we are now ready for questions.

And at this time, if you would like to ask a question, please press star 1 on your telephone keypad. Again, that is star 1 to ask a question. Your first question comes from the line of Justin Post with Bank of America Merrill Lynch.

Great. Thank you for taking my question. I guess, Dara, looking at the results, your bookings and riders close to inline, but large speed on the profitability. How are you thinking about balancing the ability to drive the top line bookings versus drive the bottom line? How do you balance that? And then when you think about some of the new competitors entering in London, could that make that decision different going forward? And how do you feel about the London situation right now? Thank you.

Hey, Justin. Good question. Listen, I think you know that the balance between the top and bottom line is more of an art rather than a science. So if I told you that we had kind of this scientific formula that we're solving for here, we'd be lying to you. That said, if you look at our trip growth on a year-on-year basis, you know, trip growth was 37%, Q3 of 18, 37% Q4, 36% Q1, 35% Q2. So it's just at these kinds of scales, it's rare to find this kind of growth. And we do think that as we look at our marketing spend, our incentive spend, how we can leverage the business going forward, we think that there's the opportunity to scale our expenses or be more efficient with our incentive spend or be more efficient with our marketing spend, really double down on less smaller kind of projects and doubling down on the channels that are really working for us. So we actually think that if we do our jobs right, there are always trade-offs to be made in life. But I think that we can make the trade-offs where we can scale expenses and or get far more efficient in our marketing and incentive spend while improving the bottom line of the company. And listen, we're very confident that this company maturity can be cash flow positive. And the team is focused on being able to drive big-time growth at the top line while getting more efficient on all parts of the business. I think as far as the London competition goes, listen, London is a great market for us. We are trying our best to be excellent partners with TFL, the regulator there, and intend to continue to build our business in a constructive way. The new competition that we're seeing in London are frankly competitors that we're familiar with. We've been competing against those players in Paris for many, many years. Our position in Paris is very, very strong. It's quite a constructive market for us. So with a category like ride sharing, we're going to have multiple competitors in every country that we compete in. We're going to have multiple competitors in large markets like Paris and London. But so far, we're not seeing anything in London that's a surprise or unexpected that we're not seeing in 20 other cities all around the world. Great.

Thanks, Dara. Sure. Operator, next question, please.

Your next question comes from the line of Heath Terry with Goldman Sachs.

Great. Thanks. Dara, on the last earnings call, you talked about the market share in right hailing sort of reaching a point of stability. I'm curious, as you look at the competitive markets and the rate of growth on some of your main competitors, particularly in markets like the U.S., what's it take to get to that point of stability? Is it just a matter of time? Is it a matter of more investment? And how do you, whether it's bookings or revenues across the space, how do you think of what qualifies as stability?

Yeah, I think it's – listen, when we look at the ride-sharing category, our top competitor in this category is car ownership and other ways of getting around. And when I look at how we are faring against car ownership, we're faring very well. And we continue to invest in products. continuing to kind of improve the efficiency of our pool product. You've seen us bring in transit choices, a whole other host of ways that people can get around their city so that this younger generation that is coming of age, unlike myself, has zero need to own a car. That said, within our category of ride-sharing, we are going to have multiple competitors. We and Lyft are big-time competitors here and have been for some period of time. And for now, we are seeing generally category positions that are stable. And, you know, we're focused on improving profitability in this market and many other markets around the world. And based on what we read, you know, Lyft seems to be focused in a similar way. But as you know, competitive environments can change. But the big picture is we want to be there any way you want to get around your city, and I think we're well on a path to do so in a profitable way.

Great. Thanks, John. You're welcome for the question. Operator, next question.

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

Thanks for taking my question. I have two. The first one on the U.S. eats. Curious to hear about sort of any impact at all from elasticity associated with that service fee. And how do you think about potentially rolling it out to other markets in the back half or into next year? And then on India Eats, I remember last quarter you called it out as one of the headwinds to overall ANR. Is there any update on India Eats in the quarter? And how do you think about strategic options to improve your ability to more profitably grow in that market? Thanks.

Yeah, I think on the U.S. and elasticity as it relates to the service fee, we're – constantly testing and learning. What we found, as you can see from the take rate improvement, this is two quarters in a row where you're seeing very, very substantial take rate improvement on each side. The team is executing well. They're focused. There is due to be some elasticity, but what I can tell you is that the improvements that we are seeing in our take rate from a revenue standpoint and from a profitability standpoint are significantly in excess of any business that we might be losing on the top line. And, of course, this is within the context of the top line of our each business, you know, growing bookings at, you know, 90-plus percent on a year-on-year basis. So we think that at this scale and at these kinds of top lines, the kind of tradeoff decisions that we're making are the right tradeoff decisions, and, frankly, they're not too difficult to make. we will look at taking some of these learnings in different markets. Every single market has its own character, has its own competitive environment. So at this point, we can't point to a specific plan or a rollout plan. There are certain markets where we'll introduce the fees, and there are certain markets where we won't, and we'll be pretty disciplined and data-driven in our approach to every single market. In terms of India, it's a big market. On the ride share side in India, we're very happy with the results there, both in terms of category position, the top line, and especially the bottom line. And we're taking some of those lessons and extending them into the East category. Right now, the market is very, very competitive. There are a few very strong competitors there. Generally, I would tell you that we want to be the number one or number two in every single market. Right now in India, we're the number three. And so the team knows there's a big lift ahead of them. But we're in the game. And I think India, what's great about India is we have a local team there. We've got a great engineering team there. We're kind of a local company in India. We've proven our ability to win in rides. And my expectation is the same on the east side.

Great. Thanks, Ryan. Thanks for the question. Sure. Operator, next question, please.

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

Hey, guys. Just one clarification and then a question around that. So if we back out the $287 million shares for the riders or for the drivers in 2Q, your rides net revenue or adjusted net revenue was – 2.6 billion and take rate 21.3. So I just want to clarify that that's actually accurate and the right way to handle that 287. And then if so, you know, that take rate's up, you know, 100 bits or so sequentially. And you mentioned that it's going to go up in the back half. So what's driving up the rides take rate? Is it the U.S.? Is it Brazil getting less bad? Any color on what's happening with rides take rate both in 2Q and and back after this year. Thank you.

Hey, Ross, I think you've gotten the numbers right, Nelson, correct me if I'm wrong? Yeah, that's right. I think, listen, on the take rate, we don't want to get into particulars as far as market by market, but I think the characterization, which is the competitive environment in most of the markets in which we're competing with are stable or improving or our competitive tactics are improving, I think that's a generalization that is true in most of the markets out there in the rise category. And that is translating into take rates that are an improvement quarter on quarter. And if things remain the same, we think those trends are healthy and we'll take them.

Thank you, Ross, for the question. Operator, next question, please.

Your next question comes from the line of Lloyd Walmsley with Deutsche Bank.

Thanks. There's two if I can. First, you know, Dara, you mentioned some interesting innovations coming in the second half. Is there anything you can share with us on kind of where those might fall or any specifics there would be great? And then just secondly, you know, SoftBank's in the process of raising a second vision fund. They continue to put money in the competitors. So just, you know, wondering what kind of dialogue you might have with them and to try to bring about more of a healthy market in the space? Anything you could share there would be great.

Yeah, Lloyd, the marketing team would kill me if I steal their thunder as far as the innovation goes on the pool side. But on the shared ride category, listen, one of the keys with shared rides is you have to create matching efficiency. And we were the pioneer of in shared rides to begin with. We were the pioneer in shared rides, the Protestant shared rides, where you walk and wait in order to create greater matching efficiencies. And you should expect more of that pioneering and innovative spirit in shared rides going forward. We're already experimenting in high-capacity vehicles, for example, Uber bus, Uber van, to kind of take sharing from two or three people in the backseat to 10 people in a van, you know, which we think benefits riders, it benefits cities, it benefits the environment. And there's a whole lot of technical kind of innovation and investment that has to go into matching. It's a category that because of our volumes and basically every single market that we compete with on the ride side, we're the largest player. Shared rides tend to be a category where our network effects are amplified. So we want to invest technically behind those network effects, and I think you'll see kind of more matching tech coming up in the back half of the year that we think will hopefully take us to kind of the next growth phase of shared rides. You know, I think as far as SoftBank and the Vision Fund 2.0, we're as awe-inspired as everyone else as far as SoftBank's ability to raise capital and put that capital to work. And, you know, I said it the first time, which is I'm really happy that SoftBank is a partner of ours. I'm even slightly happier now that SoftBank is a partner of ours because, you know, a partner that's global, that has that much capital is someone that you want to have with you, and SoftBank has been a great partner, and I think they'll continue to be a good partner going forward. We are sensitive as to industry dynamics, so when we talk to SoftBank, we talk about things that are relevant to us, and we leave the investment up to them.

Thanks, Lloyd, for the questions. Our next question, please.

Your next question comes from the lineup. Ron Josie with the JMP Securities.

Great. Thanks for taking the question. I want to ask a little bit more. I think, Dara, you talked about increased consumer promotions this quarter. Sorry, more effective deployment of incentives this quarter. I just want to understand a little bit more, particularly as you talked about promotions been down and Some sequential improvements. So just any information around promotions and incentives would be helpful. Thank you.

Yeah, I think it's – we don't want to get into too many details because this is – you're entering into competitive categories. But I think that there are two factors going on. One is there's always spend that is kind of on the inefficient side of incrementality, kind of the next dollar that you put to work, the incremental return tends to be worse. And we've got our engineers and marketing folks always looking for the least efficient incremental spend and then testing and learning their way into more efficient types of spend going forward. So you've got kind of engineers and marketers rinsing and repeating there. And I do think that we are coming with types of incentives that are designed not just to drive volume for the next week, but they're designed to drive volume for the next month or two months, and increasingly investing more in programs like our loyalty program, both Uber Pro on our driver's side, but then Uber Rewards, which are designed to essentially invest money for loyalty that carries over for not months, but hopefully years. So it's a continuing process. At the same time, we are seeing the competitive environment in general be more constructive. And listen, that always helps as well. The combination of better science, better marketing, and a more constructive environment we think makes for a decent to hopefully better than decent second half for us.

Thank you, Dora. You're welcome. Thanks, Ron, for the question. Operator, next question, please.

Our next question comes from the line of John Blackledge with Cowan.

Great. Two questions. First, just curious about the pricing environment in the U.S., thoughts on ability to raise price and or potential for raising price as we run on through the year on the ride-sharing side. And then just second, on the marketing team change, just any early thoughts on how it may impact brand spend or customer acquisition spend. Thank you.

Hey, John. As far as the pricing power and pricing in general in the U.S., We're constantly testing and learning in terms of pricing. I do think that we have pricing power as a category. As to what's the best way to exercise that pricing power one way or the other, I think remains to be seen, and we don't want to talk too much about kind of what our intentions are going forward. But I think as a service, we have pricing power, and I think it will inure to our ability to grow this business for many, many years to come. As far as marketing and what we're doing, listen, part of the design around the restructuring of the marketing team was really looking at where we came from. Really, the marketing team grew organically, and based on kind of the history of how Uber grew up, Uber was very decentralized from a local basis, businesses essentially, business leaders and city leaders who were their own CEOs, And over a period of time, as businesses grow, as they become more consistent, it makes sense to centralize some of the capabilities. And the decentralization that served us very, very well early on in our development as a company to some extent hurt us as we think about how we tune our marketing teams for the next five years. A significant amount of marketing, as you can imagine, happens, for example, online on big online global systems, Google, Facebook, Twitter, Snapchat, et cetera. These are all essentially technical global platforms. And to have a bunch of local teams, all of whom are starting from square one, engaging with these technical global platforms in their own ways and reinventing the wheel didn't make sense. So the reorganization is about improving effectiveness and it's about thinking about where we're going to be for the next five years of the company versus where we come from. And I think, listen, my expectation is that our marketing spend, I can't speak for the second half of the year, but our marketing spend for the next few years is actually going to both increase and be more effective as a result of the changes that we're making in the marketing organization. Great, John. Thanks for the question.

Operator, next question, please.

Your next question comes from the line of Mark Mahaney with RBC Capital Markets.

Mark, are you online? You might be on mute. Operator, why don't we go ahead and come back to Mark. Can we go to the next question, please?

Yes, your next question comes from the line of Brad Erickson with Needham & Company.

Hi, thanks. I think there's a fair amount of work being done at the city and local government level around the world to understand, I guess, the effects that mobility platforms are having on broader transportation in those cities. So relative to some of those works that are ongoing and the conversations you all are having with those those cities and local governments, how should we think about any impact, either positive or negative, if and as supply of TNCs are controlled in more cities here going forward?

Listen, I think that every conversation that we're having with every city is different. So it's difficult to give you a global answer. In general, what I can tell you is that the great news is that we're actually having dialogue and constructive dialogue with many of the cities and many of the transportation authorities in these cities. So if you look at London, for example, we have a clean air plan and a plan to actually fund electrifying our fleet, which is obviously great for the environment. I think it's great for London, it's great for consumers, and it's great for us. And that's as a result of you know, terrific dialogue with the city. We are now in dialogue with multiple transit operators, and we have a transit product that's live that is actually feeding demand into public transit, which we think is, again, a good thing for us, it's a good thing for the city, and it's certainly a great thing for public transit as well. We are now having active dialogue in terms of sharing our data. Obviously we don't share any personal data for riders, but sharing aggregated traffic data that will allow cities to design more effectively for the next five years in a smarter, better way. So I think the dialogue that we're having, this dialogue will turn into what we think are constructive results. There are some cities with whom the dialogue, unfortunately, we think is not constructive. New York is one of them. But I think that the majority of these conversations are are positive and we want to be a partner and the best partner for cities going forward as it relates to their transportation solutions for the next 10 years. Great Brad, thank you for the question.

Next question please.

Yes, your next question comes from the line of Mark Mahaney with RBC Capital Markets.

Okay, thanks. Sorry about that. Hey, could we just talk about, Dara, could you talk a little bit about two regulatory fronts, New York City, what's happened to demand the profitability of the Uber platform in New York City over the last couple of months as these series of changes have been introduced? And then just comment on the likelihood or the outcome materiality with the California, the pending legislation in California about the changing people from contractor full-time employees and what kind of impact that could have. If you could address both of those, please. Thanks, Ari.

Yeah, sure, Mark. So, listen, I think that a lot of the changes that have been introduced or potentially introduced in New York City, we just don't agree with. You know, the city is essentially introducing another medallion system. And if you've read any of the articles in the New York Times, you know that that system is ripe for abuse by people in power and it's happened in the past and the city could be setting itself up again. If you look at our business in New York, it's pretty healthy and it continues to grow. The problem is that we are growing fastest in areas of the city and where you've got consumers who can afford, you know, significantly higher prices and the price increases that we have had to go forward in the city, while areas like East New York or, you know, Wakefield, Bronx, or Central Harlem are not growing because consumers there can't afford the increases in prices, and as a result, we're making kind of mobility unavailable to them. So I think anyone who thinks that the changes that – who tells you that the changes in New York City are good is full of malarkey, frankly. And, you know, de Blasio – even de Blasio appointed TLC commissioners, they acted over the objection of city council and drivers and editorial boards and community groups and even a former TLC chair and transit experts. So we think, you know, frankly, we don't get it. but we are doing our best in New York City. I think one of the issues that we hold dear as it relates to Uber and our system is that Uber has always been an open labor system. We've always been available to anybody who wants to find labor on our system, make money on our system any which way they can, and the new rules could potentially restrict where, when, how drivers can work, and we just don't think that's good for New Yorkers. As far as California and AB5, listen, if AB5 passes, it'll simply be a codification of existing law. It doesn't immediately transform drivers into employees. It just changes kind of the legal test in the court. We think that there's a better way forward. The fact is that Our drivers consistently tell us that the reason why they value Uber is they value their freedom. They're their own boss. They run their own business. They can drive for us or not drive for us whenever they want, however they want. And we do think that there's a better path forward that would allow drivers to keep their status, you know, independent status, but add the kind of protections that, frankly, we think are good protections. These are like minimum earnings and benefits and avoids and kind of decisions as it relates to the system that would affect their livelihood. So we think there's a win-win there, and we're having dialogue with various parties to hopefully get to a win-win, and we think that will be the way forward. So stay tuned. We're hoping that the dialogue is a constructive dialogue, but, you know, it's early.

Thank you, Mark, for the question. Okay, thank you, Doug. Operator, next question, please.

Your next question comes from the line of Michael Graham with Ken Accord.

Thank you. I just wanted to ask on public transit again. You know, you mentioned launching in London and Boston. Any update on rider engagement with that part of the platform, either in those cities or in some of the places you've been a little bit longer? And is this – Is this a city relations thing primarily and a rider convenience thing, or is there a business opportunity there as well in a direct way? Thanks.

Yeah, Michael, it's very early, but what we're seeing, which is super encouraging, is that transit options and, frankly, more options, more transportation options in our app increase engagement with the Uber app. So it's more transit, more bikes and scooters, even in certain cases like Uber, bus, et cetera, all of these additions, for example, taxi is a very, very fast-growing category for us in certain parts of the world as well. As we add in more transportation options, we become – a factor in a larger percentage of the population's transportation decisions. We have a great product and technical team that can build these solutions in an artful, simple way that over a period of time learn about you and can personalize the choices for you. So the transit option is just one way in which we are increasing our relevance to a greater number of consumers on a global basis. and we are seeing it in higher engagement in the app specifically with London and some of the other areas where we've grown transit. And listen, we think it's good for consumers, we think it's good for us, and we think it's good for mass transit and the city as well. So this one's a win-win-win, but it's pretty early, and we think there's going to be a lot of kind of testing and learning going forward as we build these products.

Okay, thank you.

Great, thanks, Michael. Operator, next question, please.

Your next question comes from the line of Benjamin Black with Evercore ISI.

Hey, thanks for the question. I was just wondering if you could give us an update on the six focus countries. Where are you seeing meaningful traction? Where are there incremental work to be done? What does the competitive environment look like in some of these countries? Thank you.

Yeah, sure. We can certainly give you a quick tour around the countries. Listen, Argentina is a very strong market for us. Buenos Aires continues to be one of our biggest and fastest growing markets in the world. And we think that there's constructive regulatory momentum in the country and we hope to build on that momentum. Germany is another great market for us. We are building our business in Germany in the right way as it relates to rideshare. What's interesting is that we launched our jump bikes in Berlin, and they've been spectacular. They've been a huge hit in the city. I think that bike ridership in Europe is more prevalent, and we're certainly seeing it with our product as well. And what you see with us in Germany is an expansion into more cities, both on the ride side and on the bike side as well. And listen, we're getting into Germany with freight as well. So Germany, we think, is going to be a pretty interesting market for us. Japan and Korea are a couple of other markets. These are taxi-heavy markets. We think that the regulatory environment in both markets is continuing to improve, although we have a long way to go to build a big ride business. I will tell you that each business in Japan – is doing incredibly well. In Japan, I think we will be in eats first and then ride second business, which is terrific. It goes to some of the flexibility that we have in our model as far as introducing the Uber brand into a market and then expanding the definition of what Uber means to consumers in that market. Spain has had good parts and bad parts. Barcelona, the regulations in Barcelona and A couple of the eastern regions were not great. But honestly, the rest of Spain is doing incredibly well. We're growing well there in the ride category, and we're starting to invest in ETH as well. And so that's going well. So I think most of the story around these markets are strong. Italy is an area where we haven't really developed a big business there. But I'll take where we are, and I take five of the six countries. These are some pretty big countries. They're all going to take a lot of work. but they're all showing promise in different ways.

Great, Benjamin, thank you for the question. Thank you. Operator, next question, please.

Your next question comes from the line of Justin Patterson with Raymond James.

Great, thank you very much. Maybe a big picture one. Nora, you've been involved with a variety of Internet businesses over the course of your career. Could you talk about how scaling Uber differs from traditionally online businesses? And how we should think through the timeline toward reaping those financial benefits. And then as a quick follow-up, can you provide an update around how you're thinking about opportunities around payments? Thanks.

Sure. I'll take the first, and Nelson, maybe you can talk on the payment side. Listen, I think that there are ways in which Uber is a unique beast and there are ways in which it's like any other business. You know, I think that there's the meme around, which is, can Uber ever be profitable? I've certainly heard that meme along with others. And I'll tell you, we have a business in the rides area that has a 20-plus percent take rate, which is a very, very strong take rate. And a business at scale, the way we are, a global business at scale that has network effects with a 20-plus percent take rate, I believe – has the potential, and if we execute should, turn out to be a spectacular business long term. And I think that the same goes for Eats, and we're making bets in a lot of other categories that carry with them incredible potential. So it's hard to compare Uber to other businesses because it's a unique entity. It's one of those rare brands in the world. I think what's very interesting about Uber is that we're a digital and physical business, And so the connectivity between the digital and the physical world and local regulatory bodies and the presence that we need in every single city and the difference in kind of local customs, all of those are amplified as it relates to this business. That makes it all the more interesting and to some extent also makes for pretty interesting barriers for entry once you build a business. So I think that myself and the team are well prepared. but I think we're very, very early in this, you know, incredible journey. But, Nelson, you want to talk on payments?

Well, and the only thing I'd add on that is if you listen to the script, at the end of the script when I talk about our rides contribution in the second quarter, and so we had a very strong second quarter on the rides contribution. And, again, if you, again, deducted from that, what we call our corporate overhead, which is all the unallocated corporate overhead and tech supporting the entire company, excluding what we invest in ATG, the loss would have been $100 million. So it should give you a little bit of sense of the path to profitability on the rides business. And then, obviously, we'll have plenty of dialogue on some of the other bets we're making, whether it be in Eats or in Freight or in Nemo or around Autonomous. But it should give you guys a sense of kind of the path we're moving, and we talk about healthy growth in the market environment. Your second question on payments, we continue to make good progress. I would say the team has done a very, very good job in terms of reducing some of the payment card fees. A lot of it is working with our partners, and we've been able to reduce some of the things. And it literally has been better than we would have expected, both on a quarter-on-quarter and a year-on-year basis. As we move towards the next phase of the payments, we are going to be testing, broadening out some of the capabilities, particularly in Latin America. And, again, we think this will have beneficial impact, particularly in terms of driver retention, as we offer more tools to allow them to kind of operate every day and also try to take cash out of some markets like Brazil, where we think that also provides some safety benefits.

Great. Thank you. Thank you for the questions, Justin. Operator, next question, please.

Our next question comes from the line of Jason Hildenstein with Oppenheimer.

Thanks. Just two questions. Anything you can share to help us understand the early impact of the loyalty program and its impact on repeat usage and retention? And then just around EATS, do you expect to deploy batching and other dynamics to improve EATS delivery efficiency in the near term, or is that something more longer term given the complexity to do that? Thanks.

Yeah, Jason, as far as our loyalty programs go, we are definitely observing what I call interesting behavior with our consumers. We're really looking for increased retention, increased spend. So we're seeing both. I think that identifying causal versus correlative behavior is harder and takes time. But as you can expect from the expansion of our loyalty program in the U.S. and into other markets, you should assume that we're expanding it because we like what we see. As far as each batching goes, we're batching our orders now. And we're using kind of the efficiency in the marketplace. And I think that you should expect to see more batching going forward as we create increased matching orders. the same way that we built pool over the past couple of years.

Thanks. Okay, thanks, Jason. Operator, next question, please.

Your next question comes from the line of Masha Khan with HSBC.

Hi, thanks for the opportunity. I wanted to ask you about some news reports about you going into grocery delivery, if you could comment on that. And the other one, From the EATS perspective, what makes it very interesting as a country from your economics perspective, like which countries you like better than the others? Can you maybe characterize some of the aspects of what makes EATS a good business in a certain market? Thank you.

Yeah, Masha, as far as grocery, I don't want to comment too much other than we have said in the past that we are going to look at additional categories that can take advantage of the fulfillment of network, essentially, that we are building and can give our couriers and drivers higher utilization and higher work, especially during non-peak times as it relates to driving. So grocery could be one of those categories, hypothetically. And once we have something announced, we'll definitely tell you about it. But it's something that we could take a look at. Nelson, you want to talk on?

Sure. And so it tends to be more on a city-by-city than just straight country. And a lot of it just has to do with how fast we're in there, and then our competitive position. So what I would say is that, you know, you heard us talk about a 10.2% take rate, if you will, for each in the second quarter. If you look at the top five cities around the world where we are, those take rates range between 8% and 16%. And so you'll see, you know, we do have some markets, and somebody asked earlier about India, where you have a very, very low or negative take rate. But, again, we think it can be an attractive business in a lot of those different parts of the market. And so, you know, in most of the markets we're in, and we have some where we have very, very strong category position, those tend to be the ones where you'll see those kinds of high take rates and contributions.

Okay, thank you.

Asha, thank you for the question. Operator, we'll go ahead and take our last question.

Our last question comes from the line of David Dillon with SMBC.

Hi, thank you for the question. Just following up on that, Eiji, you had a nice expansion there on the takeaway despite the more competitive pricing environment you're talking about and new competitors coming to market. And just kind of triangulating that with what you said about Japan and nice growth there, would you expect that takeaway to be sustainable here or possibly continue to expand in the back half of 2019?

Yes, this is Nelson. We hope so, right? And so, again, we put in the service fee in the U.S. at the end of the first quarter, and so we think there will be a little bit of a tailwind as we continue on the back half of the year. You know, obviously we'll continue to watch India. So if you think about the fact that our take rate was 10.2%, ex-India probably would have been another 100 basis points or so. The one thing that we do watch is there is seasonality in the fourth quarter. particularly has to do with drivers and couriers. And so we will have to watch that in terms of what impact it is. But we do think over time that we'll be able to continue to improve in terms of our take rates.

Thank you for sitting here.

I appreciate it.

Thanks, David. So with that, thank you, everyone, for joining us. I wanted to give a special thank you to all of our Uber employees all around the world. This is their first full quarter as a public company. You know, we're entering a different phase now, Uber, from an execution basis. I think that everyone is putting their best foot forward, and I think it certainly showed this quarter with revenue accelerating and bottom line getting better. And I think the team would be not satisfied with anything but these kinds of results going forward. So thank you again for joining us, and we'll talk to you next quarter.

This concludes today's conference call. You may now disconnect.