Uber Technologies, Inc.

Good afternoon, everyone, and thank you for calling today's conference call. As a reminder, during today's session, all parties will be in a listen-only mode. Later, we will conduct a live interact. At that time, if you have a phone question, please press star 1 on your telephone keypad. To withdraw your question, simply press the pound key. I will now turn the call over to our first speaker, Emily Reuter with Investor Relations. Ma'am, please go ahead.

Thank you, Operator. Thank you for joining us today, and welcome to Uber Technologies' first quarter 2020 earnings presentation. On the call today, we have Dara Khosrowshahi and Nelson Che. We also have Kent Schofield, and this is Emily Reuter from the Investor Relations Team. 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, are included in the press release, supplemental slides, and our filings with the SEC, each of which is posted to investor.uber.com. 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, and under 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 this section, under the caption, Risk Factors, financial conditions, and results of operations in our annual report on Form 10-K, filed with the SEC on March 2, 2020, and in any subsequent Form 10-Qs and Form 8-Ks filed with the SEC. Today, we will open the call for questions. For the remainder of this discussion, all growth rates reflect year-over-year growth, unless otherwise noted. With that, let me hand it over to Dara.

Thanks, Emily, and thank you all for joining us today. It's been seven weeks since I updated you last on the state of our business. In that time, there have been some hopeful signs. Cities are beginning to open up, or at the very least, plan for recovery. Early but promising results in clinical trials for potential treatments and vaccines, and perhaps most inspiring of all, global solidarity and support of those on the front lines. But there remains a lot unknown. clear that the city, states, and countries will take action and there's a little consensus over the right way to do it. Given this backdrop, I want to tell you how I'm managing Uber, both through this crisis and for the long term. My objective is based on the quote, skate to where the puck is going, not to where it's been. For Uber, that means tight focus in three key areas. First, while we have a very strong balance sheet, it's my job to ensure that remains the case, regardless of how fast or slow the recovery is. Hard look at our overall cost structure and our other bets to ensure our core business of rides and eats emerges stronger than ever. We've significantly reduced our marketing incentive spend and deferred real estate CapEx for planned offices in Chicago, Dallas, and Mexico City. Our wholly owned subsidiary in the Middle East took the difficult step of reducing its workforce by 31%. Yesterday, consistent with lower trip volumes and our hiring freeze, we announced a reduction in our customer support and recruiting teams by more than 3,700 employees. And this morning, we announced that we're merging our jump unit into line. With this deal, Uber customers will still have access to bikes and scooters through our app, resulting in an annual EBITDA savings of $160 million in addition to meaningful CapEx savings. Altogether, the actions we've taken and the actions we intend to take in the near future will result in a reduction of more than $1 billion in annualized fixed costs versus our Q4 plan. Reaching profitability as soon as possible remains a strategic priority for us. We believe that disruption caused by COVID-19 will impact our timeline and by a matter of quarters and not years. Second, at a time when our ride business is down significantly due to shelter in place, our EATS business is surging. We've seen an enormous acceleration in demand since mid-March, with 89% year-over-year gross bookings growth in April, excluding India. And just last week, EATS crossed the $25 billion gross bookings annual run rate. Additionally, there's been a tremendous increase in restaurant sign-ups, leading up to rapid improvement in selection in major markets. Behavioral shifts, like the willingness on the part of fine dining establishments to sign up for delivery. We believe these trends are here to stay and will result in an expansion of the entire category. Some of the three 2019 calls to invest aggressively can establish or defend a number one or number two position. Consistent with that strategy, on Monday, we announced this move will allow us to redouble our efforts in markets with larger long-term potential and higher returns like the U.S. Improving each margin and cost structure over time, just as we did with rides, remains a key priority, and we're seeing improvements due to larger order sizes, improved career marketing, and customer acquisitions. Finally, I want to talk about what we're seeing in our rides business today, and I won't sugarcoat it. COVID-19 has had a dramatic impact on rides, with the business down globally around 80% in April. Still, there's some green shoots driving restraint. We've seen week-on-week growth globally for the past three weeks. This week is tracking to be our fourth consecutive week of growth. Last week, we saw 9% trip growth in the past three weeks, week-on-week. We believe the U.S. is off the bottom. U.S. growth bookings were up last week by 12% overall week-on-week, including New York City up 14%, San Francisco up 8%, Los Angeles up 10%, and Chicago up 11%. Perhaps more interestingly, growth bookings in large cities across Georgia and Texas significantly are up substantially from the bottom at 43% and 50% respectively. Hong Kong is back to 70% of pre-crisis gross bookings levels. And in India, we began operating again in designated green and orange zones, which account for more than 80% of the country's 733 districts. In France, before COVID, shows within a month. 90% expected to do the same in less than three months. And 98% of all riders say they will take a trip again, suggesting pre-COVID usage, will build back steadily. Nevertheless, it's very early days. Our expectation is that the recovery will vary geographically and will be nonlinear, meaning we'll see some markets in recovery while others temporarily retreat. As the only truly scaled global player, we think this represents an advantage, both in terms of revenue coming in as well as operational insights we can apply across markets. Today, we've seen that the rebound is led by weekday 9 to 5 trips, including commute use cases. For reference, in 2019, 80% of our gross bookings were delivered from trips in a user's home city, meaning people traveled around their own commute percent from trips in a user's home country. We expect that a recovery led primarily by commute trips will open up exciting new prospects for Uber for Business. as companies look to move their employees to and from offices, as well as partnership opportunities with transit agencies to move essential workers. We're aggressively pursuing both and already working with MTA in New York to do the latter. Now, a bit more on our Q1 performance. Our rides business experienced strong momentum through February, with year-over-year gross bookings growth of nearly 20% for the two-month period of 2019. As the lockdown began to affect our business in mid-March, we experienced trip and gross bookings declines of nearly 40%. And despite this sudden deterioration, we're able to maintain strong Q1 take rate of 22.8% and rides adjusted EBITDA margin of 23.5% of adjusted net revenue, clearly demonstrating the variable cost structure of our rides business. Our rides focus has now turned to recovery, specifically on providing safe experience for drivers and riders and as they start to move around their communities again. And as we publicly confirmed several days ago, we're working through plans to require drivers and riders to wear masks or face coverings when using Uber in certain countries, including the U.S. We intend to continue to set the standard. As the rides business recovers, we've been hit for a number of reasons. Rides-only players have been disproportionately impacted. While our rides bookings were down 80% in April, our total company is only significantly by EATS. EATS has also allowed us to maintain and to bring in new customers onto our platform and faster recovery than rides-only players. We also have a profitable ride business globally with many non-U.S. markets that are higher margin, allowing us to cross-subsidize as necessary and to recovery from a position of strength since we have a larger rider and driver base. Reportedly, many drivers have spent their time on Uber during this period because we've been able to offer them an alternative source of work in food delivery. Less important in the near term, this was historically a sweet spot for a primary competitor in the U.S. with around a 50%. Now, turning to Eats, which performed extremely well in Q1, generating 4.7 billion gross bookings, up 54%, growth year-on-year, while expanding take rate to 11.3% loss to $313 million. In addition to our core Eats product, we're seeing strong demand for grocery and convenience items, launching partnerships with supermarket chains, allowing them to sell a limited menu of everyday essentials via our restaurant platform. From early March levels, grocery and convenience gross bookings increased 117% over the same period and increased 34%, including Care4, one of Europe's largest supermarket chains. Finally, in the next few months, we expect to close our acquisition of Corner Shop, one of the largest grocery delivery platforms in Latin America, with operations in Chile, Mexico, Brazil, expected stickiness of grocery post-COVID, and our footprint in LATAM, we look forward to closing this transaction soon and creating an integrated product across the Cornership, Uber, and Uber Eats apps. While no one could have predicted the swift and intense impact that COVID would have had on our lives and our business, I'm incredibly proud of the quick and decisive action our team has taken to respond to the ever-changing environment. And now, over to Nelson for more details on the numbers.

Thanks, Dara. Now onto the GAAP results for Q1 2020 with comparisons year over year, unless otherwise noted. Our GAAP revenue of $3.5 billion was up 14%. GAAP costs to revenues excluding DNA of $1.8 billion decreased to 50% from 54% of revenue in Q1 of 2019. GAAP EPS was a loss of $1.70 in comparison to a loss of $2.23 in Q1 of 2019. 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 stock-based compensation. Our total global trips were generally in EMEA and Latin America, up 11%. As an average during the three months of the quarter, and March was heavily Total company gross bookings of $15.8 billion grew 8% or 10% on a constant currency basis. Adjusted net revenue or ANR was 10% on a constant currency basis. Our ANR take rate was 20.6% of gross bookings of 180 basis points. Non-GAAP cost to 46% from 50% of ANR. Insurance and payments as a percent of ANR improved quarter-over-quarter and year-over-year operating expenses. Operations and support decreased year-over-year to 15% from 16%, reflecting continued rise, especially offset by a mixed shift to EATS, where we are making progress automating customer support, but where contact rates remain higher than rides. Sales and marketing decreased to 26% from 36% of adjusted net revenue versus Q1 2019. This decrease is primarily due to lower marketing and promotion spend, particularly in rides. R&D remained flat at 15% of adjusted net revenue. G&A increased to 18% from 15% of ANR versus the year-ago quarter. Quarter over quarter, our spend remained relatively flat, but increased as a percentage of adjusted net revenue due to the top-line pressure from COVID-19. Our Q1 2020 total adjusted EBITDA loss of $612 million for a $257 million improvement year over year. Now I'll provide additional detail on our segments. RISE gross bookings of $10.9 billion declined 3% on a constant currency basis, led by the U.S., but due to the COVID-19 impacts taking hold in March, offset by positive growth in Latin America and EMEA. Rides ANR of $2.5 billion grew 6% on a constant currency basis, with a take rate of 22.8%, which improved both year-over-year and quarter-over-quarter due to rationalization of incentive spend, mainly in the U.S. Importantly, global rides gross bookings in ANR on a constant currency basis and excluding shared rides were growing in the mid-20% and high-20% respectively during the months of January and February. $581 million, or 23.5% of ANR, In the months January and February, rises adjusted EBITDA margin. Eats gross bookings of $4.7 billion grew 50% on a constant currency basis, driven by continued tailwinds from stay-at-home orders in the U.S. and international markets. Up $124% on a constant currency basis due to a mixed shift towards small and medium-sized restaurants, driving higher courier payment efficiencies, mainly in the U.S. Excluding Eats India, which we divested to Zomato in January of this year, this represents a significant 150 basis point improvement quarter-on-quarter, which is 10% long-term take rate. We are confident these take rate improvements are structural improvements. Eats is Suggested EBITDA loss was 313.4% of ANR. That does represent a 50% or $148 million quarter-over-quarter improvement. Given this large improvement quarter-over-quarter, we expect each suggested EBITDA losses in Q2 to be similar to Q1, despite each gross bookings likely coming in well above our plan. EBITDA margins continue to improve in Q3. Uber Freight grew ANR to $199 million, an adjusted EBITDA loss of $64 million. Our other bets segment had ANR of $30 million and an adjusted EBITDA loss of $63 million. Of course, given the deal we announced today with Lime, the vast majority of these losses, ATG's adjusted net EBITDA was a loss of $108 million. And our Q1 for Morindy, $645. which represents the GN5 segments, increased 14%. In terms of liquidity, we ended the quarter with approximately $9 billion in cash and cash equivalents, in short, over $2 billion from our revolver. Since then, we have paid $900 million of the commitments for 2020 that we discussed on our March 19th call. We expect 2020 CapEx to be in the $550 to $600 million range. In January and February, we produced a ride-segment EBITDA margin of 30% of ANR, a 22% year-over-year improvement over Q1 2019's margin of 8%. In EATS, we continue to make progress towards a ride-segment EBITDA margin improvement of 46% as a percentage of ANR. We will continue to make progress towards our EATS long-term profitability target. While a lot remains unknown, you can expect us to continue to focus on liquidity discipline and take actions to maintain our position, our strength, turning our growth to business and achieving profitability for all of our stakeholders, which we are now planning to achieve on an adjusted EBITDA basis on a quarterly basis in 2021. With that, now I'll open it up

All right.

Thank you, sir. Star one now. Our first question comes from Brian Nowak with Morgan Stanley.

Thank you for taking my question. I have two. I wanted to kind of pick your brain a little bit on the way you think about new business opportunities and the way the business overall can emerge and change post-COVID into 21. You talked a little about grocery and essentials. Maybe talk to us about other opportunities you see and other investments you need to make to really capitalize on those. Then the second one, just around safety for riders and drivers. Maybe talk to us about how you think about using the safety of the rides for everyone. Thanks.

Sure, Brian. Absolutely. In general, as far as new business goes, silver lining to this unbelievably tragic is the business that we have of eats just looked like, just substantially increased, and some would say by multiples. And we had already signed up an agreement to buy the majority of Corner Shop, which is a very big grocery player in LATAM as well. And we've got a great team from Corner Shop who's working on grocery. and essentially we're going to bring Corner Shop in and hopefully give the Corner Shop kind of exposure that it brings on a global basis. We haven't closed yet, but you can imagine the opportunity there. So as far as new opportunity goes, you know, the new opportunity, The big opportunity that we thought eats was just got bigger. You can see that from the acceleration of our Q1 growth rates, which actually beat our own internal plans, and Q2 growth rates are substantially increased. And then with grocery, we've already started with some essentials as it relates to eat. We've got grocery coming in. And then we're developing such as Uber Connect and Uber Direct, where retailers can send packages. as well. So when you put this all together, actually the core business and the opportunities in the core business look much bigger. And we don't have to look far for very substantial continuing growth going forward. That's how we look at it. For riders and drivers go, you know, we have been an absolute priority at this company ever since I joined. We were safety for riders and drivers previously. And now we're absolutely looking at, as a combination, we're shipping millions of PPE and masks to our drivers to make sure that second and continuing drives that our riders take are safe and they feel safe. are looking at technologies such as, for example, our selfie technology, where we make sure that the driver who has been, who's signed up is the actual driver who's driving. We can use that technology to make sure that the driver is wearing a mask where appropriate. So we're absolutely exploring technology, and you need a combination of technology, logistics, and local know-how in order to operate safely at the kind of scale that we do on a global basis. So we absolutely believe we're going to be the leaders in defining the safety of this platform.

Great. Thanks. Thank you. Our next question comes from Justin Post with Bank of America.

Can you talk about market share businesses? Obviously, you U.S., maybe Mexico and London, what you're seeing there, and are there opportunities for you to take some share here in this environment? And then with travel, I know it's an important topic, airport trips. Can you talk about how important they are? Just remind us on booking availability. Thank you.

Sure. In terms of share dynamics, and then Nelson will take the airport question. You know, in terms of share dynamics, we did see early on, And this year, we met in California to really solidify our position as a platform in terms of independent work, our drivers getting more information, the payments going directly to drivers, et cetera. And that did result in some loss in category position in California markets. We haven't seen substantial changes since, and frankly, with business being down so much, the data is – and the U.K. Nothing – you know, I think the share in general has been pretty – multiple competitors in both – in the U.K. Share trends and I would say the – aggressiveness of promotions to COVID. We haven't seen things change significantly during this period. Our competitors are saying in general kind of promotions are down, couponing is down, and I think competitors are focused more on profitability. So much remarkable. Coming out, we do think we have an advantage with customers and millions and millions of eaters today. That engagement is substantial with grocery engagement. Already with our drivers, for example, about 40% of our drivers who are dispatched to eat in the month of April, which is an all-time high. the structural advantage that are having to spend a bunch of capital buying into category positions, so to speak.

Airports? Yeah, so, Justin, airports are important to us, but as Dara said in his prepared remarks, you know, 80% from the user's home. So, for us, it provides growth bookings at about 70%. 16% of our rides segment EBITDA. So it is important, and we do expect that that recovery will take a little bit longer.

Great. Thank you.

Next question.

Texas cities are up 50% from the bottom, so I assume that means they're 20% of peak. Is that sound right? And how does the curve on the recovery compared to Hong Kong at the same stage? And do you think that is Hong Kong, are they taking share from public transportation? It would be great. Thank you.

Yeah, Ross, it's too soon to tell regarding the share from transportation. I'll start with Hong Kong. The recovery is uneven. We've had certain weeks where Hong Kong was down. 40% from peak, 50% getting better. So certainly the passage of time seems to be pushing trends in a positive direction. Whether or not there is share being taken from public transport, in talking to many of our U4B customers, some consternation at bringing back their employees' and using public transport. So I'd say from a conversational from a U4B customers, it does seem like commute is going to be the use case. I wouldn't be surprised if from transit. But it's too early to tell at this point. I will also say that we believe that We absolutely believe in partnerships with transit agencies. You've seen us put transit on our app, but more and more we're offering services to transit hours for MTA between midnight and I think it's 5 a.m. during hours when it just doesn't make sense to run a transit. I do think that we can be a part of the solution and I think we'll be one of the early movers And we're certainly going to look to partner with transit going forward. Texas. Nelson, do you know the particular weather, what percentage of peak they are? I mean, it's markets, but the trends. But, Nelson, anything to add there?

Yeah.

Yeah, no, I don't know.

All right, next question.

Do you have any sense for your competitor markets where they're not number one, number two, to what degree you're to see sort of similar actions Obviously, no, you're not in their head, but to the extent that using your gut and your – what you expect to see on that front and any sense of timing that – Yeah, Heath, from a macro standpoint, I would say rationalization both in the right category –

has been the name of the game. All of these competitors have been burning money for a long time. We're unique in the rides category of scale in that we're global in our rides. Very, very profitable. Our EBITDA margins were running over in Jan, Feb. And I think in the food category, you were seeing a bunch of consolidation. There was a bunch of consolidation happening on a global basis. players can not only provide better service for restaurants and consumers, but can provide a better service on an economic basis that is sustainable. Which is this food delivery grocery category just got a lot bigger. There's a ton of new customers coming to this category. And what we've seen with the customer acquisition, then there's very high frequency, very high satisfaction of the product. So we think there's in terms of the category that the commercial and the capital kind of rationalization is still going to continue. but it is a big category and big categories that just got bigger. I think you'll see similar plays from other players. The markets seem to like rationalization, and I think ultimately the markets are going to drive long-term behavior. But, you know, the category got bigger and capital chases the category, and certainly growth is at a premium right now. So we'll see. It's hard to be absolutely predictive.

Great.

Next question.

Thank you. Our next question.

Sure, taking the question. Dara, you talked about the 40% of U.S. to EAPS in April as you come out of the crisis. And then, secondly, I just wanted to ask you about your investments and your thinking is there during this time. Thanks.

Yeah, Doug, and, you know, The loyalty of both our riders and drivers is based on the service that we provide them. And we want to make sure, you know, that – and I do think that in the recovery scenario, as these countries open up, our platform is going to be an incredibly important platform for people to start earning again. So I think if we bring the voltage in that our volume with rides is not only going to come back, and, you know, we don't know exactly how fast it's going to come back, but it's on the comeback trail. But having EATS just provides a structural advantage, and ultimately it's about the service that takes care of them in terms of safety, and during a time when, you know, the economic damage to a lot of folks in need has been very, very significant. And you also remember that we were consistently, you know, first and, for example, providing our drivers with help if they were diagnosed with COVID or they had to shelter at home. So I think we've consistently shown leadership and we're there for them. And, you know, we're not going to stop them from working on any other platform or using any other platform. We're an open platform. But I think if we're consistent, we take care of them, and we give them an opportunity to earn, I think we'll be successful. As far as our ATG investments, listen, I think from a standpoint, ATG has always been a long-term investment. You could hypothesize that some people are going to feel safer with a car that is driven by a robot than a person. Our job, number one, is person-driven. But the fundamental ATG technology, its relevance, the market size hasn't changed. That said, in a market like this where capital is dear and we bring discipline to everything that we do, we are asking every part of the company, that includes ATG, to make sure that every dollar you spend is a dollar that brings a return. and that's going to include the ATG group as well as other groups.

Great. Thank you, Dar.

You bet. Next question.

Thank you. Our next question comes from Eric Sheridan with UBS.

Taking the question, maybe a few on EATS. You know, Dar, I wanted to get your perspective as more supply comes into the EATS business, what you're seeing from a competitive dynamic on either EATS user side and how sort of a more level playing field of supply and market demand and market share. And then what does that mean for the long-term profitability of these?

Sure. We are absolutely, both on an absolute basis and relative to our competitors as well, We've signed up Chipotle. We've signed up Shake Shack. We've got Dunkin' on our platform as well. So there are big brands that are coming onto our platform that demand, and the more choice we have, the more restaurants we have available per search, we see conversion going up. So I think on the restaurant supply front, we are making progress. there's significant progress to be made. And what's interesting is we're seeing the kind of acceleration in growth rates that we're seeing in April and it continues in May, if anything, it's improving, despite my belief and I think the team's belief that we can do better on the supply front. So if our character is optimized on supply, we're still signing up a ton of restaurants. These restaurants need us. And we want to make sure we're there for them. And right now, the trends in terms of supply look very, very good. Now, I do think that the big brands and the national brands or the global brands are really important. I would make sure folks know that our small and medium restaurants still account for the vast majority of our volume. and are a big part, are going to continue to be a big part of our volume going forward. So the big brands are kind of great customer acquisition vehicles. They're terrific food quality. They're safe. They bring a lot of folks in. But small and medium businesses and restaurants continue to be a significant part of our business and our growth going forward. In terms of the margins, revenue margins, You've seen the trends, and I think we can continue to improve revenue margins. This is about generally margins. We are improving our courier efficiencies. The more demand we have, kind of the more concentration we can have a market, we can batch more couriers, couriers kind of carrying more than one package, et cetera. And in general, better technology, can improve our revenue margin as far as utilization goes as well. So I do think that the take rate improvements that you have seen are going to continue, and we're quite confident in that.

And then the only thing I would add is that you continue to see it like we did yesterday, earlier this week, and like we did in India. And so we're going to continue to optimize and work hard on our capital allocation model.

And just to give folks a little more character on SMBs, our SMB gross bookings grew at three times the pace of our non-SMB business from February to April. So SMB is growing really, really quickly, and our SMB self-service business grew at 70%, which is like five times the pace of non-SMB businesses over the same period. So this is SMB structurally. One is SMB. We're helping a lot of these restaurants stay in business during incredibly difficult times. So it's like we're doing good, but it's also structurally good for the business going forward.

Great. Thanks for all the color.

You're welcome. Next question.

Thank you. Our next question comes from Mark Shumlick with Bernstein.

Thanks for taking the question. A couple, if I may. The first, you know, you shared the stat around, you know, 40% of drivers being able to move over and support the Eats business. Any color in terms of the demand side and the customers? You know, how many of those Uber ride-sharing folks are now adopting and trying it? And then anything around cost of acquisition that you could talk about would be great, around any discounts offered versus, like, pre-COVID level. How much inbound demand are you seeing would be great. And then for my second question, it's always tough to make headcount reductions. It sounds like a lot of the folks have been in the recruiting and customer service departments. How much of that headcount kind of comes back as demand comes back? And then, you know, are there any incremental efficiencies you see here with kind of a new way of doing business? Thank you.

Yeah, absolutely. As far as demand side, I don't want to disclose any particulars, but we have been using the Rides platform, and we're getting more and more effective in using the Rides platform to cross-promote into EATS. You'll see that in some of the designs of our rides out front, rides and eats and other categories. For example, grocery could be another category. Transit could be another category. So on the product side, we're getting much better, and I'd say we are in the early innings of continuing to cross-promote different kinds of services. This is also going to be possible on eats, again, grocery and some of the neighboring services as well. So we have seen substantial pickup. A higher and higher percentage of our RISE customers are using EATS, and I think that we're generally in the early innings there. The one exception I would tell you is there are certain markets in Europe, for example, where restaurants have closed, so restaurant supply is well down. So on those markets, you don't see as much of the cross-pollination. As far as the cost of acquisition trends go, friends, there's always a tradeoff between cost of acquisition and then the amount of volume that you can bring in. So, you know, you can keep the same cost of acquisition and push optimize for acquisition costs. We are happy with our cost of acquisition. Improve our technology there or tracking there. We still think we have improvement ahead of us and be in a place where we are pushing for volume at the same customer acquisition costs or less and be able to improve revenue margins and EBITDA margins overall on our EATS business. It's just not going well, and the technology and the capabilities are getting better and better. If you look at EAPS, for example, monthly active platform consumers are up 50% year-on-year since Q1 of 19. And I don't think anyone on the team would say that we are doing as well as we can or should on the customer acquisition front. Nelson, you want to talk about the headcount and how much comes from back end or how much comes back as demand comes back?

No, I would be happy to. So, yes, we did make the move. And as everybody knows, those are tough decisions that have to be made. We do expect that as business continues to grow, I don't think you'll see us adding back at that same level. As you know, the company has been very much focused on efficiency and what we call contactless service. And we've been seeing good marks there. And so you'll see us continue And then the only other thing I'd want to add is that, you know, we're continuing to look across our business and our platform for more efficiencies. And so you should make sure that as you get off the call that you hear that. I think the deal that you saw today that we did with Lyme as well is also a good proxy. The reality is the world has changed, right? And so we don't know when the recovery is going to be. We think we're very well positioned today. it's incumbent upon us to make sure we come out of this even stronger and better positioned. It's not lost upon us. We are going to take the actions that we think are necessary, that we continue to strengthen our core rides in these businesses. And there's no sacred cows. And so we are going to look at everything across the whole platform. And so that is something that is going on right now.

All right, next question.

Thank you. Our next question comes from Jason Helfstein with Oppenheimer.

Two questions, I guess. On EATS, it looks like you're coming from a lower take rate than your peers. There's probably some mixed issues when we look at consolidated, but just talk about what that means. You know, you're kind of coming from low to higher, and a lot of them are going from higher to lower, and kind of what that does with your positioning with the restaurants. And then has there been any discussions on, as cities try to deal with social distancing, particularly dense cities, that you can do to work with them, et cetera, that could work out in your favor? Thank you.

So I'll take the first one, and Dara will take the second part of that. So in terms of the margins, it is very difficult to look and compare because, as you know, many of them are – either single geography or just a few and as you know we're global and so we're we operate in you know over 50 countries and so it's very very difficult and so as you know we've been taking the action profitability including the actions we took earlier this week and took the actions uh took our india business and sold it into zomato and so um If you look peer-on-peer, there are some places in some countries where we are over-indexed against some of the large chains, and so that will tend to drive down the take rates versus a competitor that is more SMB. But as you heard from Dara's comments, as we continue to build up our SMB businesses, as well as our customers, as well as even some of the smaller now as a result of COVID-19, And so that really is driving the take rate improvement that we're seeing in the second and third quarter. We're seeing this. We're seeing higher basket sizes. We are taking some operational steps on courier efficiency, and this will all translate into us continuing to make progress against our longer-term EATS target margins. Dara, you want to cover the other part of the question?

Yeah, absolutely. I think as far as social distancing and working either with cities or states or countries that Listen, we're going to be responsible. We want to be part of the solution and not part of the problem. For example, with our app, when there was shelter in place and someone tried to use the Uber app, we'd make sure that they really needed to use the Uber app. Much more on PPE, making sure that our shipping cleaning supplies for them to ride as well because we want everyone to be safe. Riders wearing masks, encouraging them to wash hands, et cetera. So we're a very big platform, and as part of the work with cities, states, and our constituencies to make sure that we are helping educate the public so that we can live the life that we've all loved in a responsible way. And we're absolutely going to be part of that solution. And as far as partnerships that we're striking with transit agencies, we are going to be there step-by-step and to be part, again, of making sure that we're turning them back on in a safe way.

Thank you. Our next question comes from Mark Mahaney with RBC.

Thanks. I want to ask about how the crisis has catalyzed new businesses' opportunities. We've talked about this a little bit in the past, but expanding it, and you're doing it for a century.

services but other other commercial opportunities of that opportunity for you thank you very much yeah mark i think in in in these times of crisis you have to keep being simple um we have it's not a new opportunity but it just got a lot bigger and it's called eats and we have rides which is the global number one and basically everywhere that we operate with margin so We're going to focus on that really, really strong. Work incredibly well. There is a really interesting opportunity for us to get into grocery, both organically and with our acquisition. And with both rides and eats, we are going to, because we just think it's going to be a much bigger part of retail in general going forward. So the good news is that the growth opportunity is in the core, and we already have global scale in the core, and we have in that core as well. And we're going to focus on that right now. Okay.

Thank you, Dara.

You're welcome. Next question. Thank you.

Our next question comes from Lloyd Walsomley with Deutsche Bank. Thank you.

on some of the kind of clavis markets and any progress you made pre-COVID? And then, you know, is there any change in how you think about those markets that you can give us an update on?

Yeah, we were making strong progress. You know, the Germany was a – and very growing at triple digits, essentially. COVID. Argentina was a very promising market for us. That was – markets in general were growing about seven. There's no reason to think that structurally post-COVID. anything's going to change. I think Germany has done a great job of opening up their market, so to speak. And as these markets open up, we're going to open up with them, and we're going to do so in a safe way.

Okay, thank you.

You're welcome. Next question.

Our next question comes from Yusuf Squala with SunTrust.

Great, thank you. This Dare, you've alluded to this in some of your remarks, but curious if you could comment maybe more specifically on changes you're positioning with the TFL.

We're going to have our day in court. We're confident of the changes that we've made to the service. We think that we are setting a bar for safety. We have been setting a bar for safety, and I think we're improving on our own bar for safety. We're going to keep upping the ante, so to speak, in terms of safety. We have a great partnership with the National Health Service. People are in need of help. it's tough to tell as to whether COVID is going to delay things one way or the other. It actually changes and we are confident of our position and, you know, I think that we'll see, we'll have our day in court and we like our chances.

Thank you. We have a question from John Blackledge with Cohen.

On EATS, Do you think the level of growth in April is sustainable as we round through the year, potentially given people's concerns about eating out and despite a looming bad macro environment pandemic, online grocery demand has seemingly been pulled forward a couple of years, as you alluded to, Dara. How are you going to address grocery delivery in the U.S. platforms and deals they have with large grocers? Thank you.

Yeah, so in terms of the EATS growth and is it sustainable to predict what's happening in these markets, it certainly does seem to be sustainable over this period. What we described in April were trends during periods in which some big European markets in terms of restaurants, et cetera, were closed. So we're optimistic of trends in the category. The team is only improving as well. We're very happy with the execution. So is the category, did the category just get much bigger? Yes. Did millions of millions of new customers essentially try out the category? Yes. And are we in a superior position to be one of those services Yes. So I think we're in a great position, but I think it would be foolish to try to predict particulars in terms of growth rates. We are optimistic as it relates to ETS. In general, on the grocery side, corner shop is our big play there. We've an asset acquisition. Corner Shop is quite focused in Latin America. You know that we have a very big rides business in Latin America, so Latin America can be not only a big market but also a high-margin market as well. And I think in the U.S., right now, just the category is so big that we think that there is going to be room for more than one player, and we have very big scale in terms of audiences. We're in many of these cities already. So we just have the infrastructure to be able to get started in these cities in a very low-cost way versus someone kind of starting up in the category. We saw kind of very, very strong early signs from grocery just with essentials. And I do think it's something that can scale, and we can be one of the scale players. But we're going to do so in a careful way. We're not going to buy our way into share. We're going to earn our way. and I think we're in a pretty good position to earn our way. Thank you. You're welcome.

Yes, sir. We have a question from Brian Fitzgerald with Wells Fargo.

Thanks, guys. So my question is, franchises allocate national advertising budget and spend to yourselves and the food delivery industry. advertise, shifting budgets, supporting the medium and the industry. Case in point, for context, McDonald's requires, I think, 4% or 5% of gross sales to be spent on advertising. So that is something that I think would subsidize you guys and support you guys. So that's my question. Thanks.

Yeah, Brian, it's a good question. I think in general, The category, it makes a lot of sense. I mean, the national players are simple marketers. I mean, they build these incredible brands, and you can expect them to allocate brand to where the growth is. So I would absolutely not be surprised to see a McDonald's or Chipotle or other national brands focus their advertising more on delivery. I don't think it's a hard sell right now, and I think that it's going to benefit them, and it's going to benefit the category as well. I do think that for us, advertising in general, on Eats especially, is a pretty interesting category. When I was in the olden days, when I was running Speedia, advertising and travel turned out to be a very fast-growing category that was incredibly high margin. You've seen leading players like Amazon that have built product search and then built advertising on top of product search as well. And I think that we've got the same opportunity with Eats. So when we talk about the revenue margin opportunity for Eats, that's really a revenue margin opportunity for the pure play. And we think that there's an advertising opportunity with Eats as well. Just as you see end caps in supermarkets, you could see end caps in the Eats feed, for example. So it's early, but we have seen this play run before, and we have an excellent engineering team, and we're quite optimistic as far as the advertising opportunity goes. inside of the Eats product, and then eventually it might go to the Rides product. I think that's it. I would like to thank everyone for joining us. This is an extraordinary time, so we appreciate the time. And again, I do want to thank everyone at Uber, all the employees. I think this has been a very, very tough time, but I think that we – We as a company have risen to the occasion. There's a lot of hard work ahead of us, but I know that as a company we're more than up for it. So thank you very much for joining. We'll talk to you next quarter, and stay safe.

That does conclude the conference call. You may now disconnect.