Uber Technologies, Inc.

Ladies and gentlemen, thank you for standing by, and welcome to the Uber Technologies Q3 2020 earnings conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded, and if you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Ms. Emily Reuter, Investor Relations, please go ahead.

Emily Reuter Thank you, operator. Thank you for joining us today, and welcome to Uber Technologies' third quarter 2020 earnings presentation. On the call today, we have Dara Khatashahi and Nelson Che. We also have Apology Christian Murphy, 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 the reconciliation of GAAP and 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. I will 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 section under the caption Risk Factors and Management Discussion and Analysis of 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. Following prepared remarks today, we will open the call to questions. For the remainder of this discussion, all growth rates reflect year-over-year growth and on a constant currency basis, unless otherwise noted. With that, let me hand it over to Dara.

Thanks, Emily, and thanks, everyone, for joining us today. It's hard to believe that it's been eight months since I first spoke with you about the coronavirus pandemic. Without question, its impact on the world has been one of the most significant events of our lifetimes, and we've moved quickly as a company to respond. We've taken steps to prepare our mobility business for any recovery scenario and to seize a vastly expanded opportunity ahead for a delivery business, all while improving the overall health of the company by taking out more than $1 billion in fixed costs, strengthening our balance sheet, and more rigorously allocating capital with a focus on our core segments. Despite the volatile environment, we steadily recovered gross bookings throughout the last two quarters, with September run rate gross bookings reaching nearly $65 billion, down just 6% compared to last year. And despite the 50% decline in mobility gross bookings, we ended Q3 with total company adjusted EBITDA only 7% lower than last year, and we expect to improve adjusted EBITDA year-on-year in Q4. Whether consumers want to safely go someplace somewhere in their city or get something delivered to their door in 30 minutes, Uber is becoming their go-to app. In September alone, over 80 million people generated more than 425 million trips or deliveries across our platform. What I'm even more proud of, though, is that we connected 3.2 million drivers and delivery people to earnings opportunities and over 560,000 restaurants and small businesses to their customers during an unprecedented economic crisis. I'll now dive into each of our core segments, starting with mobility. Unsurprisingly, the mobility recovery continues to be directly correlated with the level of lockdown restrictions in any given city. When cities start to move, so too does Uber. Mobility growth bookings continue to improve throughout the third quarter, nearly doubling from Q2 levels and down 50% year-on-year. We saw mobility GBs improve 10% month-on-month versus September to down 44% year-on-year. That's October mobility growth bookings. LATAM and APAC led the recovery, offset by slower gains in the U.S. and Canada and a modest contraction in EMEA driven by the new lockdown orders. The U.S. has been an overall drag on our global recovery. As a point of comparison, mobility GBs outside of the U.S. were down 34% in October versus down 55% in the U.S. But we have some bright spots, even in the U.S. Since bringing the case count under control over the past few months, New York City has improved significantly, with bookings recovered to 63% of year-ago levels in October. We're seeing Uber recovery faster than taxi and public transit in the city, indicating a deep level of consumer trust we believe stems from our safety technology investments and the reliability of our service. New York City rider engagement is up double digits year on year, but it's particularly up during non-peak hours, suggesting the emergence of new use cases. As of last week, while New York weekday commute and weekend gross bookings have recovered to roughly 85% of prior year levels, weekday gross bookings outside of commute hours have recovered to nearly 100% of prior year levels. Elsewhere, Brazil, our largest market on trips, recovered to 87% of prior year levels in October. We're seeing workday, commute, weekend use cases nearly fully recovered year on year with airports, of course, lagging. All early evidence we see makes it increasingly clear that it's a question of when, not if, our mobility business will recover. These trends give us the confidence that mobility will fully recover as public health situation improves and as people return to Uber to get to work, go shopping, or reunite with their friends or family. Finally, It's important to note that we're continuing to invest in product innovation to drive growth. For existence, our taxi business grew nearly 20% year-on-year in Q3, and auto rickshaws and motorbikes are recovering faster than the rest of our mobility segment. We're leaning in and seeing strong momentum with Uber for Business. Nearly 40% of our top 50 enterprise accounts are new since March, driven by increased demand for new products, including specialized commute offerings and guest products such as vouchers. Now, switching over to our delivery business, which is benefiting from a massive structural shift in consumer behavior. As I've noted before, consumers are quickly becoming accustomed to the magic of having anything delivered to their door in half an hour, much like the magic of having a car show up in a few minutes. It's my belief that the tailwinds behind this category are so strong that we can continue to deliver exceptional growth while also improving profitability. In Q3, delivery gross bookings accelerated to 135% annual growth rate and reached a $35 billion GB run rate. Adjusted net revenue nearly tripled year-on-year, expanding take rate to 13.3% and improving adjusted EBITDA margin as a percentage of A&R by more than 10 points quarter-on-quarter. This growth is coming not only from an influx of new users, but also from higher engagement from existing users. With delivery MAPSE growth over 70% and trip growth over 110%, excluding markets that we exited, eater, restaurant, delivery, driver retention all increased year-on-year and quarter-on-quarter. And we continue to add new eaters at an elevated level. We did all of this with consistent improvement in the unit economics of this business in each quarter of this year. On the competitive front, we improved our category position in most major markets around the world, including growing GBs at triple digits year-on-year, and several large markets, including the U.S., Canada, U.K., France, Spain, Japan, Taiwan, amongst others. In the U.K., we continued to expand our national footprint outwards from our leading position in London, delivering gross bookings growth of nearly 200%. On a trip basis, we're now only about 30% smaller than the reported numbers from Justice Takeaway. This compares to 60% smaller a year ago. While the U.S. remains one of our most competitive markets globally, we made real progress in the quarter, with GBs up roughly 123% year-on-year. We improved our position in 11 of the top 15 markets, including New York City, Chicago, Washington, D.C., Boston, and Atlanta. Bookings in New York City grew more than 150%, sustaining our momentum from Q2, even as the city led the U.S. in reopening. We've also made meaningful progress in corporate ordering with our Uber for Business platform, adding new enterprise customers like Bank of America, Unilever, and Citadel. We also leaned into a number of growth opportunities during the quarter. We closed our corner shop transaction in all markets excluding Mexico and scaled our grocery business to over 30 markets, exceeding $1 billion in annual run rate. We expanded Uber Eats Pass to four additional countries, surpassing a combined 1 million paid members across Uber Pass and Eats Pass. We're particularly encouraged by the improved use of the trends we see with our Eats Pass members and will continue to roll out our other markets in Q4. Our ads offering is now live in the U.S. with over 30,000 restaurants running ad campaigns, many with significantly positive ROI. Even with the substantial growth investments, we continue to make progress towards profitability. In Q3, we had over 10 delivery countries adjusted EBITDA breakeven or better. While we recognize we still have enormous opportunity for growth and investment in the segment, we're confident that we can lean in and turn delivery EBITDA profitable sometime next year. Lastly, a quick word on Proposition 22, which we're happy to say passed with a healthy margin in California. This important question has now been settled in the most populous state in the country. California voters listen to what the vast majority of drivers want. new benefits and protections with the same flexibility. Going forward, drivers and delivery people in California will be guaranteed a minimum earning standard, health care contributions, accident insurance, increased safety protections, and more. We feel strongly that this is the right approach. We should be adding benefits to gig work to make it better, not getting rid of it altogether in favor of an employment-only system. That's why going forward, you'll see us more loudly advocate for new laws like Prop 22, which we believe strike the balance between preserving the flexibility that drivers value so much while adding protections that all gig workers deserve. Our proposal for a new pragmatic approach is supported by 82% of drivers and 76% of voters, and it's a priority for us to work with governments across the U.S. and the world to make this a reality. To sum up, while the last eight months have been tough for me, for our team, and for the millions of people and businesses who rely on our technology, I'm more optimistic than ever about Uber's future. The tough actions we took, the resilience we've demonstrated give me confidence that we'll emerge from the pandemic on an even stronger foundation, more nimble, more innovative, and more relevant to people's lives than ever before. Now over to Nelson for more details on the numbers.

Thanks, Dara. In spite of the unpredictable environment, I'm pleased with our ability to adapt quickly to respond to the challenges of COVID, stabilizing the business in the case of mobility and seizing new opportunities for delivery, all with a relentless focus on cost discipline and a drive towards quarterly adjusted EBITDA profitability in 2021. I will now discuss key operational metrics as well as non-GAAP financial measures. All comparisons are year-over-year and on a constant currency basis unless otherwise noticed. Total company gross bookings declined 8%, but improved 44% quarter over quarter. Adjusted net revenue of A&R was $2.8 billion, down 19%, again up 47% versus the second quarter. Our A&R take rate was 19.1% of gross bookings, down 238 basis points year over year, but up 32 basis points quarter over quarter. Non-GAAP cost of revenue, including DNA, increased to 46% from 45% of ANR, but down $320 million on an absolute basis, driven by lower volumes in our mobility business, resulting in a decrease in insurance and payment costs. Turning now to non-GAAP operating expenses, which include pro forma adjustments, such as stock-based compensation and restructuring charges. Operations and support decreased to 12% from 13% of ANR and was down $119 million on an absolute dollar basis, reflecting the headcount reduction actions taken in the second quarter. Sales and marketing increased to 32% from 30% of ANR, but decreased $152 million on an absolute dollar basis as we saw lower marketing and promotion spend in our mobility business. R&D increased to 14% from 13% of A&R, but down $75 million, primarily driven by a decrease in people spend. G&A increased to 18% and 15% of A&R, but again down 14% from a year ago. Quarter over quarter, our spend increased $76 million, but improved as a percentage of A&R at four percentage points and continued top-line recovery. Our Q3 2020 total company adjusted EBITDA loss was $625 million. Now I'll provide additional segment detail on our segments, starting with mobility. Mobility gross bookings of $5.9 billion improved 94% quarter over quarter and was down 50% year over year. And ANR of $1.4 billion improved 72% quarter over quarter and was down 51% year over year, while take rate of 23.1% improved year-over-year due to rationalization of incentives spent mainly in the U.S. and in Canada. Despite a significant headwind to our top-line performance, mobility-adjusted EBITDA was $245 million, or 18% of mobility ANR, improving $195 million quarter-on-quarter. Now to deliveries. We've seen continued tailwinds related to stay-at-home orders, as well as the consolidation of corner shop results this quarter, driving delivery gross bookings to $8.6 billion, up 135%. Delivery ANR of $1.1 billion, up 191%, due to an increase in food delivery orders, higher basket sizes from stay-at-home order demand, coupled with network efficiencies, mainly in the U.S. Delivery A&R take rate was 13.3%, up 256 basis points year-over-year, and up 56 basis points quarter-over-quarter, due to overall improvement in basket sizes and rationalization of incentive spend. Additionally, we realized an 80 basis point benefit year-over-year from business model changes in some countries that reclassify certain payments and incentives as cost of revenues. Delivery adjusted EBITDA was a loss of $183 million, or negative 16.1% of ANR, but that represents a $49 million and 10% improvement quarter over quarter, respectively. On to freight, which grew ANR 32% to $288 million, and adjusted EBITDA was a loss of $73 million. Freight EBITDA margin improved nearly 12 percentage points year over year, but weakened two percentage points quarter over quarter. The shift in consumer consumption from services to goods as a result of COVID has led to a surge in demand for freight. Combined with industry-wide driver shortages, this has led to a rise in market rates and pressure on margins across the industry and our freight business. Despite the industry headwinds, we are encouraged by the progress made this year. Tech-driven solutions can provide value to shippers and carriers, and we've seen this through the strong growth of digital channels like API Tendered Loads and adoption of other SaaS solutions like Uber Freight Enterprise. Over time, these real-time solutions will reduce our exposure to market volatility while also delivering strong economics. On to ATG and other technology programs. The adjusted EBITDA loss for the quarter was $104 million. In Q3, we returned our test vehicles to the streets of Washington, D.C., in addition to continuing operations in the Pittsburgh market. Our Q3 2020 corporate G&A and platform R&D of $510 million, which represents the G&A and R&D not allocated to one of our segments, improved 18% and held relatively flat quarter-on-quarter on an absolute dollar basis. As a percentage of total A&R, corporate G&A and R&D improved 8 percentage points quarter over quarter as we saw fixed cost leverage from restructuring actions taken in Q2. As a reminder, platform R&D represents over a third of the spend in the category, and the corporate G&A also includes accrued sales taxes and other fees. In terms of liquidity, we ended the quarter with approximately $7.3 billion in unrestricted cash, cash equivalents, and short-term investments, and have access to over $2 billion from our revolver, providing us with ample liquidity to manage through the recovery ahead. Based on October trend, I'll provide a few comments around our expectations for Q4. In October, mobility was at a $28 billion annualized gross broken run rate. While we expect the recovery to continue, we would highlight two factors to consider in Q4. First, EMEA, which was our most recovered geography in Q3, started experiencing new lockdowns in October, including in France and UK. Immunomobility growth bookings declined 3% month over month in October. And FX will continue to be a drag on year-on-year trends, particularly with LATAM as our most recovered geography today. For context, the Brazilian real has depreciated roughly 30% year-on-year, and we saw a three-point adverse impact from FX in Q3. In October, mobility gross bookings were down 44% year-over-year on a constant currency basis, but down 47% year-over-year on a reported basis. We expect mobility A&R take rates to be relatively flat year-on-year, consistent with normal seasonal declines, despite adverse geographical mix due to slower recovery in the U.S. For context, as a percentage of mobility gross bookings, the U.S. is currently 10 percentage point lower than in 2019. We expect delivery adjusted EBITDA losses in Q4 to be similar to Q3 levels on an absolute basis, with sequential improvements beyond Q4. As a reminder, we are leaning into delivery opportunities, including with incremental brand marketing spending in the U.S. and Europe, as well as investments in our growing grocery business. We expect stock-based compensation in Q4 to be $200 to $250 million. Overall, I'm pleased with the health of the business today and the progress we have made throughout this year. Importantly, we are not letting up on our profitability goals, even with our mobility gross booking still down significantly. In Q3, we produced $245 million in mobility-adjusted EBITDA, up nearly $200 million quarter-on-quarter. Put another way, this quarter's mobility-adjusted EBITDA margin of 18% was down only four percentage points year-on-year, demonstrating the structural improvements in profitability we have achieved despite the impact of the pandemic. Based on our current cost structure, we are confident that we can achieve total company-adjusted EBITDA break-even with mobility growth spooking 10% to 20% lower than Q4 2019 levels. And we now expect delivery to be break-even sometime in 2021. With that, I'll open it up to questions.

Thank you. And as a reminder, in order to ask a question, simply press star 1 on your telephone keypad. To withdraw your question, simply press the pound key. Our first question will come from the line of Brian Nowak of Morgan Stanley. Please go ahead.

Thanks for taking my questions. I have two. The first one, on the individual cities or markets where you've seen a sharper recovery in rides, can you just talk to us about what you're seeing in the competitive environment side for either drivers or riders? And the second one, congrats on Prop 22. Congrats. Question on that, as we're sort of thinking about it philosophically, talk to us about how you think about Prop 22 now impacting the pricing for the riders as well as strategies that could change the way you think about attracting drivers and maximizing their overall earnings. Thanks.

All right. Thank you very much for the question. As far as the recovering markets and the competitive environment there, I'd say the environment is constructive. A couple of notes. Generally, in certain markets, and the U.S. being an example, as the markets come back, we're actually in more of an undersupply position than an oversupply position as these markets come back. Just we have to make sure that drivers understand that it's safe to drive. I think that they're very comforted by the investments that we've made in technology and how clear we have been as it relates to our no mask, no ride policy. But it takes time. And, you know, these are human beings and what's happening outside is very tough. So the driver supply coming back is a bit slower than we would want. Some would say that's a first-class problem, and we are putting some incentives into the market in order to make sure that drivers come back and have great earnings opportunities during a period where economically more and more people need those earnings opportunities. As it relates to riders, what we are seeing is that the earlier cohort of riders who is coming back tends to be more price sensitive. These are folks who have to come back to work. They don't have an option sometimes to stay at home. And as a result, we're seeing a cohort that is more price sensitive in general, which is a little bit different than what we've seen in the past. which will provide some margin pressure for us. Although I tell you, if you look at our margins now, we're more than making it up in terms of discipline, et cetera. So as the world returns to normal, we think there will be margin upside as the cohort of riders that kind of come back represent a more fulsome kind of example of the ridership that we had pre-pandemic. All that said, as it relates to the competitive environment, it's constructive. All the competitors are being rational, and we don't see that changing. As far as your second question, Prop 22 increases in strategies, listen, I think on Prop 22 for now, what we are really focused on is making sure that we do everything that we can to get the benefits that Prop 22 promises to drivers as quickly as possible. There's some calculation that you have to do in terms of minimum earning standards, etc. So we are very much focused on the execution on Prop 22 as it relates to our drivers and drivers who use the platform. It may have some implication as it relates to rates. but we think that any effect that it has on rates will not have a significant effect on trip volumes one way or the other based on the kinds of sensitivities that we've seen in the past. Great. Thanks, John. You're welcome. Next question.

Next question will come from the line of Heath Terry of Goldman Sachs. Please go ahead.

Great, thanks. You mentioned the recovery that you're seeing in New York. As you look at the recovery in places like New York, Hong Kong, even what you were seeing in London before the more recent lockdown, can you give us a sense in terms of the characterization of the type of customers that you're seeing, the level of activity, what you're seeing in terms of business versus leisure versus obviously the travel part, which is going to be, smaller. And then what that sort of tells you about the pace of the recovery that we can expect in terms of other markets opening back up even as we start to see lockdowns like what we're seeing in Massachusetts. So just appreciate any sort of additional kind of insight around the right-hailing business that you can share based on that. And then you mentioned sort of the rationality of competition. Interested in any insight into how that carries over to the food delivery business post some of the consolidation that we've seen there. Thank you.

Sure. As far as the shape of the recovery, I mean, first of all, the shape of recovery, it's a city-by-city recovery that very much depends on the health situation on a local basis, which, as is apparently obvious, we can't do anything about other than making sure that our platform is the safest transportation platform out there. And I really do think it is in terms of the technology that we have invested there. We looked at kind of, well, does the recovery, does commute come back faster, workday come back faster, weekend come back faster, et cetera. And on a global basis, there is no tale to tell, which I consider great, which is the business just comes back. And there are some markets where work use cases are coming back faster than non-work use cases. The one interesting trend that we are seeing is, as I mentioned in New York, that the kinds of use cases that riders are using to engage with Uber seem to be changing, and we are getting kind of a broader demand set at broader hours of the day. So people are using the service, whereas they might have used it only in commute hours, they're kind of extending the hours, which might be just being more flexible in terms of how they live, or might be entirely new use cases. Say, I've got to go get groceries and I'm going to use Uber. The second factor that we are observing is that Uber is coming back faster than other transportation alternatives. I think we all want mass transit to come back. The mass transit systems in many cities have been in a very, very difficult state. We believe in mass transit with investments that we've made in route match, but we're seeing Uber, for example, come back much faster than mass transit. Same thing as it relates to taxi. For example, when we look at our volumes versus taxi in New York City, Uber's coming much faster than taxi, again, I think because of the investments we made on the platform, because of all the information that our riders have and our no-mass, no-ride policy, for example. So I think, you know, to sum it up, The evidence that we're seeing is Uber comes back when cities come back, and if anything, Uber is an advantage form of transportation versus alternatives as they come back. It's very early. Is this going to translate into long-term behavior? We're kind of seeing the food certainly translate into long-term behavior. So we like where we stand, but we, like everyone else, are waiting for the world to open up. As far as the food delivery space goes, again, nothing of note. We are focused on our own service, making sure that our reliability or dependability, the average time to order, et cetera, all of these areas continue to improve. We're very much focused on optimizing cost per trip and kind of the number of contacts that we have. And the result of all that, along with the Uber brand and are continuing to lead into the Uber brand with, for example, the Tonight I'll Be Eating campaign, has resulted in our ability to improve margins and generally improve our competitive position over our competition. So nothing of note to call out on the competitive front one way or the other, other than we're growing faster than our competitors and we're going to keep it that way. Great. Thanks, Dara.

You're welcome.

Next question.

Next question will come from the line of Justin Post of Bank of America. Please go ahead.

Great. Thanks for taking my question. I guess I'll focus on the delivery business. You're clearly kind of doubling down as a company, buying corner shop and Postmates. But just give us a flavor. Do you think that business could be bigger than or similar to rides at maturity? Secondly, I think you said you expected delivery to be profitable next year. Just want to double check that and what's different about the cities that are profitable versus those that aren't. And then third, maybe a corner shop update. Thank you.

Sure, absolutely. I'll start and then Nelson, if you can take on the delivery profitability question. As far as the site delivery marketplace, listen, I think that the TAM that we see in this segment is just as big as the transportation TAM. It is very, very significant. And the crisis, the pandemic crisis certainly has introduced new customers to this segment at a velocity that, frankly, we had not anticipated, we could not have anticipated. In hindsight, the fact that we doubled down on this category as aggressively as we did for the past two, three years, it's either foresight or being lucky, and it's probably a combination of both. The point that I would make as it relates to delivery, how big it can get, is the extraordinarily low penetration that we still have in terms of the restaurant universe being on the Eats platform. We talked about 550,000 restaurants being on the platform. In the U.S., we have about 30% of restaurants in the U.S. In the U.K., we've got about 16% of restaurants. In France, it's 15% of restaurants. In Mexico, Brazil, it's about 10% of restaurants. In Japan, it's less than 5% of restaurants on our service. So that would tell you that the growth that we have going forward is going to be many multiples as we penetrate deeper and deeper into newer restaurants. Now, I think that the incremental restaurant that we bring onto the platform probably is not going to be quite as productive as the restaurants already on the platform, but it just tells you that we're very, very early in the penetration here. I'm not going to make a call as to whether mobility or delivery are going to be bigger. I want those teams to fight it out. I think the great thing about Uber is that we've got both. We have a path to profitability for both. And we have a natural hedge as well as global scope that no other company is even close to. Nelson, do you want to talk about delivery, profitability, and then I'll end with Karshav?

Sure. So what happens in countries where we are profitable – We have a very strong, what we call competitive position, you call market share, across a number of the key cities in the country. This leads to very, very good selection, as well as mid-teens type take rates, which we've talked about how important that is in the past. It tends to be teams that are really executing well as we're building the brand investment and then continue to make some of the operational improvements. So you've heard DARG actually call out the progress they're making in the U.K., And so that has all the making of how you get to a country to be very profitable like we have already in the system. So the result of all this is we tend to have really high customer loyalty. And then we have this great experience. And so in France, for instance, we actually have a 24-minute average delivery time. And so we just... really outperform everybody. And so, you know, again, there's nothing special. It's just that teams are doing a great job. And we think that we'll be able to bring more countries towards those type of metrics as we continue down the path.

Great. And then as it relates to Corner Shop, it's very early. We love the Corner Shop team. And our grocery business now is a combined between Corner Shop and our delivery platform over a billion dollars in run rate. We expect that to be multiples of that billion dollars next year. So we're leaning forward pretty strongly as it relates to Corner Shop. We've signed up a number of partners, Eastern Grocers, Red Apples, Sainsbury's, many, many brands all around the world, and we think we're in the very, very early days. Notes for investors that we have not closed Corner Shop in Mexico. Mexico is one of Corner Shop's leading markets. We are optimistic that we'll receive an approval from Cofese that has been undergoing a rigorous analysis here of the acquisition. You know, we think the transaction benefits customers, merchants, and earners, and allow Uber Corner Shop to just bring far more options to consumers for a service that's now classified as essential there. So we think we're looking forward to getting into Mexico, hopefully, if Cofese approves the deal. And I think it'll showcase Mexico as a real world-class hub for entrepreneurship and foreign investment. Next question.

Our next question will come from the line of Mark Mahoney of RBC. Please go ahead.

Yeah, I'm on. Two questions, please. First, I think you provided a little bit of a trading update for mobility for the December quarter. Could you do the same thing with EATS? I'm sorry, you did for mobility, but not for delivery. Any update on delivery for the quarter? That growth rate is staggeringly high. Obviously, it's got to come down, but how do you think about the rate at which that comes down? And then, Dara, you mentioned a couple of these, you mentioned a couple times these kind of newer cases for mobility, different times of the day. Do you have just some basic examples of what those kind of newer cases of mobility would be? Thanks a lot.

So, Mark, I'll handle Q4, and I'll let Dara talk about the use cases. So, you know, we do expect you'll continue to see the momentum continue kind of where we are today in the very healthy triple-digit kind of range. I was careful to provide guidance in terms of the segment EBITDA for the quarter in Q4, largely because we are investing behind the business that made me put. So that business continues to do extremely well. We're very, very optimistic. I don't think DARA would have made – we would not have made the commentary about profitability on delivery at some point next year if we didn't see the efficiency as well as the consumer adoption that's going on.

And Mark, in terms of the use cases, listen, they're very broad. I haven't looked at it personally as to what the use cases are. What's interesting is that the number of trips per rider, not all ridership is back, but the riders who are starting to use our service, the trips per rider is up significantly. And during these kind of other times, the trips per rider is actually up double digits. And I think If you live in a city, Uber is just a utility type of use case. People use it for all kinds of different uses. We've introduced hourly rentals. We've introduced the ability to deliver packages as well. So all of the new use cases that we're introducing essentially broaden the service range. And we're certainly seeing that broadening translate into a greater use of the service in different times of the day.

Okay. Thanks, Dara. Thank you, Nelson.

You're welcome.

Next question?

Our next question will come from the line of Mark Smolik of Bernstein. Please go ahead.

Yes. Hey, guys. Thanks for taking the question. A couple if I may. The first, you mentioned a bit about what are some of the drivers behind the MAPC number. And we'd love if there's any incremental color you can share in terms of what's making that up in terms of whether it's just returning users, new users. I know you launched the new iOS app, and how that cross-sell might be going would be great to hear. And then the second one is, as we think about the delivery business, it sounds like ads is now up and running, grocery certainly, and I saw pharma as well. How do we think about the changing economics of the delivery business with all of those kind of new businesses that are sitting within it? Thank you.

Sure. As far as MAPSE goes, what we're seeing is Very, very significant MAPSE growth for the delivery business as expected. The number of new eaters coming onto the platform remains at elevated levels. And the retention of those eaters has also increased on a year-on-year basis. So we got more eaters. They're staying longer. They're ordering more. And that translates into very, very strong MAPSE growth. We're seeing a good MAPC bounce back on the mobility side of the business. And mobility still, even with delivery being at the elevated level that it is, the mobility business has a significantly higher number of MAPCs than delivery. So mobility for us, one, is coming back nicely with strong margins. But it's a great loudspeaker that we have as it relates to the new app. And what we're seeing happen is that with zero cannibalization, of our mobility business, we are able to introduce a whole new segment of rides users to Uber Eats. And often we see them coming back to Uber Eats within the mobility app itself. So we actually, early on, we expected, well, you know, we'll throw them to Uber Eats, download the app. Sometimes they'll use the rides app. Sometimes they'll use the Eats app. a double-digit percentage of folks who use the Rise app. Now we're just using kind of the Eats web view inside of the Rise app, which we think is a great sign. So this, we think, is a pretty strong advantage. It's increasing the frequency of use. uh for our mainline uber app and it's introducing a new a whole new segment to eat and it's kind of a growth channel that we have that some of our competition uh clearly doesn't have uh in terms of the new businesses the way i simplified is ads is clearly a very high margin business and something that we're quite excited about. Grocery and pharma on balance are going to be lower margin than our mainline business because they're just not nearly as mature. So I think the grocery and pharma will have negative effects on margin going forward, as will have a positive effect. We think we have the capability as it relates to our portfolio to balance the investments and the growth to get our delivery business to profitability next year. Great. Thank you. You're welcome.

Next question. Next question will come from the line of Ross Sandler of Barclays. Please go ahead.

Hey, guys. Just back to Prop 22. You had provided some stats that If you had rolled this out in 2019, it would have cost you a little bit more in a blog post a few months ago. If we apply that to, you know, just the unit economics, you're already above the minimum wage in a lot of markets. So what's the incremental driver earnings or cost that you'll have to absorb post Prop 22 rolling out? You know, I would say in all U.S. markets, maybe, you know, if you just do a per unit and then maybe a 2022 impact, And then back to the frequency and retention for EATS. Dara, you just mentioned that you're seeing this huge uptick. What do you see in frequency and retention for each customer relative to pre-COVID levels that informs you about your ability to kind of retain some of this GMV that you're seeing right now longer term? And anything that you're seeing in the data that suggests that the uptick is permanent versus temporary? Thanks a lot.

I'll start with the second, and Nelson, if you can then finish up with the first as far as the economics go. As far as the frequency and retention, listen, it's going to be very difficult to kind of look forward. And one way in which we try to understand what's going to happen post-COVID is to compare markets like a New York or certain countries that have opened up let's say France, before the lockdown or are in a process of opening up in advance of the other countries and to see whether the retention metrics or the basket size, et cetera, whether these metrics go down. And we haven't seen any evidence of that. There's no question that, you know, we are benefiting from the higher MAPCs, higher retention, higher basket size, higher frequency of order. As we look at markets that have opened up, we don't see any significant degradation of any of those metrics. We'll watch as we go forward. There's no question in my mind that this represents fundamentally – there's a fundamental behavioral shift that has gone on. I think people aren't going to stop using Amazon. People aren't going to stop using Eats. And we're taking advantage of that not only to grow our mainline business, but also to get into local commerce adjacencies. And I think we're one of the very few companies in the world to be able to take advantage of that at this kind of scale. Nelson, do you want to talk Prop 22?

Yeah, so, Ross, obviously, there's a lot of ifs and ands, so it's difficult to really answer it. And so it's not because you have to do it based on, you know, certain volumes. But obviously, it's very important that we maintain the independent contractor status. It will result in probably a 5% type increase in order to cover the incremental, whether it be minimums, whether it be incremental benefits. And we do expect that much of it will be passed along. Now, it could be different depending on the city by city or the time of day. But, again, as Dara said earlier, we do believe that it will be manageable, and we don't believe based on the models we run that it will have a material impact in terms of demand.

And this is specific to the mobility business? Specific to mobility, yeah. Next question?

Next question will come from the line of Eric Sheridan of UBS. Please go ahead.

Thanks for taking the question. Maybe one big picture one and one following up on Prop 22. From a big picture perspective, Dora, how should we be thinking about the type of behaviors you're seeing as the product set you offer to consumers continues to widen and the proposition continues to go a little bit deeper in terms of wallet share and local commerce? and what that might mean for sort of spend per customer on an annualized basis, or maybe even reflecting it back to cost, whether you could see a large inflection point in terms of marketing ROI that might give you a differentiated edge versus your competitors. And then on Prop 22, with the industry having won, how should we be thinking about what that means for either other states or maybe even a national solution. There's been a lot covered in the press on potential paths forward for the industry to be regulated, not in the form 85 was, but maybe to find a middle ground here. I would love your perspective on that as well. Thanks.

Absolutely. So, Eric, what we see consistently is that as we add utility, to both our mainline Uber app and our Eats app, and utility means just more to do in kind of an artful, well-designed way, the engagement with our app increases. So again, with our mainline app, as we add choices, et cetera, these choices don't cannibalize the mainline use of the app. And we're very careful to make sure we test and learn and understand what the use cases are so that we're not getting in your way. But in general, as we increase utility, as we increase choice, engagement increases. And as engagement increases, then retention rates, et cetera, increase as well. We are now at a position to do this for two apps in two very large segments. In mobility, as far as getting deeper into mobility, not just rides, but we've got taxi product internationally. We're investing in in mass transit, and many other bikes and scooters in our partnership with Lime. So we're expanding into other use cases as it relates to transportation. So anytime you want to go someplace, you come to us. We have the cross-promotion from our mainline Uber app into our Eats app. And with Eats now, we're expanding from just food now to grocery and pharmacy and other categories as well. And we're seeing, again, greater engagement, greater retention, higher spend as it relates to these consumers. We're underscoring this higher engagement with going out and launching Eats Pass and Uber Pass or subscription products. So subscription products essentially allow riders or eaters to get a discount for a for a subscription fee every month. We have over 1 million subscribers. We see the growth there as being very, very significant. And we see the frequency of our Eats Pass and Rides Pass subscribers move up a notch, a significant notch, in terms of the number of times that they come back. So I think that we've got this kind of a structured platform, two apps, one of which is making a transition from rides to all transportation. The other one that's making a transportation from grocery to all local commerce. The two of them essentially will be cross-promoting each other, and we will have a foundation of a payments platform, a routing platform, but also a membership platform as well. We think this puts us in an enviable position on a competitive front, but it's a lot of work to do from the teams. It's not going to be a plus 50%. It's like all of this work gets you advantages of 2%, 3%, 4% in terms of customer acquisition, lifetime value on a quarter-by-quarter basis. But the compounding effect of all this we think puts us in a very, very strong competitive position. As far as Prop 22 and your question as to its expansion, listen, we have always come forward. We were the first to come forward with this IC Plus model, the idea that drivers deserve flexibility plus benefits. I wrote a New York Times op-ed about this. We want to have a dialogue with governments in other states, We have had really constructive dialogue in other countries, like India just passed a legislation that we think was very constructive. So absolutely, we will have dialogue. And I think with dialogue, usually you wind up at the right place, which is the middle ground. And we think just this IC Plus model, it has huge support with our drivers. It has huge support of the voters. And we think over the long term, it's going to win. Next question.

Your next question comes from of New Street Research. Please go ahead.

Hey, thank you for taking my question. You can hear me well? Yes. Great. I was looking at your marginal economics between the second and the third quarter in the recovery, and it looks like if I look at rides, you have like a marginal take rate if I take your A&R, like different growth in A&R divided by growth in bookings of 20%. And then on that, you have an EBITDA margin of about 35%. And so my question was, does that reflect well your economics outside of the US? It looks like that's where you got most of your sequential growth. And should we expect, you know, once you grow sequentially with a stable mix, should we expect to start seeing your target profitability metrics, 25% tech rate and 45% EBITDA margin showing up on a marginal basis like that?

So, Pierre, I thank you for the question. Yes, we are seeing continued improvement. in the bottom line margin sequentially as the business starts coming back, specifically on mobility. If you listen to the first quarter call, we actually talked about the fact that if you looked at the February year-to-date number pre-COVID, we are actually getting to about a 30% margin as a percentage of ANR already. And so we knew that we were confident in terms of our ability to get to our longer-term margin targets because of the leverage we have. With the actions that we took on the productivity side, again, we feel confident that as the world recovers, and you've seen the quarter-over-quarter recovery, both at the top and the bottom line for our mobility business, that we will be able to achieve those longer-term margins. The part of it is that, you know, the COVID recovery is real. And so, obviously, as places like Paris and London go back into lockdown, That impacts the number of rides and how much people are going out. In fact, all of us are on these calls right now. You know, we're all sitting in our own different homes. Again, so once we start moving around, we're confident we will get to our longer-term margins. Pre-COVID, we were already getting there on the mobility side of the business. And so we do know, especially based on the actions we've taken, that we will again. And if you look at our Q3 performance, based on the rides business being down 50% year over year, we think that it showed very good margin profile. Thank you.

Thanks, Nathan. And maybe a quick follow-up, similar question on the On delivery, you've increased revenues massively more than double them, and we're still far from your target margin. So I guess it is not that much scaling out that is going to improve profitability in delivery. So how should we expect that to come through going forward?

So, again, what we've talked about is the fact that in the earlier question we talked about what is it about the countries where we're profitable today. As you know, our delivery business, which is really the older breeds business, is a little more than four years old. And so the business has grown tremendously. We run the largest food delivery business outside of China globally now. You've seen the tremendous growth we have. And so we've made tremendous improvement in terms of improving the bottom line on the efficiency side. We've talked in the past about getting towards those mid-teen type of take rates in that business. which we have in those countries so as we continue to grow the business as we continue to move our competitive position um again we think that we will be there um but again the path on the the delivery margins will take a little bit longer just like it took in terms of getting there for the um the rides part of the business and i'll remind you that that there are many markets where penetration in terms of restaurant penetration is 10 15 20 so we think that's the right

strategic way forward is to lean in on growth and draw profitability, and we can do both. We're in a great position to be able to deliver both. Next question. You're welcome.

Your next question will come from the line of Alex Potter of Piper Sandberg. Please go ahead.

Yep, thanks. Maybe just a quick follow-up on that question. You talk about the areas where restaurant participation, you're at the 10, 20, 30% penetration rate. Regionally, are you talking primarily about suburbs there in the U.S.? And if so, what's the status update? And then I have one follow-up on freight.

Generally, our penetration in the cities or larger cities is higher than our penetration in the suburbs. But again, like Nelson said, we really... got into this business in a real way four years ago. So we just have lots of expansion room and green field in smaller cities, secondary cities, tertiary cities, as well as suburbs. We are certainly making headway in the suburbs in the U.S., but there are areas like Japan, for example, where we were very much focused on Tokyo and some of the other big cities in But now we're growing at over 300%, and it is an expansion into secondary cities but also outside of city proper in places like Japan as well. So the move, secondary city suburban move, it's not a U.S.-only effort. It really is a global effort.

Okay, great.

You had a freight question?

Yeah, so I guess just on strategic fit, I mean, obviously it makes a ton of sense. We talk about EATS basically in the same breath as mobility, and you can cross-sell, and there's so much strategic fit between those businesses. How do you see freight fitting into that? Can you lever all of the work that you have and all of the great position that you have in other businesses into that business, or is it more or less operating in a vacuum?

So I would like to say it's operating in the vacuum. So there is some back-end technology and stuff that we can do. But it is a little bit different because it is not a consumer-facing business. We think that freight's a very attractive business. You know the progress we've made there. But you also know that we recently raised $500 million from Greenbrier at a roughly $3.3 billion valuation. And we believe that money and that investment will allow us to fund freight until it's profitable. The business continues to scale and grow, and we love the fact that it's doing it, and we kind of judge it on its own. Would there ever be a point – you know, I don't know, but right now we kind of like what we're seeing from the freight business right now. The freight marketplace went through a very challenging summer because of the increased demand in terms of trying to get goods shipped across the country, and there's a tight labor supply because of some of the – the $600 a week weekly stuff. But we're working through that. The business is getting better more globally. And so we'll see. So as you know, Uber has had a lot of different businesses. As you know, we've made decisions during the course of the year to really focus in on the core. And, you know, we continue to look at how freight is operating today, and we'll continue to evaluate.

I think the one other mention that I'll make is that There's no question that freight is benefiting from the marketplace technology, pricing technology, the technical staff, and the infrastructure that we have. Now, freight is focused on really delivery from warehouse to store. Eats and our delivery business is focused on delivery from store to last mile, to homes. You can imagine a world that's not a world that is we'll be here tomorrow, but we're not betting for tomorrow. We're betting for three to five years from now where we start chaining together warehouse to last mile. And again, I think it is a solution that we uniquely are suited to bring. And I think it would be a stage two or three if we get there. All right. Next one.

have time for one more question from benjamin black of evercore isi please go ahead great thanks for sneaking in here um i i had two quick ones here so the first one grocery i i'd be curious if you could talk about the longer term opportunities we in grocery from from a top line and also from a margin standpoint and also from the perspective of driving users the uber pass that's given that groceries is a higher frequency product and then secondly I know you guys mentioned driver supply has been tight on the mobility side. Curious to hear how you see that playing out in the next few quarters and how that relates to your outlook for takeaways on the mobility side in 2021.

Thank you. I'll take the first one. Nelson can take the second one. Listen, I think as it relates to grocery, the asset that we have is we have a giant audience in terms of our both mobility business and delivery business. So we're able to build a grocery business with an audience already and really deepen that engagement with the audience. And so we think the grocery business can, again, increase engagement, increase retention. And when we look at Corner Shop, for example, The percentage of corner shop volume that comes from corner shop members, and by the way, we're going to have all of the different memberships talk to each other, is much higher than the percentage of our volume that comes from each membership, for example, or our rides membership. So we do think that the membership slash subscription angle is a pretty substantive one as it relates to grocery. Grocery is never going to be a high margin type of a product. But it is a very, very high engagement product with big basket sizes. And we think it can be a very compelling part of the opportunity here. We're investing carefully. But again, having the fulfillment stack or having the routing stack or having the couriers or having the audience already gives us a pretty significant advantage in terms of investing and making the economics work for that category.

In terms of driver's supply, the first thing I want to make sure that people understand is the take rate is relatively flat year over year, despite some of the shortages and the U.S. mix being a smaller percentage of the total. So I would say that the driver's supply improved during the quarter. It still lags a little bit on the recoveries. In the U.S., what I would say is some of the imbalances are really more kind of weekend, late-night hours as people are starting to get out more. And then internationally, it's mainly because in places like Brazil and Latin America, where the marketplace and the demand has increased dramatically, trying to keep up with it. We think it's gotten better. We think there's a little bit more of an imbalance. I'm not going to really kind of comment too many quarters that out because a lot of us do the recovery both on the rider and the driver side. But it has improved versus the second quarter. I think a lot of it has to do with our efforts. I think people appreciate a lot of the safety efforts that we've taken, no mask, no ride, and some of the other enhancements that we've had to try to make drivers more comfortable. I think some of the stimulus as well has put people out there driving a little bit more. And so we are seeing it improve, and particularly versus the last quarter.

Thank you so much. Appreciate it. All right. I think that's the last question. Thank you, everyone, for joining us this quarter. And a huge thank you to the Uber teams. Nelson and I get to talk to you about these numbers, but they're the ones who do all the work. So thank you very much to Team Uber. And we'll talk to you next quarter.

And this concludes today's conference call. Thank you very much for participating. You may now disconnect.