Uber Technologies, Inc.

Ladies and gentlemen, thank you for standing by, and welcome to Uber's Q4 2020 earnings conference call. At this time, all participants are in a 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. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Balaji Krishnamurti, Investor Relations, Thank you. Please go ahead, sir.

Thank you, David. Thank you for joining us today, and welcome to Uber Technologies' fourth quarter and full year 2020 earnings presentation. On the call today, we have Uber CEO Dara Khosrowshahi and CFO Nelson Che. This is Balaji Krishnamoorthy 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. I will remind you that these numbers are unaudited and may be subject to change. Certain statements in this presentation and on this call are 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, except as required by law. 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 the risks and uncertainties described in our most recent quarterly report on Form 10Q for the quarter ended September 30, 2020, and in other filings made with the SEC when available. 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 are on a constant currency basis, unless otherwise noted. With that, let me hand it over to Dara.

Thank you, Balaji, and thanks for everyone joining us today. Since our last earnings call, the world has made considerable progress in the fight against COVID. While there's still a lot of work to do, we're cautiously optimistic that this progress will continue and, in fact, accelerate over the next quarter. However long the recovery takes, Uber's business remains well-positioned. Despite renewed lockdowns in Q4, the end of the year, with total company growth bookings nearly flat year-on-year in December, with growth bookings turning positive in January. Discipline execution and increased scale in our delivery business allowed us to improve adjusted EBITDA by $161 million year-on-year in Q4. This quarter marks the completion of a series of portfolio actions that began in Q2 with the goal of focusing the company on its two massive core opportunities of mobility and delivery. We executed 17 transactions in 2020, including acquisitions that increased our run rate gross by over $6 billion. and divestitures of non-core operations that, combined with other cost optimization actions, reduce their annualized EBITDA losses by over $1 billion. These transactions, coupled with disciplined operational execution and continued product innovation, have put us in a stronger and more focused foundation heading into 2021. As such, we have increased confidence in our ability to reach break-even this year while continuing to invest in long-term initiatives close to our core. Looking ahead, our strategic priority in 2021 is to continue to harness the power that our Class I, with its multiple and growing product offerings, can uniquely provide. Wherever you need to go, whatever you need to get, Uber can help. We believe a highly engaged consumer base on delivery will drive stronger mobility growth as cities reopen. On the flip side, we expect mobility to become an increasingly powerful acquisition channel for our delivery business. For instance, our redesigned Uber Super app already generated more than 10% of first-time heaters in Q4. We plan to accelerate cross-platform usage for a renewed focus on our UberPass and ePass membership programs. We believe these will only become more valuable as we add new benefits and verticals like pharmacy and alcohol. Memberships ramped up significantly in Q4 with over 5 million members across 16 countries, and we have aggressive global expansion plans in 2021. Now we'll dive into each of the core segments. First, mobility, which continues to be affected by lockdowns around the world. Mobility GVs improved modestly in the fourth quarter, up 15% from Q3 levels, but still down 47% year-on-year. In January, growth bookings were down 47% year-on-year, declining 10% month-on-month close elevator holiday activity in December. We're seeing extremely encouraging trends in APAC and Latin America, with growth in those two regions down only 25% to 30% in January. Two of our largest markets, Brazil and Australia, were down only 10% to 20% in January, while Taiwan grew 16% year-on-year. The recovery in these markets demonstrates consumers' pent-up desire to start moving again, while Uber is continuing to gain share versus other modes of transportation. Over the next six months, we'll begin to prepare our business to go from preservation mode to re-ignition. This means investing in new mobility products such as Uber Reserve, rentals, transit, taxis, and motorbikes, and rolling out new segmented offerings like Uber Comfort. We will focus on re-engaging riders for their second first trips and re-engaging drivers to meet ramping demands. If we do these things right, and the public health situation improves as expected, we're bullish that we can deliver strong growth and expanding margins in the second half of the year. Now turning to delivery, where we continue to execute well against the massive expansion of mechanicals. We narrowed our focus to markets that we consider attractive and where we can win, and we're now number one or number two in nearly the entirety of our delivery footprint. At the same time, we're scaling our next strategic leg of 10-plus-year growth, expanding our offerings into adjacencies beyond food delivery and into broader, instant, on-demand local commerce. Q4 growth bookings grew 128% and reached a $44 billion run rate in December. Revenue more than tripled, and adjusted EBITDA margin as a percentage of revenue improved 100 points year-on-year. We've seen our business accelerate in January to over 150% year-on-year growth as delivery continues to provide a natural hedge and lockdowns. It's become clear that the pandemic has increased consumers' appetite for on-demand delivery of not just food, but all goods, and we've taken major steps to address this enormous opportunity. Our acquisition of Corner Shop opened up grocery delivery for Uber, where we've rapidly expanded globally. With Postmates, we bolstered our local commerce capability through their delivery as a service offering that already counts Walmart, Apple, and 7-Eleven as customers. In December, delivery as a service represented 18% of Postmates orders, and we intend to scale this out further along with our Uber Direct product. Lastly, we announced our agreement to acquire Drizzly, which will add the leading online alcohol marketplace to our portfolio. Drizzly is growing at 300% year-on-year and is already profitable on an EBITDA basis. These new initiatives will remain an investment priority going forward, and in 2021, we expect to invest $200 to $250 million pre-integration synergies to grow the business by meaningful multiples. While we lean into growth, we also make significant progress overall on overall delivery profitability. In Q4, we have 15 countries generating over $100 million of EBITDA on just over $2.5 billion of gross booking. We remain confident that delivery will turn EBITDA profitable in 2021, although we will not hesitate to lean in during the first half of the year. While the external environment remains uncertain, I am more optimistic than ever about Uber's future. We've established the world's largest mobility platform with a leading position in every major region that we operate in. In five years, we built the world's largest food delivery platform outside of China, which is growing substantially faster than the category and which we're using to expand into high potential adjacencies. These two platforms are synergistic and are powered by many common components built by the most talented tech team in the business. We're lean, we're focused, and we're operating at global scale, and we will innovate relentlessly to make consumers' lives a bit easier and to create more earnings opportunities for drivers, couriers, and our merchant partners. Uber is ready to go. Now we're going to ask him for more details on the numbers.

Thanks, Dara. We continue to execute well against the tough operating environment for our mobility business. Investing for growth and delivery while improving total company adjusted EBITDA for both year-on-year and quarter-on-quarter. During the quarter, we completed significant portfolio realignment actions, including our divestiture of ATG and acquisition of Postmates. 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 were down 4%, but up 16% quarter over quarter. Revenue was $3.2 billion, down 15%, but up 13% quarter over quarter. Our revenue take rate was 18.5% of gross bookings, down 221 basis points year over year, and down 62 basis points quarter over quarter as our business mix continued to shift towards delivery. Non-GAAP costs of revenue, excluding DNA, increased to 45% and 43% of revenues, but down 177 on an absolute dollar basis, driven by lower volumes in our mobility business. Turning now to non-GAAP operating expenses, which exclude pro forma adjustments, such as stock-based compensation and restructuring charges, operations and support was down $123 million year-on-year, reflecting continued leverage from headcount reduction actions taken in the second quarter. Sales and marketing decreased $209 million as a result of lower marketing and promotion spend in our mobility business. R&D was down $126 million, primarily driven by a decrease in headcount-related spend. G&A was down $80 million year-on-year and quarter-on-quarter. Our spend decreased $10 million and improved as a percentage of revenue by two percentage points and continued top-line recovery. Our Q4 2020 total company adjusted EBITDA loss was $454 million, improving $161 million year over year and $171 million quarter over quarter. Now I'll provide additional detail on our segments. Starting with mobility, mobility gross bookings of $6.8 billion, improved 15% quarter over quarter, but was down 47% year-on-year, and revenue of $1.5 billion improved 8% quarter-over-quarter, but was down 51% year-over-year. Revenue take rate of 21.7% declined 90 basis points year-over-year, with a 40 basis point impact from a one-time driver litigation settlement in Q4, and with lower take rate geographies such as LATAM recovering faster than expected. Despite a significant headwind to our top-line performance, mobility adjusted EBITDA was $293 million, or 20% of mobility revenue, improving $48 million quarter over quarter. Now on to delivery. We've seen continued tailwinds related to stay-at-home orders driving delivery gross bookings to $10.1 billion, up 128%. We consolidated Postmates in December, which contributed eight points to year-on-year growth. Delivery revenue of $1.4 billion, up 220%, significantly outpacing gross bookings growth. Delivery revenue take rate was 13.5%, up 391 basis points year-on-year, and up 21 basis points quarter-on-quarter. The year-over-year expansion was driven by higher basket sizes, improved network efficiencies, and an increase in subscription revenue from each pack. Additionally, we realized 100 basis point benefit year on year from business model changes in some countries that reclassify certain payments and incentives as cost of revenue. Delivery adjusted EBITDA was a loss of $145 million or negative 10.7% of revenue. That represents a 38 million or 5.4 percentage point quarter over quarter improvement respectively. Now onto freight. which grew revenue 43% year-on-year to $313 million, and adjusted EBITDA loss was $41 million. Trade EBITDA margin improved 12 percentage points quarter-over-quarter and year-on-year. Market rates remained elevated in Q4, putting constrained pressure on both industry margins and shipper supply chains. In this challenging environment, we've seen strong adoption of our digital offerings like API Bookloads and Uber Freight Enterprises. Technology enables to provide shippers real-time and transparent access to carriers. And as a result, we saw a 45% quarter-on-quarter increase in active user bases of these products. Additionally, Phrase technology now provides for automated visibility into nearly 80% of loads moved, resulting in better service at lower operating costs. We feel good about the progress of freight business making, and we are encouraged by the numerous awards the team has won for service and technology from both industry pundits and our larger shippers. On to ATG and other technology programs, the adjusted EBITDA loss for the quarter was $72 million. As a reminder, we divested ATG and UberElevate during the quarter with both transactions closing in January. Our Q4 2020 corporate G&A and platform R&D of $489 million, which represents the G&A and R&D not allocated to one of our segments, improved 24% year-on-year and slightly improved quarter-over-quarter on an absolute basis. As a percentage of total revenue, corporate G&A and platform R&D improved three percentage points quarter-over-quarter as we saw fixed cost leverage. In terms of liquidity, we ended the quarter with approximately $6.8 billion of unrestricted cash, cash equivalents, and short-term investments that have access to over $2 billion from our revolver, providing us with ample liquidity to manage through the recovery ahead. Based on January trends, I'll provide a few comments around our expectations for Q1 performance. In January, mobility gross bookings were at a $25 billion annualized run rate, down 47% year-on-year on a constant currency basis, or down 49% on a reported basis. COVID caseloads remain elevated with associated movement restrictions in many of our largest markets, including the U.S., the U.K., Canada, and France. We are targeting the ability to take relatively flat quarter-on-quarter, consistent with normal seasonality, although market mix based on COVID cases may impact take rate positively or negatively. Turn-into delivery will provide some color around quarter-over-quarter EBITDA progression expectations. Given the continued influx of new consumers to the category, particularly in markets like Europe, we are continuing to lean into delivery opportunities, including with incremental brand marketing spend, customer acquisition spend, as well as investments in our growing grocery and other new verticals. In Q4, incremental spend for grocery postmates was offset by one-off benefits. During Q1, we expect an incremental investment of roughly $40 to $50 million towards Postmates, groceries, and other new verticals. For Postmates in particular, we expect to narrow the losses as we move through integration and remain on track to delivering the $200-plus million in run rate synergy goals we disclosed last year. As we progress throughout the year, the delivery of EBITDA should improve significantly, and we remain confident in achieving break-even at some point in 2021. Putting it all together, we expect total company growth bookings to return to year-on-year growth in Q1, despite the current COVID impacts in mobility, as delivery continues to drive strong growth. Based on current mobility growth booking levels and anticipated delivery investments, we expect Uber's Q1 adjusted EBITDA to be flat or down quarter over quarter before we start seeing meaningful improvement throughout the rest of the year. We are pleased with the progress we've made in the last year. Uber is now on a stronger footing with a strong liquidity position of nearly $7 billion in cash. And while the bulk of our portfolio rational actions are behind us, we will continue to focus on activities that drive value to our shareholders, including monetizing our equity stakes, as we have done recently with a small portion of our DD stake, and executing strategic transactions such as Drizzly. We remain on track to turn the EBITDA profitable in 2021, and we are confident that Uber can deliver sustained, strong, top-line growth as we move past this pandemic. And with that, we'll open it up for questions.

As a reminder, to ask a question, you will need to press star 1 on your telephone. To withdraw your question, please press the pound or hash key. Please stand by while we compile the Q&A roster. Your first question comes from the line of Justin Post with Bank of America. Your line is open.

Justin Post Great. I hope you can hear me okay. I'm actually in an Uber. I got stuck. A couple of questions. I guess first- David Morgan Justin, you can ask questions from an Uber anytime. Justin Post It sounds like, you know, some of your- more of your markets have turned profitable for delivery. So, I'm guessing what is enabling that? Is it scale? Are you finding operational efficiencies? And are any markets that you're a long-term target, And then I guess a second question, just how are trends in the U.S., obviously you're going to be compared to your public comps, but just how are you doing on delivery and rides in the U.S. market share-wise? Thanks.

Yeah, sure. I think it's basically on delivery that general business is scaling. uh as our as we bring more restaurants onto the platform as we bring more eaters onto the platform of couriers onto the platform essentially we get to drive network density as the network gets more dense essentially a courier has uh less uh less miles to cover for the average delivery And our algorithms are getting smarter in terms of routing, in terms of wait time with restaurants, and optimizing every last percentage in order to drive cost per transaction efficiency, which then helps our net revenue, and also really helps career earnings because they are being productive a higher percentage of the time. that they are on network. That, in addition to just the business scaling up, right, if you're tripling revenue, I can tell you that we're certainly not tripling headcount or tripling overheads, so you just have revenue synergy, which is pretty beneficial. uh and we continue also to benefit from basket size increases uh and you know as basket size increase the cost of the delivery stays the same and again that accrues to margin as well so i would say there's not a single element that is responsible for the improvement in margins. But it's many elements coming together. And frankly, it's the team and the technology focused on continuing to drive hyper efficiency in every part of the business. I think the last part I would say is that as your customer base, as your established customer base becomes a higher percentage of your overall customer base, you've seen us increase our membership base from a million to five million. As you get a higher percentage of members, as you get a higher percentage of customers who have been with you for a period of time, your marketing costs should come down as a percentage of bookings or revenue. We're not there yet. We're leading in. But I think that as I look forward two, three, four years on the delivery business, there's more efficiency. But right now we're finding a lot of new customers. And on the marketing side, generally we are leading in and also getting the additional benefit of new eaters through our mobility business. As far as the – the trends versus other players in the U.S. You know, I'd say that no surprises. Obviously, Lyft, who's our largest competitor, released their numbers yesterday. I would say that there are no surprises as it relates to their numbers. They're a strong operator, and I would say that generally we see our trends roughly comparable to their trends, although from the insurance side, we've been pretty consistent in executing well there, so we kind of don't have these uh surprises so to speak um as it relates to the delivery business uh you know we are uh in the u.s uh growing at very significant rates uh triple digit rates we see january trends in the u.s actually uh improving all over already strong trends that we saw in q4 we can't exactly tell how we're doing versus all of our competition in the u.s but we think that we're more than holding our own. And frankly, there's more to do there with a real focus being on improving our restaurant selection, which I think holds significant upside for us.

Great. Thanks, Zahra.

You're welcome. Next question.

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

Thanks for taking my question. I have two questions. First one, Dara, with all the cost reductions and the adjustments you've made to the business throughout 2020, and now with the rides business continuing to evolve, how do you think about the long-term rides profitability now? Do you remove those costs and the mix of the business continues evolving? And the second question on UberPass, any of you can share with us about frequency or user behavior of UberPass members versus non-members? And then you mentioned sort of being more aggressive to drive adoption. What types of strategies have you not yet really deployed to drive that growth of that UberPass?

Yeah, I'll start with UberPass, and I'll have Nelson talk about the long-term P&L. As far as UberPass goes, Listen, we are very early in the development of PaaS. I mean, we started leading into PaaS middle of last year. We built the East PaaS essentially on infra that the Mahon Uber PaaS team had built. And as a result, you see pretty significant acceleration. I think the last time we talked to you, we had a million paid members and we got 5 million total members with that number expected to go up very significantly in 2021. While I don't want to give away competitive information, the frequency... of past members is significantly higher than the frequency of non-pass members so going out and acquiring past members is while it may be unprofitable in period if you look at the frequency increases and apply them to some reasonable lifetime value estimates this becomes a very, very strong profit pool for us that either we can pull to the bottom line or we can use to reinvest in other appropriate markets. With that, Nelson, do you want to talk on margins?

So, Brian, we haven't updated our long-term margins. But again, we believe we'll continue to make progress towards it. And as you know, even given the COVID restrictions, as you heard in my prepared comments, we were at 20% in mobility in the fourth quarter. As you know, in the first quarter of last year, we were at around 30%. And so we're pretty confident in our ability to do that. The incremental margins we're seeing are kind of in the mid-40s versus Q3. And again, a lot of it just has to do with us continuing to leverage against and get the efficiencies against our fixed cost base. And so we're pretty optimistic that as we get more COVID recovery, as people start moving, that, you know, we think we're very bullish in terms of the profitability profile for our mobility business.

The other factor to add there is, you know, Nelson and I are constantly managing the business based on portfolio of kind of profits and opportunities. And while we talk about the delivery business, and rightly so, based on the growth of that business right now, as it relates to mobility, when we look at the Germanys of the world, Japan, Argentina, new markets to get into, as we look at the opportunity to power taxi technology, inhalables in general, when we think about the opportunity of shared rides when things open up, and then we look at our transit team, there are many, many growth opportunities in the mobility segment. So, I do think that we will take some of the incremental margins that we see in mobility and reinvest in growth opportunities because we expect our mobility business to grow at very attractive rates for years and years and years. And I think we're one of the few companies around that can afford to invest in those areas. And, you know, I think taxis are going to want more demand. Obviously, you've heard about transit needing help in terms of tech and in terms of cost effectiveness. And we want to help. We want to be a part of the solution. But it's also a great opportunity for us.

Brian, actually, one last thing is I would say that you've heard us talk in the past about where we see recovery. In the past, we talked about being 10% or 20% down in terms of getting towards break-even. And so, obviously, we have more room now because of the actions we took. And so, again, we're feeling much better about it. But as Dara said, we are going to take some of that profitability and invest back in. So it doesn't necessarily change the full year outlook on when we're going to achieve total company profitability, but we certainly have more degrees of freedom. And so, again, Dara covered and we covered in our prepared marks all the actions we took last year, and so we feel very good about how we're set up moving forward.

Great. Thank you both.

You're welcome. Next question.

Your next question comes from the line of Eric Sheridan with UBS. Your line is open.

Thanks so much for taking the questions. Maybe a few on the concept of what you've already seen in some of the markets with mobility that have started to improve. Curious, just maybe following up on the last answer and some of the comments you made in the prepared remarks, just what form is that taking in either stoking demand, growing or retaining the user base on the customer side, as opposed to investing more heavily on the supply side and investing a deepening on the supply side in the markets that have recovered or have started the process of recovery, and how should we be thinking about that being applied more globally and what we should be watching for in terms of the form those investments might take? Thanks, guys.

Sure, Eric. I think that the team that we have on the mobility side is – you know, has dealt with the significant changes in volumes in mobility and pretty incredible, right? Like Q2, we were able to drive segment EBITDA profitability. So as the markets come back, one is that we're seeing both social use cases come back. So social use cases and a bunch of the markets that have come back are like over 100% year on year. And workday community uses come back. The only use case that hasn't come back is airport. And the teams are very closely watching the balance between supply drivers who are coming onto the platform and demand, which are our riders who are also coming back onto the platform. And what's really exciting is that the coronavirus and everything that's happened, it's actually changed the nature of some of our riders using the mobility use case. So if you look at, for example, Brazil, we are at 90 plus percent recovered in Brazil. Yet 30% of our riders who happen to be very, very high value riders haven't even come back. So our business is already 90% back. And then 30% of high value riders, of total riders who happen to be very high value, they haven't even started to ride again. So we're seeing some pretty attractive signs. uh the team has been able to balance the marketplace pretty effectively uh i do think that i'm worried about one thing going into the second half of the year is are we going to have enough drivers to um to meet the the demand that we're going to have in the mobility segment But I think, you know, this team has proven himself over and over again. And as the mobility business comes back, we will look to continue to fund some of the new use cases, hailables, transit, et cetera. But frankly, we've been doing that anyway, because those kinds of long-term bets are all bets that we should be pushing during good or bad times. Does that answer your question, Eric?

It does. Thanks for the color. And by the way, happy new year to the whole team. Hope everyone's up well. Thanks a lot.

Thank you. Next question.

Your next question comes from the line of Ross Sandler with Barclays. Your line is open.

Hey, guys. A couple questions on delivery. We've heard some grumblings about increased competition. in each business in the UK, Japan, and Australia. So has your outlook changed at all for those big, you know, those three big countries? Are they still on track for a break-even? And is that $40 million of incremental investment, is that for Eats or is that for these adjacencies like Corner Shop and and Postmates, et cetera. And then the second one is Drizzly. From what we understand, this is an ad marketplace. You kind of break even on the transaction, and then, you know, the EBITDA is coming from the advertising side. So I guess how does that fit in, and then are there any practices that they're doing that could be applied to Corner Shop, Yeats, or the rest of Uber? Thanks a lot.

I'll let Nelson talk about the investment. But as far as the competitive environment goes, listen, the only environment we've known in delivery is competitive. We were relatively late to the game. There were a bunch of marketplace players who had already been, in some cases, incumbent. And I think based on the results that you're seeing, we are able to make progress, grow the business, grow faster than the category, and improve margins. And I think that speaks to the power of the platform. It speaks to the fact that we have access to many, many common components as it relates to our tech platform, our identity platform, risk, insurance, et cetera. And it speaks to the power of the Uber brand and ops teams who are local and understand a market deeply. I wouldn't characterize the competitive environment as getting any better or worse. I would characterize it as continuing to be intense, but it's been that way since we started.

Nelson, do you want to talk through the investment? So in terms of the investment, I think we said there's going to be probably an incremental $40 million to $50 million in the first quarter, and that is for Postmates Groceries as well as other adjacencies. In terms of your question on specifically around food delivery, again, you've heard us talk in the past. We have a capital allocation model. We go through it every month. We continue to lean and invest and grow. You are right. We are in very competitive marketplaces, as Dara mentioned. We believe we're winning in places like the U.K. and Japan where we're seeing, you know, high triple-digit type of growth that we saw in the quarter, and we are continuing to improve the economics. And then, obviously, there are some marketplaces like the Australian, as you called out, and others that we've called out in the past in terms of not just being very, very strong from a top-line perspective, but also being very good from a margin perspective as well.

And we continue like that. The number of markets that are profitable that then we can use to either reinvest or we can use to increase our overall profit profile, just the quantum number of markets is increasing and the dollars that those markets are contributing to the P&L are also improving. So those are good trends. But again, it's within the context of a very competitive marketplace. And with these kinds of category growth, I certainly wouldn't count on it getting any better.

And then the only thing I would add is that I think you heard my prepared remarks. We will deliver against the $200 million of synergies and postmates when we announce the transaction. And so as those synergies come in, again, it'll be less in terms of the drag as it is in the first quarter. But again, as Dara mentioned, there are some areas that we will continue to invest for growth.

Operator, next question.

Your next question comes from the line of Mark Smollett with Bernstein. Your line is open.

Yes, thanks for taking my question. A couple, if I may. First, I just wanted to follow up on Eric's question. One of the things you mentioned are in some of those international markets like Australia where 30% of those super users haven't returned. Can you share a little bit of color on who has? That was Brazil, to be specific. Sorry, Brazil, yeah. Can you share a color on who is kind of driving that demand? Is it just other kind of returning users or any kind of cross-sell that you're seeing from kind of the delivery side as a customer acquisition channel? And then second question, just, you know, I think you called it the super app. You know, and as we just kind of look ahead, any updates on the roadmap there and the timing on how you think about integrating the different pieces into that super app? Thank you.

Sure. In terms of the user base, I think that it's, you know, it's increasingly become apparent that Uber as a transportation platform is recovering faster than other transportation offerings in most of the markets in which we operate. And I think it reflects the investment that we made in safety, the technology that we've left in to make sure that drivers are masked up and the trust that investors have, sorry, that riders have in the platforms that we're building. So we see our service come back faster than taxi. In many cases, we see our volumes come back faster than transit, and it's because of consumer trust and it's because of investments that we're making. So we are seeing new customer acquisition. It's a customer base that tends to be a bit more price-sensitive, So generally, I would tell you that our trips are going faster than bookings. Generally, if you if you look at many of these many of these markets, and The consumer who – there's a set of consumers, you know, we're lucky enough, who don't need to go to work that can work remotely. That's the consumer who hasn't come back. And when that consumer comes back, we think it will be an enormous tailwind because we'll have a bunch of new customers who have switched over from other forms of transportation, and then we'll have our loyal base coming back as well. So we think the setup is actually – a pretty good setup. I think one factor that has been a little bit surprising to us is that we've also seen non-urban riders come onto the platform with, you know, new use cases, et cetera. So in many times we've seen core come back, we've seen kind of, you know, the outer boroughs come back, but we've also seen suburbs come back as well And again, I think it's because we're a trusted form of transportation. You get a lot of information regarding our platform, and we've invested in it. I think we're seeing the results of those investments. What was the second question again?

Just around the super app and the timeline and roadmap.

Again, I don't want to give away a map that's competitive, but... the team is, I think there are two factors as it relates to the roadmap. One is that we're adding more categories, and as a result, you will see a super app that is more complete, And then just as important as adding more categories is that we are adding, we're using machine learning technology to make sure that the choices that we surface to you as either a rider or eater are the best, most personalized choices. And as you can imagine, we have more data than anyone else in the field. We understand not only usage within mobility and within delivery, but across the two. So the combination of more choice and more personalization we think is pretty powerful. you know, the 10% of new eaters that I pointed out in Q4, that was with the super app being available for the first quarter in Android. So like that number is going to go up. And what we haven't really driven is delivery back to mobility in a big way. Our focus has been more mobility to delivery, but we see real potential as far as delivery to mobility or delivery to alcohol or delivery to grocery, and those are all areas that we're focused on. Next question, operator?

Your next question comes from the line of Doug Anmuth with J.P. Morgan. Your line is open.

Great. Thanks for taking the question.

Dar, you may have touched on it briefly on Drizzly and the acquisition, but just wondering if you can help us understand more just the rationale kind of from a bill versus buy perspective, and then also a little bit more around the unit economics of the business. Thanks. Yeah, I think for us, as far as bill versus buy, it went down to we got to know the Drizzly team. We were super, super impressed with them. And I think that while at a high level, it's easy to say, well, this is delivery of all things, and it's delivery of food or delivery of grocery or delivery of alcohol. Actually, each of these verticals can be quite idiosyncratic. And it is hard when you have a generalized platform to go in really, really deep as far as, for example, how do you search for products? So as one small example, People who come to the Uber Eats app tend to search restaurant first, merchant first, and then product. People who come to Drizzly tend to search product first and then merchant. You know, what are you looking for? What do you want? you know, IPA, they go product first, then the Jersey team is able to identify the merchants who are able to fulfill that product based on a combination of speed and price, and then you go merchant second. That's just one example of how these two products that seem similar And over a period of time, they're going to come together. They're actually in these early iterations, and it's the details that really, really count. Quite idiosyncratic, quite different. With alcohol, you've got the regulatory environment, which is different from state to state to state. As you know, we're a highly, highly regulated company on a local basis. And we just saw a Jersey team who built fast, who built profitably, and also did it the right way. So I think putting together like a product that is first class merchant base that is highly penetrated and introducing them to the giant audience that we have that's a pretty powerful combination and you've seen it, you know, kind of executed on and other tech companies. Um, and I think we will be able to turbo charge grizzly growth, hopefully. Um, and also, you know, leave that team to execute the way that they've been executing, which is at a very, very high level. Thanks for any snakes. I'll go ahead. Sorry. I was just going to follow up and ask any more color just on how you think about unit economics and take rate in the business.

Yeah, so this is Nelson. So as you might expect, the take rates of the basket sizes are larger versus the traditional ride or even a food delivery. And then, as Dara mentioned, it is a little bit different because it's mostly a 2P business. And so what they do is they connect local merchants. And so if you've not used the product, you should. They do a wonderful job. And then what they do is they're competing. And they're providing, in most cases, the courier. If not, they do use third-party couriers as well. And so the economics actually are quite good. And as Dara mentioned earlier, they are profitable today. And, you know, as you know, they are small, and we think that they have a huge opportunity to continue to grow. Navigating through all of the various state-by-state liquor. So if you're in the state of Pennsylvania, you actually can't buy liquor. You can only buy beer, and it differs by state. And so they've done a very, very good job in terms of setting it up. But, again, we like the union economics a lot. The basket sizes are very strong. Great.

Thank you both. We also think the media opportunity there is pretty interesting as it is in the delivery space generally. Okay, next question, operator.

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

Thanks, guys. I have two questions if I can. Just first, can you just talk a little bit more about your strategy for passing along the kind of Prop 22 costs? Are you passing the entire amount along to customers or are you keeping it in California? What are you seeing kind of competitors do and customers react? And then the second one, you know, can you talk about Uber Direct? You know, how big of a priority is that for this year? And, you know, besides maybe grocery, what are some of the focus areas in terms of your partnerships and anything you can share on kind of unit economics for that would be helpful? Thanks.

Okay, so I'll cover Prop 22. So, first of all, we believe Prop 22 was the right outcome for drivers and riders in Uber. And the price increases are manageable when compared to the 100 plus increases associated with traditional employment that we would have seen us exit most markets in California and not just us, but our other competitors as well. So for mobility, we've increased prices to account for most of the new costs, although we've absorbed a small amount ourselves. And for delivery, the cost impacts are larger than mobility. And while the price increases have accounted for a majority of the cost to the customer, we have seen slightly bigger impact than mobility. So I guess the short answer is we have seen some costs. We do think it's right. We've passed a fair amount on to consumers, but we've also absorbed some ourselves.

And then on Uber Direct, as we mentioned, the direct business is about 18% of Postmates business in Q4. It's a much, much smaller percentage of Uber's overall business. And our focus on the enterprise has mostly been as it relates to U4B and now Eats for Business, where we've seen incredible enterprise growth. But it's Bank of America, for example, using Eats for Business. So this is actually, I would consider it a relatively greenfield opportunity for Uber. Um, we have, uh, we focused on initially kind of, uh, consumer to consumer package delivery through Uber connect, which has been very, uh, interesting. But the enterprise business is one where frankly, we're going to take the lead from the Postmates team who has built out those capabilities already has merchant relationships with Apple, with Walmart, uh, and many others. And with our scale and our geographic footprint, which is broader, we think we can scale that business out quite attractively. The unit economics of the business that we've seen with Postmates are encouraging. And we think that it will be additive business and margins that are generally comparable on a bottom line basis. because you're not going to get kind of revenue, net revenue margins that are the same as a marketplace business. But from a bottom line kind of variable contribution margin basis, we think the unit economics are going to be roughly comparable. But it's a pretty cool, promising business, and we're looking forward to the Postmates team and building on their efforts.

All right. Thank you.

You're welcome. Next question, operator.

Your next question comes from the line of Jason Helfstein with Oppenheimer. Your line is open.

Thanks. Two questions. Nelson, can you unpack maybe the quarter-to-quarter decline in the mobility or the decline in mobility mobility take rate, and then maybe comment a bit how we should think about it in the first quarter. And then, Dara, I mean, we're all kind of working through our TAM models. It just may be, how are you thinking about ramping grocery versus convenience versus pharmacy versus alcohol? And just how do you think about U.S. versus international? Because I think the business is kind of, right now, a unit economics by geography thing.

So the big driver, the take rate change for mobility is really just mixed. You heard Dara talk earlier about the fact that Brazil is almost 80 percent, 85, 90 percent of where it was pre-crisis. And so Brazil, which, as you know, is one of our larger countries. marketplaces has come back a lot faster than a place like the U.S. and parts of Western Europe. And so it's really just mix shift related. I think you heard in my prepared comments on McCall, we expect take rates to be largely flattish in the first quarter. But again, there could be some variability based on mix shift. And as we see more recovery in some of the markets like the U.S. or like parts of Western Europe, you should see the mix shift benefit as that happens.

And then as far as the adjacencies and how we think about the adjacencies, obviously Corner Shop has been a part of our business for longer, for a bit of time now. It's a team that, again, has really built that business quite effectively with a relatively small amount of capital. So they have built a pretty efficient cost base and a service that really is driving a significant amount of loyalty as far as their customer base goes. So listen, I think if I were to order it, I think the grocery opportunity is very significant. And when you look at the percentage of consumers who have ordered grocery delivery, have used grocery delivery versus let's say food delivery, actually grocery delivery is substantially behind in terms of adoption than food delivery. So we think the opportunity with grocery is significant. We don't think that the markets have been won. We have obviously the corner shop team has a big presence already in Latin America. Uber has a very big presence in Latin America. So the Latin markets are absolutely a priority. But I think Europe and the U.S. are very high potential markets. In the U.S., I think our approach is going to be more merchant-led. We'll look to sign of significant merchants, and obviously then we will expand in geographies that match up those those merchants and Europe we're going to be quite opportunistic so certain countries like France for example we are off to a really really strong start they're organically through the mainline uber service so I think grocery we're kind of working on all fronts But the global scope that we have is unique. We're going to scale the business. We anticipate scaling the business at multiples of the run rate that we're at now, which is the billion and a half run rate. And the unit economics, you know, we don't have to kind of prove out the unit economics. The corner shop team has already proven out the unit economics. So it's about taking attractive unit economics, scaling and really investing and building in the merchant, the merchant relationships over a period of time. All right. Next question.

Yes, your next question comes from the line of Yusuf Squally with Truist Securities. Your line is open.

Great, thank you. Two questions, please. One is actually just a follow-up to that question, Dara. Maybe focusing on grocery and convenience store opportunities, so the competitive landscape seems to be pretty intense, probably even more intensive than delivery. Can you just speak to the competitive advantages that you see Uber as having relative to your key competitors and and kind of what are the key issues that still need to be ironed out before you kind of basically maybe accelerate the investments there beyond what Nelson just said earlier about Q1. And then on Prop 22, it's now being challenged in court by some drivers in the labor union. Does that worry you, and where are you in your discussions with policymakers in other states, I guess, especially given the new administration? Thanks a lot.

Sure. I think on grocery, I'll keep it simple. We have over 90 million monthly active platform consumers right now on the platform. And we have proven with our mobility business being able to drive consumers to our delivery app basically for free. uh the ability to move consumers and audience across this platform because they trust uber they trust our brand we have all their information they trust us with their payment information they trust us with their location uh so we've already we've already done it um and and i think we can do the same with with grocery because we've essentially already proven out the unit economics we don't need to make the unit economics work the unit economics already work we have a global audience And that's, we think, a substantial strategic advantage versus our competition. It's really the merchant relationships that we have to work on. And in many markets, we are in great shape. And in some markets, we have to develop those merchant relationships. On the Prop 22, we've got Tony Lester, Chief Legal Officer, on the line, I think. Tony, are you on? Can you comment on?

Sure, but could you just repeat the Prop 22? I know it was driver support, but I didn't get the full question.

Yeah, so just saying that it's basically being challenged in court by, I know, at least one labor union and some drivers. And so is that something that worries you at this point? And just broadly speaking, where are you in your discussions with policymakers in other states to try to use Prop 22 as a blueprint for other geographies?

So taking that last question, question first. Those conversations are ongoing, and we were very clear after Prop 22 that we thought it was a good model, a good base from which to have conversations about how you have an independent contractor plus model, one that allows for benefits in addition to the flexibility and independence that that we know earners prefer. So those conversations are ongoing in various venues around the country. And with regard to the lawsuit, you may have seen that the California Supreme Court actually denied the lawsuit, said it was not properly brought in at the Supreme Court level. We expect that that lawsuit will probably show up again in some other form in a lower court, but on the merits, it's not one that particularly concerns us.

All right.

Thank you.

Operator, let's take the last question.

Certainly. Your last question comes from John Blackledge with Cowan. Your line is open.

Great. Thanks. Two questions. First, on mobility, could you just discuss views on the business recovery over the next two years, maybe parsing out commuting versus business slash airport travel? And then on delivery, how do you view the long-term profit profile for the new verticals relative to each long-term profit profile?

Thank you. Sure, I'll get started on mobility. And Nelson, maybe if you can talk about the profit profile. Listen, I think as far as the mobility recovery goes, this year, the recovery timing is going to be very much dependent on when and how cities open up. So while we can't predict quarters, we can certainly predict direction. And I think we've proven out in big markets like Brazil and Australia, which is as these markets open up, the business comes back and it will start growing again. This is a business that has grown for many, many years. It's fundamentally a better way of moving. and i think what's really encouraging is that we are seeing a new customer base come onto our platform during these very difficult times and when you combine that with a customer base who is going to start going to work again who's going to start going out again you know our loyal customer base historically i think you're going to have a very strong growth profile So there's no doubt in my mind that as we go to look at next year, 2022 or 2023, our mobility business will grow at substantial double-digit rates. And I believe that we will take share from other modes of mobility because we have demonstrated the safety of the platform, the efficacy of the platform. the ease of use, the dependableness, and the affordability of the platform as well. So I'm very, very optimistic as it relates to mobility trends. What I'm even more optimistic about are the investments that we're making in other modes of transport in helping the transit uh agencies of the world uh recover and rebound of powering taxis with our routing our hail e-mail technology our pricing technology etc these i think will be incremental positives uh and putting all together i think it adds up to essentially a platform for any kind of transport in your city and a unique platform in terms of a scale and global scope. You know, I think that travel, internal company business travel, uh will probably come back a bit slower so it may take a couple of years to come back companies have cut down on it they're using zoom etc so i think that will be a slow return but i think external travel sales people going to visit clients once you've got you know salesperson win a client with a personal visit versus you know someone who just tries to win a client on zoom you're going to have plenty of folks traveling out just like they have for years and years and years. So internal travel, business travel may be a little slow to recover, but external business travel we think will recover very quickly. And I think leisure travel will bounce back really quickly and significantly, not just this year, but the next two or three years. So we're pretty optimistic. Again, we can't predict near-term timing, but when we look over a couple of years, the trends are there. And I think we got a great kind of investment profile as well as profit and cost profile as the business comes back. Nelson, you want to take the second question?

Sure. So in terms of... new verticals in delivery. It's actually too early to comment and be too specific, but hopefully we've proven to be pretty disciplined in terms of how we view investment. And we've been talking about it with our investors and with all of you folks. over the past quarters in terms of how we go through our research allocation. You've seen and you saw during the course of 2020 the number of different actions we've taken, including not just acquiring but also moving away from things that we didn't think made sense from a long-term profit perspective. We are going to continue to test and try a lot of different things. You probably heard Dara talk before about the fact that, you know, we really want to own the next hour. And so in doing so, we are trying to figure out over the course of the next few years as we move through COVID recovery, what are those things that we have the right to play? And you will see us lean in. And as you know, we've announced that we're doing some pharmacy-type things in a place like New York. You've already talked a little bit about Drizzly on the call. You've heard us talk a little bit about corner shop and grocery. So we think there are a number of different verticals that you're going to see us continue to build on. And it's all about building and bringing in more people into the community. And so you hear about how many people and active users we have. And so we will continue to build on it. We will be disciplined in terms of the economics. You heard on Drizzly, one of the things we really like is just the basket sizes. And you've heard us talk in the past about the way you drive margin is you get scale, you have economies, you get good basket sizes, and you can generate margins. And so we'll continue to do that.

I mean, just the only thing to add is, like, I think that it's pretty simple in that our customer acquisition costs will structurally be lower than all things being equal, than our competitors' customer acquisition costs. And in these early markets, because all of these markets are in very, very early adoption, customer acquisition costs tend to be very significant as a percentage of, let's say, economics. What I'm really excited about with our membership program, now it's 5 million members strong, is that Our membership program just becomes more and more powerful. We'll be the only membership program that is providing discounts on food, providing discounts on rides, free grocery delivery, free alcohol delivery, et cetera. We will have the deepest and most meaningful local membership, high-frequency local membership model. And what that will result in is not only a structural advantage in terms of customer acquisition costs, but also hopefully an advantage in terms of customer retention and lifetime value. And then underneath all of that, we built the payments ecosystem. We built the identity ecosystem. We have teams on the ground in every single one of these cities. So our overhead costs and our operational costs should actually be more efficient than any of the other players. So, like, better CAC, better LTV, more attractive players, uh uh more attractive margin uh uh margin profile you put that together and you have the makings of you know we did it in mobility we did it in food we're going to do them in delivery thanks so much super helpful you're welcome all right i think biology that was the last question if i'm uh correct is that right All right, great. I did want to say a special thank you to the Uber teams. 2020, I think, has been a super difficult year for the world. It's been a really difficult year for us as a team, but I'm just incredibly proud of how the team stood up. You know, we asked ourselves a question like, how can we help our community first? How can we help our drivers first, our couriers first? And the team really, really stepped up this year. We've got a huge amount of work ahead of us. But, you know, you really stepped up. So thank you for that. As far as our investors go, we will talk to you next quarter. And thank you for your interest and thank you for your investment.

Ladies and gentlemen this concludes today's conference call. Thank you for participating. You may now disconnect.