Uber believes that travel demand remains strong, with a focus on improving user stickiness and habits (3Q22 conference call minutes).

The following is the summary of Uber's Q3 2022 conference call. For financial results analysis, please refer to《 Uber Profitable Without Growing, A Story for the Markets? 》

Q: Have you noticed any weakness in consumer spending? How have the results been by business unit or by geographic market?

A: We are not currently seeing any signs of consumer spending weakness. Consumer spending is not only strong, but it is also shifting from retail to the service industry, from which Uber benefits.

In terms of transportation, we have not seen any dramatic fluctuations and seasonal trends remain unchanged. As for Europe, we believe that the severity of the economic downturn is worse, but there has been no decline in transportation demand.

In terms of food delivery, the order frequency of active platform users remains consistent every month, not only in the United States but also in other countries. We will remain cautious in terms of costs.

The biggest factor affecting our financial condition is foreign exchange and the strengthening of the US dollar, which has significantly affected the company's profit margins, but this is something we can overcome.

Q: What strategy will you use in the taxi business to convert low-frequency consumers to high-frequency consumers?

A: Our active platform users' average number of trips has increased from 5.0 earlier this year to 5.3. We see increasing levels of consumer engagement on the platform. I think there are several factors:

1. Firstly, our membership plan, Uber One, which now has over 10 million members, has been launched in eight markets worldwide. Uber One's advantage is that it applies to both taxi and food delivery services. Therefore, Uber One can help improve taxi frequency.

2. Secondly, cross-selling. We actively cross-sell food delivery, grocery stores, and taxi services. Thus, the increase in cross-selling on our entire platform has driven new customers, increased retention rates, and stimulated healthy growth in total bookings.

Q: Please share your thoughts on the proposed policy by the Labor Department. How might it evolve, and how might the business structure evolve in the next few years?

A: This policy does not reclassify any workers, so we believe it can provide job security and a favorable operating environment.

Work on employment status is being carried out at the state level, with the aim of maintaining flexibility at the state level, ensuring an adequate workforce, and providing appropriate protections for partners.

The current trend is favorable for us, but the nature of employment is always a major issue for the company, and we are responsible for maintaining communication with local governments.

Q: If consumer spending power weakens, how will the food delivery business grow? How will you hedge the impact in the next 12 to 18 months? What is the food delivery growth plan from now until 2024?

A: The company has not seen any weakness in the food delivery business. Per capita spending on food delivery has increased, and the frequency is more stable now. About 10% of diners currently use our grocery delivery service every month, and we are increasing user stickiness. The penetration rate of Uber One members in the food delivery segment will gradually increase. North American growth remains very healthy, with a 19% increase in bookings. In fact, on a constant currency basis, Europe also saw a slight increase in total bookings. The takeaway business is stable, with growth rates depending on the addition of new diners.

As for the number of merchants on the platform, we are now at our highest level ever, with about 870,000 merchants, a year-over-year increase of about 11%.

So we see an increase in both diners and merchants on the demand and supply sides of the takeaway business, and both have contributed to the growth of the business, and we are encouraged by the consumption frequency we see on Uber One.

Q: What are the driving factors behind a take rate of 27.9% in the travel business, an increase of 130 basis points?

A: The disclosed take rate is 27.9%, but if we exclude the impact of the change in the UK business model, the actual take rate will be 20.2%. The actual take rate still increased by about 100 basis points compared to the previous period. In addition, if we exclude the impact of fuel prices, the actual take rate will be around 22%.

Q: What is the positive significance of showing drivers the destination and estimated cost in advance for the ride-hailing business?

A: Showing the cost and destination in advance is a very useful function, which is related to driver satisfaction.

Globally, the number of drivers has returned to its 2019 peak. In the United States, the number of drivers now exceeds 80% of the 2019 level. However, the number of drivers worldwide has increased by 37% compared to 2019. Compared to history, driver attrition rates have decreased by nearly 20%.

The average hourly wage for US drivers is $36, and the average driving time has increased by 16% year over year.

Q: The EBITDA profit margin for the company's ride-hailing business further increased to 6.6% this quarter. What are the driving factors behind the increase in profit margin? Is the company's long-term profit margin target still 11%?

A: Our long-term profit margin target (adj. EBITDA caliber) is 10%, and there are two reasons why the company's profit can be further improved: 1. We have optimized costs and expenses; 2. Last year we made a lot of investment in improving capacity supply, and after supply increased this year, operating efficiency also improved.

We have generally seen an improvement in profitability across all markets, not just in the best-performing markets. We are confident in achieving our long-term profit goals.

Q: What is the reason for the strong profit margin in the takeaway business in the third quarter? Are there any factors that have led to a decrease in delivery costs per order? Are platform economies of scale or other factors at play?

A: First of all, we consciously accelerated the pace of improving the profitability of the takeaway business. We improved the algorithm efficiency of the platform and the delivery efficiency of the deliveryman, which is the main reason for the better-than-expected improvement in profitability.

Secondly, the competitive environment the company faces has become more rational, and many competitors are also trying to improve their profitability. Q: Has the macroeconomic recession in certain global regions had a positive impact on driver supply?

A: The supply of drivers is becoming healthier globally. I believe that there are several factors:

1. We are allocating more resources to drivers. Our incentive policies for drivers are improving, and we are investing billions of dollars in driver incentives.

2. We have invested a lot of money in the onboarding process, optimizing the speed of entry and improving the registration process for drivers.

3. American drivers earn an average of $36 per hour, which is a very healthy income level. At least 70% of drivers in the United States believe that this job can help them cover their living expenses and make their lives more comfortable in an inflationary environment.

Q: In the future, how will Uber make its value proposition more attractive for Uber One and increase customer membership from 10 million to 20 million or 30 million?

A: Uber One is a young product, and we are still expanding our market. We currently provide services in eight global markets. Compared with companies that only provide delivery services, our product offers more services and competitive pricing. We provide discounts ranging from 5% to 10% on both our delivery services and taxi rides compared to our competitors. Benefits of Uber One include airport priority pick up and priority matching for taxi rides.

Q: You mentioned that the number of active drivers has returned to the level of September 2019, and you also mentioned improvements in ETA and surge pricing. Have these metrics returned to their previous levels, and what else needs to be done to continue to improve?

A: Surge pricing and ETA are both decreasing. The current surge pricing is between 20% and 30%. The average ETA is 6 minutes, but 5 minutes is a more comfortable level, and sustained investment and supply are required to achieve this level.

The company is continuously improving the supply of transportation, particularly through the inclusion of new drivers, while also improving participation of current drivers.

Q: Recently, you've mentioned that variables aside from time and distance affect pricing. Can you tell us more about the other variables in the algorithm aside from time and distance?

A: In addition to time and distance, one variable is the supply of drivers in that area; the higher the supply, the lower the price, and vice versa.

In addition, the probability that a driver can pick up passengers after arriving at the destination is also a variable. The higher the probability, the lower the price. Another variable is the distance that drivers have to travel to arrive at the pick-up location.

Furthermore, the company currently shows drivers trip information and expected income in advance. We observe the probability of drivers accepting or declining various types of orders. The lower the pricing, the higher the probability of acceptance.

Q: In terms of advertising, from a tool, vertical industry, or sales perspective, could you elaborate on how to reach $1 billion in revenue?

A: We are very confident in our advertising business, and the $1 billion revenue target is based on conservative assumptions. We found that competitors in the market have advertising revenue that accounts for 2% of their total booking volume. Based on the company's revenue target, advertising revenue in 2024 will be less than 2% of the total booking amount. We believe that ad revenue has reached $1 billion and will continue to grow. Through these ads, we have gained good stickiness among ride-sharing consumers, and we are also tracking those high-quality advertisers.

Q: Can you talk about Uber's market share in the transportation and delivery markets? And in terms of the ride-hailing business, can you talk about the number of rides compared to the peak before the epidemic?

A: For the ride-sharing business, our market share in the United States, Australia, and the United Kingdom is close to a historic high, especially in the UK, where our market share is very high.

In terms of delivery, our category position has improved every quarter, with more than 75% of our total orders remaining stable or increasing.

Due to the scale effect of the company's leading position and the platform effect of both ride-sharing and delivery, the company is able to gain market advantages and higher profit margins.

In terms of the recovery level, ride-sharing business has exceeded the pre-epidemic level. Globally, the recovery rate of tourism has reached 94%.

Q: In Europe, taking the UK as an example, consumers who only use delivery services are many times more than those who use ride-hailing business. Can you explain in detail how to convert users who only use delivery services into ride-hailing users?

A: For example, the company provides ride-sharing promotions to delivery users and non-users, which can cross-promote ride-hailing demand.

Taking the UK as an example, our delivery business has a wider coverage, not only in London, but also in many other cities such as Manchester, Liverpool, and Newcastle. However, the ride-sharing business is mostly concentrated in London, so we can help expand the ride-sharing business by covering a wider area of the delivery business.

We believe that delivery promotion for ride-sharing has great potential, and we are still in the early stage of market development.

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