Uber: Confident in future growth, will increase investment in the next quarter

The following is a summary of Uber's first quarter financial report conference call. For the financial report analysis, please refer to " "The 'American Version of DiDi' is in Trouble, Is it Just a Temporary Setback or a Real Collapse?" 》

I. Review of Key Financial Information:

II. Detailed Content of the Financial Report Conference Call

Q&A Analyst Q&A

Q: Excluding the impact of exchange rates, what specific factors, whether adverse or favorable, should be noted for the second quarter order growth of around 20%?

A: Regarding our total order amount, we want everyone to remember the growth algorithm, which measures user count, usage frequency, and pricing. For the first quarter, our user count saw strong growth, increasing by 15%, usage frequency also showed good growth at 6%, while prices remained relatively stable. We expect a similar trend for the second quarter, which is also a component of the growth algorithm implied in our guidance. Demand for our products remains strong, and we anticipate that the total transaction volume for the next quarter will continue to grow by over 20%.

The order amount for the ride-hailing business will be negatively impacted by exchange rates by approximately 5 percentage points. We still expect the growth of the ride-hailing business to be in the mid-20% range when excluding currency exchange rates. Additionally, we anticipate a slight decrease in the adjusted EBITDA profit margin for the ride-hailing business between quarters, as we made some reserved investments in the first quarter that we will not repeat in the second quarter.

Q: How do you view the impact of autonomous driving on Uber and the potential new competition?

A: Autonomous driving technology, when mature, will have a positive impact on the industry and Uber, improving ride safety, lowering prices, and expanding market coverage. However, the development of the technology takes time and requires the establishment of corresponding regulatory frameworks. During the transition period, we will see human drivers operating alongside autonomous vehicles, and over time, the penetration rate of autonomous vehicles will gradually increase. We are committed to collaborating with the autonomous driving industry to leverage our systems and demand to increase vehicle utilization and contribute to the industry's development. At the same time, we see the development of new technologies and simulation models that will attract more participants to enter the market, reducing development costs. We look forward to collaborating with partners of various scales to jointly promote the development of autonomous driving technology for the benefit of the entire industry and passengers.

Q: Which investments have we postponed? How will we consider driver and passenger incentives and investment strategies in the future to achieve sustainable growth?

A: For market investments, we focus on three aspects: attracting drivers and couriers, attracting merchants, and encouraging consumers. We rotate quarterly among these three based on market demandIn the first quarter, the ride-hailing market usually sees lower investment returns due to seasonal factors, so we choose to invest less in this quarter and increase investment in the second quarter. We mention this just to caution against being overly optimistic about profit improvement in the ride-hailing market, although we are very confident in its continued improvement trend.

Q: Recently, competitors have indicated the possibility of withdrawing investments in Latin America. What is our observation of Latin America? Additionally, what are the prospects for Latin America?

A: In Latin America, we see very healthy growth in the ride-hailing market, at around 20%. While some competitors have hinted at more cautious spending, we have not seen this yet. On the contrary, we see competitors spending quite aggressively in the market, possibly to showcase international growth and prepare for an IPO. We are accustomed to this competitive environment, have prepared effective response strategies, and will continue to maintain a positive attitude to uphold our leading position in the market.

Q: Can you briefly discuss the monthly trip details of MAPC in the first quarter, especially in Latin America, the impact of holidays, and how this affects the second quarter?

A: The order volume growth for the ride-hailing business in the first quarter is 26% at constant exchange rates. About one percentage point of headwind is due to the non-shared ride portion of our Careem business being spun off in December last year. Additionally, seasonally, Latin America saw stronger demand during last year's carnival period, which did not repeat in the first quarter this year. Furthermore, adjustments in Easter and Ramadan timings also impacted the quarter.

Q: Could you briefly discuss the strategy and key success factors of the food delivery business in the suburbs, as well as the role of the partnership with Instacart?

A: The growth rate at constant exchange rates in Q2 is in the mid-teens, very consistent with Q1. Audience and frequency are strong at an overall Uber level, and performance across various business lines is good.

Regarding our EATS strategy in the suburbs, it is similar to the global food delivery business strategy. The growth rate is satisfactory, with a consistent 17% growth rate in two quarters, higher in the US and Canada. Generally, growth in the suburbs is higher than penetration rates in city centers, with the key being laying the groundwork, increasing choices, ensuring competitive pricing, and maintaining high service quality.

Through the partnership with Instacart, we have introduced high-quality and highly targeted suburban audiences to the Uber Eats ecosystem and merchants, bringing additional demand and being well-received by merchants. Additionally, we have expanded partnerships with Domino's and other merchants in the suburbs. Therefore, we believe we are ready for sustained growth in the suburbs, and Instacart transactions will create more opportunities for future growth in the suburbsQ: First of all, with Uber One already launched and expanding in some overseas markets, do you have any further plans for international market development? What do you think is the biggest gap in driving more subscription revenue and adding more value and depth to Uber One at the subscription level?

A: Internationally, our Uber One strategy is basically the same as our domestic and global strategies. Members contributed 32% of the total mobile and delivery transaction volume, with a good year-on-year growth. In the total delivery transaction volume, this proportion exceeds 45%, with members' monthly spending being 3.4 times that of non-members.

We are implementing a series of new initiatives. One of them is to continue optimizing the use of Uber Cash on the mobile end. Business riders can also earn Uber Cash. We have seen that over 60% of Uber Cash earned on mobile is actually redeemed for delivery. So the membership system is a powerful lever for driving market entry and frequency growth, as well as a good way to introduce more users to delivery benefits.

In terms of ride-hailing, we believe we can penetrate deeper. We are now launching a cashback accelerator to promote the use of higher-end products, and we will see more member-exclusive activities and experiences, which will bring surprises to our members. Finally, we are globally transitioning more members to annual passes, which helps improve retention rates.

Q: Does the growth rate of Uber One match the overall business growth of around 20%?

A: In terms of ride-hailing growth in the United States, we do not have data distinguishing between the U.S. and non-U.S. markets. But looking at our overall data, our ride-hailing business growth rate is 26%, down from 28% in the previous quarter, with a 100 basis point slowdown due to Careem's comparable base. These growth rates are very high, and the U.S. is our largest market in terms of gross profit bookings, so its growth is crucial to the overall business growth.

Q: Can you elaborate on where the growth is coming from? Although the service is no longer new, are you still able to acquire healthy new customers? What is your view on the sustainability of this growth?

A: As for the sources of growth, I can say that the most significant part of the growth comes from the number of users, with a year-on-year growth rate of 17% for mobile monthly active users and an overall growth of 15%, so the audience growth for ride-hailing is actually faster.

We also see new products as a significant driver of growth. For example, our Halibles product, U4B health business, Reserve, and UberX Share, among other new products, have growth rates as high as 80%. Additionally, over 20% of new customers come from these new product categories, introducing new user groups to us. Furthermore, during the pandemic, some commuting customers paused usage, but as people return to work, we see a significant increase in weekday transactions, which is a positive signalQ: Can you provide the proportion of non-restaurant advertising revenue to total annual advertising revenue? Can we launch related advertisements for the new Instacart partnership? Additionally, how will the Instacart partnership change your strategy in the American grocery market, and what are the economic benefits of this collaboration?

A: Our advertising revenue in Q4 2023 reached an annual revenue level of $9 billion, but we did not differentiate between food delivery and ride-hailing. Regarding the arrangement with Instacart, when users click through Instacart to view Uber Eats' web or app interface, that is our advertising space that we can leverage and monetize.

As for non-restaurant advertising, we believe this is still in its early stages. However, we believe our sponsored product offerings, especially groceries, can achieve a higher percentage. We have fully launched sponsored products in the US and Canada and plan to expand to eight additional key markets in 2024. We are very confident that this will become a significant revenue stream for us. Additionally, we are optimistic about advertising in the delivery driver app. We see high engagement from drivers, with a click-through rate of 2.5%, well above the industry average. Therefore, video ads and tablet ads continue to be very promising growth areas for us.

Q: You mentioned the accelerated growth of MAPC in the food delivery market, such as in the US. Can you explain why your MAPC growth has accelerated?

A: In terms of the growth of our food delivery business and audience expansion, this has been quite steady. We have accelerated the growth rate of our food delivery business from close to 10% at the beginning of last year to double digits. The nature of growth is also improving, with most growth coming from audience and frequency rather than price. This is thanks to the quality service we provide, a wide selection, and improved pricing strategies such as merchant-funded promotions. Additionally, the number of active merchants is increasing, providing users with more choices. We continue to invest in brand marketing, believing Uber Eats is a top-tier brand. Furthermore, our ride-hailing business also brings unique platform advantages to our food delivery business, further expanding the audience. All these factors contribute to increasing user frequency and retention, and we have achieved this growth while improving profitability.

Q: Can you discuss the impact of groceries and retail on segmented profits? Or how is the unit economics? And how much does it impact the overall profitability of food delivery, or when can profitability be achieved?

A: Calculated at constant exchange rates, total order volume grew by approximately 40%, showing strong growth, and we successfully increased the EBITDA profit margin of food delivery by about 20% compared to the previous period. Although it has not yet reached our expected level, the situation is improving both annually and sequentially. Therefore, we are very satisfied with the path to profitability for the grocery business. Approximately 15% of food delivery users are ordering groceries, and this proportion is gradually increasing. We believe that through the power of the platform, advertising opportunities, and measures such as reducing consumer promotions, we will gradually achieve profitability in the grocery businessQ: Can you update us on the regulatory situation of the gig economy in Europe, which policies should we pay attention to, and how does it affect labor costs?

A: As far as the EU Platform Work Directive is concerned, EU legislators have essentially voted to maintain the status quo, with the status of platform workers continuing to be determined by individual member states. Each member state needs to implement the directive by mid-2026. We believe that this agreement is unlikely to bring significant changes in most EU countries. Our view remains the same, that the flexibility brought by the gig economy should be extended to couriers and drivers, while discussions should be held at the local level and certain protective measures introduced. Therefore, we do not actually expect any changes in the EU situation.

Q: In the United States, could we understand the impact of minimum wage standards in Seattle and New York on order volume and EBITDA, and how do you plan to mitigate this impact in the future?

A: Regarding Seattle and New York, we have seen some regulatory measures that have faced strong opposition from couriers, restaurants, and customers. In Seattle, delivery orders have decreased by 45%, leading to a 50% increase in courier wait times compared to the previous year. Therefore, while the income per order may have increased, the number of orders has decreased, with 30% of active couriers leaving the platform. We see the Seattle City Council proposing reforms to make the standards lower and more favorable to the platform. While the goals have not been met yet, we expect the voting results to be positive. In New York, regulatory measures have forced us to significantly reduce the number of couriers on the platform, resulting in a decrease in courier income. We have been able to withstand the economic losses these various regulatory measures have brought to our platform, but we hope regulatory authorities can find solutions that are more favorable to those affected.

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