Earnings Call: Q4 2020

Feb 10, 2021

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 speakers' presentation, there will be a question and answer 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 4th quarter and full year 2020 earnings presentation. On the call today, we have Uber's CEO, Dharik Hosroshahi 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, You should not place undue reliance on forward looking statements. Actual results may differ materially from these forward looking statements, and we do not 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 10 Q 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 With that, let me hand it over to Bahram. Thank you, Balaji, and thanks for everyone joining us today. That this progress will continue and in fact accelerate over the next quarters. However long the recovery takes, Uber's business remains well positioned. Despite renewed lockdowns in Q4, we ended the year with total company gross bookings nearly flat year on year in December with gross bookings turning positive in January. Disciplined execution and increased scale on our delivery business allowed us to improve adjusted EBITDA by $161,000,000 year on year in Q4. This quarter marks the completion of a series of portfolio actions that began in Q2 with a goal of focusing the company on its 2 massive core opportunities of mobility and delivery. We executed 17 transactions in 2020, including acquisitions that increased our run rate Our run rate gross bookings by over $6,000,000,000 and divestitures of non core operations that combined with other cost optimization actions We reduced our annualized EBITDA losses by over $1,000,000,000 These transactions coupled with disciplined operational execution and continued product innovation Confidence in our ability to reach breakeven this year, while continuing to invest in long term initiatives close to the core. Looking ahead, our strategic priority in 2021 is to continue to harness the power that our platform 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 your highly engaged consumer base on delivery will drive stronger mobility growth as cities reopen. On the flip side, we expect mobility to become an Our full acquisition channel for our delivery business. For instance, our redesigned Uber Super App Already generated more than 10% of first time leaders in Q4. We plan to accelerate Cross platform usage through renewed focus on our UberPass and Eatspass membership programs. These leases will only become more valuable as we add new benefits and verticals like pharmacy and alcohol. Memberships ramped up significantly in Q4 with over 5,000,000 members across 16 countries And we have aggressive global expansion plans in 2021. Now I'll dive into each of the core segments. 1st, mobility, which continues to be Lockdowns around the world. Mobility GBs improved modestly in the 4th quarter, up 15% from Q3 levels, but still down 47% year on year. In January, gross bookings were down 47% year on year, declining 10% month on month close to elevated holiday activity in December. We're seeing extremely encouraging trends in APAC and Latin America with growth bookings in those two regions down only 25% to 30% in January. 2 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 6 months, we'll begin to prepare our business to go from preservation mode to reengondition. This means investing in new mobility products such as Uber Reserve, rentals, Transit taxis and motorbikes and rolling out new segmented offerings like UberConference. We will focus on reengaging riders for their 2nd first trips And reengaging drivers to meet ramping demand. 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, We continue to execute well against the massive expansion of the category. We narrowed our focus to markets that we consider attractive 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 reached a $44,000,000,000 run rate in December. Revenue more than tripled and adjusted EBITDA margin as a percentage of revenue improved a 100 points year on year. We've seen our business accelerate in January to over 150% year on year growth As delivery continues to drive a natural hedge and lockdown. It's become clear that the pandemic has increased consumers' appetite Our acquisition of CornerShops opened up grocery delivery for Uber where we've rapidly expanded globally. With CloseMates, we bolstered our local commerce capability through a delivery as a service offering that already counts Walmart, Apple and 711 as customers. In December, delivery as a service represented 18% of both make orders and we intend to scale this out further along with our Uber direct product. Lastly, we announced our agreement to acquire Drizly, which will add the leading online alcohol marketplace to our portfolio. Drizly is growing 300% year on year and is already profitable on an EBITDA basis. These new initiatives We'll remain an investment priority going forward and in 2021, we expect to invest $200,000,000 to $250,000,000 pre integration synergies to grow the business by meaningful multiples. While we leaned into growth, we also made significant progress overall on just over $2,500,000,000 of gross bookings. 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 In 5 years, we've 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 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 I'd like to now open for more details on the numbers. Thanks, Tara. We continue to execute well against the tough operating environment For our Mobility business, investing for growth in 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 noted. Total company gross bookings were down 4%, but up 16% quarter over quarter. Revenue was $3,200,000,000 down 15% but up 13% quarter over quarter. Our revenue take rate was 18.5% of gross bookings, Down two twenty one basis points year over year and down 62 basis points quarter over quarter as our business mix continue to shift towards delivery. Non GAAP cost of revenue, excluding D and A, increased to 45% from 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 form a adjustments, Such as stock based compensation and restructuring charges, operations and support was down $123,000,000 year on year, reflecting continued Headcount reduction actions taken in the Q2. Sales and marketing decreased $209,000,000 as a result of lower marketing and promotion spend in our Mobility business. R and D was down $126,000,000 primarily driven by a decrease in headcount related spend. G and A was down $80,000,000 year on year and quarter on quarter. Our spend decreased $10,000,000 and improved as a percentage of revenue by 2 percentage points and continued top line recovery. Our Q4 2020 total company adjusted EBITDA loss $454,000,000 improving $161,000,000 year over year and $171,000,000 quarter over quarter. Now I'll provide additional detail on our segments. Starting with Mobility, Mobility gross bookings of 6,800,000,000 improved 15% quarter over quarter but was down 47% year on year and revenue of $1,500,000,000 improved 8% quarter over quarter It 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 $293,000,000 We're at 20% of mobility revenue, improving $48,000,000 quarter over quarter. Now on to delivery. We've seen continued tailwinds related to stay at home orders driving delivery gross bookings to $10,100,000,000 up 128%. We consolidated postmates in December, which contributed 8 points to year on year growth. Delivery revenue of $1,400,000,000 up 2 20 percent, Significantly outpacing gross bookings growth. The Liberty revenue take rate was 13.5%, up 3 91 basis points year on year and up 21 basis points quarter on quarter. The year over year expansion was driven by higher basket sizes, 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 $145,000,000 or negative 10.7 percent of revenue. That represents a $38,000,000 or 5.4 percentage point quarter over quarter improvement, respectively. Now on to freight, which grew revenue 43% year on year to $313,000,000 and adjusted EBITDA loss was 41,000,000 Freight 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 shippers' supply chains. In this challenging environment, we've seen strong adoption of our digital offerings Like API Bookloads and Uber Freight Enterprise, technology enables to provide shippers real time and transparent access to carriers. Additionally, freight 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 the Freightliner is making, and we are encouraged by the numerous awards the team has won for service and technology from both industry pundits and our largest shippers. On to ATG and other technology programs, the adjusted EBITDA loss for the quarter was $72,000,000 As a reminder, we divested ATG and Uber Elevate during the quarter with both transactions closing in January. Our Q4 2020 corporate G and A and platform R and D of $489,000,000 which represents the G and A and R and 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 and A and platform R and D improved 3 percentage points quarter over quarter as we saw fixed cost Leverage. In terms of liquidity, we ended the quarter with approximately $6,800,000,000 of unrestricted cash, cash equivalents and short term investments that have access to over A few comments around our expectations for Q1 performance. In January, mobility gross bookings were at a $25,000,000,000 annualized run rate, Down 47% year on year on a constant currency basis or down 49% on a reported basis. COVID With associated movement restrictions in many of our largest markets, including the U. S, the U. K, Canada and France, We are targeting mobility take rate relatively flat quarter over quarter consistent with normal seasonality, although market mix based on COVID cases may impact Turning to delivery, while I provide some color around quarter over quarter EBITDA progression expectations. Given the continued influx of new consumers to the cat area, 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 incremental investment Roughly $40,000,000 to $50,000,000 towards Postmates groceries and other new verticals. For Postmates in particular, we expect to narrow the losses as we move through integration and I remain on track to delivering the $200,000,000 plus in run rate synergy goals we disclosed last year. As we progress throughout the year, The delivered EBITDA should improve significantly and we remain confident in achieving breakeven at some point in 2021. Putting it all together, we expect total company gross bookings To return to year on year growth in Q1 despite the current COVID impact in mobility as delivery continues to drive strong growth. Based on current mobility gross 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 $7,000,000,000 in cash and while the bulk of our portfolio rationalizations 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 Drizly. We remain on track to turn to EBITDA profitable in 2021, 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. Please stand by while we compile the Q and A roster. Your first question comes from the line of Justin Post with Bank of America. Your line is open. Great. I hope you can hear me okay. I'm actually in an Uber. I got stuck. A couple of questions. I guess first Justin, you can ask questions from an Uber anytime. It sounds like 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 your 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. Just how are you doing on delivery and rides in the U. S. Market share wise? Thanks. Yes, sure. I think it's basically on delivery. The general business is scaling. As As we bring more restaurants onto the platform, as we bring more eaters onto the platform or couriers onto the platform, essentially We get to drive network density. As the network gets more dense, essentially a courier has 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 helps our net revenue And also really helps courier 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. And we continue also to benefit from basket size increases. And 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 It becomes a higher percentage of your overall customer base. You've seen us increase our membership base from 1,000,000 to 5,000,000 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 leaning in. But I think As I look forward 2, 3, 4 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 leaning in and also getting the additional benefit of new eaters through our As far as the trends Versus other players in the U. S, 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 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 surprises, so to speak. As it relates to the delivery business, we are in the U. S. Growing at very significant rates, triple digit rates, we see January trends in the U. S. Actually improving 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 on improving our restaurant selection, which I think holds significant upside for us. Your next question comes from the line of Brian Nowak with Morgan Stanley. Your line is open. Thanks for taking my question. I have 2. First one, Dara, with all the cost reductions and the adjustments you made to the business throughout 2020 And now with the rides business kind of continuing to evolve, how do you think about sort of the long term rides profitability now? Do you sort of remove those costs and the mix of the business continues evolving? And the second question on UberPass, anything you can share with us about Frequency or user behavior of Uber Pass members versus non members. And then you mentioned sort of being more aggressive drive that growth of that Uber Pass. Yes. I'll start with UberPass and I'll have Nelson talk about the long term P and L. As far as UberPass goes, Listen, we are very early in the development of Pass. I mean, we started leading into Pass middle of last year. We built the East Pass essentially on infrapt that the mainline Uber Pass team had built. And as a result, you see pretty significant acceleration. I think the last time we talked to you, we had a 1,000,000 paid members and we got 5,000,000 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 past 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. Would that Nelson, do you want to talk on margins? So Brian, we have not updated our long term margin. 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 Q4. As you know, in the Q1 of last year, we were at higher 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 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 We think we're very bullish in terms of the profitability profile for our mobility business. The other factor to add there is 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 and halables 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 years years. And I think we're one of the few companies around that can afford to invest in those areas. And 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 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 In the past, we talked about being 10% or 20% down in terms of getting towards breakeven. 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 Zara 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 remarks, all the actions we took last year. And so we feel very good about how we're set up 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 have recovered and 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 Mike, thanks guys. Sure, Eric. I think that the team that we have on the mobility side is Has dealt with the significant changes in volumes in mobility in pretty incredible way, right? 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 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 on to 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 recovery 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. The team has been able to balance the marketplace Pretty effectively. I do think that if I'm worried about one thing going into the second half of the year, it's are we going to have enough drivers to meet the demand that we're going to have in the mobility segment. But I think the team has proven itself over and over again. And as the mobility business comes back, we will look to continue to fund some of the new use cases, 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 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 of questions on delivery. We've heard some grumblings about increased competition in the Eats business in the UK, And in Australia, so has your outlook changed at all for those big those 3 big countries? And it's still on track for a breakeven and is that $40,000,000 of incremental investment, is that for ease or is that for these adjacencies like Corner Shop And Postmates, etcetera. And then the second one is Drizly. From what we understand, this is an ad marketplace. You kind of break even on the Transaction and then 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 Eats or the rest of Uber? Thanks a lot. Got it. 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 in the category and improved 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, And it speaks to the power of the Uber brand and ops teams who are local and understand Our market, deeply. So I wouldn't characterize the competitive environment as getting any better or worse. I would We characterize it as continuing to be intense, but it's been that way since we started. Nelson, do you want to talk through investment? So in terms of the investment, I think we said there's probably an incremental $40,000,000 to $50,000,000 in the Q1 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 marketplace, as Dara mentioned. But we believe we're winning in places like the UK In Japan, where we're seeing high triple digit type of growth, we saw in the quarter and we are continuing to improve the economics. And then obviously there are some marketplaces like the Australia 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 to like this, but the number of markets that are profitable that then we can use to either reinvest or we can use 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 and L are also improving. So those are good trends. But again, it's within the A very competitive marketplace and with these kinds of category growth, I certainly wouldn't count on it getting any better. Then the only thing I would add is that I think you heard in my prepared remarks, we will deliver against the $200,000,000 of synergies in Postmates when we announced the transaction. And so as those synergies come in, again, it'll be less in terms of the drag as it is in the Q1. But again, as Darr 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 Schmulich With Bernstein, your line is open. Yes. Hi. Thanks for taking my question. A couple, if I may. The first, just wanted to follow-up Up on Eric's question, one of the things that 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 Sorry, that was Brazil to be specific. Sorry, Brazil, yes. Can you share Color on and 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 the customer And then second question, just I think you called it the super app. 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 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 investments that we made in safety, the Technology that we've asked them to make sure that drivers are masked up and the trust that investors have, Sorry, that riders have and 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 growing faster than bookings. Generally, if you look at Many of these markets and the consumer who there's a set of consumers 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 When the 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 New use cases, etcetera. So in many times, we've seen core come back. We've seen kind of the outer boroughs come back, but we've also seen suburbs come back as well. Come back as well. And again, I think it's because we're a trusted pharma transportation. You get a lot of information regarding our platform And we've invested and 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. I don't again, I don't want to give away people on that. That's competitive. But The team is I think there are 2 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 an 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 2. So the combination of more choice and more personalization we think is pretty powerful. And the 10% of new eaters that I pointed out in Q4 that was with the super app being available for the Q1 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 on 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. Your next question comes from the line of Doug Anmuth with JPMorgan. Your line is open. Great. Thanks for taking the question. Dara, you may have touched on it briefly on Drizly and the acquisition. But just Wondering if you can help us understand more just the rationale kind of from a build versus buy perspective and then also a little bit more around the unit economics Yes, I think for us as far as build versus buy, it went down to, we got to know the Drizly 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 food or delivery 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 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 through Drizly tend to search product first and then merchant. What are you looking for? Do you want IPA? They go product first, then the Jersey team is able to identify the merchants who are able to fulfill their product based on a combination of speed and price, And then you dig 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, we'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 highly, highly regulated company on a local basis and we just saw a Drizly team who built fast, We built profitably and also did it the right way. So I think putting together like a product that is 1st 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 in other type companies, and I think we will be able to turbocharge Jersey Group hopefully, And also, you know, leave that team to execute the way that they've been executing, which is at a very, very high level. 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. Yes. So this is Nelson. So as you might expect, the take rates, the basket sizes are larger versus 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 that they're competing and so and they're providing in most cases the courier, if not, they do use 3rd party couriers as well. And so the economics actually are quite good. And as Dar mentioned earlier, they are profitable today. And as you know, They are small and we think 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 terms of setting it up. But again, we like the Uniti Theromics 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 Prop 22 costs, are you passing the entire amount along to customers? Are you keeping it in California? What are you seeing kind of competitors do and And then the second one, can you talk about Uber Direct? How big of a priority is that for this year? And 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 and 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 on 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 the 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 a, you know, I would consider it a relatively greenfield opportunity for Uber. We have we focused on initially kind of a consumer Delivery through Uber Connect, which has been very interesting, but the enterprise business is one where frankly we're going from the Postmates team who has built out those capabilities, already has merchant relationships with Apple, with Walmart and many others. And with our scale and our geographic footprint, which is broader, we think we can scale that business out Quite attractive, Woody. 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 is the same as our 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 post 'eighteen and building on their efforts. 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 take rate. And then maybe comment a bit How we should think about it in the Q1? And then, Dara, I mean, we're all kind of working through our TAM models. And just maybe how are you thinking about ramping grocery versus convenience versus pharmacy versus alcohol and just how you think about U. S. Versus international because I think The business is kind of right now a different unit economics by geography. Thanks. So the big driver of the take rate change from mobility is really just mix. You heard Dara talk earlier about the fact that Brazil is almost 80% 85%, 90% of where it was pre crisis. And so Brazil, which as you know is one of our larger 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 the call, we expect take rates to be largely Flattish in the Q1, 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, CornerShot 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 had 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 Standsually behind in terms of adoption and food delivery. So we think the opportunity with grocery is significant. We don't think that the markets 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 LatAm markets are absolutely a priority, but I think Europe and the U. S. Are very Our 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 Stand in geographies that match up those merchants. And Europe, we're going to be quite opportunistic there 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 Nordstrom team has already proven out the unit economics. So it's about taking Economics, scaling and really investing and building in the merchant relationships. All right. Next question. Yes. Your next question comes from the line of Youssef Squali with Truist Securities. Your line is open. Great. Thank you. Two questions, please. One is actually just a follow-up. And kind of what are the key issues that still need to be ironed Now 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 challenging quarter by some drivers in the labor union. Does that worry you and worry 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're 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, 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 So we've already we've already chipped. On the Prop 22, we've got Tony West, their Chief Legal Officer, on the line, I think. Tony, are you on? Can you Comments on? Sure. But could you just repeat the Prop 22? I know it was driver support, but I didn't get the full question. Yes. So I was just saying that it's basically being challenging quarter by I know at least one labor union and some drivers. And So is that something that where are 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 first, those conversations are ongoing and we were very clear after Talk 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 we know earners prefer. So those conversations are ongoing in various venues around the country. And with regards to the lawsuit, You may have seen that the California Supreme Court actually denied the lawsuit, Said it was not properly broadened at the Supreme Court level. We expect that that lawsuit will probably show up again in some other In a lower court, but on the merit, 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 Cowen. Your line is open. Great. Thanks. Two questions. First on mobility, could you just discuss views on the business recovery Over the next 2 years, maybe parsing out commuting versus businessairport 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? Sure. I'll get started on Mobility and Nelson, maybe if you can talk about the profit profile. Listen, I think as 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 Moving. And I think what's really encouraging is that we are seeing a new customer base come on to 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, 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 For 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 and helping the transit Agencies of the world recover and rebound, powering taxis with our routing, our eHail technology, our Pricing technology, etcetera. These I think will be incremental positives. 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 the scale and global I think that travel internal company business travel 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, etcetera. So I think that will be a slow return. But I think external travel, salespeople going to visit clients. Once you've got salesperson who win a client with a personal visit versus Someone who just tries to win a client on Zoom, they're going to have plenty of folks traveling out just like they have for 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 next 2 or 3 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 and delivery, it's actually too early to Comment or 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 our and 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 didn't 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 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 as you know, we've announced that we're doing some pharmacy type things in the place like New York. You've already talked a little bit about Drizly on the Paul, 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 we can act with users we have. And so we will continue to build on it. We will be disciplined in terms of the economics. You heard on Grizzly, 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 Gail, 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, 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 is 5,000,000 ever 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 RISE, Free grocery delivery, free alcohol delivery, etcetera. We will have the deepest and most meaningful Local membership high frequency local membership model and 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 identity ecosystem. We have teams on the ground in every single one of these cities. So overhead costs and our operational costs should actually be more efficient Than any of the other players. So like better cap, better LTV, More attractive margin profile, you put that together and you have the makings of We did it in mobility. We did it in food. We're going to do it in delivery. Thanks so much. Super helpful. You're welcome. All right. I think, Balaji, that was the last question, if I'm correct. Is that right? Yes. All right, great. Just I did want to say a special thank you to the Uber teams. 2020, I think it 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. 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 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.