Investor Update

Mar 19, 2020

Good day, and welcome to the Uber Technologies Inc. Update Conference Call and Webcast. All participants will be in a listen only mode. After today's presentation there will be an opportunity Please note this event is being recorded. I would now like to turn the conference call over to Ms. Emily Majer Order of Investor Relations. Ma'am, the floor is yours. Thank you, operator. Thank you all for joining us today. On the call today, we have Dara Casa Shahhi and Nelson Che, and we also have Kent Scofield, and this is Emily Reuter from the Investor Relations team. Certain statements in this presentation and on this call are forward looking statements. Such statements 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 we do not undertake any obligation to update any forward looking statements we make today, except as may be required by law. For more information factors that may cause actual results to differ materially from forward looking statements, please refer to the risks and uncertainties described in the risk factors the MD and A sections of our annual report on Form Ten K that was filed on March 2nd this year. Later on this call, we'll provide some insight into our cash position under several different areas. Those insights are not guidance. We will discuss as we are not commenting on or updating our guidance at this time due to the fluidity of the situation. Following a few prepared remarks today, we will open the call to questions. With that, let me hand it over to Dara. Thanks, Emily, and thank you all for joining us today. This is most definitely an unprecedented time, so I wanted to update you on what we're doing and to answer any questions that you may have. First, our top priority has been the health and safety of our staff and everyone who uses our platform. At the same time, we move fast to ensure that our business remains on solid footing. The most important thing to know is that we're well positioned to weather this crisis and emerge even stronger. We have ample liquidity, We have a highly variable cost structure, a global footprint, multiple business lines that give us some diversity. And case studies for how quickly our business is likely to rebound, after, shock like this. All of this gives us confidence. Before I go into detail about our response, I wanna talk about drivers, delivery, people, and others who earn on Uber. Their well-being continues to be at the top of mind for me and our team. I know our drivers, our our business is incredibly resilient and will bounce back, but I recognize that many people, drivers, couriers were truck workers are suffering right now. This is why we led the industry in offering financial assistance for drivers, diagnosed with, or at individually quarantined due to COVID 19. We're also actively lobbying to ensure that independent and on demand workers are included in relief packages. Supporting drivers, which also helped flatten the curve of transmission is absolutely the right thing to do for our communities and for our business. Now turning to the business, in any crisis liquidity is key. And we're very fortunate to have a strong cash position with about $10,000,000,000 of unrestricted cash as of the end of February. We have about $1,500,000,000 committed for M and A through the end of 2020, including our Korean obligations and our Corner Shop investment. In addition, we have no significant financial covenant in our debt with the earliest maturity not coming until 2020. 2023. Again, no significant financial covenants. In terms of business impact, the situation remains highly fluid. Course people sheltering in place means that they take fewer Uber trips. In more recently impacted markets like Seattle, we're in the middle of watching this play out and have seen booking declines in the last few days, in the range of 60% to 70% year on year. Latin America has been largely insulated into the last day or 2 when we started to see some more moderate impacts on demand. However, we feel confident based on our prior experience in our always on business model, but as soon as cities start moving, Uber will too. In some parts of our business, we're already seeing what we believe is a worse of the impact behind us and the beginnings of a recovery. Hong Kong, for example, saw trips declined 45% from their peak, but have ticked upwards consistently, now down to 30%. From their peaks. All of this has happened over the course of 2 months. Our Each business is an important resource right now, especially for restaurants that have been hurt by containment policies. Even in Seattle, a community that has been hit really hard, that each business is still growing. And in the US, our small our FNB sales team is not closing two and a half times the number of new restaurants we normally do per day. And a restaurant self-service website that's even 10 x increase in sign ups since last Thursday. Each is becoming all the more important first partners. And we expect to be there for them. Now as you would expect of us, we're also performing extensive stress testing with multiple scenarios that we're running through. As an extreme edge case scenario, where a Ride business declines 80% for the rest of the year with no recovery, shows us ending the year with 4,000,000,000 of unrestricted cash, not including access to over $2,000,000,000 from our revolver. We absolutely don't expect this kind of edge case to happen, but we feel responsible to model it. Even in that edge case, our balance sheet remains strong. In a scenario where Q2 is the bottom, we've modeled Q2 being the bottom for various markets, that we see in various states of, business. With a recovery beginning in Q3, that scenario shows us ending the year with about $6,000,000,000 in cash and the 2,000,000,000 of Robarn Place. So in either case, whether it's an extreme edge case, or a case that could be more likely, our balance sheet is incredibly strong. We have plenty of liquidity on the books. Which we think positions us to come out of this crisis, and we will come out of this crisis, strong capable and important for our partners in our cities as well. Now these scenarios demonstrate a very important advantage 2 thirds of our cost of revenue and operating expenses, excluding stock based comp, is variable. So simply, if a trip doesn't happen, many of these costs go away. To drive the point even further, in q4 2019, our RISE gross bookings could have been down 80% and we still would have been breakeven on the Ride's segment EBITDA. Again, even in a case, based on last Q Four, If a RISE business was down 80%, we would have been EBITDA breakeven on that segment. That shows you the variable nature of our cost structure. And how we can turn dials appropriately. And as to that, in all the areas of business we're taking action as approved first step, We've already frozen headcount. And in a period of just 2 weeks, we will pull back $150,000,000 in incentives and marketing, which shows how quickly we can react. These are well exercised muscles for us, and we've always managed a business, city by city, day by day, hour by hour. Finally, as I hope I make clear, my job is to ensure the business is sound in any scenario. But, of course, the last few weeks have been anything but predictable. As such, we're not updating guidance today, but we'll of course do so at the appropriate time. With that, I'll turn it back to Emily. And, we'd like to open it up for any questions you got. Thanks, Dara. Operator, could you please take the first question? Yes, ma'am. And the first question we have will come from Brian Nowak with Morgan Stanley. I have 2. Just the first one, Dara, it's a good to serve here about the Hong Kong recovery now down only 30% from the peak. Maybe can you talk to us about the use cases that are coming back first. I know there's a lot of ways people use Ubers, between airports, commuting, bars, etcetera. What's come back first and how do you think about sort of the the timing of when different use cases come back across these regions? And then the second one, can you talk to us about any impact at all on driver supply are you seeing a pullback in driver's willingness to drive given the COVID 19 situation? Thanks. Yes, it's a good question on Hong Kong. Actually, the first use case that we see coming back, is the commute use case. It's a work use case. So, you know, when the city turns on again, I think, especially, like, people want back to work. They wanna get back to living. And the commute use case for us is our largest use case. So the biggest part of our business, the minute a company says, hey, come back to work. And by the way, I think there'll be a rush of people coming back to work. I don't think there'll be as many people in the world, happy to go back to their work, Uber's gonna turn off again. And we're also in a situation where supply is very fluid, which is when the demand is there, the supply is gonna be there instantly, because our driver or partners you know, they need to work. So the commute use case comes in quickly. Some of the other use cases travel, or do you would expect in Hong Kong is still down? Use cases, evening, going out, for dinner, etcetera. So that's coming down, but that's coming slower. And I think that pattern of people instantly gonna work and then making their way back into everyday life, but making their way kinda fits on their way back into everyday life, I think that will probably be a pattern. But when work turns on, Uber turns on, and we think that's pretty powerful. As far as the, driver, demand goes right now or driver supply goes, we've got plenty of driver supply. And if anything, we are encouraging our drivers, to not only take what rides are available there. And as you know, the ride businesses is down, but also move over to, Eats and, and delivering food and our grocery for eats. And it's a real advantage that we have in our business line, which is not only are we more useful in there for our drivers because we can't give them alternate uses of work, but each our each business has an instant inflow, folks who are ready for work, they've been in background check. They've got all their details. They've got a relationship bank relationship with us as well. That's really what we're working on is getting more water to eat because the yeast business has definitely held up much, much better. Hey, Brian. This is Nelson. Just one other touch point on that is, We've actually seen the driver funnel increase this week. And as you know, as, as this this coronavirus has an impact on a lot of week to week, earners and paycheck folks. And we expect that we'll see the driver funnel continue to increase. And so it's just more of managing the the funnel. Great. Thanks guys. You're welcome. Next question. Next, Justin Post Bank of America. Great. Thank you. A question on the drivers. You mentioned high variable costs yet trying to help them. So just trying to understand how you reconcile that and how you help the drivers, but also variable cost. And then secondly, Are you finding other areas where you can occupy drivers with things like grocery or food? And do you think that could be a bigger business for you? And then maybe longer term, how you think this event affects the competitive intensity of the industry? Thank you. Yeah. Sure. I mean, the the driver, pay essentially comes through our system. And is it's not a cost per se on our books, but it's a it's a it's a very significant part of the transportation cost structure. And we typically are spending significant amounts of money, recruiting drivers, bringing them in, green light hubs, etcetera. And during a period like this, when there's naturally more demand to drive than is that, than there is supply, we could take those costs out carefully, making sure that we are there for drivers and can help them when when they need help. So, again, we have a very, very local business. We got, I think, the best operational GMs in the world, and they're tuning the business so that we could be there for drivers. We can make sure that our that our service is second to none, but at the same time, we are can variable as a cost structure and, essentially scale up or down, based on demand. We are definitely looking at alternative, use cases. I I'll remind you that we have an agreement to buy a corner shop, which is in the grocery segment, that business is absolutely exploding in a great way. It is growing very, very quickly So we are looking at how and if we can, prior to close and the right way, integrate some of the corner shops capabilities into our service. And, you know, organically, actually, a lot of small stores, kind of, these corner shops have been integrating with each as well. We want to be there to help them. There's demand there. So we're we're absolutely aggressively looking at alternative distribution, whether it's grocery or food, and we definitely expect it to be a bigger part of our business. Long term, as far as competitive intensity of the market, I think these kinds of crises typically lead to weaker player dropping out. They lead to consolidation, and they lead to the strongest player. And we ask absolutely believe we are the strongest player in the industry, both in terms of ride and food. We've got by far the biggest balance sheet. We've got, by far, the biggest presence. We've got a diverse a business, which actually now is directly feeding into each other, I think on a relative basis, while I would never ever wish for this kind of a crisis. I think on a relative basis, when we come out, we're gonna come out stronger compared to the competition, and we're going to be even more of a leader in the industry. Great. Thank you. And thanks for the cash update. Appreciate it. Sure. Happy to do it. Next question? Yes, sir. It comes from Heath Terry, Goldman Sachs. Great. Thank you, Tara. I guess, you and Nelson have referenced Seattle few times in your in your remarks. I'm I'm curious how representative you would say Seattle is to other major markets like New York, London, San Francisco, LA, that are undergoing this. And then the just to clarify on the comment about profitability in the rides business, you said that down 80%, it would still be breakeven on a segment profitability basis. Relative to Q4. Using that same math, what would the overall profitability of the business look like under that scenario? And then, just one last one on the Eats business. Can you give us a sense with with all that you're doing to support independent restaurants and and offer free delivery during this during this time. Is there an offset in terms of the cost that you that you see in that business as you have to do less in the way of of incentives and marketing and promotion is is more people just naturally, look to to Uber. For, for, help support in this environment? Yes, sure. As far as Seattle goes, within these are these are really, really uncertain and strange times. So basically what we do is we look at city curves. You know, we'll plot out a city and take a look at the curve and take a look at the behavior. Hong Kong was one of our earliest cities that was affected, and it's the it's the earliest ones that is recovering. And if the world looks like Hong Kong, we would be in great shape. Okay? But I don't think the world is gonna look like Hong Kong because I think Hong Kong particular characteristics in terms of travel and the response they've been there before. So we wanted to take a look at other cities in Western, in the Western world. And Seattle was ahead of a curve of other cities just because of the nature of the outbreak there. And quickly to shut down. And we are seeing similar patterns if I plot curves, there's a difference in timing, but the curves in SF, LA, NYC are looking similar in shape. And my guess is you know, some of them will be higher by 5%. Some of them may be lower than a couple of percent, but there are gonna be a lot of cities around the world that look like Seattle, at least that's what the curves are looking like. Once we know more, again, we want to be early update in a certain time, our analysts or investors, once once we more know for you, no more, we'll certainly offer it to you. But Seattle does look like it could be kind of an archetype for a Western City. At least that's how we're modeling when when we talk about the $6,000,000,000 by year end, and it and another 2,000,000,000 in revolver. We're taking Seattle as a model. We're assuming 2 months of absolute, lockdown shutdown based on what we're seeing. And then we're assuming that things get better because, certainly, Hong Kong is showing us that things get better. The minute people get back to work the the service turns on. So that's kind of our best guess right now. And once our best guess turns into something more specific, we'll turn that best guess into guidance. We're just not in that place right now. As far as the the P and L in a case where, the ride business is down 80% and what it looks like For perspective, our rides, EBITDA was $740,000,000 in Q4 of 'nineteen. So you would subtract $740,000,000 from the P and L. Now that said, there are actions that we that we would take. There are tough and appropriate actions that we would take, and those actions aren't included. So I wouldn't do that math literally because I think the math will be better for us because we would then, you know, not kind of a case. We have to take very tough actions to protect your company, and and we certainly we certainly would. As far as the Eats business goes, what was the question on the Eats business again? Just if the incremental cost that you're absorbing between, all of the supports that you're giving independent restaurants, free delivery for customers that are using it if there's any offset that you're benefiting from in terms of lower marketing costs, lower incentives that are necessary in this environment because you're you're seeing the kind of increase in in demand or increase in interest in the service from restaurants given the, given the need that Uber Eats is filling in this environment? Yeah. Listen, I think our first focus has been doing the right thing to support small businesses and drivers and career. So I will say that, that is the 1st order priority. We have used that as a 1st order priority knowing that we've got a lot of flex in the East business. If you remember, in Q4, we were leaning forward very aggressively with East both in terms of incentives and in terms of marketing, So, I do believe, and it's more than believe I know when the team knows that we have plenty of plenty of dials so that as we lean forward to help our community, we can pull back in certain areas like getting incentives, I would tell you that in our Eats business, while on rides, we're aggressively pulling back because the business is in pretty significantly, and that's just the reality where we are when we manage according to reality, not according to Wish. With Eats, there's a lot more flex in the system, and we are being net, leaning forward a bit, first leaning hard into our community, but also now pulling back as much because frankly, you don't have to because we have, you know, very big P and L. We've already been moving towards profitability a lot of kind of those muscles are already in place and our balance sheet is rock strong. You're welcome. Next question? Yes, sir. It'll come from Eric Sheridan, UBS. Thanks so much for having the call, Darr. Just following up on that answer with expect to eat and the leverage you could push in the business. Can you just refresh investors on the debt diagram of how the platform works in terms of the people who use rides versus he eats on the product set. And as you see some weakness on rides, and the ability to maybe push in on Eats. What are some of the levers you could pull and how do you think you could maybe bend the curve from that Venn diagram? Have people using another product on the platform? Thanks. Yeah, Eric. It's a great question. And and the majority, we we haven't disclosed that information because competitor nature, but the majority of our ride users don't use each. Now they do use, food delivery. And we are absolutely, using this, you know, a crisis and it's not using the crisis, but we're responding to the crisis by, being more aggressive in terms of this cross promotion. For example, we deployed I think it was either yesterday or the day before we deployed a push notification to all of our ride users to use Eats, and we saw huge spikes, in terms of each usage for the past, for the past couple of days. So, the, the, kind of, the, the the loud horns that we have on rides can absolutely cross promote each. And we are going to be more aggressive in doing so. We think it's good for business and we think it's a good thing to do for our users as well. Next question. Yes, sir. That'll come from Mark Mahaney of RBC. Thanks. Two questions. Could you, any data points on other cities outside of North America particularly in, Western Europe. Some of your larger markets there may be Paris or London. What kind of trends you're seeing there, if they're similar to what you're seeing in the New York City LA, San Francisco and Seattle. And then, as a product idea, what about, expanding beyond each this environment than doing something like Uber Basic. I'm sure there are a lot of people particularly, immune challenge senior citizens, perhaps, that could be, really, it could really benefit from Uber some sort of Uber Basics offering where, you know, the the series of consumer staples and medical supplies are actually delivered to them. Is that something that you're, you know, doing? Is that something you could do with local governments, etcetera? Thank you. Yeah. Absolutely, Mark. In terms of Western Europe, the way I describe Paris and, and the UK or London, is that they are behind the curve of Seattle. But, you know, the curve is looking pretty similar. Paris is My guess is a couple of days or a week behind, behind Seattle. London is less work so to speak. So London is earlier in terms of the curve developing. But, again, it does look like there's a curve developing, and it is a it's only a question of, when the curve turns, and we're hoping that we see more Hong Kongs out there. But the behavior doesn't seem to be that significantly different. Again, in a couple of weeks, there may be cities that bought them out of different rates, and and we're just we're just not sure of that. But we will make sure that we're we communicate that, pretty, as quickly as we can. In terms of these alternate business models, absolutely. I think I think the first thing that we're doing is we're we're just trying to help in in terms of alternative business models. So, we're helping transport medical workers in Spain. We've got food delivery, in London and Paris and looking to support cities and providers who are trying to get meals to seniors. So the teams are we're actually now looking to test delivery, test kit delivery, and he have a Uber for health So we already have contacts in the health sector. We've got all of the processes that you need to make sure that the materials and the passengers that they carry are are clean, etcetera. So we are looking at all areas food and logistics is kind of our core. It's something that we're really, really good at. It starts with helping the community, and that's the angle right now. And I do think that it does have the potential of turning into a business. But at this point, you know, the businesses are arrived in East, and we're really focused on running them. And then we're we're also focused on helping communities, especially as it comes to health. There could definitely be a business there. And Mark, the only thing I'd add is, we all start with our Uber Freight. Are making sure that we're involved in terms of the supply chain for critical items in the U S. And so we are also trying to get involved there and help. Okay. Thank you very much. Welcome. Same question. Pierre Ferragu of New Street Research. Hi, thank you for taking my question. Dara, I was wondering in, in Hong Kong so you mentioned the draft, 45% below peak, and then we are at 30% below backup, 30% below peak now. How much time happened between these two points? And then looking forward, what's your best guess at the moment about how Hong gets back, to that peak? Is that how many weeks is that going to take? And what are the driving the drivers of continued recovery in the business from here today? What are the changes in the life of the city that are going to keep rides coming back up? Yeah, Pierre. It's anyone's guess. It's already characterized Hong Kong and these are approximate characterizations. So please take them as such. It it was about, 4 to 5 weeks from locked down to the bottom, and then the recovery started. And I'd say that the recovery has been in place for a couple of weeks, probably 3 to 4 weeks, but these are approximations from the memory of the CEO who've been through a lot, over the past weeks. So they are approximations. So they're they may be off by a week or 2. As far as how city gets gets back into luck, I think every city is different. For for us, we see Hong Kong get back to life, at work first. And I think that is gonna be consistent in every city. Listen, I think people want to get back to business. Certainly, in the U. S. All around the world, I think business is, doing its best to operate virtually. And I think that the minute these lockdowns, are are removed, people are gonna go to work, carefully. Safely. I think there'll be, you know, kind of social distancing. There will be cleaning supplies everywhere. People will be careful and will active from but they are going to get to work and that means going to offices. And then slowly but surely, I think that life will return to normal as far as going out, socializing, that's another, big part of our business, and then finally travel I think travel will open up. And, you know, I used to be in the travel business previously. It is amazing how quickly travel comes back. But it has to have the right circumstances for it to come back. And clearly, you don't have those circumstances. But I think, again, once once the circumstances are okay for travel. I think those flood gates will open. We're not seeing that happen yet, but I fully expect to see it happen. You know, I've seen it before. So that's, you know, every city is going to be different. My guess is in Western Europe, probably, not only work is gonna bounce back, but other elements of life will bounce back a bit faster, but at this point, it's, it's complete speculation on my part. Thanks, Todd. You're welcome. Thanks. Operator, can we take the last question, please? Yes, ma'am. That question will come from Ross Sandler of Barclays. Hey guys, thanks. Actually I have like 3 short ones. So related to that last question, if we get back to out of the crisis mode, in a couple of months or quarters, but shared rides are gone, airport routes are gone. How will that impact you guys used to talk about 17% to 63% EBITDA range for rides getting to the midpoint of that. So how would that impact getting back to that midpoint medium to long term? And then what levers can you guys pull in fixed costs or in other bets if need be. Can you just walk us through some of that? And then lastly, given this crisis, Dara, how are the conversations about 1099 workforce changing, given what's going to happen to that subsection of the economy, does this get you to AV6 or the framework that you guys had come up with in that whole process? Any thoughts on the 1099 debate? Thanks. Yes, sure. As far as the segment EBITDA margins, because of the scale that we've got and because of the variable cost nature of the business, we don't anticipate segment EBITDA margins being materially different A lot of the work on margins has been driving automation in various parts of the business, reducing contact rates, reducing core errors, That's going to be true whether we have, airport trips or we don't. So I think the biggest effect of what they they're not being pulled or they're now being airport is just the volume, the top line volume of the business will be slightly lower. And And, I think the margin characteristics of the business will be, on a segment basis, will be, quite similar and we will have to adjust. And by the way, we're already adjusting our overhead. For example, we put on, a headcount freeze I think that we can adjust the G and a to make sure that we have a G and a and an operating overhead that's appropriate, for the business. So it is, it's it's, I think it's something we'll adjust to. And and it's not a it's not fundamental issue as it relates to the segment EBITDA of a business we've been working on it for a year and a half. This is not new. These are muscles that we've developed. And more important, these are technology projects that we have developed and have been shipped and there are many, many, many behind them. In terms of an extreme, cases, can we pull more levers? Absolutely. And we are preparing those levers. We will, I think, under extreme circumstances, We'll be looking at strategic alternatives. Should we draw consolidation? Should we drive more scale? How aggressive do we wanna be We do think we've got the balance sheet to stay the course, but just because we can't stay the course doesn't mean we should stay the course. And, you know, we're gonna talk with our board. And, certainly, we're gonna get together as a management team and say, hey. What are the bets that we should continue to make in this kind of a world because essentially the cost of any debt that you'll you make, you'll increase. And as a result, you better be convinced as to the, as to, the returns on any kind of event. So we're certainly going through that. Right now, though, job number 1 is our our couriers, our drivers, restaurants being there for them. And then we're laying out a strategic kind of choice matrix based on a new capital allocation model going forward. We're putting that together, and we'll be making decisions on those over the next couple of weeks. You know, as far as the question on, on work, listen, this is this situation, certainly demonstrates the downside of attaching basic protections to w 2 employment. And what we have said very, very consistently, is that we need a third way. And we think a third way is good for society, which is allows, workers who want flexibility to work, flexibly based on what their own needs are. But also have access to protections. And that is we've been very, very consistent about that. And I think this kind of a situation only highlights it. So, we and and by the way, having those, workers having protections that's actually an important part of getting the economy back on its feet and getting the economy to, to recover. So I do think that this is an important discussion. One example of New York State given the these circumstances the it is no longer pursuing kind of the 85 type legislation that California is pursuing. It just seems completely off And during this time, this is about kind of getting as much flexible work as you can and providing protection that we think is a better formula going forward. And once, you know, everyone comes up for air, and we have a little room to breathe, we're hoping to have that dial up with government and certainly in terms of government help. We think that, you, anyone who is working full time or part time, equally deserve the help of a government because they're equally paying taxes to the government as well as they have to. So we very, very much hope for that. Our drivers and careers aren't forgotten, and we're absolutely gonna stand behind them. I think that's it. Emily, is that it for the call? Yep. Yeah. We're we're done with questions. So, thanks everyone. If you just want to take it over for joining, we need to go outside. Thank you so much for joining. And, we will update you as we know more, but we just thought it's really important to update you quickly. Such a dynamic situation. And, you know, thank you to, to anyone at Uber who's looking for this call. We got a we got a bunch of heroes, and we got a lot of work ahead of us. Everyone for joining us. And we thank you management team for your time also today. Again, the conference call is now concluded. Again, thank you all for attending. At this time, you may disconnect your lines. Thank you. Take care and have a great day, everyone.