Uber Q3 2024 Earnings Call Summary

The following is the summary of Uber's Q3 2024 earnings call. For the earnings report interpretation, please refer to Uber: A 10% Plunge, What Mistake Did the Honor Student Make?

1. Key Information Review:

2. Detailed Content of the Earnings Call

2.1. Executive Statements:

Over 7.8 million people drove and delivered shopping through Uber, with revenue exceeding $18 billion this quarter. Now, over 25 million are Uber One members, a year-on-year increase of 70%.

The advertising business grew nearly 80% year-on-year, and the autonomous driving strategy is also progressing steadily, with Uber's 14 autonomous driving partners gaining a deeper understanding of Uber's importance in their deployment plans.

In terms of capital returns, we plan to steadily increase our share buybacks over the next few quarters. Specifically, we intend to gradually reduce the number of shares by 2025.

2.2. Q&A Analyst Questions

Q: Regarding less dense markets. Can you discuss the opportunities in these markets in more depth, and how to build supply and stimulate demand operationally? How should we consider expansion in the coming years?

A: We believe there are huge opportunities in lower-density markets. Uber initially developed in large cities, which remain the primary source of demand. However, we have found that demand is growing faster outside of core cities, both in rides and delivery businesses. Non-core cities in the U.S. represent 60% to 70% of the market, making up a significant portion. We are focusing on improving options in these areas and building the necessary supply-demand liquidity to ensure drivers remain busy. By investing on both sides of supply and demand, we can enhance service levels and expand this strategy in the U.S., U.K., Australia, and elsewhere. We believe the opportunities in these lower-density areas are very significant and will drive core business growth over the next two to three years or even longer.

Q: Since the last investor conference update, how do you view the trends in the U.S. business? Are there areas that are exceeding or slightly below your expectations for U.S. ride business growth? Has there been any change in the outlook for the contribution of U.S. rides to growth?

A: The U.S. market has always been our largest market, contributing less than 50% of total gross bookings (GB), but profitability exceeds 50%. We have observed several trends: first, the cost of commercial insurance has significantly increased over the past two years, especially in states with high insurance costs like New Jersey and California. As these costs are passed on, consumer transaction growth has slowed. Growth on weekdays is stronger than on weekends, indicating that people are returning to work. Uber for Business is growing very strongly, with overall growth exceeding 50% Consumers are more price-sensitive when deciding whether to go out, but demand on weekdays is very strong, especially for Uber For Business, which has grown by over 50%. We have not seen a downgrade trend in product selection among consumers; on the contrary, our shared products are growing rapidly. Overall, we are optimistic about the development of the U.S. market, although the increase in insurance costs has led to a slowdown in expected transactions.

Q: What updates are there regarding autonomous driving in Arizona?

A: In Phoenix, Arizona, we currently have a relatively small number of vehicles, but the experience is very good. Passengers have rated autonomous driving highly. We plan to significantly expand our collaboration with Waymo in Atlanta, with hundreds of Waymo vehicles expected to be in operation next year. We are optimistic about the potential of autonomous driving and are collaborating with 14 autonomous driving partners, with plans to continue expanding in domestic and international markets.

While we do not expect autonomous driving to become a major source of profit in the next 5 to 10 years, this does not affect our continued advancement in autonomous driving development along the path we have been pursuing for the past five years.

Q: Looking ahead to a reality where autonomous driving is achieved, what are Uber's operational goals for its fleet? How can the efficiency of autonomous driving technology providers be improved?

A: We have been working with our fleet for many years, and currently, about 15% of global fleet operating hours (potentially for commercial operation of taxis/rideshare services) come from our partnered fleets, which typically operate longer hours and provide multi-shift services. We have developed special tools for fleets to improve vehicle utilization based on demand. We believe that the advantages of a global platform in demand and operations can manage local complex logistics more effectively, thereby reducing costs. We aim to be the best demand and operations platform in the field of autonomous driving and plan to start expanding from our collaboration with Waymo.

Q: What is Waymo's impact in the San Francisco market?

A: In San Francisco, we frequently see Waymo vehicles operating. They hold a high single-digit to low double-digit market share in the areas where we operate. We have not observed a significant preference among consumers between choosing us or Waymo. Waymo's pricing is generally slightly higher than UberX, falling into a more comfortable electric vehicle category.

Q: How did Uber's ride bookings and incremental commission rates perform in the third quarter of 2024? What are the driving factors for growth?

A: In the third quarter of 2024, Uber's total bookings grew by 20% at constant exchange rates. This marks the fourth consecutive quarter of at least 20% growth, primarily driven by an increase in the number of users and usage frequency, with the number of users growing by 13% and usage frequency by 4%. The use of financial leverage has resulted in EBITDA growth nearly three times that of total bookings growth. We expect ride activity in the fourth quarter to be similar to the third quarter, but it may slightly slow down due to last year's pricing effects. We anticipate that the ride-hailing business will maintain around 20% growth at constant exchange rates in the fourth quarter, while EBITDA margins may remain stable

Q: What challenges does the company face in terms of insurance costs? Which markets are these challenges primarily concentrated in?

A: The rise in insurance costs is primarily concentrated in the U.S. market, especially in providing insurance for drivers. Over the past few quarters, we have observed a steady increase in insurance costs, with insurance costs in the U.S. rising by 16% year-on-year in September. However, this growth trend has begun to moderate. Looking ahead to 2025, we expect insurance costs to continue to rise, but the growth rate will significantly slow down. We are working to reduce insurance costs by deploying safety technologies, risk management programs, and collaborating with regulators, passing these savings on to passengers.

Q: How is the company's advertising business growing? Where are the future growth opportunities?

A: The company's advertising business is growing strongly, particularly in the delivery segment, where advertising revenue accounts for between 1% and 2% of total bookings. The advertising business is mainly divided into four categories: CPC ads for small businesses, corporate ads, sponsored listing products, and travel ads. Both small business ads and corporate ads are growing rapidly, especially as large enterprises seek new consumer groups. We have launched sponsored listing products in the grocery business, currently promoting them in eight markets. In terms of travel ads, we have partnered with T-Mobile to launch "Journey TV" ads, covering 50,000 vehicles across the U.S. Overall, the advertising business provides us with opportunities to improve profit margins and driver income, and we are confident in the growth potential ahead.

Q: How is the collaboration between Uber and restaurants progressing in the delivery business? Additionally, how is the awareness of investments and consumption in grocery delivery and other new business areas improving?

A: The delivery business achieved a 17% growth this quarter, continuing to excel in attracting new users, particularly through cross-promotion with the ride-hailing business. About one-third of new users come from the ride-hailing business, and these users have a lower cost and a high level of interaction with the platform. We have increased advertising and brand spending globally, enhancing our market position. In our top ten markets, the market position of the delivery business has improved. We are focused on improving service quality, increasing choices, ensuring timeliness, and reducing delivery errors. The spending frequency of members is three times that of non-members, and member retention rates are also higher, with the current membership reaching 25 million, a year-on-year increase of 70%.

Q: In terms of capital allocation, how does Uber choose between partnerships and acquisitions? What are Uber's priorities in expansion and diversification?

A: Our top priority is responsible investment, focusing on strategies that drive free cash flow growth. We have many opportunities in mobility and delivery businesses, such as grocery delivery. We have achieved profitability, allowing us to focus on returning excess capital to shareholders. We will selectively evaluate mergers and acquisitions, but the standards are high, requiring both strategic value and financial returns. Foodpanda is a great example, as it is a clear win both strategically and financially. We plan to reduce the number of shares through a buyback program. Regarding the choice between partnerships and acquisitions, we will consider whether we can add value in that area and whether it is closely related to our core business For areas that are not within our core business scope, we tend to collaborate with other companies.

Q: What are the strategies and advantages of the company's "Direct" business?

A: In the Direct business (i.e., domestic point-to-point express delivery business), Uber continues to invest actively and has established partnerships with multiple collaborators. The global nature of our business allows us to work with global brands and integrate into their technology ecosystems to provide services worldwide. We are increasing our engineering capabilities, signing more partnerships, and deepening our service capabilities. The Direct business is one of our fastest-growing segments, and we believe that expanding the Direct business into a more fundamental fulfillment ecosystem presents a real potential opportunity.

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