Below is the summary of Uber's 4Q22 conference call abroad, and the financial report review can be found in "Didi in the United States: Does this Small but Beautiful Triumph the Strong and Big?"

Q1: How should we consider Uber One as an expanding attribute of a subscription product? What strategies do we have to drive growth in member subscriptions?

A1: As for Uber One, we now have over 12 million subscribing members, almost double from last year. We are also actively promoting the development of Uber One. The monthly spend of members is 4.1 times that of non-members-performing well in creating significant user stickiness. The member retention rate is 15% higher than non-members. As member numbers continue to increase, we'll see that member bookings continue to account for a growing proportion of total bookings. Globally, about 25% of total orders come from members. In the United States, 40% of our delivery orders come from members. This business is a moat we'll keep and continue to develop.

Q2: Based on the company's incremental profit strategy, how should we consider specific opinions on internal efficiency, especially cost structure?

A2: Our ride-hailing business used to account for over 85% of the company's total. And in the first half of 2020, our business shrank by 80%. So we responded by saving over $1 billion in costs from infrastructure, closing a bunch of business lines, and having to lay off over 20%. This year, our employee count will remain roughly the same—despite increasing by about 10% in the past few years, except for certain periods of time in our freight business. Our total bookings increased from $62 billion in 2019 to $115 billion last year.

As for growth efficiency, it is beneficial for us to employ managers from the clerical and sales fields. The start of this year has been quite good, so we have raised guidance for next quarter.

Q3: Regarding the frequency and engagement of users' platform use, how do we view the key driving factors in 2023 to bring it back to the high level of 2019?

A3: About the frequency of (ride-hailing), I need to point out 4 driving factors:

First, our membership program increases the base and coverage of members, making users more frequently receive more coupons and increase their usage frequency.

Second, is the power of the platform. Cross-promotion between ride-hailing and delivery to gain free or discounted traffic. Smart selling and cross-selling in an intelligent way driven by AI and machine learning.

Third is the breadth of products we offer. The grocery store is an example of a new product - more choices that drive higher usage frequency. Reopening is something that benefits us—people going out shopping, going out to eat, etc. There is no reason to suggest that we cannot reach or exceed historical highs in a period of time. Q4: Why shouldn't the incremental profit margin of the takeaway business stay at a high level in 2023?

A4: We are very satisfied with the growth of the profit from the takeaway business, which has grown by more than 20% compared to last year. There are mainly two sources of profit growth, one is that the company has improved the efficiency of delivery through technology, and the other is that the company is increasing the monetization degree of new business, and the advertising business continues to exceed the set target. The combination of these three factors has driven the increase in profit.

However, the pace of recovery will definitely slow down, so the increment of profit from the takeaway business in 2023 will increase less.

Q5: How does the overall impact of front-end technology innovation compare with other past innovations? Looking forward to the next few years, will we see other technological updates?

A5: In fact, it is difficult to predict the impact of innovative technologies, but informing the destination and price in advance is the greatest version ever. A lot of back-end work is needed in the training mode, and tests need to be conducted in various markets to ensure that we are correct. If drivers know the price and location in advance, it will reduce cancellations.

Q6: Is there any special impact of the new taxi product? What is the pace of launching the pre-booking and destination function worldwide?

A6: I think the biggest impact is pre-booking. In our overall product portfolio, the new products account for approximately $6 billion in total bookings, and this combination is growing at a rate of approximately 100% per year. They will account for a larger proportion of the overall bookings. The largest booking is pre-booking, which exceeds $2 billion.

We are also interested in low-cost products--UberX shares the opportunity to carry 2 to 3 passengers. It is more efficient and better for the environment. Our dream is to share travel with everyone. This will also be a good thing for traffic congestion and the environment.

I expect that by the end of this year, the pre-booking and destination function will be launched in all markets worldwide (excluding markets where it cannot be launched due to policy reasons).

Q7: Regarding the 24-year outlook, there are also some obstacles in foreign exchange and other aspects. Is there any update? And regarding some cost issues, the minimum driver fee limit and insurance costs in New York changed this quarter. What are the potential impacts?

A7: The impact of foreign exchange has improved, and foreign exchange may not be a problem in 2024. The targets for the incremental profit margin and profitability set last year have been achieved this year. We strive to cross the break-even point at some point this year.

Regarding some regulatory costs, the government in New York requires a 6% pay raise for ride-hail drivers, and the additional cost will be absorbed by the platform.

Regarding insurance costs, although we have had a lot of communication with insurance companies, we have not made much progress in reducing the insurance cost of each trip. I think insurance costs may be a project that we cannot optimize. Q8: Regarding the profit margin of the takeaway service, could you provide some measures to increase efficiency, such as optimizing advertising and market incentives?

A8: We have achieved the previously set profit margin growth target and exceeded our prior expectations. We will continue to strive to achieve the company's overall 7% profit margin target.

As for advertising, our annual revenue has exceeded $500 million. Active advertisers have increased by 80% year over year, but the penetration rate of takeaway merchants is only 5%, so there is considerable room for the company's advertising business to grow. We aim to achieve a yearly revenue of $1 billion.

Travel ads on the ride-hailing app have a click-through rate of over 3%, with a CPM of $45. We are also launching new types of ads, such as car rooftop and tablet ads - products whose essence is essentially to enable drivers to earn higher monthly incomes, which will then translate into more drivers on the platform.

Q9: Regarding the weekly active user penetration rate, in some markets like the UK, it seems to have reached pre-COVID-19 levels, but in the US it is still lower than before. Is there any reason for this lag in user performance and how to consider employee compensation levels in 2023?

A9: The reason for the lag in the US penetration rate is due to the drag from the West Coast. Most major cities, such as Miami, New York, Atlanta, and Houston, are at pre-COVID-19 levels. Our northern neighbors, such as Canada, have also surpassed their 2019 levels. But it is indeed San Francisco, Seattle, Portland, Los Angeles, and other West Coast cities that are lagging behind. However, the West Coast is also recovering.

We expect our employee headcount to remain relatively stable. There will be no significant changes to current employee compensation. We definitely manage our employee headcount very wisely.

Q10: Regarding Uber One, you mentioned a strong rebound in spending, what is the contribution of Uber One members and non-members? What is the profit of this plan?

A10: I don't want to reveal too many details about Uber One, but if an Uber One member only stays for one year, the company is basically not profitable. It is only in the second year that the company may profit from the membership service. This is just a trade-off - we actively balance our order frequency, average order value, and profit margin to drive Uber's penetration. Another advantage is that more and more merchants are willing to pay for advertising in our food delivery business, thus gaining exposure to our highest quality users.

Q11: With the macro-economy improving, driver supply improving, and the supply chain continuing to optimize, how do you consider pricing and conversion rate issues?

A11: As far as driver supply is concerned, the growth level is very healthy - the number of drivers has increased by 35% year over year. In an inflationary world, more people will enter the platform to earn money. In the past, Mexico experienced some setbacks, as did Brazil, and we saw that a weak economic environment helped drive our driver supply. This is a favorable factor in terms of travel volume. In addition, we have always focused on improving driver income. At present, drivers earn 5 US dollars per hour. Calculated at a constant exchange rate, this represents an increase of 7% year-on-year. Apart from the economic environment, the income levels and services we provide are a driving force. Waiting time in January has decreased to 4.5 minutes. The market itself is becoming increasingly healthy.

Q12: Regarding the takeaway business, how do you estimate the growth of the takeaway business?

A12: Overall, the takeaway business still has resilience in the post-pandemic era. Globally, our competitors have significantly reduced their unhealthy spending levels from the past. And we benefit from the advantages of the dual business platform, with very low customer acquisition costs. We get more new food customers from the ride-hailing business than we do from Google, Facebook, and Instagram combined, at a cost of about a quarter of the latter.

At the same time, Uber One members help drive higher order frequency, higher spending, and higher retention rates. As the only platform with both ride-hailing and delivery businesses, we believe the company can achieve above-market average growth and profitability.

Q13: The ride-hailing business continues to bring impressive booking growth. How does revenue sharing work? Can Uber create a permanent competitive advantage and increase market share?

A13: I have never seen a permanent competitive advantage, and neither will Uber. The company holds a leading share in regions such as the United States, Europe, and Australia. A competitor in France attempted to gain market share through massive subsidies, but was ineffective.

We do not believe that heavy subsidies are an effective strategy, and increasing the efficiency of use, adding technology features such as predictive pricing, and a strong membership platform, are the right direction to take.

The company will have to persist in order to continue to improve profitability while gaining a market-leading position. When we relax, competitors will gain an advantage.

Q14: Regarding freight, the second question. Freight bookings and EBITDA were slightly lower than our expectations. Can you talk about your views and expectations for this area?

A14: The freight industry is showing some unhealthy characteristics. We acquired Transplate in 2021. We spent considerable time integrating our freight business last year. We are trying to use this brand and Uber’s technology to make the freight business successful.

We are more focused on medium and small shippers, so some organizational adjustments are being made within this sector. The overall trend in the freight industry continues to affect our business. Therefore, the freight sector may continue to underperform this year.

Q15: It seems that the leverage of promotions is quite good. This is the third consecutive quarter of declining marketing expenses. How much more efficiency can be improved? Considering the ambition of total booking growth, will the company increase promotion spending in the future?

A15: We are once again focused on achieving and balancing growth and efficiency, and we have achieved very good results. We believe there will still be good growth in the future.

Regarding the driving role of S&M spending in revenue growth, we can only say that we will use every penny of spending to drive the most revenue. For example, the Super Bowl advertisement, this is an expensive advertisement to drive the growth of our strategic products. Therefore, strategically, the efficiency advantage of our platform allows investment in different sectors, including marketing and technology. This way, we can establish an advantage beyond our competitors. However, we must maintain and improve this efficiency every day, every week, every month, and every year.

Dolphin's previous research on Uber:

November 2, 2022 telephone meeting "Uber believes that the demand for travel is still strong, and the future focus is on improving user stickiness and habits (3Q22 telephone conference minutes)"

November 2, 2022 financial report review "Can Uber make money without growth, and the market pays the bill?"

November 21, 2022 "Through the joys and sorrows of the epidemic, where is Uber's future path?"

October 14, 2022 "Through the epidemic and inflation, the killer behind Uber's luck"

Risk disclosure and statement in this article: Dolphin Investment Research Disclaimer and General Disclosure

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