Uber CEO Talks at Goldman Sachs Tech Conference: 7 Key Takeaways

A day after revealing somewhat encouraging fourth-quarter numbers, Uber’s new CEO argued his company has quite a lot of growth still in front of it, as well as a roadmap for paring its big losses.

Dara Khosrowshahi, who left Expedia to become controversy-marred Uber’s CEO last August, delivered a wide-ranging talk at the Goldman Sachs Technology & Internet Conference about (among other things) his company’s growth opportunities, dealmaking and financials. Here are some takeaways:

1. Khosrowshahi declared ride-hailing services are just the starting point for Uber in a broader effort to become the largest company in a $5 trillion transportation industry that it still claims less than 1% of. “Cars are to us what books are to Amazon (AMZN) ,” he said, perhaps overstating the point a bit. Among the other opportunities he mentioned: The UberEats food delivery service, which did over $1 billion in gross bookings in Q4 and is still growing at a 100%-plus clip, and the Uber Freight trucking platform, which (though still in its early stages) is expected to reach a run rate in the “multiple hundreds of millions” in 2018. Uber’s forays into the electric bike-sharing space were also mentioned.
2. Nonetheless, some gaudy stats were shared for Uber’s core business. The company now has over 3 million drivers on its platform and claims to cover over 80% of the world’s population. Khosrowshahi also stated Uber moves more people than the entire airline industry, that close to 50% of its trips in some cities now rely on pooling services and (as signaled by reported Q4 bookings of $11.1 billion) Uber is now on a $40 billion-plus annual bookings run rate. That represents strong growth from reported 2016 bookings of $20 billion.
3. When asked about Uber’s autonomous driving investments, Khosrowshahi noted the Uber X ride-sharing service costs about $2.50 per mile in cities, and that private car ownership costs about 80 to 90 cents per mile. Uber (like others) sees autonomy as the only way to eliminate that gap. “We don’t want you to buy cars,” he said. “We want you to use shared mobility.”
4. But while Uber has been developing its own autonomous driving system, Khosrowshahi asserts Uber is happy to partner with third-party system providers, and wants “every single autonomous player plugged into [Uber’s] network. He adds Uber’s ride-sharing operations give it expertise in dealing with “edge cases” that autonomous systems could struggle with, and also allow it to push a “hybrid” approach in which autonomy is first introduced on select routes.
5. Regarding the recent SoftBank deal, through which the Japanese conglomerate obtained a 15% stake by buying shares from existing Uber investors and injecting a bit of new capital, Khosrowshahi praised SoftBank and founder Masayoshi Son’s pedigree – “You want smart money,” he said. – and noted the company is involved in many “adjacencies” relevant to Uber in areas such as transportation and electrification. He also pointed out the SoftBank deal coincided with needed governance changes ahead of Uber’s planned 2019 IPO.
6. On Uber’s recent settlement of a bitter trade secret theft suit with Alphabet’s (GOOGL – Get Report) Waymo, Khosrowshahi expressed relief on putting what was “a very significant distraction” for Uber’s autonomous driving team behind it, and claimed to be pleased the settlement (it involves an equity payment) makes Google a larger investor in Uber. “Neither company’s particularly happy with the settlement, which to me means it was a good settlement,” he quipped.
7. Though Uber continues is coming off a Q4 in which it posted a $1.1 billion (down from $1.46 billion a year earlier), Khosrowshahi insists Uber’s contribution margin – defined as the profit margin for its regional operations after backing out driver payments and overhead, but not some other expenses – is now “solidly positive” on a global basis. He claims the main reasons operating income remains negative: Major investments in emerging markets such as India, along with “big bets” in areas such as autonomous driving, food delivery and freight. Khosrowshahi also suggests Uber’s “path to profitability” will look clearer by the time its IPO draws close.