Logo of jester cap with thought bubble.

Image source: The Motley Fool.

Uber Technologies, Inc. (NYSE:UBER)
Q2 2019 Earnings Call
Aug 8, 2019, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day. My name is Jericka, and I will be your conference operator today. At this time, I would like to welcome everyone to the Uber Q2 2019 Earnings Conference Call. [Operator Instructions]

It is now my pleasure to turn today's program over to Mr. Kent Schofield. Sir, the floor is yours.

Kent Schofield -- Head of Investor Relations

Thank you, operator. Thank you for joining us today, and welcome to Uber Technologies Q2 2019 Earnings Presentation. On the call today, we have Dara Khosrowshahi, CEO; Nelson Chai, CFO; and this is Kent Schofield, Head of Investor Relations. 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 is included in the press release, supplemental slides and on filings with our -- the SEC, each of which is posted to investor.uber.com.

I'll remind you that these numbers are unaudited and may be subject to change. Certain statements in this presentation and on this call may be deemed to be forward-looking statements. Such statements can 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, and we do not undertake any obligation to update any forward-looking statements we make today.

For more information about factors that may cause actual results to differ materially from forward-looking statements, please refer to the press release we issued today as well as risks and uncertainties included in the sections under the captions Risk Factors and Management's Discussion and Analysis of Financial Condition and Results of Operation in our final prospectus filed with the SEC in connection with our IPO on May 13, 2019, as well as our first quarter Form 10-Q that was filed on June 4, 2019. Following prepared remarks today, we will open the call to questions.

With that, let me hand it over to Dara.

Dara Khosrowshahi -- Chief Executive Officer

Thanks, Kent. We're proud of the progress we made in Q2 '19 toward becoming the platform of choice for the movement of people and powering global commerce all around over the world. During the quarter, we continued to produce strong growth in gross bookings across all of our platform offerings with overall growth of 37% year-on-year at constant currency, producing a $63 billion annual run rate. Our adjusted net revenue, or ANR, was $2.9 billion, up 12% year-on-year, excluding a driver appreciation award noncash made in connection with our IPO; and on a constant currency basis, ANR accelerated nicely, up 26%, powered by strongly monthly active platform consumers, or MAPC, growth of 30%. Our MAPC growth has continued into the second half of the year, and we're proud to announce that we passed 100 million MAPCs in the month of June.

Note that we expect ANR growth to continue to accelerate beyond the 30% mark in constant currency during the back half of the year as we continue to grow MAPCs, increase multi-offering users, improve take rates sequentially and with the help of easier comps in the prior year periods. Our Q2 '19 adjusted EBITDA loss came in at $656 million, a big improvement versus Q1 and handily beating our own internal plan due to strong execution of our teams across the businesses. The competitive environment and our position in the ridesharing space continues to be stable to improve. We will take some of that improvement to continue to lean into our Eats business, where we see plenty of competition and significant capital investment but incredible potential.

While you often have to make trade-offs in life, we believe that we can continue to invest aggressively in growth while driving efficiencies from scale by building great tech to improve effectiveness and from good old-fashioned focus on the bottom line. Our much improved core platform contribution of $220 million in Q2 was driven by an increased focus on products, service, tech and brand differentiation in the U.S. and Latin America ridesharing categories, a more effective deployment of incentives, greater efficiency in shared rides and a focus on higher margin products. Our share ride teams are focusing more of their energy in tech capabilities and driving share ride efficiency rather than simply discounting for volume. This is resulting in a mix shift into more profitable UberX volumes.

We'll continue to innovate in the shared ride space with exciting new products such as nonstop shared rides, much more sophisticated pricing algorithms and some pretty interesting innovations coming up in the second half of the year. We're also ramping up our emphasis on consumer segmentation. Uber Rewards, which you will recall became available to 100% of U.S. rides and Eats consumers in March, has seen great momentum. Enrolled users are about twice as likely to use both rides and Eats than unenrolled users. Uber Rewards is just one part of a broader suite of loyalty products, including Uber Cash, our Uber-branded credit card, and ongoing experimentation with subscription products in rides and Eats. Uber Comfort, our new premium economy offering, has been a hit and continues to roll out globally. And our Uber for Business solution suite grew quite strongly a 60% on a year-on-year basis. Finally, our Uber Health platform that helps improve assets to healthcare organizations grew at over 400% year-on-year this quarter.

Now moving to Eats. Q2 '19 MAPC growth of over 140% helped drive 98% year-on-year gross bookings growth at constant currency to $3.4 billion, while our take rate improved 240 basis points over our Q1 take rate. We made significant progress in expanding restaurant selection with over 315,000 restaurant partners now on the platform at the end of the quarter. We launched several Eats product features during the quarter including pilots, the test subscription, pricing strategies with our most engaged users. We continue to work on improving restaurant onboarding efficiency by reducing friction including point-of-sale integrations through partnerships such as Olo and custom integration via our own APIs. And lastly, we enabled even more ways for restaurants to engage Eats customers through new options like dine-in, pick-up and the ability to use their own delivery personnel.

We continue to be the #1 or 2 player in online food delivery category in multiple geographies, including the U.S., Japan, France, Mexico, Australia and New Zealand. And in the back half of 2019, we'll continue to invest in our most strategic Eats markets, lean in on pole marketing programs with partners such as McDonald's and Starbucks and accelerate our innovation and restaurant selection engine. We continue to invest and innovate in our Other Bets segment, growing Q2 gross bookings by 160% year-on-year at constant currency to $132 million. Uber Freight continued to see impressive growth and great progress in Q2 despite soft market conditions. And NeMo trips grew triple digits quarter-on-quarter as we launched in 11 new markets including Paris and Berlin, which have quickly become 2 of our best performing cities. Finally, in our Advanced Technologies Group, we unveiled our first production car capable of self-driving with Volvo's newest XC90 SUV. Direct from the factory, the platform is designed with the chassis ready to integrate into ATG self-driving system.

And now on to Nelson for some more details on the numbers.

Nelson Chai -- Chief Financial Officer

Thanks, Dara. During Q2 our GAAP revenue was $3.2 billion, up 14% year-over-year. Our GAAP cost of revenue excluding D&A of $1.7 billion increased from 55% from 48% of revenue in Q2 of 2018. GAAP EPS was a loss $4.72, which was impacted by a $3.9 billion stock-based compensation charge due to restricted stock units that vested as part of our IPO and compares to a loss of $2.01 in Q2 of 2018. For the remainder of the call, unless otherwise noted, I will discuss key operational metrics as well as non-GAAP financial measures excluding pro forma adjustments such as our $299 million driver appreciation award and the $3.9 billion stock-based compensation charge, both related to the IPO. First, our total company global trips of 1.7 billion grew 35% year-over-year. Growth was driven principally by international growth in rides and Eats. MAPCs grew 30% year-over-year to 99 million. We continue to see strong new MAPC additions to the platform via Uber Eats and NeMo.

Total company gross bookings grew 31% to $15.8 billion and on a constant currency basis, grew 37% year-over-year, continued solid growth in Ridesharing gross bookings growth across all our regions led by the U.S. and Latin America. Eats gross bookings growth was driven by strong year-over-year growth in U.S. and Canada and APAC despite the significant amount of capital that is poured into the space. Adjusted net revenue, or ANR, excluding the driver appreciation award, was $3.2 billion, which was up 26% on a constant currency basis. Core platform ANR excluding the driver appreciation reward was $3 billion or up 22% on a constant currency basis. Core Ridesharing ANR was up 7% year-over-year, and Eats ANR was up 56% year-over-year. And they were up 20% and 60% year-over-year, respectively, on a constant currency basis. Our core platform ANR as a percentage of gross bookings was 19% versus 21% in Q2 of 2018 primarily due to Eats, which has a lower take rate than Ridesharing growing as a larger percentage of core mix and the year-over-year increase in user ridesharing incentives particularly in the U.S. and Latin America.

We did increase our core ANR take rate to 19% versus 18% in Q1 this year reflecting more favorable economic conditions in U.S. ridesharing industry and improved share ride efficiency, and the new service fee structure in Uber Eats in the U.S. which was launched at the end of Q1, which drove the significant quarter-over-quarter take rate improvement to 10.2% from 7.8%. Non-GAAP cost of revenues excluding D&A increased to 47% from 43% of ANR and was flat with Q2 2018 at 9% as a percentage of gross bookings. Cost of revenue was flat as a percentage of gross bookings as improvement in insurance and payment costs were offset by an increase in cost of revenue due to Freight's and NeMo's gross merchant model where Freight partner payments and NeMo's scooter hardware and field costs are included in our cost of revenue. Now turning to non-GAAP operating expenses. Operations in support increased to 14% from 13% on an adjusted net revenue and remained flat at 2.9% of gross bookings since the second quarter of last year, reflecting Eats' higher support contact rates offsetting efficiency and ride support.

Sales and marketing increased 31% -- to 31% from 26% of ANR and increased to 6.2% from 5.7% of gross bookings versus the second quarter of 2018. This increase was primarily due to increased consumer promotion as well as increased advertising and marketing head count. However, promotion expense was down quarter-over-quarter particularly in the U.S., which helped drive the sequential improvement in the second quarter of 2019 from the first quarter 2019. In July, we've put in place a more centralized structure for our global marketing team in an effort to quickly and efficiently build a more consistent external brand narrative across audiences, products and regions. As part of this, we made the difficult decision to let go of around 400 marketing personnel, about 1.5% of our total head count. Now onto core platform contribution margin. As a reminder, our core platform contribution margin as a percentage of core platform ANR and demonstrates the margin that we generate as the direct expenses related to our Ridesharing and Uber Eats businesses but does not include indirect unallocated R&D and G&A expenses including ATG and other technology programs and our Other Bets segments.

Our core platform contribution margin in Q2 was 8% as a percentage of ANR. While this is down versus the year ago, strong execution against our internal plan, improvements in shared rides efficiency and improved dynamics in certain markets led to an impressive 1,200 basis point improvement quarter-over-quarter versus the first quarter of this year. R&D remained flat at 14% of ANR and decreased to 2.9% from 3% of gross bookings in the second quarter of 2018. G&A decreased to 14% from 15% of ANR and decreased to 2.8% from 3.3% of gross bookings in the second quarter of last year, but we continue to invest in the systems and infrastructure needed to be a public company we are seeing leveraged across our platform. In Q2 2019, adjusted EBITDA loss was $656 million. We -- handily beat our internal EBITDA plan due to strong execution of our teams across the business. We know we have a lot more work to do here, and we continue to focus on balancing investments and profitability improvement. In terms of liquidity, we ended the quarter with approximately $11.7 billion in unrestricted cash and cash equivalents and $13.7 billion in both restricted and unrestricted cash and cash equivalents.

We received $1 billion in aggregate proceeds from the Toyota, DENSO and SoftBank in July of 2019, so this will be reflected on our Q3 2019 balance sheet. Now I will wrap up by providing guidance and comments for the first time as a public company. For 2019 gross bookings, we expect constant currency growth of 31% to 35% year-over-year, which translates to an estimated range of $65 billion to $67 billion. Based on June month end rates, our constant currency growth represents about $64 billion to $66 billion in recorded gross bookings. We continue to see the rideshare markets remain stable for the balance of the year and monitor closely the competitive dynamics. The Eats market will continue to be competitive as competitors have raised funds investment growth in this fast-growing category. We will continue to invest including in the fourth quarter of 2019 when seasonal career cost increase and expect to see continued strong growth for the balance of the year.

As a reminder, competitive intensity for our platform most directly impacts take rates in sales and marketing expense. That being said, we expect adjusted net revenue growth rates to improve in the back half of the year. For 2019 adjusted EBITDA, we expect a loss of a range between $3.2 billion and $3 billion. As we are a newly public company, we're also providing additional guidance. For Q3 2019 stock-based compensation, we expect an expense of $450 million to $500 million, and we expect our Q3 2019 basic and diluted weighted average share count to be 1.7 billion to 1.725 billion shares. This full year EBITDA guidance reflects continued investments in Eats, Other Bets, ATG and our infrastructure. We believe the profitability of the rides business will prove out. In fact, in the second quarter, if we take our rides contribution and deduct all of the corporate overhead, which includes the unallocated expenses and tech support in the entire company excluding ATG, the loss would have been approximately $100 million in the quarter.

Now back over to Dara for the wrap-up of the call.

Dara Khosrowshahi -- Chief Executive Officer

Thank you very much, Nelson. We're pleased with our progress this quarter. We hope to deliver more for you. And with that, let's open up for questions.

Kent Schofield -- Head of Investor Relations

Great. Thanks, Dara. Operator, we are now ready for questions.

Questions and Answers:

Operator

[Operator Instructions] Your first question comes from the line of Justin Post with Bank of America Merrill Lynch.

Justin Post -- Bank of America Merrill Lynch -- Analyst

Thank you for taking my question. I guess, Dara, looking at the results, your bookings and riders close to in line but large beat on the profitability. How are you thinking about balancing the ability to drive the top line bookings versus drive the bottom line? How do you balance that? And then when you think about some of the new competitors entering in London, could that make that decision different going forward? And how do you feel about the London situation right now? Thank you.

Dara Khosrowshahi -- Chief Executive Officer

Hey, Justin. Good question. Listen, I think you know that the balance between the top and bottom line is more of an art rather than a science. So if I told you that we had kind of the scientific formula that we're solving for here, we'd be lying to you. That said, if you look at our trip growth on a year-on-year basis, trip growth was 37% Q3 of '18; 37%, Q4; 36%, Q1; 35%, Q2, so it's just, at these kinds of scale, it's rare to find this kind of growth. And we do think that as we look at our marketing spend, our incentive spend, how we can leverage the business going forward, we think that there's the opportunity to scale our expenses or be more efficient with our incentive spend or be more efficient with our marketing spend, really double down on less, smaller kind of projects and doubling down on the channels that are really working for us. So we actually think that if we do our jobs right, there are always trade-offs to be made in life. But I think that we can make the trade-offs where we can scale expenses and/or get far more efficient in our marketing and incentive spend while improving the bottom line of the company.

And listen, we're very confident that this company at maturity can be cash flow positive, and the team is focused on being able to drive big-time growth at the top line while getting more efficient on all parts of the business. I think as far as the London competition goes, listen, the -- London is a great market for us. We are trying our best to be excellent partners with TfL, the regulator there, and intend to continue to build our business in a constructive way. The new competition that we're seeing in London are, frankly, competitors that we're familiar with. We've been competing against those of players in Paris for many, many years. Our position in Paris is very, very strong. It's quite a constructive market for us. So with a category like Ridesharing, we're going to have multiple competitors in every country that we compete in. We're going to have multiple competitors in large markets like Paris and London. But so far, we're not seeing anything in London that's a surprise or unexpected that we're not seeing in 20 other cities all around the world.

Justin Post -- Bank of America Merrill Lynch -- Analyst

Great. Thanks, Dara.

Dara Khosrowshahi -- Chief Executive Officer

Sure.

Kent Schofield -- Head of Investor Relations

Operator, next question please.

Operator

Your next question comes from the line of Heath Terry with Goldman Sachs.

Heath Terry -- Goldman Sachs -- Analyst

Great. Thanks. Dara, on the last earnings call, you talked about earning -- or about the market share in ride hailing sort of reaching a point of stability. I'm curious, as you look at the competitive markets and the rate of growth on some of your main competitors particularly in markets like the U.S., what's it take to get to that point of stability? Is it a -- just a matter of time? Is it a matter of more investment? And sort of how do you, whether it's bookings or revenues across the space, sort of how do you think of what qualifies as stability?

Dara Khosrowshahi -- Chief Executive Officer

Yes. I think it's -- listen, we -- when we look at the Ridesharing category, our top competitor in this category is car ownership and other ways of getting around. And when I look at how we are faring against car ownership, we're faring very well. And we continue to invest in products, continuing to kind of improve the efficiency of our POOL product. You've seen us bring in transit choices, a whole other host of ways that people can get around their city so that this younger generation that is coming of age, unlike myself, has 0 need to own a car. That said, within our category of Ridesharing, we are going to have multiple competitors. We and Lyft are big-time competitors here and have been for some period of time. And for now we are seeing generally category positions that are stable, and we're focused on improving profitability in this market as many -- and many other markets around the world. And based on what we read, Lyft seems to be focused in a similar way. But as you know, competitive environments can change. But the big picture is we want to be there any way you want to get around your city, and I think we're well on a path to do so in a profitable way.

Heath Terry -- Goldman Sachs -- Analyst

Great. Thanks Dara.

Dara Khosrowshahi -- Chief Executive Officer

Thanks.

You're welcome for the question. Operator, next question.

Operator

Your next question comes from the line of Brian Nowak with Morgan Stanley.

Brian Nowak -- Morgan Stanley -- Analyst

Thanks for taking my question. I have two. The first one on the U.S. Eats. Curious to hear about sort of any impact at all from elasticity associated with that service fee. And how do you think about potentially rolling it out to other markets in the back half or into next year? And then India Eats, I remember last quarter you called it out as one of the headwinds to overall ANR. Is there any update on India Eats in the quarter? And how do you think about strategic options to improve your ability to more profitably grow in that market?

Dara Khosrowshahi -- Chief Executive Officer

Yes. I think on the U.S. and elasticity as it relates to service fee, we're constantly testing and learning. What we found is, as you can see from the take rate improvement, this is 2 quarters in a row where you're seeing very, very substantial take rate improvement on the Eats side. The team is executing well. They're focused. There is due to be some elasticity. But what I can tell you is that the improvements that we are seeing in our take rate from a revenue standpoint and from a profitability standpoint are significantly in excess of any business that we might be losing on the top line.

And of course, this is within the context of the top line of our Eats business growing bookings at 90-plus percent on a year-over-year basis. So we think that at this scale and at these kinds of top lines, the kind of trade-off decisions that we're making are the right trade-off decisions, and frankly, they're not too difficult to make. We will look at taking some of these learnings in different markets. Every single market is its own -- has its own character, has its own competitive environment. So at this point, we can't point to a specific plan or a rollout plan. There are certain markets where we'll introduce the fees, and there are certain markets where we won't. And we'll be pretty disciplined and data driven in our approach to every single market. In terms of India, it's a big market on the rideshare side in India.

We're very happy with the results there both in terms of category position, the top line and especially the bottom line. And we're taking some of the lessons and extending them into the Eats category. Right now the market is very, very competitive. There are a few very strong competitors there. Generally, I would tell you that we want to be the #1 or #2 in every single market. Right now in India, we're the #3. And so the team knows there's a big lift ahead of them, but we're on the game. And I think India, what's great about India is we have a local team there. We've got a great engineering team there. We're kind of a local company in India. We've proven our ability to win in rides, and my expectation is the same on the Eats side.

Brian Nowak -- Morgan Stanley -- Analyst

Great. Thanks Dara, and thank you for the question.

Dara Khosrowshahi -- Chief Executive Officer

Sure.

Kent Schofield -- Head of Investor Relations

Operator, next question please.

Operator

Your next question comes from the line of Ross Sandler with Barclays.

Ross Sandler -- Barclays -- Analyst

Hey, guys. Just one clarification and then a question around that. So if we back out the $287 million shares for the riders -- or for the drivers in 2Q, your rides net revenue or adjusted net revenue was $2.6 billion and take rate, 21.3%. So just want to clarify is that accurate and the right way to handle that $287 million. And then if so, that take rate's up 100 bps or so sequentially, and you mentioned that it's going to go up in the back half. So what's driving up the rides take rate, the U.S.? Is it Brazil getting less bad? Any color on what's happening with rides take rate both in 2Q and back half this year?

Dara Khosrowshahi -- Chief Executive Officer

Hey, Ross, I think you've done the numbers right. Nelson, correct me if I'm wrong.

Nelson Chai -- Chief Financial Officer

Yes, that's right.

Dara Khosrowshahi -- Chief Executive Officer

I think, listen, on the take rate, we don't want to get into particulars as far as market by market. But I think the characterization, which is the competitive environment in most of the markets in which we're competing with are stable or improving or our competitive tactics are improving. I think that's a generalization that is true in most of the markets out there in the rides category. And that is translating into take rates that are an improvement quarter-on-quarter. And if things remain the same, we think those trends are healthy and we'll take them.

Kent Schofield -- Head of Investor Relations

Thank you, Ross for the question. Operator, next question please.

Operator

Your next question comes from the line of Lloyd Walmsley with Deutsche Bank.

Lloyd Walmsley -- Deutsche Bank -- Analyst

Thanks. Have two if I can. First, Dara, you've mentioned some interesting innovations coming in the second half. Is there anything you can share with us on kind of where those might fall? Or any specifics there would be great. And then just secondly, SoftBank's in the process of raising a second Vision Fund. They continue to put money in the competitor. So wondering what kind of dialogue you might have with them to try to bring about more of a healthy market in the space. Anything you could share would be great.

Dara Khosrowshahi -- Chief Executive Officer

Yes, Lloyd, I would -- the marketing team would kill me if I steal their thunder as far as innovation goes on the POOL side. But on the shared ride category, listen, one of the keys with shared rides is you have to create matching efficiency. And we were the pioneer in shared rides to begin with. We were the pioneer in shared rides, the product in shared rides where you walk and wait in order to create greater matching efficiencies. And you should expect more of that pioneering and innovative spirit in shared rides going forward. We're already experimenting in high-capacity vehicles, for example, Uber Bus, Uber Van, to kind of take sharing from two or three people on the back seat to 10 people in a van, which we think benefits riders. It benefit cities. It benefits the environment.

And there's a whole lot of technical kind of innovation and investment that has to go into matching. It's a category that, because of our volumes and basically every single market that we compete with on the rides side we're the largest player, shared rides tend to be a category where our network effects are amplified. So we want to invest technically behind those network effects, and I think you'll see kind of more matching tech coming up in the back half of the year that we think will hopefully take us to kind of the next growth phase of shared rides. I think as far as SoftBank and the Vision Fund 2.0, we're as awe inspired as everyone else as far as SoftBank's ability to raise capital and put that capital to work. And I said it the first time, which is I'm really happy that SoftBank is a partner of ours. I'm even slightly happier now that SoftBank is a partner of ours because a partner that's global, that has that much capital is someone that you want to have with you. And SoftBank has been a great partner, and I think they'll continue to be a good partner going forward. We are sensitive as to industry dynamics, so when we talk to SoftBank, we talk about things that are relevant to us, and we leave the investment up to them.

Kent Schofield -- Head of Investor Relations

Thanks Lloyd for the questions. Operator, next question, please.

Operator

Your next question comes from the line of Ron Josey with JMP Securities.

Ron Josey -- JMP Securities -- Analyst

Great. Thanks for taking the question. I wanted to ask a little bit more. I think, Dara, you talked about increased consumer promotions this quarter -- sorry more effective deployment of incentives this quarter. Just want to understand a little bit more particularly as you talked about that promotion spend down and some sequential improvement. So just any information around promotions and incentives would be helpful. Thank you.

Dara Khosrowshahi -- Chief Executive Officer

Yes. I think it's -- we don't want to get into too many details because this is -- you're entering into competitive categories. But I think there are 2 factors going on. One is there's always spend that is kind of on the inefficient side of incrementality. Kind of the next dollar that you put to work, the incremental return tends to be worse. And we've got our engineers and marketing folks always looking for the least efficient incremental spend and then testing and learning their way into more efficient types of spend going forward. So you've got kind of engineers and marketers rinsing and repeating there. And I do think that we are coming with types of incentives that are designed not just to drive volume for the next week, but they're designed to drive volume for the next month or two months and increasingly investing more in programs like our loyalty program, both Uber Pro on the -- on our drivers side but then Uber Rewards, which are designed to essentially invest money for loyalty that carries over for not months but hopefully years. So it's a continuing process. At the same time, we are seeing the competitive environment in general be more constructive. And listen, that always helps as well. The combination of better science, better marketing and a more constructive environment we think makes for a decent to hopefully better-than-decent second half for us.

Ron Josey -- JMP Securities -- Analyst

Thank you, Dara.

Dara Khosrowshahi -- Chief Executive Officer

You're welcome.

Kent Schofield -- Head of Investor Relations

Thanks, Ron for the question. Operator, next question please.

Operator

Your next question comes from the line of John Blackledge with Cowen.

John Blackledge -- Cowen -- Analyst

Great. Two questions. Two questions. First, just curious about the pricing environment in the U.S., thoughts on ability to raise prices and/or potential for raising price as we ramp through the year on the Ridesharing side. And then just second on the marketing team change, just any early thoughts on how it may impact brand spend or customer acquisition spend?

Dara Khosrowshahi -- Chief Executive Officer

Hey, John. As far as the pricing power and pricing in general in the U.S., we're constantly testing and learning in terms of pricing. I do think that we have pricing power as a category. As to what's the best way to exercise that pricing power one way or the other, I think it remains to be seen and we don't want to talk too much about kind of what our intentions are going forward. But I think as a service, we have pricing power, and I think it will inure to our ability to grow this business for many, many years to come. As far as marketing and what we're doing, listen, the -- part of the design around the restructuring of the marketing team was really looking at where we came from.

Really, the marketing team grew organically. And based on kind of the history of how Uber grew up, Uber was very decentralized from a local base of businesses essentially, business leaders and city leaders who were their own CEOs. And over a period of time, as businesses grow and they become more consistent, it makes sense to centralize some of the capabilities. And the decentralization that served us very, very well early on in our development as a company, to some extent, hurt us is as we think about how we tune our marketing teams for the next five years. A significant amount of marketing, as you can imagine, happens, for example, online, on big online global systems: Google, Facebook, Twitter, Snapchat, etc.

These are all essentially technical global platforms, and to have a bunch of local teams, all of whom are starting from square one, engaging with these technical global platforms in their own ways and reinvesting the wheel, didn't make sense. So the reorganization is about improving effectiveness and it's about thinking about where we're going to be for the next five years of the company versus where we come from. And I think, listen, my expectation is that our marketing spend, I can't speak to the -- for the second half of the year, but our marketing spend for the next few years is actually going to both increase and be more effective as a result of the changes that we're making in the marketing organization.

Kent Schofield -- Head of Investor Relations

John, thanks for the question. Operator, next question please.

Operator

Your next question comes from the line of Mark Mahaney with RBC Capital Markets.

Kent Schofield -- Head of Investor Relations

Mark, are you online? You might be on mute. Operator why don't we go ahead and come back to Mark. Can we go to the next question please.

Operator

Yes. Next question comes from the line of Brad Erickson with Needham & Company.

Brad Erickson -- Needham & Company -- Analyst

Hi. Thanks. I think there's a fair amount of work being done at the city and local government level around the world to understand, I guess, the effect that mobility platforms are having on broader transportation in those cities. So relative to some of those works that are ongoing and the conversations you all are having with those cities and local governments, how should we think about any impact either positive or negative even as supply of TNCs are controlled in more cities here going forward?

Dara Khosrowshahi -- Chief Executive Officer

Listen, I think that it's -- every conversation that we're having with every city is different, so it's difficult to give you a global answer. In general, what I can tell you is that the great news is that we're actually having dialogue and constructive dialogue with many of the cities and many of the transportation authorities in these cities. So if you look at London, for example, we have a clean air plan and a plan to actually fund electrifying our fleet, which is obviously great for the environment. I think it's great for London. It's great for consumers, and it's great for us. And that is a result of terrific dialogue with the city. We are now in dialogue with multiple transit operators, and we have a transit product that's live that is actually feeding demand into public transit, which we think is, again, a good thing for us.

It's a good thing for the city, and it's certainly a great thing for public transit as well. We are now having active dialogue in terms of sharing our data. Obviously, we don't share any personal data for riders but sharing aggregated traffic data that will allow cities to design more effectively for the next five years in a smarter, better way. So I think the dialogue that we're having, this dialogue will turn into what we think are constructive results. There are some cities with whom the dialogue, unfortunately, we think is not constructive. New York is one of them. But I think that the majority of these conversations are positive, and we want to be a partner and the best partner for cities going forward as it relates to their transportation solutions for the next 10 years.

Kent Schofield -- Head of Investor Relations

Okay, Brad. Thank you for the question. Operator, next question, please.

Operator

Your next question comes from the line of Mark Mahaney with RBC Capital Markets.

Mark Mahaney -- RBC Capital Markets -- Analyst

Okay. Thanks. Sorry about that. Could we just talk about -- Dara, could you talk a little bit about the 2 regulatory fronts, New York City, what's happened to demand, the profitability of the Uber platform in New York City over the last couple of months as these series of changes have been introduced? And then just comment on the likelihood or the outcome materiality with these -- the California -- the pending legislation in California about changing people from contract to full-time employees and what kind of impact that could have. If you could address both of those, please. Thanks Dara.

Dara Khosrowshahi -- Chief Executive Officer

Yes. Sure, Mark. So I think that a lot of the changes that are -- have been introduced or potentially introduced in New York City, we just don't agree with. The city's essentially introducing another medallion system. And if you've read any of the articles in The New York Times, that, that system is right for abuse by people in power. And it's happened in the past, and the city could be setting itself up again. If you look at our business in New York, it's pretty healthy and it continues to grow. The problem is that we are growing fastest in areas of the city where you've got consumers who can afford significantly higher prices and the price increases that we have had to put forward in the city, while areas like East New York or Wakefield, Bronx or Central Harlem are not growing because consumers there can't afford the increases in prices, and as a result, we're making kind of mobility unavailable to them.

So I think anyone who thinks that the changes that -- who tells you that the changes in New York City are good is full of malarkey frankly. And de Blasio -- even de Blasio appointed TLC commissioners, they acted over the objection of city council and drivers and editorial boards and community groups and even a former TLC chair and transit experts. So we think -- frankly, we don't get it, but we are doing our best in New York City. I think one of the issues that we hold dear as it relates to Uber and our system is that Uber has always been an open-labor system. We've always been available to anybody who wants to find labor on our system, make money on our system any which way they can. And the new rules could potentially restrict where, when, how drivers can work, and we just don't think that's good for New Yorkers.

As far as California and AB5. Listen, if AB5 passes, it'll simply be a qualification of existing law. It doesn't immediately transform drivers into employees. It just changes kind of the legal test in the court. We think that there's a better way forward. The fact is that our drivers consistently tell us that the reason why they value Uber is they value their freedom. They're their own boss. They run their own business. They can drive for us or not drive for us whenever they want, however they want. And we do think that there's a better path forward that would allow drivers to keep their status, independent status but add the counter protections that, frankly, we think are good protections. These are like minimum earnings and benefits and a voice in kind of decisions as it relates to the system that would affect their livelihood. So we think there's a win-win there. And we're having dialogue with various parties to hopefully get to a win-win, and we think that will be the way forward. So stay tuned. We're hoping that the dialogue is a constructive dialogue, but it's early.

Thank you Mark for the question.

Kent Schofield -- Head of Investor Relations

Okay, thank you, Dara. Operator, next question please?

Operator

Your next question comes from the line of Michael Graham with Canaccord.

Michael Graham -- Canaccord -- Analyst

Thank you. I just wanted to ask on public transit again. You mentioned launching in London and Boston. Any update on rider engagement with that part of the platform either in those cities or in some of the places you've been a little bit longer. And is this a city relations thing primarily and a rider convenience thing? Or is there a business opportunity there as well in a direct way? Thanks.

Dara Khosrowshahi -- Chief Executive Officer

Yes. Michael, it's very early. But what we're seeing, which is super encouraging, is that transit options and frankly, more options, more transportation options in our app increase engagement with the Uber app. So it's more transit, more bikes and scooters even in certain cases like Uber Bus, etc., all of these additions -- for example, taxi is a very, very fast-growing category for us in certain parts of the world as well. As we add in more transportation options, we become a factor in a larger percentage of the population's transportation decisions. We have a great product and technical team that can build these solutions in an artful, simple way that over a period of time learn about you and can personalize the choices for you. So the transit option is just one way in which we are increasing our relevance to a greater number of consumers on a global basis, and we are seeing it in higher engagement in the apps specifically with London and some of the other areas where we've grown transit. And listen, we think it's good for consumers. We think it's good for us, and we think it's good for mass transit and the city as well. So this one's a win-win-win. But it's pretty early, and we think there's going to be a lot of kind of testing and learning going forward as we build these products.

Michael Graham -- Canaccord -- Analyst

Thank you.

Kent Schofield -- Head of Investor Relations

Great. Thanks Michael. Operator, next question please?

Operator

Your next question comes from the line of Benjamin Black with Evercore ISI.

Benjamin Black -- Evercore ISI -- Analyst

Hey, thanks for the question. I'm just wondering if you could give us an update on the 6 focus countries. Where are you seeing meaningful traction, where the incremental work to be done? What does the competitive environment look like in some of these countries? Thank you.

Dara Khosrowshahi -- Chief Executive Officer

Yes. Sure, we can certainly give you a quick tour around the countries. Listen, Argentina is a very strong market for us. Buenos Aires continues to be one of our biggest and fastest growing markets in the world. And we think that there's a good, constructive regulatory momentum in the country, and we hope to build on that momentum. Germany is another great market for us. We are building our business in Germany in the right way as it relates to rideshare. What's interesting is that we've launched our JUMP bikes in Berlin, and they've been spectacular.

They've been a huge hit in the city. I think that bike ridership in Europe is more prevalent, and we're certainly seeing it with our product as well. And what you'll see with us in Germany is an expansion into more cities, both on the ride side and on the bike side as well. And listen, we're actually -- we're getting into Germany with Freight as well. So Germany, we think is going to be a pretty interesting market for us. Japan and Korea are a couple of other markets. These are taxi-heavy markets. We think that regulatory -- the regulatory environment in both markets is continuing to improve, although we have a long way to go to build the rides -- big rides business. I will tell you that our Eats business in Japan is doing incredibly well. And in Japan, I think we will be an Eats first and then rides second business, which is terrific.

It goes to some of the flexibility that we have in our model as far as introducing the Uber brand into a market and then expanding the definition what that -- of what Uber means to consumers in that market. Spain has had good parts and bad parts. Barcelona, the regulation from Barcelona and a couple of the eastern regions were not great. But honestly, the rest of Spain is doing incredibly well. We're growing well there in the ride category, and we're starting to invest in Eats as well. And so that's going well. So I think most of the story around these markets are strong. Italy is an area where we haven't really developed a big business there. But I'll take where we are and I'd say 5 of the 6 countries, these are some pretty big countries. They're all going to take a lot of work, but they're all showing promise in different ways.

Benjamin Black -- Evercore ISI -- Analyst

Great. Thank you.

Kent Schofield -- Head of Investor Relations

Benjamin, thank you for the question.

Benjamin Black -- Evercore ISI -- Analyst

Thank you.

Kent Schofield -- Head of Investor Relations

Operator, next question please?

Operator

Your next question comes from the line of Justin Patterson with Raymond James.

Justin Patterson -- Raymond James -- Analyst

Great. Thank you very much. Maybe a big picture one. Dara, you've been involved with a variety of Internet businesses over the course of your career. Could you talk about how scaling Uber differs from traditionally online businesses and how we should think through the time line toward reaping those financial benefits? And then as a quick follow-up, can you provide an update around how you're thinking about opportunities around payments? Thanks.

Dara Khosrowshahi -- Chief Executive Officer

Sure. I'll take the first; and Nelson, maybe you can take on the payment side. Listen, I think that there are ways in which Uber is a unique beast and then ways in which it's like any other business. I think that there's the meme around, which is can Uber ever be profitable. I've certainly heard that meme along with others. And I'll tell you, we have a business in the rides area that has a 20-plus percent take rate, which is a very, very strong take rate. And a business at scale the way we are a global business at scale but has network effects with a 20-plus percent take rate I believe has the potential and if we execute should turn out to be a spectacular business long term. And I think that the same goes for Eats, and we're making bets in a lot of other categories that carry with them incredible potential.

So it's hard to compare Uber to other businesses because it's a unique entity. It's one of those rare brands in the world. I think what's very interesting about Uber is that we're a digital and physical business. And so the connectivity between the digital and the physical world and local regulatory bodies and at the presence that we need in every single city and the difference in kind of local customs, all of those are amplified as it relates to this business which that makes it all the more interesting, and to some extent, also it makes for pretty interesting barriers for entry once you build the business. So it's -- I think that myself and my team are well prepared, but I think we're very, very early in this incredible journey. But Nelson, do you want to talk about payments?

Nelson Chai -- Chief Financial Officer

The only thing I'd add on that is if you listen to the script -- at the end of the script, when I talked about our rides contribution in the second quarter, and so we had a very strong second quarter on the rides contribution. And again, if you again deducted that -- from that what we call our corporate overhead, which is all the unallocated corporate overhead and tech supporting the entire company excluding what we invest in ATG, the loss would have been $100 million. So it should give you a little bit of sense of the path to profitability on the rides business. And then, obviously, we'll have plenty of dialogue on some of the other bets we're making, whether it would be in Eats or in Freight or in NeMo or around autonomous. But it should give you guys a sense of kind of the path in moving and we talk about healthy growth in the market environment.

Your second question on payments, we continue to make good progress. I would say the team has done a very, very good job in terms of reducing some of the payment card fees. A lot of it is working with our partners, and we've been able to reduce some of the things. And it literally has been better than we would have expected both on a quarter-on-quarter and a year-on-year basis. As we move toward the next phase of the payments, we are going to be testing broadening out some of the capabilities particularly in Latin America. And again, we think this will have beneficial impact particularly in terms of driver retention as we offer more tools to allow them to kind of operate every day and also try to take cash out of some markets like Brazil, where we think that also provides some safety benefit.

Justin Patterson -- Raymond James -- Analyst

Great. Thank you team.

Kent Schofield -- Head of Investor Relations

Thank you for the questions Justin. Operator, next question, please.

Operator

Your next question comes from the line of Jason Helfstein with Oppenheimer.

Jason Helfstein -- Oppenheimer -- Analyst

Thanks. Just two questions. It's two questions. Anything you can share to help us understand your early impact of the loyalty program and its impact on repeat usage or retention? And then just around Eats, do you expect to deploy batching and other dynamics to improve Eats delivery efficiency in the near term? Or is that something more longer term given the complexity to do that?

Dara Khosrowshahi -- Chief Executive Officer

Yes. Jason, as far as our loyalty programs go, we are definitely observing what I call interesting behavior with our consumers. We're really looking for increased retention, increased spend. So we're seeing both. I think that identifying cause -- causal versus correlative behavior is harder and takes time. But as you can expect from our expansion of our loyalty program in the U.S. and into other markets, you should assume that we're expanding it because we like what we see. As far as Eats batching goes, we're batching our orders now. It's -- and we're using kind of efficiency in the marketplace. And I think that you should expect to see more batching going forward as we create increased matching the same way that we build POOL over the past couple of years.

Jason Helfstein -- Oppenheimer -- Analyst

Thanks.

Kent Schofield -- Head of Investor Relations

Thanks, Jason. Operator, next question please.

Operator

Your next question comes from the line of Masha Kahn with HSBC.

Masha Kahn -- HSBC -- Analyst

Hi, thanks for the opportunity. Wanted to ask you about some user reports about you going to grocery delivery, if you could comment on that. And the other one from an Eats perspective, what makes it very interesting as a country from a unit economics perspective, like which country you like better than the others? Could you maybe characterize some of the aspects of what makes Eats a good business in a certain market? Thank you.

Dara Khosrowshahi -- Chief Executive Officer

Yes. Masha, as far as grocery, I don't want to comment too much other than we have said in the past that we are going to look at additional categories that are -- can take advantage of the fulfillment network essentially that we are building and can give our couriers and drivers higher utilization and higher work especially during nonpeak times as it relates to driving. So grocery could be one of those categories hypothetically. And once we have something to announce, we'll definitely tell you about it. But it's something that we could take a look at. Nelson, do you want to talk on...

Nelson Chai -- Chief Financial Officer

Sure. It tends to be more on the city by city than just straight country, and a lot of it just has to do with how fast we're in there and then our competitive position. So what I would say is that you heard us talk about a 10.2% take rate, if you will, for Eats in the second quarter. If you look at the top 5 cities around the world where we are, those take rates range between 8% and 16%. And so you'll see -- we do have some markets, and somebody asked earlier about India, where you have a very, very low negative take rate. But again, we think it can be an attractive business in a lot of those different parts of the market. And so in most of the markets we're in, and we have some where we have very, very strong category position, those tend to be the ones where you'll see that, those kinds of high take rates and contributions.

Masha Kahn -- HSBC -- Analyst

Okay. Thank you.

Kent Schofield -- Head of Investor Relations

Masha, thank you for the question. Operator, we will go ahead and take our last question.

Operator

Your last question comes from the line of David Dillon with SMBC.

David Dillon -- SMBC -- Analyst

Hi. Thank you for the question. Just following up on that ATG. You had nice expansion there on the take rate despite the more competitive pricing environment you're talking about and new competitors coming to market. And just kind of triangulating that with what you said about Japan and nice growth there. Would you expect that take rate to have -- to be sustainable here or possibly continue to expand in the back half of '19?

Nelson Chai -- Chief Financial Officer

Yes. It's Nelson. We are -- we hope so, right? And so again, we put in the service fee in the U.S. at the end of the first quarter, and so we think that'll be a little bit of a tailwind as we continue on the back half of the year. Obviously, we'll continue to watch India. So if you think about the fact that our take rate was 10.2%, ex India, it probably would have been another 100 basis points or so. The one thing that we do watch is there is seasonality in the fourth quarter. Particularly, it has to do with drivers and couriers. And so we will have to watch that in terms of what impact it is. But we do think over time that we'll be able to continue to improve in terms of our take rates.

David Dillon -- SMBC -- Analyst

Thank you. Appreciate it.

Kent Schofield -- Head of Investor Relations

Thanks David.

Dara Khosrowshahi -- Chief Executive Officer

So with that, thank you, everyone, for joining us. I wanted to give a special thank you to all of our Uber employees all around the world. This is our first full quarter as a public company. We're entering a different phase now, Uber. From an execution basis, I think that everyone is putting their best foot forward, and I think it certainly showed this quarter with revenue accelerating and bottom line getting better. And I think the team would be not satisfied with anything but these kinds of results going forward. So thank you again for joining us, and we'll talk to you next quarter.

Operator

[Operator Closing Remarks]

Duration: 57 minutes

Call participants:

Kent Schofield -- Head of Investor Relations

Dara Khosrowshahi -- Chief Executive Officer

Nelson Chai -- Chief Financial Officer

Justin Post -- Bank of America Merrill Lynch -- Analyst

Heath Terry -- Goldman Sachs -- Analyst

Brian Nowak -- Morgan Stanley -- Analyst

Ross Sandler -- Barclays -- Analyst

Lloyd Walmsley -- Deutsche Bank -- Analyst

Ron Josey -- JMP Securities -- Analyst

John Blackledge -- Cowen -- Analyst

Brad Erickson -- Needham & Company -- Analyst

Mark Mahaney -- RBC Capital Markets -- Analyst

Michael Graham -- Canaccord -- Analyst

Benjamin Black -- Evercore ISI -- Analyst

Justin Patterson -- Raymond James -- Analyst

Jason Helfstein -- Oppenheimer -- Analyst

Masha Kahn -- HSBC -- Analyst

David Dillon -- SMBC -- Analyst

More UBER analysis

All earnings call transcripts

AlphaStreet Logo