Uber Technologies (UBER) Q1 2023 Earnings Call Transcript

Uber Technologies (UBER -0.07%)
Q1 2023 Earnings Call
May 02, 2023, 8:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good morning, and welcome to Uber Technology Inc.'s Q1 2023 earnings conference call. All participants are in a listen-only mode. After the speaker's presentation, we will conduct a question-and-answer session. [Operator instructions] As a reminder, this conference call is being recorded.

I would now like to turn the call over to Balaji Krishnamurthy, head of investor relations. Thank you, please go ahead.

Balaji Krishnamurthy -- Head of Investor Relations

Thank you, operator. Thank you for joining us today, and welcome to Uber's first quarter 2023 earnings presentation. On the call today, we have Uber CEO, Dara Khosrowshahi; and CFO, Nelson Chai. 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, are included in the press release, supplemental slides, and our filings with the SEC, each of which is posted to investor.uber.com. As a reminder, these numbers are unaudited and may be subject to change. Certain statements in this presentation and on this call are forward-looking statements. Such statements can be identified by terms such as belief, expect, intent, 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 statement we make today, except as required by law. For more information about factors that may cause actual results to differ materially from forward-looking statements, please refer to the press release we shoot today, as well as risks and uncertainties described in our most recent annual report on Form 10-K for the year ended December 31, 2022, and in other filings made with the SEC when available. We published our quarterly earnings press release, prepared remarks, and supplemental slides to our investor relations website earlier today, and we ask you to review those documents if you haven't already.

We will open the call to questions following brief opening remarks from Dara. With that, let me hand it over to Dara.

Dara Khosrowshahi -- Chief Executive Officer

Thanks, Balaji. Uber is off to a strong start in 2023 with gross bookings up 22% year on year at constant currency. Trips outpace gross bookings growth and accelerated to 24% growth from 19% last quarter. Adjusted EBITDA of 761 million exceeded the high end of our guidance.

And we delivered strong incremental adjusted EBITDA margin of 12% and record free cash flow of 549 million. Over the past two years, we've consistently delivered results that have exceeded both investor expectations and our own internal plans. Even as we perform well, we're acutely aware that expectations have only continued to increase for scale platforms like ours. We're working to accelerate our path to GAAP net income by optimizing our entire P&L, every single line item.

Despite any macroeconomic uncertainty, I'm more confident than ever in our prospects and remain committed to best-of-breed cashflow growth. The Uber platform has never been stronger. Our own expectations have never been higher, and we're excited to leave no doubt as to the scope of our ambitions for exceptionally profitable growth. With that, let's open it -- the call to questions.

Questions & Answers:

Operator

[Operator instructions] Our first question comes from Doug Anmuth from JPMorgan. Please go ahead. Your line is open.

Doug Anmuth -- JPMorgan Chase and Company -- Analyst

Thanks so much for taking the questions. Dara, good EBITDA upside, the 549 million free cashflow and talking about GAAP operating income this year. I think headcount has flattened down this year. Do you believe you need to tighten up the cost structure anymore? And how do you balance those considerations with product and growth? And then, secondly, just in terms of AI, you talked about improvements on ETAs and onboarding.

What are some of the other ways you envision AI driving the consumer experience for Uber?

Dara Khosrowshahi -- Chief Executive Officer

Yeah, absolutely. So, I think as far as the cost structure goes, listen, we manage the cost structure dynamically based on the environment that we're seeing. And I think the results speak for themselves in terms of our bookings growth, trip acceleration on a quarter-on-quarter basis. And then, you look at our EBITDA that we delivered, well above Street expectations, well above our guidance, and the forward EBITDA, 850 million that we got it to, again, even at the low end, above what Street expectations were.

So, we will be managing our cost structure to the opportunities ahead and also with a very strong kind of dose of discipline. So, even in a market where we're getting category position, we expect our headcount to be flattened down for the balance of the year. And that is going to be our starting point as we go into next year as well. So, I think you're going to see pretty extraordinary leverage in terms of the top line and bottom line.

The incremental EBITDA that we deliver this last quarter was 12%, which is well above the 7% target that we talked about. And if you look at our guidance, the incremental EBITDA that we're talking about for Q2, it was about 10%, which remains well above our targets. You know, if the business slows down, and we don't expect it to slow down materially, we will adjust. And I think Nelson, myself, the rest of the team have demonstrated the ability to deliver in good markets and bad markets.

Remember, this is not a fair weather company. We've been through a lot of difficult things. We came out of COVID. So, just the muscle -- the P&L muscles were there.

And hopefully you'll remember, early last year before everyone else was raising alarms about the reality of today's capital markets and discipline needed, we raised the alarms internally, and we took action early so that we didn't have to be reactive like a lot of other tech companies have been. So, like we're innovating, we're building while a bunch of people are restructuring. And I think that's a good position to be in. You know, as far as AI goes, we are looking full stack at AI.

I think a lot of people obviously want to talk about the sexy kind of new consumer applications. I would tell you that I think that the earliest and most significant effect that AI is going to have on our company is going to have to -- is actually going to be as it relates to our developer productivity. Some of the tools that we're seeing in terms of co-pilot are going to allow our devs to kind of be super devs and to be able to innovate more, build more faster, having co-pilot along with them. And that will essentially leverage and accelerate innovation across the platform.

And this is with a platform that I think is innovating faster than anyone else. I think on the cost side, you can see chat bots powering a lot more experiences as opposed to let's say live agents. I think the quality of those chat bot experiences is going to increase with AI with, you know, a voice that can be more human, that can -- interactions that can be more complex, etc. And then, we will look to surprise and delight, you know, pick me up at the airport.

I'm arriving in American flight 260 on Tuesday. And we will know who you are, where your home is, what kind of cars you like, etc. And AI can power those kinds of experiences. So, it's going to go from productivity, to cost, to delight.

And we're thrilled. It's like it's a wonderful toy that hopefully will return significantly going forward for the company.

Doug Anmuth -- JPMorgan Chase and Company -- Analyst

Thank you, Dara.

Dara Khosrowshahi -- Chief Executive Officer

You bet.

Operator

Our next question comes from Ross Sandler from Barclays. Please go ahead. Your line is open.

Ross Sandler -- Barclays -- Analyst

Hey, guys. Congrats. Question on the rides take rate. So, you mentioned in the prepared remarks that both rider and driver incentives were down pretty nicely in the U.S.

and your category position stable. So, is that the primary driver of the improvement in rides take rate? And kind of looking forward, how much more room do you see to kind of continue that trend of reducing incentives while holding category share? Thanks a lot.

Nelson Chai -- Chief Financial Officer

Yeah, so as Dara mentioned, we optimize, you know, our marketplace in order to both make sure that we are driving and overachieving against the guidance that we put out on the bottom line. But certainly we also want to try to allocate and drive growth on the top line as well. And so, right now things are working quite well if you look at both the top line, as well as the bottom line growth in the quarter. And so I would say it's a combination of both.

So, we leaned in a lot, as you know, last year in terms of bringing drivers back. And so, the marketplace is much more healthy from a supply perspective. So, periodically, we will put in some more incentive to continue to drive demand. And again, what I would say is that we work very hard at balancing our marketplace because it's not just delivering the EBITDA and the free cash flow that we're promising.

We are trying to continue to grow the company at scale. And so, you saw that our gross bookings were up 22% on a constant basis and the mobility business even higher. And so, as we go into next year, what's actually exciting about is our trip growth is actually accelerating faster. And again, that for us -- that's our marketplace working.

And so, again, you'll see us continue to toggle back between the two. And our focal point really is on continuing to drive our company at scale on the top line and overdeliver against our commitments on the bottom.

Dara Khosrowshahi -- Chief Executive Officer

And, Ross, just to add one point is part of the take-rate increase that you saw Q4 to Q1 on the mobility business is seasonal. Q4 tends to be very, very busy from a demand perspective, so we put more money, so to speak, into incentives to make sure that supply is balanced. Q1, usually demand is a bit lower and supply is elevated. Therefore, we can take down incentives, which has the effect of increasing our take rate.

If you take a look -- if you ignore the merchant model, kind of the accounting adjustments that we had, our take rate Q4 to Q1 went from, call it, 21.4 to 21.1. So, there's a slight decrease -- sorry, it was the other way, went to 21.4 from 21.1. So, there's a slight increase in take rate, but most of that is seasonal. And really, it's, as Nelson said, we're managing for the entire P&L, and take rate is just one element of the P&L.

Nelson Chai -- Chief Financial Officer

Yeah, so, what Dara is referencing is the business model change in the U.K. that happened last March, and so you're seeing that overlap. That was the -- with our point of that.

Ross Sandler -- Barclays -- Analyst

Thank you.

Dara Khosrowshahi -- Chief Executive Officer

Next question?

Operator

Our next question comes from Brian Nowak from Morgan Stanley. Please go ahead. Your line is open.

Brian Nowak -- Morgan Stanley -- Analyst

Great. Thanks for taking my questions. I have two. The first one, I appreciate the new rider cohort data in the slide deck.

I'd be curious to hear a little more detail about which use cases or products that are sort of driving this strong new user cohort frequency and spend behavior that you're seeing. And then, the second one, on delivery, you're talking about acceleration in the business really healthy. Can you just talk to us about which products or regions are driving that acceleration and how we should think about that over the course of the year? Thanks.

Dara Khosrowshahi -- Chief Executive Officer

Yeah, Brian, in terms of the mobility cohorts, which are positive kind of on a year-on-year basis, and then the newer cohorts are actually even more healthy in terms of per frequency, it comes really from the amalgamation of all of the work that we are doing on the platform. Supply is strong. ETAs are coming down. Surge came down from Q4 to Q1.

And that's resulting in higher conversion rates in terms of how many sessions does a rider have and do they convert on that session. So, the quality of the marketplace is clearly having an effect, but at the same time, we're innovating and we're adding a ton of new products and choices for the rider as well. Reserve is an example. I talk about 20% now of our airport drop-offs being reserve trips.

And what we're finding is that Reserve has a combination of riders who used to use our on-demand marketplace now using Reserve to make sure that they're kind of guaranteed availability or guaranteed a much higher reliability. But it's also bringing new riders into the system as well that are -- you know, it's a use case travel -- it's a strong use case with high average fares as well. So, I think it's a combination of marketplace health and innovation around new use cases that is driving the frequency that we are seeing. In terms of delivery, as far as the growth there and the acceleration drivers, you know, one is just that we have omicron comps earlier in the year.

So, if you look at January, delivery volumes were a bit lighter just because of comps. And then, we saw acceleration going into February and March, and we expect strong growth for the balance of the year. And the other factor in terms of delivery is, again, the customer cohort data is actually quite healthy. Eater retention has improved significantly.

So, eaters are staying with the platform. Frequency is up and a higher percentage of our eaters and riders but especially eaters are members. And as you know, members spend four times the amount that nonmembers do. So, all of that is adding up to continue healthy growth for the platform, both on the mobility side and on the East side as well.

Brian Nowak -- Morgan Stanley -- Analyst

Great. Thanks, Dara.

Dara Khosrowshahi -- Chief Executive Officer

You're welcome. Next question?

Operator

Our next question comes from Eric Sheridan from Goldman Sachs. Please go ahead. Your line is open.

Eric Sheridan -- Goldman Sachs -- Analyst

Maybe following up on that with you on the delivery side of the equation. Dara, you called out in the letter, improving your category position in large markets. Can you give us a little bit better sense of what you see as the key investments to improve category position are and how investors should think about the growth output or the yield from those investments looking out over the medium to long term? And then, second, with respect to the delivery business, how should we think about market share dynamics broadly in the delivery business versus where you see yourself as the best positioned to compete where there's an overlap between the Uber One subscription and the mobility business, where that might put you on a competitive footing that's different than markets where that may not be as prevalent. Thank you.

Dara Khosrowshahi -- Chief Executive Officer

Yeah, absolutely. So, I think on the delivery side, we're seeing the result of a couple of factors. First of all, we've got the power of the platform in that we have our mobility business that is actively upselling our mobility customers to our each product. The audience that we have on the mobility business is the largest audience in the world in terms of any of our mobility competitors.

And we're the only players who scale players who are upselling from mobility to delivery, and then vice versa. So, against our competitors, who are model on competitors, who are, you know, delivery-only competitors, we have a source of low-cost traffic, significantly low-cost traffic. Our mobility business sends us more customers than we get from Facebook and Google and Snap and all of these different platforms combined. And that's just a structural advantage that we have against the overall market, certainly, against the competitors.

And then, I think we're executing particularly well algorithmically as it relates to improving our marketplace efficiency on the delivery side, higher percentage of batching orders, and using deep-learning techniques to drive down cost per transaction on the delivery side. You add on top of that our advertising product, which continues to grow at high rates. Advertisers are up 70% year on year using our platform. And you get some pretty powerful economic drivers that's allowing us to deliver the kinds of bottom line that you saw on our delivery business, which is well ahead of estimates, while getting category position in nine of our top 10 markets on a global basis.

So, I think that it's, you know, happening broadly. It's not five out of 10. It's nine out of 10 markets where we're gaining category position. And I do think it's the power of the platform.

And again, we see it in almost every single market out there.

Eric Sheridan -- Goldman Sachs -- Analyst

Great, thank you.

Dara Khosrowshahi -- Chief Executive Officer

Sure.

Operator

Our next question comes from Justin Post from Bank of America. Please go ahead. Your line is open.

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

Great, thanks. Nelson, maybe just give us an update on the EBITDA progress. If you take 850 times 4, you're already over $3 billion run rate. What are the drivers to get over $5 billion here? Is it network efficiencies, marketing spend, leverage on personnel? How are you thinking about the growth from here? And then, I noticed you had some interesting comments on the taxi business.

Just a high level, how much that's helping your mobility growth. Thank you.

Nelson Chai -- Chief Financial Officer

OK. So, I'll handle the first half of it. So, again, when we put out the targets last year, our expectation was at least achieve them on the top line, but overdeliver on the bottom. And I think history shows that we've overachieved every quarter, and we intend to continue to do so.

So, again, if you take the Q2 trajectory, which is actually what you're referencing, we don't stop there, right? So, we're continuing to invest actually in our marketplace and continue to grow the marketplace. And we actually are optimizing every single line of the P&L, and we're seeing those benefits. And so, last year we talked a lot about the cost per trip benefits we're getting on delivery. This year, you heard us talk a little bit about RNA and some of the benefits we can have there.

And these are big dollars. And so, the platform really is operating quite well. And so, like, what we're doing is we work with our teams and work with our product -- our tech folks to make sure we're just optimizing the platform. So, to be able to grow 22% constant currency at our scale year over year, it's hard, right? It's tremendous what we're doing here and be able to deliver the incremental.

So, I think what you should think through is more about where we think we're going to end up next year, understanding that we think we'll continue to outpace on the bottom line. And you heard the commentary about, you know, we think we were 12% incremental margins in Q1. Right now, if you look at the midpoint of the guidance, it's 10%. So, our expectations that will continue to do better and importantly generate a lot of free cash flow that we think is going to ramp in the coming quarters.

So, while we're not touching upon new guidance for '24 or the out years, hopefully we're building track record to show you that the company is really operating at a high level right now.

Dara Khosrowshahi -- Chief Executive Officer

And then, as it relates to the taxi market, we don't disclose, let's say taxi bookings. When we look at hailables, which is taxi two-wheelers, three-wheelers in certain markets, that's a business that's already over a billion dollars. But really, the way that we look at our portfolio is a set of growth steps that we're making. These are taxi, two-wheelers, three-wheelers, low cost, our UberX Share, high capacity vehicles that we're investing in.

Our Uber for business for health, and then newer products like Reserve that are creating entirely kind of new instances for our riders to use the service. If you add up all those growth bets, we're about a $6 billion run rate, growing at 100% year on year. So, we talked about when we put together a growth platform, we talked about 50% of our growth coming from our base business, 35% of our growth coming from new bets, 15% of our growth coming from certain international expansion. It's the traditional Uber business but with a twist.

And if you look at our growth bets, our growth bets were about 10% of our volume in Q1. They're about 20% of our growth in Q1. And they also account for 20% of new riders coming onto the platform. So, not only are they a big part of our growth and kind of a new business segment that we're building, but we're introducing an entirely new audience to the Uber platform.

And those new riders tend to use other products. They'll come in on U4B. They'll use this main line. They'll come in on low cost, and then they'll treat themselves to an UberX or Comfort as well.

So, we see taxi as a part of a portfolio. Nelson and his team are constantly allocating capital to the base business, to the growth bets as well in a dynamic way to deliver the kinds of top lines and then excellent bottom lines that you're seeing.

Nelson Chai -- Chief Financial Officer

So, think about it, our GBs are up 22% on a constant basis just to go back to that. And our EBITDA is up 4x year over year. And so, again, I think that we really are pulling all the levers to make sure we deliver top- and bottom-line growth. And so, again, I think we're both very confident that we'll continue to do that in the coming quarters.

Dara Khosrowshahi -- Chief Executive Officer

Great. Thanks, Nelson. Thanks, Dara.

Nelson Chai -- Chief Financial Officer

Sure.

Dara Khosrowshahi -- Chief Executive Officer

Thank you. Next question?

Operator

Our next question comes from Lloyd Walmsley from UBS. Please go ahead. Your line is open.

Lloyd Walmsley -- UBS -- Analyst

Thanks a lot. Two, if I can. First, just kind of continuing on the last question, appreciate the color on hailables and the new formats. I guess on that international side of the medium-term growth, what is the latest update on some of the markets you flagged at the analyst day, like South Korea, Spain, and Germany? And then, second one, following up on some of the earlier delivery questions, like how, much do you think of the benefit you guys are seeing in terms of market share as a function of product improvements versus maybe more discipline across the competitive landscape just with the rising cost of capital.

You flagged, I think, Japan in particular. But like anything, you feel like those are also part of the benefit and where are we in seeing the benefit of just a more rational competitive landscape. Thanks.

Dara Khosrowshahi -- Chief Executive Officer

Yeah. I'll start in terms of the international markets, a couple that I'll call out, Spain, Germany and Turkey. Spain is a highly regulated market, but we're having a ton of success in terms of having supply into our marketplace. Earnings are strong, demand is strong.

And Spain is growing at very significant rates, and we believe we're gaining category position in Spain. Same with Germany. It's a market that we started on probably around four years ago, and it's developed very well. We're playing by the rules.

And Germany is the largest GDP in Europe. So, it's a very, very large market to go after. And we're seeing promise both on the mobility side and the delivery side in Germany. We're happy with that development.

A couple of other markets are Turkey where Turkey is a taxi market. And our innovating around hailables and building a taxi product has allowed us to penetrate into that market as well. And then, Argentina as well, showing real promise in South America. You know, we're seeing with South Korea and Japan.

The market development there is slower than we'd like, frankly. And it's partially because of regulatory issues as it relates to dynamic pricing, etc. We're not really -- we're not able to kind of flex all of the muscles of the marketplace of what makes Uber great, especially on the pricing side. We think pricing reform that will benefit drivers, so we think it's absolutely something that will help out the market, but it's taking a little more time than we would like.

And then, Nelson, you want to talk about the second?

Nelson Chai -- Chief Financial Officer

Yeah, so on the delivery, so, yes, you're partially correct. I think the rationalization of the marketplace is driven by the higher cost of capital. As you know, we've led in terms of trying to drive companies toward profitability. And frankly, for me, companies need to make free cash flow.

And so we've led from the front on that. And certainly, everybody's had to follow given where the market is right now. And so, we are seeing the benefit of having a bigger and, frankly, a more efficient platform. And it's allowing us to really make progress in certain marketplaces, like, most of Asia and particularly the U.K.

are big callouts in the first quarter. And importantly, what's important now is that right now, if you look at our top 20 delivery markets, so overall, on delivery, we're generating 2% EBITDA margin, we're profitable in 15 of our top 20. And actually six of our top 20 markets today in the first quarter are already above our long-term targets. So, we're growing our category position.

We're gaining. We're growing at the top line, and we're delivering on the bottom line. I think that's just a good formula. But, certainly, the overall cost of capital increases and what's going on the broader role has helped when you have the broadest and the most efficient platform, and one where we have the benefit of going cross-platform.

Lloyd Walmsley -- UBS -- Analyst

OK, thank you guys.

Nelson Chai -- Chief Financial Officer

Thank you.

Dara Khosrowshahi -- Chief Executive Officer

Next question?

Operator

Our next question comes from Mark Mahaney from Evercore. Please go ahead. Your line is open.

Mark Mahaney -- Evercore ISI -- Analyst

Thanks. I wanted to ask about two questions on the advertising side, what traction you're seeing for advertising on the mobility side. And then, in terms of the Uber One program and the prepared comments you talked about, seeing really nice traction, record high levels in North America. Could you talk about in the rest of the world? And also, kind of the what -- is there product development areas you want to lean into to make the program even more attractive.

Thank you.

Dara Khosrowshahi -- Chief Executive Officer

Yeah, so we are very happy overall with our ad products. We talked about the number of advertisers who are using our product growing 70% of 345,000 businesses. And the majority of our revenue is to be clear is on Uber Eats. And it's obviously a big growing platform, along with the new products that we're launching, all the new vertical ad side with sponsored items in the U.S.

that are designed for CPG advertisers. We continue to see strong momentum on the mobility side with journey ads. And these Journey ads are getting us premium CPMs because if you think about the Uber rider, this is a very high demographic rider. They tend to be younger.

So, obviously, more open to first-rate brands and advertising. They tend to be mobile, they tend to be urban, and they go places. You know, they are moving and they are spending, so we are seeing very high CPMs as it relates to our mobility advertisers. One of the newer products that we're quite excited about are car tops that you see in certain cities like New York City.

And also tablets that we're launching in certain cities as well. These are newer formats. And what's exciting about these new formats is that. They are a way for us to improve driver earnings.

So, for example, with the driver who has a car top. We'll make an average of a $100 extra a week. As it relates to those earnings, so if drivers are making more money, retention is higher, supply hours are higher, and they're happier and making more, which helps out the marketplace. So, we're quite optimistic about our prospects there.

As it relates to Uber One, I'd say strength across the board. We are -- the goal of Uber One is really we are giving a discount to our best customers in order to drive frequency, and we continue to see Uber One members spend four times more than nonmembers. Retention is 15% higher than nonmembers as well. And Uber One continues to be a higher and higher percentage of our bookings.

It's about 27% now, and we have a target of driving that to 50-plus percent. And in certain markets outside of the U.S., Uber One penetration is significantly higher than that 50% target. So, that's not the radical target, that's a target that is absolutely achievable. And I will also add that Uber One members are profitable.

And what we find is it's a very, very effective way, essentially, to draw frequency and higher engagement with our customer base.

Mark Mahaney -- Evercore ISI -- Analyst

OK, thank you.

Dara Khosrowshahi -- Chief Executive Officer

You're welcome. Next question?

Operator

Our next question comes from Deepak Mathivanan from Wolfe Research. Please go ahead. Your line is open.

Deepak Mathivanan -- Wolfe Research -- Analyst

Great. Thanks for taking the questions. Dara, your competitor in the U.S. is going through a transition currently.

How do you think about the potential impact of this on the U.S. ride share market? And philosophically, what is Uber's priority between kind of defending category position and profitability if, you know, for some reason competition intensifies in this space? And then, a second question, maybe for Nelson, you noted in response to a prior question that you intend to outperform on EBITDA. Certainly, the incremental margins have been great. But wanted to ask if there is any update on your thinking on top-line bookings for 2024.

You know, since you provided the guidance at the analyst day, FX has been a headwind and some markets are on different trajectory. You know, wanted to ask if you have any updated thoughts on 2024 top-line growth. Thank you so much.

Nelson Chai -- Chief Financial Officer

So, I'll go first, and Dara can answer the competitive question second. So, certainly, if you think about what we did in the first quarter, right, 22% constant currency and even 19% reported across our businesses is extremely strong, especially given some of the headwinds on Freight. And if you just think about what we're doing in terms of the forecast in Q2, so we expect our core mobility and delivery businesses, gross bookings to grow, you know, 18% to 22%, depending where you are on the guidance on a constant currency basis. So, as we said, we are committed and we are enabled because we have been so efficient in terms of operating the business and getting the leverage.

And we've been mindful about our costs to be able to invest back in some of the products that you heard or talked about already today. And so, we are seeing some of that meaningful benefit as we think about going into '24. And so, again, we are trying to do both, which is continue to invest in products that we think will enable us to deliver against the top line. But importantly, we expect to continue to do what we've been doing, which is over deliver against the bottom and generate a very, very strong free cash flow in the coming quarters.

And so, again, I would just say that we spend a lot of time on capital allocation inside the company. And right now, the formula is working quite well because we're able to do both, as well as, again, invest in new geographies and invest in new products. And I think you should just expect that to continue.

Dara Khosrowshahi -- Chief Executive Officer

And, Deepak, as far as the trade-off between CP and profitability, the first thing I'll say is, you know, I hope that we have demonstrated over the past six, seven quarters that that's a false trade-off. We've been consistently gating category position. And as you've seen, we've been delivering on profitability at a rate well in excess of our internal targets and an excess of external expectations, right, 12% this last quarter and, you know, again, delivering essentially record adjusted EBITDA of 288 million and adjusted EBITDA over 20% incremental margins, while gaining category position in nine out of our 10 markets. And it's a combination of the team executing really well are being the scale player, are being the global player, and are having to power the platform that our competitors don't.

As far as what we are seeing domestically with Lyft, obviously, they're going through a lot of changes. It's a very, very strong brand. It's not going anywhere. And what we're seeing is they're looking to price competitively with us.

And we think that sets up a competitive environment where we're competing on brand, and we're competing on service and ETAs and accuracy, reliability, etc. So, we think it sets up a constructive competitive environment going forward. We haven't seen any signal otherwise. But I think you'll have to ask them that question when they report their earnings as far as what their strategy is going forward.

But so far, what we see is constructive, and we don't see any reason why it would change. I do think a more disciplined marketplace, you know, I think the market has said very, very clearly that the days of paying for share and essentially using shareholder money to buy share temporarily, those days are over. And so, we think the overall competitive environment for tech generally, but especially in our market, is going to be constructed going forward.

Deepak Mathivanan -- Wolfe Research -- Analyst

Great. Thank you so much.

Dara Khosrowshahi -- Chief Executive Officer

Thank you. Next question?

Operator

Our next question comes from John Colantuoni from Jefferies. Please go ahead. Your line is open.

John Colantuoni -- Jefferies -- Analyst

Hey. Thanks for taking my questions. I wanted to look at the U.S. and Canada cohort figures again.

I'm curious why frequency among the pre-COVID cohorts in 2022 was lower than the newer cohorts. Is there something about demographics or adoption of reserve for the newer cohorts, or something else that's causing the higher frequency? And mainly, I'm curious if there's an opportunity to improve adoption of reserve or Uber One in the older cohorts. And then, second question --

Dara Khosrowshahi -- Chief Executive Officer

Yeah --

John Colantuoni -- Jefferies -- Analyst

Oh, sorry, go ahead.

Dara Khosrowshahi -- Chief Executive Officer

No, go ahead, go ahead, and ask your second question and then we'll answer.

John Colantuoni -- Jefferies -- Analyst

Yeah, yeah, just quickly on Freight. Freight's been falling short on expectations from industry headwinds. Can you just sort of update us on how you envision performance of that business trending throughout the year? And when you think about ROIC and capital allocation to build that business relative to your core mobility and delivery businesses, are you looking for opportunities to pair back a bit or even to look for strategic opportunities to monetize that business to help accelerate your path to GAAP profitability and investment grade. Thanks.

Dara Khosrowshahi -- Chief Executive Officer

Yeah, absolutely. So, I think on the first one -- Nelson will take the second one. In terms of frequency of cohorts, we think it's exactly what you talked about, which is it's the product set. If you look at our product set today versus 2019, the breadth of product that we have available to our mobility riders is significantly higher than it was, whether it's Reserved or Reimagine, X Share, etc., there's just more opportunities for someone to use our product, and that's resulting in higher frequency kind of on a year-on-year basis.

But if you look at each cohort, the 2021 cohort, you know, their frequency increases as well as, you know, we have healthy pricing, healthy availability, and then newer products available for them. Also, remember that our membership program, we think over a period of time, is just mathematically going to drive higher frequency across the business. It'll have a higher impact because the incrementality generally is higher for delivery than mobility. But it should also show up in mobility as well.

So, these are very, very strong, as you know, kind of frequency numbers. They're only getting better. And we think as we continue to innovate around new products, we should be able to have industry-leading frequency, especially since we are able to bring in users on a ride platform or e-platform and cross-sell them in a way that no one else can. Nelson, you want to talk about Freight?

Nelson Chai -- Chief Financial Officer

Sure. So, first of all, I'm afraid from a macro perspective, we are at a macro low in terms of the cycle. And so, what happened was a lot of supply entered the market broadly. And a lot of the supply chain challenges that came during COVID have arrested.

So, right now, you're seeing a very oversupplied market that really impact rates. And it really impacts the combination of spot versus contract rates. And so, that's actually going on globally, and you probably will see that as you think about other freight carriers and certainly in the brokerage space. In terms of its impact, as we think about the guidance that we put out, as we think about getting toward GAAP operating profit, those are all taken to account into the guidance to make, into the statements we've made.

And so, you know, while we think about -- from a capital allocation perspective, it is important to note that we, you know, we raised excess external capital to fund Freight, and we actually fund it separately. And, in fact, even the employees of Freight are getting freight equity as well. And so, there's a separate board that that manages it as well. So.

Freight really is something that we still believe in. The team continues to make progress in terms of digitizing a very analog business. We are in a very challenging part of the cycle. And again, we have a lot of optionality around it.

But again, the team does make progress and the [Inaudible] and team are making very good progress in terms of some of the applications there. But again, we're in a tough part of the cycle. And it has no impact, if you will, or minimal impact as we think about the guidance that we give at the corporate perspective in terms of generating both GAAP operating profit, as well as free cash flow.

Dara Khosrowshahi -- Chief Executive Officer

I think just one other note, going back to frequency to add. One of the reasons why we're quite optimistic about our frequency on the mobility side is if you look at the 2019 cohort, actually UberPool, which was a high frequency but extremely low-margin product, negative margin product for us, was a much more significant part of the portfolio than UberX shares now. We are now launching UberX Share, I would say, in the right way with economics at work. We are aligning incentives between the rider and the driver and ourself in terms of pricing as well.

So, as we expand UberX share, as consumers experience it and we're seeing strong signal there, we think that could be an additional tailwind for frequency going forward, in addition to general experience and the membership program. Next question? This will be the last question. Thank you.

Operator

Our last question will come from Ron Josey from Citi. Please go ahead. Your line is open.

Ron Josey -- Citi -- Analyst

Great. Thanks for taking the question. I wanted to ask a little bit more about Uber One, just given it now accounts for 27% of gross bookings. Talk to us a little bit more about the programs just to drive continued adoption of Uber One.

And then, in the letter, as it relates to delivery, there was talk about investments around grocery convenience, just newer verticals within delivery. Would love to hear the progress there as well. Thank you very much.

Dara Khosrowshahi -- Chief Executive Officer

Yeah, absolutely, Ron. So, in terms of our program while adoption of Uber One is incredibly important, we're actually more focused on retention. You know, anytime that you build a membership program, it's easy to get, call it, initial numbers up. But if your retention statistics are not where kind of we want them to be, then at some point you're going to hit a wall.

So, actually if you look at the team and what their priorities are, it's very much on retention, making sure that the experience of an Uber One member is first rate. If they get a delivery that's late, kind of we make it up for them. Making sure that even details, like payments for renewal, payment failure rates, are minimized, etc. All of this work that is kind of grating work kind of behind the scenes is actually our priority in making sure that we improve retention rates for our membership program.

If we improve retention rates and we're quite confident that trends are definitely moving in the right direction, then you'll see overall membership continue to increase. And, obviously, higher retention means happier members as well. So, that really is the focus of the group. And it's definitely showing up in the increased penetration as it relates to our overall gross bookings.

You will see more experiential benefits of the Uber One. Right now, it's all about discounts, and discounts are awesome. And a much higher percentage of our members just logically should be using the program because they will save a ton of money. But also we will look for experiential benefits like what they priority dispatch during certain periods to introduce into the program as well.

Those are unique benefits that we can offer that really no one else can offer. As far as New Verticals, we're very, very optimistic on our progress there. We're now at in excess of a $5 billion annualized gross bookings run rate. The business is growing 30% year on year.

And really, it's a disciplined investment path into the category. What we're most excited about is the product itself. We are introducing the native grocery experience to a much larger audience across the company. And as we have done that, we have seen the percentage of Uber Eats customers who then order from New Verticals increase nicely.

It's about a 300 basis points year on year in terms of the percentage of Eats customers who use New Verticals. And then, it's all about selection. It's about launching new retail partners. So, selection like partners like Coles in Australia.

They're the second largest grocer. As we add selection, as experience continues to improve, those Eats customers who use New Verticals are going to be happy and they're going to come back. So, the trend here is positive. But we have a very long way to go.

Our ambition for New Verticals are multiples with a $5 billion that we're at now. But it is going to take discipline growth to get there. And I think by the results that you've seen, you have seen us able to invest in new products, like New Verticals, but at the same time deliver substantial increases in margins at the same time. And I think it'll be more the same going forward if we do adjust.

Balaji Krishnamurthy -- Head of Investor Relations

Great. Let's wrap it up there. Thank you, everyone, for joining.

Dara Khosrowshahi -- Chief Executive Officer

Thank you very much for joining, and we'll talk to you next quarter.

Operator

[Operator signoff]

Duration: 0 minutes

Call participants:

Balaji Krishnamurthy -- Head of Investor Relations

Dara Khosrowshahi -- Chief Executive Officer

Doug Anmuth -- JPMorgan Chase and Company -- Analyst

Ross Sandler -- Barclays -- Analyst

Nelson Chai -- Chief Financial Officer

Brian Nowak -- Morgan Stanley -- Analyst

Eric Sheridan -- Goldman Sachs -- Analyst

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

Lloyd Walmsley -- UBS -- Analyst

Mark Mahaney -- Evercore ISI -- Analyst

Deepak Mathivanan -- Wolfe Research -- Analyst

John Colantuoni -- Jefferies -- Analyst

Ron Josey -- Citi -- Analyst

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