Uber Technologies Inc (UBER) Q1 2023 Earnings Call Transcript

Uber Technologies Inc (NYSE:UBER) Q1 2023 Earnings Call dated May. 02, 2023.

Corporate Participants:

Balaji Krishnamurthy — Head of Investor Relations

Dara Khosrowshahi — Chief Executive Officer

Nelson Chai — Chief Financial Officer

Analysts:

Doug Anmuth — JPMorgan — Analyst

Ross Sandler — Barclays — Analyst

Brian Nowak — Morgan Stanley — Analyst

Eric Sheridan — Goldman Sachs — Analyst

Justin Post — Bank of America — Analyst

Lloyd Walmsley — UBS — Analyst

Mark Mahaney — Evercore — Analyst

Deepak Mathivanan — Wolfe Research — Analyst

John Colantuoni — Jefferies — Analyst

Ron Josey — Citi — Analyst

Presentation:

Operator

Good morning, and welcome to Uber Technologies, Inc.’s Q1 2023 Earnings Conference Call. [Operator Instructions] 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’s 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 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, 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 issued 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’s off to a strong start in 2023, with gross bookings up 22% year-on-year, constant currency. Trips outpaced 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 cash flow 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 up the call to questions.

Questions and Answers:

Operator

Our first question comes from Doug Anmuth, from JPMorgan. Please go ahead, your line is open.

Doug Anmuth — JPMorgan — Analyst

Thanks so much, for taking the questions. Dara, good EBITDA upside, the $400, $549 million free cash flow, and talking about GAAP operating income. This year, I think headcount flat to 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

Yes, 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, $800 million to $850 million that we guided 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 gaining category position, we expect our headcount to be flat to 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 delivered 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 was about 10%, which remains well above our targets.

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 muscles, 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 the 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.

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 — it’ s actually going to be, as it relates to our developer productivity, some of the tools that we’re seeing in terms of copilot are going to allow our devs to kind of be super devs. And to be able to innovate more, build more, faster, having copilot 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 chatbots, powering a lot more experiences as opposed to, let’s say, live agents. I think the quality of those chatbot experiences is going to increase with AI, with a voice stack in, be more human, that can — interactions that can be more complex, etc. And then, we will look to surprise and delight. 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 ploy that hopefully will return significantly going forward for the company.

Doug Anmuth — JPMorgan — Analyst

Thank you, Dara.

Operator

Our next question comes from Ross Sandler, from Barclays. Please go ahead, your line is now open.

Ross Sandler — Barclays — Analyst

Hey, guys. Congrats. A 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 is stable. So is that, the primary driver of the improvement in rides take rate, I mean, 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

Yes. So, as Dara mentioned, we optimize 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 growth, 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 on, 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, but 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 is even higher. And so, as we go into next year, what’s actually exciting about it 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 over deliver 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 kind of Q4 to Q1 went from, call it, 21.4% to 21.1%. So there’s a slight decrease slight, sorry, it was the other way, 21.4% to 21.1%. So there’s a slight increase in take rate, but most of that is seasonal. And really, 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

Yes. 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 what Dara pointed out.

Ross Sandler — Barclays — Analyst

Thank you.

Nelson Chai — Chief Financial Officer

Thanks, welcome.

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, the rider cohort data in the slide deck. I’d be curious to hear, a little more detail about which use cases or products, are sort of, driving this strong new user cohort frequency and spend behavior, that you’re using, that you’re seeing.

And then the second one on delivery, you’re talking about acceleration in the business is really healthy. Can you just talk to us about which products or regions, are driving that acceleration? How we should think about that, over the course of the year? Thanks.

Dara Khosrowshahi — Chief Executive Officer

Yes. 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, 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 the rider have, and do they convert on that session. So that quality of the marketplace has clearly had 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 talked 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 — is a use case travel, that is 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, one is just that, we had 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. [Indecipherable], 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 non-members do. So all of that is adding up to continued healthy growth for the platform, both on the Mobility side, and on the Eats side as well.

Brian Nowak — Morgan Stanley — Analyst

Thanks, Dara.

Dara Khosrowshahi — Chief Executive Officer

You are, welcome.

Operator

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

Eric Sheridan — Goldman Sachs — Analyst

May be following up on that with two 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

Yes, absolutely, Eric. 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 Eats products. 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, kind of, upselling from Mobility to Delivery, and then vice versa.

So against our competitors, who are monologue competitors, who are 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 our competitors.

And then, I think, we are 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 kind of bottom line that you saw on our delivery business, which is well ahead of estimates, while getting category position in 9 of our top 10 markets, on a global basis.

So, I think, that it’s happening broadly. It’s not 5 out of 10, it’s not 9 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 — Analyst

Great, thanks. Nelson, maybe just give us an update on the EBITDA progress. If you take $850 million times for, you’re already over a $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 at high level, how much that’s helping your mobility growth? Thank you.

Nelson Chai — Chief Financial Officer

Okay. So I’ll handle the first half of it. So again, when we put out the targets last year, our expectation was, to at least achieve them on the top line, but over deliver on the bottom. And that, we’re five quarters into putting out a 12-month plan. 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 in our marketplace and continuing 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 incrementals.

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 that, we think we recall percent incremental margins in Q1. Right now, if you look at the midpoint of the guidance, it’s 10%. And so, our expectation is that, we’ll 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 $1 billion. But really, the way that we look at our portfolio is, a set of growth bets 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, Uber 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% growth coming from certain international expansion. It’s the traditional Uber business, but with its list. 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 on to the platform. So not only are they a big part of our growth and kind of a new business segment that we’re building, while 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 Uber eat, or they’ll use this mainline, 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 our GBs are up 22% on a constant basis, just to go back to that. And our EBITDA is up four times, 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.

Justin Post — Bank of America — Analyst

Great, thank a lot, Nelson. Thanks, Dara.

Dara Khosrowshahi — Chief Executive Officer

Sure, 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 is, just kind of continuing on the last question, I appreciate the color on hailables and the new formats. I guess on that international side of the medium-term growth, what is the update, 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, do you feel like those are also part of the benefit, and like 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 would call out are, Spain, Germany and Turkey. Spain is a highly regulated market, but we’re having a ton of success in terms of, adding 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 then 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 the taxi market, and our innovating around hailables and building our taxi products, has allowed us to penetrate into that market as well.

And then, Argentina as well, showing real promise in South America. 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 there 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, do 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 towards 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 has 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. But, and it’s allowing us to really make progress in certain marketplaces, like most of Asia, and particularly the U.K., are big call outs 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 6 of our top 20 markets today, in the first quarter are already above our long-term targets. So we’re growing our markets, 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 in the broader world 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

Okay, thank you guys.

Dara Khosrowshahi — Chief Executive Officer

Thank you. Next question.

Operator

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

Mark Mahaney — Evercore — Analyst

Thanks a lot. 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, in 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 if they’re product development areas, you want to lean into, to make the Uber One program, even more attractive? Thank you.

Dara Khosrowshahi — Chief Executive Officer

Yeah, absolutely. So we are on very happy overall with our ad products. We talked about the number of advertisers, who are using our products, 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 assets 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, 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, cartops, 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 cartop, the driver who has a cartop, will make an average of $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. Where 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 non-members, 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 a theoretical 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 drive frequency and higher engagement with our customer base.

Mark Mahaney — Evercore — Analyst

Okay. Thank you.

Dara Khosrowshahi — Chief Executive Officer

You are 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. rideshare market? And philosophically, what is Uber’s priority between kind of defending category position and profitability? If, for some reason, competition intensifies in the space?

And then, 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 I wanted to ask, if there was any update on your thinking on top line bookings for 2024? Since, you provided the guidance at the Analyst Day, FX has been a headwind and some markets are in different trajectory. I wanted to ask, if you have any updated thoughts on ’24 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 business, 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 growth bookings to grow 18% to 22%, depending on where you are on the guidance on a constant currency basis.

So as we said, we are committed, and we are able, 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’ve heard Dara, 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

Yes. And Deepak, as far as the trade-off between CP and profitability, the first thing I would say is, I hope that we have demonstrated over the past six, seven quarters, that’s a false trade-off. We’ve been consistently gaining category position. And as you’ve seen, we’ve been delivering on profitability at a rate well in excess of our internal targets, and in excess of external expectations, right, 12% this last quarter.

And again, delivering essentially, record adjusted EBITDA of $288 million in adjusted EBITDA, over 20% incremental margins, while gaining category position in 9 out of our 10 markets. And it’s a combination of the team executing really well, or being the scale player, or being the global player, and or having the power of 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. I think the market as 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 constructive 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

Hi, guys. 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. [Speech Overlap] Oh, sorry. Go ahead.

Dara Khosrowshahi — Chief Executive Officer

No, go ahead. Ask your second question.

John Colantuoni — Jefferies — Analyst

Yes. Just quickly on Freight. Freight has 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 pare back a bit? Or even to look for strategic opportunities to monetize that business to help accelerate your path to GAAP, profitability and investment? Thanks.

Dara Khosrowshahi — Chief Executive Officer

Yes, absolutely. So I’ ll take 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 Reserve or Reimagined, X Share, etc. There are 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 Eats cohort, the 2021 cohort, there frequency increases, as well. As 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, it’s just mathematically going to drive higher frequency across the business. It will 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 rides platform or Eats platform, and cross-sell them in a way that no one else can.

Nelson, do you want to talk on freight?

Nelson Chai — Chief Financial Officer

Sure. So first of all on Freight, from a macro perspective, this is 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, and so that really impacts rates. And it really impacts a 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 towards GAAP operating profit, those are all taken into account, into the guidance we make, into the statements we’ve made. And so, while we think about from a capital allocation perspective, it is important to note that, 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 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, like me and other team does make progress, and Leo 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 share is now. We are now launching UberX Share, I would say, in the right way, with economics that work. We are aligning incentives between the rider, and the driver, and ourselves, 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.

Balaji Krishnamurthy — Head of Investor Relations

This will be the last question.

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 my question. I wanted to ask a little bit more about Uber One, just given it now accounts for 27% of gross bookings. Can you just talk to us at 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

Yes, absolutely, Ron. So in terms of our Uber One program, while adoption of Uber One is incredibly important, we’re actually more focused on retention. Any time that you build the 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 renewals, payment failure rates are minimized, etc. All of this work that is kind of gritty 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, half year members as well. So that really is the focus of the group. And it’s definitely showing them with 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 a 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 grocer 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 up 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, selection of like partners like Kohl’s 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 of the $5 billion that we’re at now, but it is going to take disciplined 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 will be more of the same going forward, if we do our jobs.

Balaji Krishnamurthy — Head of Investor Relations

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 Closing Remarks]