CNBC Transcript: Uber CEO Dara Khosrowshahi Speaks With CNBC’s Andrew Ross Sorkin On “Squawk Box” Today
WHEN: Today, Friday, May 10th
WHERE: CNBC’s “Squawk Box”
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Following is the unofficial transcript of a CNBC interview with Uber CEO Dara Khosrowshahi on CNBC’s “Squawk Box” (M-F, 6AM-9AM ET), today, Friday, May 10th. Following is a link to the video from CNBC.com:
Watch CNBC's full interview with Uber CEO Dara Khosrowshahi ahead of its IPO
Becky Quick: let’s get straight to our big interview of the morning Andrew is standing by with the CEO of Uber. Andrew
Andrew Ross Sorkin: hey, thank you, Becky joining us now on the IPO day, Uber CEO Dara Khosrowshahi thank you for being here on this big day.
Dara Khosrowshahi: happy to be here.
Sorkin: and what a heck of a couple of weeks you’ve been involved in over this road show and what a week this has been want to talk about the pricing, want to talk about the company, want to talk about the future, but just on a very personal level, especially given what we were seeing in the markets this week --
Khosrowshahi: yeah, yeah.
Sorkin: how have you felt about this
Khosrowshahi: I am excited to be here it’s been the culmination of the work of hundreds of people at the company. So, it’s just good to get it done and I’m looking forward to going back to building and good environment, bad environment, we’re going to be building a great company.
Sorkin: but given what’s happened in the market, tell us in terms of the pricing, $45 a share, which is at the lower end of things. How do you think about that? How do you think about that in terms of you’re raising about $8.1 billion -- it’s probably less than you wanted to raise. Is that the environment? How much of that was this China news this week how did you think about that
Khosrowshahi: pricing a deal is an art, not a science. So, we will probably have had it imperfectly, but we thought that at this price, it reflected the environment. And listen, the environment is uncertain right now. And any time there’s uncertainty in the market, investors are going to be a little hesitant to put $8 billion of their dollars to work. And we wanted to put our stock with a group of funds who we know aren’t just going to hold for the next week, but they’re going to hold for the next year, and hopefully, for the next five years. So when we looked at the environment and we balance how we really think of this company long term, this was a great result $8 billion is plenty for us to build and grow on top of.
Sorkin: what kind of runway does that give you
Khosrowshahi: a very significant runway we’re quite confident about the road ahead.
Sorkin: what was the lesson of the Lyft IPO, and how did you feel when you saw that stock really drift down over the past couple of weeks since that IPO?
Khosrowshahi: yeah, listen, I think that there’s no perfect lesson here I think they probably did the best they could with the data that they had. It led us to be a bit more conservative and it did lead us to place with mutual funds that we trusted, with whom I’ve had relationships with in the past, et cetera. But again, all of this, when you’re in the middle of it, it’s very easy to second guess it two weeks later but when you’re in the middle of it, you do your best, and I think they did their best at the time.
Sorkin: What does success look like today for you? What -- how are you going to measure the success of this IPO?
Khosrowshahi: Success today is a stable price, a little bit higher than the pricing, not a lot higher than the pricing, because we want the pricing, we want there to be fair price that the company received, but we’re going to be measuring success in three to five to ten years, not in one day.
Sorkin: okay. The one question that every investor has, and I know you get asked it over and over again, is path to profitability.
Sorkin: walk us through how you get there.
Khosrowshahi: so, we are already contribution margin positive and for us, the definition of contribution margin is quite full sum. It’s not just gross profit it’s much more it’s all of the expenses associated with the profit that a country throws off. We have top five countries of ours that have 54% contribution margins and are paying significant amounts to pay for their overhead and pay for the investment in the company. So, for us, the path to profitability isn’t theoretical. There are cohorts of countries that are profitable, and it’s about getting other cohorts of countries to the same maturity level that some of our countries are operating at we do reinvest profits aggressively in new business lines like eats, that have great promise, but we’re pretty comfortable when we look at the portfolio of businesses that we have, that we have a very strong path to profitability.
Sorkin: so, Lyft says this year for them is going to be peak losses. Peak losses are going to take place this year. Can you say the same for Uber?
Khosrowshahi: that would be our intention, although there can’t be any guarantee, but that would be the intent.
Sorkin: right and we showed some videos in the last hour when we had our conversation about the comparison to Uber I’m sorry -- you are Uber -- comparison to amazon I apologize. But one of the things I was thinking about is, when you look at where amazon was at the time of its IPO, it was a much smaller company. It literally had $15 million in revenue. That was it. But it was also growing at 3,000 -- nearly 3,000%.
Sorkin: your growth has decelerated coming into the 20s now. Is it a fair comparison?
Khosrowshahi: it’s a fair comparison at the wrong time a lot of private companies now are holding off much longer before they go public.
Khosrowshahi: we are much bigger, much more mature as a company as we go public and if you do look at the growth rate, our audience is growing 33% on a year-on-year basis, transactions have grown 36%. To be able to grow transactions 36% on a $50 billion base is pretty incredible, and we hope to keep it going.
Sorkin: sort of a larger question, and I don’t know if we’re going to see protesters today, but you saw that there was protests and labor strikes that happened earlier this week. That’s a big question for the whole gig economy.
Sorkin: what did you think when you saw those protests
Khosrowshahi: I thought that we have to do better we have over 4 million drivers and couriers on our system and how they make a living and how the system works for them is quite variable, because you can plug in, you can plug out whenever you want to and as a result, for the vast majority of our drivers and couriers, it works it’s exactly what they want when they want it, but there’s definitely a group where it’s not working, and we have to do better to make sure that our system is the right system for anyone, anywhere, who wants to plug in and plug out.
Sorkin: let’s talk about that risk, because in your s1 one of the things you talk about is "Our business would be adversely affected if our drivers were classified as employees instead of independent contractors. There’s a move afoot in large parts of the world on that front. And also, we should say last night in one of your filings, you said that you settled thousands of driver claims over being misclassified as independent workers and that you plan to spend $146 million to $170 million do you anticipate there’s going to be more suits like this
Khosrowshahi: I think the question of classification’s going to go on for some time because labor is such an important part of any society’s means. We had a department of labor opinion that suggested that companies like ours and gig economy work did represent temporary labor. It wasn’t permanent labor in one way or the other. So, we think we stand on the right side of the law, but we also have to be reactive to society. So, for example, in France, we’ve introduced an insurance program with AXA that gives drivers more insurance, more benefits where they need it and we’re going to be flexible and we will look -- you know, our goal is to make sure that driving for us or being a courier for eats is a great way to either make some additional money or make a living, and that includes earnings and it includes benefits over time.
Sorkin: in terms of profitability, how much does autonomy matter? How much does it matter that we get to that place? And I know we’ve talked about it, maybe five to ten years before we really get there.
Khosrowshahi: stage one for autonomy is about growth and safety. So, first it’s got to be safe. Then autonomy is going to bring down costs per mile, which essentially is going to open up another stage of growth for us I think that profit time is well out, but I think the growth is well worth it.
Sorkin: and how should drivers feel about autonomy
Khosrowshahi: I understand when drivers are scared to some extent of what autonomous can offer, but we believe that you’re going to have a hybrid driver and autonomous state the machines are going to essentially take the simple, shorter trips that are less desirable, and that will leave the more complex trips, and hopefully, the trips that have more revenue associated with them for drivers.
Sorkin: Do you care if drivers drive for you or for Lyft ? Most of the drivers I know in New York do both.
Khosrowshahi: I care if many more drivers drive for me, but they can also drive for Lyft
Sorkin: what about the rationalization of the business? A lot of people say, look, over time after the IPO, prices are going to have to go up both of these companies are going to stop, you know, going after each other, you know, in this almost ruthless way however, you should know, last night I got a text from Lyft offering me a new promotion. And so, I’m not really sure that that’s -- I mean, tell us about that competition
Khosrowshahi: well, hopefully, you’re part of our loyalty program.
Khosrowshahi: so you’ll stick with us thank you. And that’s the whole goal of the loyalty program. This is a big sector, all right, the transportation space the area that we’re going after is $12 trillion or more. You are going to have competition. Competition makes you better and the good news is, I think both Lyft and us have the ability to keep competing, to keep prices for service very, very affordable, and over time to improve markets
Sorkin: I’ve got to ask you a compensation question for yourself there’s a note in one of the filings that says if Uber achieves $120 billion valuation on an average 90 days following the IPO, you receive a lot of money. Are you expecting that now, given where the valuation is today?
Khosrowshahi: I wasn’t expecting it any time short term. This is, I’m here to stay, I’m here to build a big company.That compensation term is not about a single day it’s about what value created over ten years and over ten years, absolutely, I expect to get there.
Sorkin: then finally, do have to ask you a little bit about the drama that’s in the news and I know he’s going to be here a little bit later today, Travi Kalanick of course, who founded the company. He’s going to be here with his father there was a debate I know he wanted to be up on the dais ringing the bell with you talk about that decision and what happened there, because there’s been a lot of headlines about it.
Khosrowshahi: yeah, sure. Those are unfortunate from where I stand. The dais for us is about longtime employees who have been with us thick and thin and drivers and couriers who use our service that’s what the dais should honor. And I think that’s the right decision for the company I’m thrilled that Travis and his father are here to celebrate with us.
Sorkin: what’s your relationship with him like now
Khosrowshahi: I think it’s fine he’s a board member, and he brings an insight to the boardroom that reflects his genius and his experience with the company, and that insight really is valuable for us.
Sorkin: what are you going to do at 4:00 P.M. Today?
Khosrowshahi: probably get a drink with my wife Syd
Sorkin: thank you for being here this morning. We wish you luck with the IPO and with the company
Khosrowshahi: thank you thanks for having me.