Uber CEO Dara Khosrowshahi on the company’s path to profitability

CNBC transcript: Uber CEO Dara Khosrowshahi speaks with CNBC’s Deirdre Bosa today

Uber CEO Dara Khosrowshahi

Image source: CNBC video screenshot

WHEN: Today, Thursday, September 26, 2019

WHERE: CNBC’s “The Exchange

The following is the unofficial transcript of a CNBC interview with Uber CEO Dara Khosrowshahi and CNBC’s Deirdre Bosa on CNBC’s “The Exchange” (M-F 1PM – 2PM) today, Thursday, September 26th. The following is a link to video of the interview on CNBC.com:

Get The Full Series in PDF

Get the entire 10-part series on Charlie Munger in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues.

Q2 hedge fund letters, conference, scoops etc

CNBC's full interview with Uber CEO Dara Khosrowshahi

 

KELLY EVANS: Welcome back. Uber just wrapping up its product event in San Francisco, where it announced it will integrate all of its apps into one. The company has had a rough go of it since the IPO, with the stock down about 30% in that time. It’s dealing with new regulations across the country, potentially threatening its bottom-line. And today we learned its roll out of a host of new safety features, just as new reports suggest its investigations units puts company interests ahead of rider’s safety. Let’s talk about all of it with Uber’s CEO Dara Khosrowshahi, who is sitting down right now with our own Deirdre Bosa out in San Francisco. Deirdre.

DEIRDRE BOSA: Kelly, thank you. And Dara, thanks for being here today.

CEO DARA KHOSROWSHAHI: Happy to be here.

DEIRDRE BOSA: I do want to get to the product stuff and certainly those safety measures, but I want to pick up on something you said last time you were on our air. Less than two months ago, you said that you had to do a better job of telling Uber’s story. It doesn’t feel like you’ve gotten any closer in terms of your share price, down 30% since that time. Do you need to change your story? Take a hard look at the business?

DARA KHOSROWSHAHI: Well, I think anytime that the market is sending a message as to whether or not they like the story from an investment standpoint, you’ve got to listen. Now, that said, short-term market sentiment can go up and down, while what really counts is long-term building and building great products and also, making sure that that product over a period of time is profitable as well. So, we have listened to our investors. We think we’re on a great path. Q2 was messy from an accounting standpoint, but all of our metrics were moving in the right direction in Q2. And I think if we have a solid Q3, Q4, we’ll be on our way.

DEIRDRE BOSA: I understand you’re looking at the long-term. Are you getting any indication—and now you guys have been public for several months—that markets are listening to your story or they’re starting to get it? What do you look for to judge whether or not that’s happening?

DARA KHOSROWSHAHI: I think you’ve got to let a couple of quarters go. Now, I will say, I do think that markets are definitely sending the signal of being more risk averse. And there is an appropriate amount to invest to grow. But I think markets definitely, in this kind of environment that is getting more risky, more uncertain, Presidential Tweets going out, we are getting the message. And I think we’ve got to—here as a company—that markets want growth but they don’t want growth at any cost. They want disciplined growth and we think, at Uber, we can deliver that.

DEIRDRE BOSA: Right. So, in terms of disciplined growth, what are you telling investors? Are you going to be taking a hard look at some of your businesses? Uber has done that in the past – they got out of China, out of Russia, when it became really competitive and losing a lot of money. Are you looking at all your businesses all the time to see where you might be able to cut? And what’s the threshold?

DARA KHOSROWSHAHI: We look at our businesses all the time. Listen, I came from a company, Expedia, I ran for 13 years. That was profitable essentially every single year in operation. We take a hard, critical look at what we’re doing. We think that the rides business and the environment around the rides business globally is constructive and we think that we can grow, but we do think that we can take costs out of the business, both on the rides on and on Eat’s side and build for the long-term, but build responsibly for the long-term.

DEIRDRE BOSA: Now, just briefly, walk me through what happens if Uber still isn’t profitable in three years? What changes at that point?

DARA KHOSROWSHAHI: I would be very disappointed if Uber isn’t profitable in three years. Right? The investors are expecting profitability going forward. I think our rides business is the most mature business, so it is going to enter in an area of profitability sooner than our other businesses. With Eats, we’re looking to get into number one or two position in every market that we compete with. And I think our investors expect us to deliver. And we understand

DEIRDRE BOSA: I understand you’d be disappointed, but walk me through what actually happens. Do you actually start to look at consolidating? Today was all about showcasing how many different things Uber does.

CEO DARA KHOSROWSHAHI: Yeah. Everything that we’re doing is about making sure that doesn’t happen, and that we are profitable in a three to four-year timeframe.

DEIRDRE BOSA: Alright. Kelly has a question for you back in –

DARA KHOSROWSHAHI: Sure.

DEIRDRE BOSA: – Englewood Cliffs.

KELLY EVANS: Deirdre, thanks and Dara, really appreciate you being here. Today there’s a lot of focus on a lot of millennials actually leaving cities and moving out to the suburbs and gentrifying them, making them cool again, whatever you want to call it. But one of the main arguments I hear for Uber and transportation as a service is based on this idea that we don’t need car ownership. Are you actually seeing trends go the other right way now? Whether it’s a coastal thing that might be true in 20 major cities but is never going to be true for the rest of country.

CEO DARA KHOSROWSHAHI: I think it’s – at this point, it’s too soon to tell. Remember too that the majority of our transactions on a global basis are outside of the U.S. Uber is a truly global enterprise. So, I wouldn’t take short-term trends that we’re seeing in the U.S. and declare them as trends happening globally, as well. In general, too, we find our services originate in the center of cities. But they actually grow far from the center. So, in New York, for example, the fastest growing segment of our business isn’t in Manhattan, but it’s the boroughs as well. So, we think our business will grow outside of the city center, even if millennials start moving outside of city centers, as well.

KELLY EVANS: Are you going to have to raise prices in order to be a profitable company?

DARA KHOSROWSHAHI: I don’t think we have to raise prices in order to be a profitable company. I think the company can scale. We can improve margins. We’re looking at costs in every single part of the business. But I do think we have pricing power. And we have seen in certain markets because of New York City regulations, for example, we have to increase prices significantly to consumers. It’s not something that we wanted to do, but we have to because of new regulations. And our New York business continues to grow.

KELLY EVANS: And finally, would it have been better for Uber to go public much sooner than it did?

CEO DARA KHOSROWSHAHI: Oh, I don’t want to question ‘Would it have been better?’ I can tell you that once I took over, we went to reform the culture, we went to fix governance and we were sprinting to get to the public markets. And I think that, when I look back, the execution there was pretty darn good.

DEIRDRE BOSA: Dara, certainly you’ve done a lot in terms of the culture, but there’s some discussion about reputation still, particularly when it comes to safety measures. You have that Post report yesterday, a bombshell of a report, suggesting that Uber investigators you employ act in the interest of the company instead of the actually riders. What’s the good of safety measures if that’s what you’re doing, ultimately?

DARA KHOSROWSHAHI: I completely disagree with that report. I think that report is absolutely off base. We have a special unit there, over 100 people trained. We’ve consulted with law enforcement. We’ve talked, we’ve consulted with advocates. The goal of the group is to help the victim and survivor first. That’s what we are all about.

DEIRDRE BOSA: Is there a three-strike system?

DARA KHOSROWSHAHI: There is no official three-strike system at this point. Now, these issues are complicated, right, so if someone makes a claim we do need to make sure that the claim is verified. If a survivor says that something has happened, we look at it as quickly as possible and if the survivor wants to notify law enforcement, we will help them do so constructively.

DEIRDRE BOSA: Would it be different, though, if your drivers were actual employees? You’d be responsible for their actions, so does that constrain you in some ways, especially when it comes to law enforcement?

DARA KHOSROWSHAHI: I think when it comes to safety, we take every single step that we can. We don’t hide behind --

DEIRDRE BOSA: How do you convince your riders of that though? It’s case after case. There’s lawsuits as well. So, what are you doing now that is not working?

CEO DARA KHOSROWSHAHI: You know, when you have over 16 million, 17 million rides every single day, the one in a million happens 16, 17 times a day. I think with all of the investments we’re making, check your ride right now, track your loved one, pin dispatch, check the license, et cetera. The 911 integration. I believe that we are the absolute leader in safety. Can we get better? Absolutely. But we’ve got over 100 engineers working on it every day. We take it totally seriously.

DEIRDRE BOSA: A few months ago you shared your thoughts on one of Uber’s biggest shareholders, Masayoshi Son and Softbank. You said he that he doesn’t throw good money after bad. You were happy to have him as an investor. Two of his biggest bets though, Uber and WeWork, have taken significant write-downs on their valuations. What is it that, you know, public markets aren’t seeing that maybe a visionary, as you implied that he was, Masayoshi Son is seeing? And what kind of conversations did you have with him ahead Uber’s IPO?

CEO DARA KHOSROWSHAHI: Well, they were very supportive of us ahead of the IPO. They agreed that it was time for the company to go public. The stock hasn’t reacted the way that we’d like it to react, but we’re focused on building a great business and whenever I talk about Masa, he’s focused on helping us build a great business.

DEIRDRE BOSA: Do you still talk to him often, now that you’re a --

DARA KHOSROWSHAHI: Yeah.

CEO DARA KHOSROWSHAHI: public company and the value has been --

DARA KHOSROWSHAHI: Absolutely.

DEIRDRE BOSA: Are you feeling pressure from him now that sort of some of his biggest investments are adding pressure?

CEO DARA KHOSROWSHAHI: The greatest pressure that I feel is from myself—not letting our team down and making sure that we build the best service out there.

DEIRDRE BOSA: Now, a lot of folks can’t help but make the parallel or comparison between Uber and WeWork. Both very disruptive companies burning money. Both of its founders and CEOs were ousted. You came in for Uber Travis Kalanick, now more than two years ago. What did you do? What was one of the immediate things that you did to turn around Uber at the time?

DARA KHOSROWSHAHI: Well, we immediately went out and made sure that we formulated the culture of the company. And by the way, we took some the old because it wasn’t all bad. But some of the aggressive culture that made Uber was it was, was weaponized. And we made sure we changed that, so we had a company that wasn’t growth at all costs, but it was responsible growth going forward. And, we did take a lead on governance. We got rid of high vote stock with one share one vote. We brought in a Chairman of the Board, Ron Sugar, who has got deep experience. So, I think we got it right on culture, we got it right on governance. Now we have to execute.

DEIRDRE BOSA: Do you have any advice for WeWork’s board as they search for a new CEO? You’ve been through this protracted process.

You know, right now, I’m focused on our company. I really do wish them the best and I think that if you’re a WeWork employee, they must be going through a tough time. I think there’s a real business there and I think if they focus on building a business, they will get there.

DEIRDRE BOSA: Dara, thank you very much for being with us today. We really appreciate it.

CEO DARA KHOSROWSHAHI: Thank you

DEIRDRE BOSA: Guys, back to you.

KELLY EVANS: And Deirdre, thank you as well. Hey, Dara. Before we go, I have one more question, just as a user. You guys are trying to be the all-in-one transportation platform, correct? That’s part of today’s big announcement. What can – I use Google maps.

DARA KHOSROWSHAHI: Yes. We want to be the operating system for your daily life.

KELLY EVANS: Yeah, but I can get on Google Maps and see when the next bus is coming and compare my options that way. How are you going to move people out of something that they might already be getting the information they need from?

DARA KHOSROWSHAHI: Yeah, I think, listen, Google is a great service. And the way that I think of Google and Google Maps is it’s all about information and search. Uber is about information, search, real-time pricing and the transaction, all the way. So, just like Google has great product search, Amazon has built out their product search all the way to delivery which we think is a terrific experience. And we think about transportation the same way. You’ve got search and you’ve got information, but you can transact all in one go, get loyalty points, use your Uber Cash, etcetera. We think all that together is superior.

KELLY EVANS: Alright. I want you to know, I’ve got five stars right now. But it’s mostly because of my mother-in-law. She’s a great passenger.

CEO DARA KHOSROWSHAHI: Well, thank you for using us. You’re a great user then.

KELLY EVANS: Thank you guys both very much.