WEBVTT 1 00:00:07.580 --> 00:00:12.170 Hello and welcome to this educational firm which is devoted to a company, 2 00:00:12.390 --> 00:00:14.010 an extremely well-known company, 3 00:00:14.640 --> 00:00:18.970 extremely successful and innovation and so innovative that it gave 4 00:00:19.430 --> 00:00:23.890 its own name to a disruptive business and financial model. 5 00:00:24.680 --> 00:00:27.010 Uberization, but Uber, 6 00:00:27.200 --> 00:00:30.970 it's not only an outstanding commercial success based on innovation, 7 00:00:31.360 --> 00:00:32.810 it's also in the early years, 8 00:00:33.160 --> 00:00:37.650 initially extremely controversial business and 9 00:00:37.770 --> 00:00:42.610 management practices followed in 2017 by a change in the C e o. 10 00:00:43.310 --> 00:00:45.610 Now it's a new culture, it's a new management, 11 00:00:46.030 --> 00:00:49.730 but eventually it's also profit because in the books in a p and l, 12 00:00:49.790 --> 00:00:52.770 the company is showing a profit. It's a profit, 13 00:00:53.270 --> 00:00:57.610 but is it really financial performance in a sustainable way? 14 00:00:57.750 --> 00:00:59.370 To understand the story of the company, 15 00:00:59.550 --> 00:01:04.490 you have to know what a classic taxi driver in Paris looks 16 00:01:04.490 --> 00:01:08.690 like. Um, this is a person who went through an exam, 17 00:01:09.340 --> 00:01:10.173 successful, 18 00:01:10.280 --> 00:01:14.930 then bought a professional card from another taxi driver who 19 00:01:15.090 --> 00:01:15.930 was retiring. 20 00:01:16.710 --> 00:01:20.330 So you pay a lot of money just to have the right to do your job. 21 00:01:21.150 --> 00:01:23.450 You put a lot of borrowing in your own balance sheet. 22 00:01:23.450 --> 00:01:26.530 You spend your entire working life to repairs the loan, 23 00:01:27.030 --> 00:01:28.570 and then when you retire, 24 00:01:28.830 --> 00:01:33.770 you sell your professional car to another taxi driver who is younger and 25 00:01:33.770 --> 00:01:36.210 is going to start repeating the cycle. 26 00:01:36.830 --> 00:01:40.570 So basically the professional card is your retirement investment. 27 00:01:40.920 --> 00:01:43.370 It's your pension the day you retire, 28 00:01:44.040 --> 00:01:47.090 there's an extremely limited number of professional card, 29 00:01:47.280 --> 00:01:51.450 certainly not enough to serve the customers. So basically it's a monopoly. 30 00:01:51.670 --> 00:01:56.050 You know that in the case of a monopole, very often, not always, 31 00:01:56.150 --> 00:01:57.010 but very often, 32 00:01:57.350 --> 00:02:02.250 the quality of service is suffering from the fact that demand and 33 00:02:02.250 --> 00:02:06.610 supply are absolutely not balanced and it is exactly what's going to be 34 00:02:06.610 --> 00:02:09.410 experienced by Travis Kanick, 35 00:02:09.520 --> 00:02:12.810 Garrett Camp and Oscar sza when they visit Paris, 36 00:02:13.160 --> 00:02:17.890 attending a conference on the internet somewhere we are in 2008 37 00:02:17.950 --> 00:02:22.370 and it's going to be a conclusive, dramatic user experience. 38 00:02:22.830 --> 00:02:23.730 As a consequence, 39 00:02:23.730 --> 00:02:27.450 they decide to create a company to break this kind of monopoly and make money 40 00:02:27.550 --> 00:02:32.090 out of that. The name of the company initially is Uber Cab, 41 00:02:32.680 --> 00:02:36.410 Uber. Uber in German means Uber Super. 42 00:02:36.710 --> 00:02:41.690 So it's a super cab company created in 2009 in San Francisco because 43 00:02:41.690 --> 00:02:45.570 this is where they stay. It's very much about mobility, 44 00:02:46.230 --> 00:02:49.730 moving people, and then moving goods a little bit later. 45 00:02:50.080 --> 00:02:54.650 They of course create a platform and an application for the platform so that you 46 00:02:54.670 --> 00:02:59.250 and me we can download the application on our smartphone. 47 00:03:00.060 --> 00:03:00.430 iOS, 48 00:03:00.430 --> 00:03:05.120 Android is going to take place in 2010 and then thanks to the app, 49 00:03:05.140 --> 00:03:06.840 you can hire a taxi. 50 00:03:07.300 --> 00:03:11.280 You start of course in San Francisco because this is where you know the business 51 00:03:11.780 --> 00:03:16.360 and in Paris and then expansion and a fantastic expansion in 52 00:03:16.360 --> 00:03:17.280 2011. 53 00:03:17.370 --> 00:03:22.360 There are eight cities which are served by the Uber app and platform 54 00:03:23.180 --> 00:03:27.040 10 years later in 2021, more than 10,000 cities, 55 00:03:27.540 --> 00:03:29.520 the companies everywhere on the planet, 56 00:03:30.060 --> 00:03:35.040 so many countries are using the app and that's why the companies now 57 00:03:35.740 --> 00:03:38.520 big company, large company global. 58 00:03:39.010 --> 00:03:43.600 There are a few metrics which show the evolution of the business and the 59 00:03:43.600 --> 00:03:47.240 fantastic commercial success number of users. 60 00:03:48.150 --> 00:03:51.560 When we look at the number of users at the beginning of 2016, 61 00:03:51.560 --> 00:03:55.600 we don't have any data available prior to that year. 62 00:03:55.820 --> 00:04:00.560 The company is listed in 2019 and we don't have data before 2016, 63 00:04:00.740 --> 00:04:05.240 20 million users beginning of 20 19, 100, 64 00:04:05.700 --> 00:04:08.800 120 million users and there will be the pandemic, 65 00:04:09.010 --> 00:04:13.720 which is going to obviously stop mobility for a while because people 66 00:04:13.820 --> 00:04:16.920 are not allowed to move and then it starts again, 67 00:04:17.580 --> 00:04:19.560 not exactly as the same rate, 68 00:04:20.020 --> 00:04:23.800 but basically it's about growth and growth at least in the number of users. 69 00:04:24.140 --> 00:04:27.640 The number of trips is following exactly the same track, quite parallel, 70 00:04:27.900 --> 00:04:32.480 and you understand that the company is again, a considerable success. 71 00:04:34.080 --> 00:04:38.400 Interestingly, quarterly revenues are not following exactly the same track. 72 00:04:38.420 --> 00:04:41.160 Of course it's up, but if you look at the first period, 73 00:04:41.470 --> 00:04:45.760 it's up and then it's a bit down but not so much down. Why? 74 00:04:45.910 --> 00:04:50.520 Because delivery as a segment is going to complement mobility. 75 00:04:51.110 --> 00:04:54.840 Uber Eats as you all know, and then there will be growth, 76 00:04:54.860 --> 00:04:59.680 but the growth rate after the pandemic is going to be higher in revenues than 77 00:04:59.680 --> 00:05:04.360 before the pandemic. It's a development of Uber Eats plus additional services. 78 00:05:05.100 --> 00:05:08.400 Now, when you observe the evolution of the revenues year on year, 79 00:05:08.980 --> 00:05:12.040 of course you have the same path in terms of revenues, 80 00:05:12.260 --> 00:05:14.360 but what's interesting is a growth rate. 81 00:05:15.020 --> 00:05:19.800 The growth rate before the pandemic was a kind of 20, 40 0 during the 82 00:05:20.040 --> 00:05:24.800 pandemic obviously, and then in 60 80 today. So the company is growing. 83 00:05:26.720 --> 00:05:30.800 Interestingly, when you look at the different segments, you have mobility, 84 00:05:31.870 --> 00:05:33.640 taxi, you have delivery, 85 00:05:34.190 --> 00:05:37.280 Uber Eats plus freight and other services. 86 00:05:37.950 --> 00:05:41.520 What is really dominant is mobility. In 2019, 87 00:05:41.870 --> 00:05:45.440 it's almost 90% of the revenues and you have delivery, 88 00:05:45.610 --> 00:05:48.120 which is starting to get up. Of course, 89 00:05:48.560 --> 00:05:53.040 delivery is going to go skyrocketing as a consequence of mobility, 90 00:05:53.050 --> 00:05:55.360 which is down, people can't move, 91 00:05:55.380 --> 00:05:59.200 but they are very happy that goods are delivered at home. 92 00:05:59.710 --> 00:06:00.920 Uber heats, 93 00:06:01.100 --> 00:06:05.600 you can observe that in 2020 it's roughly the same percentage, 94 00:06:06.080 --> 00:06:11.080 mobility and delivery and then delivery is going to go up to 60%. 95 00:06:11.360 --> 00:06:15.520 Mobility is down to 30% and freight is about 10%. 96 00:06:15.790 --> 00:06:18.640 Then delivery is going to be back to the level of mobility, 97 00:06:18.740 --> 00:06:22.680 and now mobility is up, mobility is up in absolute terms, 98 00:06:23.060 --> 00:06:28.000 but also relative to revenues and if delivery is quite stable in absolute terms, 99 00:06:28.230 --> 00:06:32.680 it's skyrocketing as well, bringing its own EBITDA to the contribution. 100 00:06:33.260 --> 00:06:34.400 Now this is about growth, 101 00:06:34.420 --> 00:06:39.000 but you all know that growth consumes funds because you have to invest 102 00:06:39.380 --> 00:06:40.360 in the application, 103 00:06:40.380 --> 00:06:43.560 you have to invest in the footprint at large and so on and so forth. 104 00:06:44.340 --> 00:06:48.200 But also growth is consuming funds. When you make losses, 105 00:06:48.990 --> 00:06:50.800 when you want to finance your growth, 106 00:06:50.820 --> 00:06:54.760 you can raise equity and debt and you can generate profits and transforms its 107 00:06:54.760 --> 00:06:56.800 profits into cash. But when you make losses, 108 00:06:57.220 --> 00:07:02.000 you need money in order to finance the development of the company and the losses 109 00:07:02.140 --> 00:07:05.560 you are going to generate in the meantime. Now, 110 00:07:05.560 --> 00:07:09.720 let's have a look at fundraising. First. The capital is created in 2008, 111 00:07:10.140 --> 00:07:12.160 2008, 2010. 112 00:07:12.560 --> 00:07:15.840 A little bit of money coming from two founders plus Business angels, 113 00:07:15.860 --> 00:07:20.480 $1.5 million. Just start 2011. 114 00:07:21.180 --> 00:07:22.760 Now you change the scale. 115 00:07:23.140 --> 00:07:27.520 You change the scale because the value of the company Premo is estimated 116 00:07:27.520 --> 00:07:30.320 $300 million series A, 117 00:07:30.340 --> 00:07:34.760 series B two fundraising in one year, $48 million. 118 00:07:35.300 --> 00:07:38.640 The second change in scale will take care. In 2015, 119 00:07:39.020 --> 00:07:43.760 the company is raising $2 billion, not a few tenths of millions of dollars. 120 00:07:43.900 --> 00:07:48.400 Series E, beginning of the year F end of the year, $40 billion, 121 00:07:48.770 --> 00:07:52.840 $50 billion as premium evaluation. In 2018, 122 00:07:54.030 --> 00:07:58.680 maan Soft Bank Vision fund is joining the portfolio of shareholders 123 00:07:59.020 --> 00:08:02.200 and providing 1.3 billion at the premium valuation, 124 00:08:02.200 --> 00:08:05.480 which is almost $70 billion and it's going to be 125 00:08:05.580 --> 00:08:07.360 82.4 billion. 126 00:08:07.630 --> 00:08:12.360 When the company is listed in 2019 and the company is taking 127 00:08:12.420 --> 00:08:16.880 the opportunity of its listing to raise an additional 8.1 billion. 128 00:08:16.980 --> 00:08:21.800 So it's a lot of money which is invested in the company and in the meantime 129 00:08:22.300 --> 00:08:25.680 the company is developing its business, but it's generating losses. 130 00:08:26.230 --> 00:08:28.480 When you observe the evolution of the return on sale, 131 00:08:28.500 --> 00:08:31.760 the commercial profitability of the company is bit divided by sales. 132 00:08:32.310 --> 00:08:35.960 It's a bit chaotic. If you look at the published ebit, 133 00:08:35.960 --> 00:08:38.640 which incorporates some exceptional items, 134 00:08:39.230 --> 00:08:43.960 what is more relevant is a current EBIT without any exceptional item and then 135 00:08:44.040 --> 00:08:47.400 you observe that it's negative starting in 2020, 136 00:08:47.830 --> 00:08:52.320 it's getting progressively up and it's close to zero full year 137 00:08:52.320 --> 00:08:53.400 2022. 138 00:08:54.580 --> 00:08:57.800 In the same time the E B D A is following the same path. 139 00:08:58.660 --> 00:09:00.000 You look at the revenues, 140 00:09:00.420 --> 00:09:05.280 you look at the current E B D A current without exceptional items and 141 00:09:05.280 --> 00:09:08.080 you understand that they are moving in the same direction. 142 00:09:08.800 --> 00:09:12.120 E B D A Fuller 2022 is a bit more than zero. 143 00:09:13.070 --> 00:09:16.880 EBIT F year 2022 was a little bit less than zero is a difference. 144 00:09:16.880 --> 00:09:18.080 It's not that big. Why? 145 00:09:18.230 --> 00:09:22.400 Because the difference is depreciation and monetization and as a company is 146 00:09:22.400 --> 00:09:24.200 definitely not CapEx intensive. 147 00:09:25.070 --> 00:09:27.440 EBIT and EBIT D are quite the same. 148 00:09:27.860 --> 00:09:31.200 Now when you look at the quarterly E B D A, not full year, 149 00:09:31.220 --> 00:09:35.160 but quarter after quarter it was negative and negative and negative. 150 00:09:35.160 --> 00:09:39.120 Then it goes up and there's a turning point, which is the third quarter, 151 00:09:39.260 --> 00:09:40.360 2021. 152 00:09:40.670 --> 00:09:45.040 Then it is at breakeven and then it goes up and up and up 153 00:09:45.360 --> 00:09:48.400 steadily. It seems that there's no end to this growth. 154 00:09:49.710 --> 00:09:52.800 What are the contributions of the respective segments? 155 00:09:53.480 --> 00:09:56.920 Mobility starting in 2019? We don't have the figures before. 156 00:09:57.780 --> 00:10:02.280 Is positive contribution to E B D of the company is positive. 157 00:10:02.740 --> 00:10:05.280 Of course it's down in 2020 because of the pandemic, 158 00:10:05.460 --> 00:10:08.720 but it's still positive mobility. The cab driver, 159 00:10:09.510 --> 00:10:13.000 then it goes up, it recovers, and then it's steadily up. 160 00:10:13.230 --> 00:10:17.160 What about Uber Eats? What about delivery? Well, 161 00:10:17.160 --> 00:10:20.640 it was negative in the early days because you are creating a business and you 162 00:10:20.640 --> 00:10:21.960 have to invest in the development. 163 00:10:22.190 --> 00:10:26.760 Then you turn to breakeven in 2021 and then it's up freight. 164 00:10:27.130 --> 00:10:31.080 Other services, no contribution breakeven zero, 165 00:10:32.180 --> 00:10:34.920 but that's about the segments themselves. Of course, 166 00:10:35.130 --> 00:10:38.240 these segments are contributing to the E B D of the company, 167 00:10:38.580 --> 00:10:42.880 but they are corporate E B D A and costs negative 168 00:10:42.930 --> 00:10:47.760 investment in direct cost and they are in a range between 400 169 00:10:47.900 --> 00:10:49.480 and $600 million. 170 00:10:49.980 --> 00:10:52.440 So if you observe what was happening at the beginning of the period, 171 00:10:52.750 --> 00:10:55.360 sometimes mobility pays for corporate, 172 00:10:55.780 --> 00:10:58.160 but mobility does not pay for delivery, 173 00:10:59.060 --> 00:11:02.600 and so this is why the E P D A is strongly negative. Now, 174 00:11:02.880 --> 00:11:07.560 mobility is up, corporate is reasonably stable, 175 00:11:07.830 --> 00:11:12.800 400, $500 million and delivery returns positive. 176 00:11:13.030 --> 00:11:17.280 This is why the company's E P D A is significantly positive 177 00:11:17.940 --> 00:11:21.040 now. Now when you look at the E P D A, 178 00:11:21.270 --> 00:11:26.120 it's about revenues minus costs, cash operating expenses. 179 00:11:26.540 --> 00:11:30.640 We observe the last two years. The cost of sales is a little bit, uh, 180 00:11:30.640 --> 00:11:35.560 because delivery is growing and delivery is not exactly the same level of cost 181 00:11:35.560 --> 00:11:39.040 of sales, but all the other expenses are down. 182 00:11:39.630 --> 00:11:44.320 It's about probably economies of scale when the company is growing 183 00:11:44.660 --> 00:11:48.880 and the fixed costs are growing but not at the same rate as the revenues, 184 00:11:49.140 --> 00:11:53.760 you simply generate economies of scale except for the precision amortization, 185 00:11:54.340 --> 00:11:58.040 but you observe that it's quite stable and it's extremely low. 186 00:11:59.180 --> 00:12:00.013 Why is it low? 187 00:12:00.030 --> 00:12:04.680 Because capital expenditures as a percentage to revenue is quite negligible. 188 00:12:04.900 --> 00:12:06.160 Of course, in 2017, 189 00:12:06.180 --> 00:12:11.000 the CapEx revenue figure is quite high because the company is creating its 190 00:12:11.120 --> 00:12:13.880 infrastructure, but then it goes down to 4%, 191 00:12:14.100 --> 00:12:18.880 and today it's about one 2% quite negligible as a consequence, 192 00:12:19.190 --> 00:12:21.440 EBIT and E B D are quite the same. 193 00:12:21.580 --> 00:12:25.440 The other way to consume cash in business operations, the cash conversion cycle, 194 00:12:25.660 --> 00:12:28.280 the working capital requirement inventories, 195 00:12:28.410 --> 00:12:30.320 there is no inventory in this business, 196 00:12:30.430 --> 00:12:33.280 obviously plus receivables minus payables, 197 00:12:33.500 --> 00:12:36.800 so the cash conversion cycle is reasonably stabilized, 198 00:12:37.080 --> 00:12:40.240 a little bit getting down, and it's about 20 days of sales. 199 00:12:40.660 --> 00:12:44.080 So you don't consume cash in a CapEx, you don't consume cash. 200 00:12:44.480 --> 00:12:48.120 A lot of cash in working capital requirement even though you have to finance the 201 00:12:48.800 --> 00:12:52.760 increase of the cash conversion cycle as a consequence of growing the revenues. 202 00:12:52.980 --> 00:12:56.160 But you understand that it's not cash consumption, which is a problem. 203 00:12:56.820 --> 00:12:59.600 It is definitely profit. Now, 204 00:12:59.610 --> 00:13:02.600 there is a disruptive model which is successful. 205 00:13:02.730 --> 00:13:07.360 There are plenty of investments for the development and obviously for the 206 00:13:07.360 --> 00:13:10.880 losses, but the good news is that now profitability is achieved, 207 00:13:11.340 --> 00:13:15.600 you reach the breakeven point and there is a reduction in capital consumption. 208 00:13:15.980 --> 00:13:17.960 So the future might look quite bright. 209 00:13:19.950 --> 00:13:24.280 What is a conseque of stock price? The company is listed on nasdaq. 210 00:13:24.470 --> 00:13:28.480 When the company is listed, the offer price is $45. 211 00:13:29.250 --> 00:13:33.520 Today recording this film, it's $46, 212 00:13:33.940 --> 00:13:37.720 so it looks a little bit gloomy. Now let's compare that with the nasdaq. 213 00:13:37.900 --> 00:13:40.560 The company is listed. Na, stock price is down. 214 00:13:40.910 --> 00:13:45.720 Then it goes up and it goes dramatically up much more than the NASDAQ itself, 215 00:13:46.300 --> 00:13:50.640 and then the company is down. When the NASDAQ is plateauing, NASDAQ is down, 216 00:13:50.640 --> 00:13:54.560 company is down and there is a recovery. This is last month, 217 00:13:54.980 --> 00:13:58.320 so at the end of the day from 45 to 46, 218 00:13:58.380 --> 00:14:02.640 and it's quite parallel with the NASDAQ in the long term. 219 00:14:02.790 --> 00:14:05.200 This is why by the way, when you calculate the beta, 220 00:14:05.270 --> 00:14:09.400 difficult to calculate the beta because we don't have a long period to 221 00:14:09.400 --> 00:14:12.880 calculate, but if you look at the 36 months beta today, 222 00:14:12.880 --> 00:14:16.280 it's quite stabilized at the level of one, a little bit more than one. 223 00:14:16.820 --> 00:14:19.240 Of course, the 12 months beta is completely chaotic. 224 00:14:19.500 --> 00:14:21.520 That's a consequence we always observe. 225 00:14:21.600 --> 00:14:26.560 When a company is listed in a tech business completely unreliable beta 226 00:14:26.560 --> 00:14:29.600 during the first month, it does not look great for Uber. 227 00:14:29.820 --> 00:14:33.000 But what about competitors? Didi and Lyft? 228 00:14:33.260 --> 00:14:36.920 If you watch the evolution of the stock prices of these three competitors since 229 00:14:37.030 --> 00:14:37.863 they were listed, 230 00:14:38.510 --> 00:14:43.480 it's quite parallel to some extent down and up and down. 231 00:14:43.620 --> 00:14:44.960 But for Didi and Lyft, 232 00:14:45.220 --> 00:14:50.200 it stayed down very much down when for Uber there was 233 00:14:50.240 --> 00:14:54.200 a kind of recovery. So you understand that in terms of market capitalization, 234 00:14:54.530 --> 00:14:59.400 stock price, Uber is completely differentiating itself against its competitors. 235 00:14:59.690 --> 00:15:03.520 Let's have a look at the metrics. In 2022, 236 00:15:03.550 --> 00:15:07.840 full year revenues DD 20 billion Lyft for Uber, 237 00:15:08.060 --> 00:15:09.040 32 billion. 238 00:15:09.780 --> 00:15:13.280 So Uber can be a bit more compared with Didi than Lyft. 239 00:15:13.280 --> 00:15:17.080 In terms of revenues, EBIT all negative, 240 00:15:17.690 --> 00:15:22.680 quite negative for Didi compared with the revenues minus 13%. 241 00:15:22.940 --> 00:15:26.040 For Lyft, it's dramatically negative and 0.5 billion, 242 00:15:26.660 --> 00:15:31.480 and you remember that for Uber it's 1.8 billion, it's but more than Lyft, 243 00:15:31.900 --> 00:15:34.080 but with the company, which is eight times as much, 244 00:15:34.260 --> 00:15:38.760 so these companies are more or less big, but they are all generating losses. 245 00:15:38.790 --> 00:15:43.720 They were listed in 2019 for Lyft and Uber and 2021 246 00:15:43.720 --> 00:15:44.560 for dd, 247 00:15:45.420 --> 00:15:50.280 the offered price for TD was $14 for the American 248 00:15:50.280 --> 00:15:52.440 depository shares based in New York, 249 00:15:52.980 --> 00:15:55.920 the valuation when the company is listed is 73 billion. 250 00:15:56.350 --> 00:15:58.400 Today's star price is three. 251 00:15:58.830 --> 00:16:03.680 Today's current valuation is 15 billion compared with I P O 252 00:16:03.740 --> 00:16:07.320 at 73 just a couple of years ago. 253 00:16:08.060 --> 00:16:12.320 If you look at Lyft, the company's listed at an offered price of 72. 254 00:16:12.330 --> 00:16:16.920 Today the stock price is 10.5 value at I P o 24 255 00:16:17.130 --> 00:16:20.520 value today, four divided by six. Now, 256 00:16:20.520 --> 00:16:24.960 if you look at Uber 45 to 46, this is what I was explaining, 257 00:16:25.260 --> 00:16:29.880 the market cap is 82 when the company is listed, and it's 94 today, 258 00:16:30.820 --> 00:16:34.840 not because the stock price is up, but because the number of shares is up. 259 00:16:35.100 --> 00:16:39.520 That's the way it works. Now, if you take into account the value creation, 260 00:16:40.360 --> 00:16:44.640 introducing on the picture how much money was invested by venture cap, 261 00:16:44.660 --> 00:16:46.600 by pension funds and so on so forth, 262 00:16:46.830 --> 00:16:49.680 private equity firms in the development of the company, 263 00:16:50.980 --> 00:16:53.520 all the datas are available for dd. 264 00:16:53.780 --> 00:16:58.280 The investment was $19 billion just for equity, 265 00:16:58.620 --> 00:17:02.480 and the valuation when the company was listed was 73, 266 00:17:02.820 --> 00:17:06.320 so it was quite okay, but today the valuation is 15, 267 00:17:07.060 --> 00:17:11.840 so the valuation was divided by five compared with the I P O and the 268 00:17:11.840 --> 00:17:16.240 market value added. Well, you are an investor. You have invested 19. Today, 269 00:17:16.240 --> 00:17:17.073 it's worth 15. 270 00:17:17.780 --> 00:17:21.440 You have destroyed four Lyft investment, 271 00:17:22.030 --> 00:17:24.680 5 billion valuation 24. 272 00:17:25.180 --> 00:17:27.720 Now valuation is four divided by six. 273 00:17:28.140 --> 00:17:32.600 Market value added four minus five is minus one. Uber. 274 00:17:32.670 --> 00:17:37.520 It's a different story because $20 billion were invested by a number 275 00:17:37.620 --> 00:17:41.320 of capitalists. Now, the valuation of the I P O is 82. 276 00:17:41.730 --> 00:17:44.760 Today it's 94, and it's the same because of, 277 00:17:45.580 --> 00:17:49.480 but the market value added is 94, minus 20, 278 00:17:49.480 --> 00:17:50.760 which is 74 billion. 279 00:17:51.100 --> 00:17:54.360 Though you understand that the reputation of Uber on the stock market, 280 00:17:54.490 --> 00:17:59.480 especially benchmarked against its competitors is quite favorable. As you know, 281 00:17:59.870 --> 00:18:04.440 Uber based its success on an innovation which is them. Uberization, 282 00:18:05.820 --> 00:18:09.640 I'm not going to make an entire lecture on Uberization, but what does it mean? 283 00:18:10.300 --> 00:18:11.880 You try to find a provider, 284 00:18:12.220 --> 00:18:16.720 but replacing the traditional intermediary with a 285 00:18:17.000 --> 00:18:20.400 platform, a platform or an application or both, 286 00:18:20.980 --> 00:18:23.320 and then you can create kind of marketplace. 287 00:18:23.660 --> 00:18:25.760 You meet supply and demand and it works. 288 00:18:26.180 --> 00:18:30.400 The first company which did that is not Uber, it's Airbnb. 289 00:18:30.820 --> 00:18:34.200 It was about short term rentals, so you don't need any more, 290 00:18:34.660 --> 00:18:36.840 any system of reservation or whatsoever. 291 00:18:37.260 --> 00:18:41.320 You just go to the platform and you make your own booking. Uber, 292 00:18:41.590 --> 00:18:46.000 it's about using the services of a private taxi. You know that perfectly well. 293 00:18:46.340 --> 00:18:50.160 Now, when there is innovation, there is creative distraction. 294 00:18:51.070 --> 00:18:53.040 What about Airbnb? To start with, 295 00:18:53.540 --> 00:18:58.240 Airbnb is simply replacing complementing hotel reservation systems 296 00:18:59.020 --> 00:19:03.560 and they are bypassing the relay estate agencies. You don't need the broker. 297 00:19:04.020 --> 00:19:07.520 You go directly to the offer, to the supply, 298 00:19:07.700 --> 00:19:11.080 and then you can make your selection. Interestingly, 299 00:19:11.080 --> 00:19:12.960 it's about bilateral evaluation. 300 00:19:13.220 --> 00:19:17.760 The provider is evaluating the user and the user is evaluating the provider, 301 00:19:18.210 --> 00:19:23.200 which is quite interesting and was implemented by Uber as well. Now, 302 00:19:23.200 --> 00:19:26.400 on the creation side of the innovation, you create something, 303 00:19:26.460 --> 00:19:27.440 an additional offer. 304 00:19:27.770 --> 00:19:32.640 There are now a number of people who are generating additional rental income 305 00:19:32.820 --> 00:19:36.280 out of their premise house somewhere in the countryside. 306 00:19:37.330 --> 00:19:38.700 What about Uber? Now, 307 00:19:39.210 --> 00:19:43.380 they aware taxi companies with a reservation system 308 00:19:43.960 --> 00:19:48.580 before Uber, but Uber decided to break a monopoly, 309 00:19:48.720 --> 00:19:51.700 and that's a distraction. You destroy Monopoly, 310 00:19:52.150 --> 00:19:54.100 which has a huge impact on cost, 311 00:19:54.450 --> 00:19:57.780 reduces quality of service up. Of course, 312 00:19:57.960 --> 00:20:01.900 the impact of that is that you improve very much a competitiveness. 313 00:20:02.560 --> 00:20:05.700 You improve competitive delivery mobility, 314 00:20:06.080 --> 00:20:10.660 and you bypass the system which was installed stable 315 00:20:11.120 --> 00:20:13.540 and long term. In terms of distraction, 316 00:20:13.930 --> 00:20:17.300 Uber dis disrupt the pension of the taxi driver. 317 00:20:17.860 --> 00:20:21.740 A taxi driver in 2013 buys a professional card for 318 00:20:21.920 --> 00:20:26.020 260,000 euros. You can buy a house, 319 00:20:26.040 --> 00:20:28.860 you can buy a flat, not in Paris, but somewhere in France. 320 00:20:29.440 --> 00:20:31.900 Now it's 120,000, 321 00:20:32.320 --> 00:20:36.780 so the pension of the person is divided by two. That's traction, 322 00:20:37.120 --> 00:20:40.540 but the consequence is that it's less capital invested in the card. 323 00:20:40.920 --> 00:20:42.220 If you don't invest in the card, 324 00:20:42.520 --> 00:20:47.020 you can invest in the quality of service in the cab itself. Now, 325 00:20:47.180 --> 00:20:51.720 is it fair competition or not? That's another story, 326 00:20:52.100 --> 00:20:56.960 but definitely it's a disruption and it's a distraction for all these people who 327 00:20:56.960 --> 00:20:58.440 bought their card. Now, 328 00:20:58.440 --> 00:21:02.520 there are a number of controversies which are attached to the name of Uber. 329 00:21:02.660 --> 00:21:06.600 The first one is about bypassing, circumventing the lobe, 330 00:21:07.300 --> 00:21:12.200 and you make the driver extremely precarious in terms of social and economic 331 00:21:12.720 --> 00:21:17.480 situation. Abstraction of justice, which was observed in a number of countries. 332 00:21:18.190 --> 00:21:22.800 Political lobby, yes, but active between quotes was uh, 333 00:21:22.830 --> 00:21:23.760 very um, 334 00:21:24.770 --> 00:21:29.520 borderline practices between quotes as well, academic influence. 335 00:21:30.310 --> 00:21:35.200 Some nice professors are writing books and articles in favor of your business. 336 00:21:35.750 --> 00:21:36.640 Last but not least, 337 00:21:36.700 --> 00:21:41.680 the internal management culture is a permanent controversy at Uber 338 00:21:41.740 --> 00:21:44.680 during the first years. Let's start with the first one. 339 00:21:45.420 --> 00:21:50.360 The taxi driver was a savvy man was working for a company 340 00:21:51.020 --> 00:21:56.000 or he was working for himself, but now it's a self-employed status period, 341 00:21:56.500 --> 00:22:00.160 so there is a complete loss of protection of the employee status. 342 00:22:00.740 --> 00:22:04.320 You are not protected anymore by the fact that you are employed by a company 343 00:22:04.670 --> 00:22:09.080 with some social security advantages and so on and so forth. This is gone. 344 00:22:09.740 --> 00:22:12.720 You are not supposed to work a number of errors and no more. 345 00:22:12.820 --> 00:22:15.760 Now you can work 24 hours per day. Of course, 346 00:22:15.820 --> 00:22:17.480 the impact is about cost reduction, 347 00:22:18.100 --> 00:22:20.800 but you also transform the salary of the person, 348 00:22:20.810 --> 00:22:25.320 which is a fixed cost into a variable cost. You work or you don't work. 349 00:22:25.460 --> 00:22:29.280 You are paid, you don't pay, so a fixed cost becomes variable. 350 00:22:29.470 --> 00:22:33.920 Uber was brought to the court by hundreds of institutions in every country, 351 00:22:34.060 --> 00:22:37.560 United States, Europe, everywhere, lawsuits. 352 00:22:37.700 --> 00:22:41.920 Why violation of social regulations? Are you an employee? 353 00:22:42.620 --> 00:22:43.920 Are you an independent person? 354 00:22:44.300 --> 00:22:48.440 If you're supposed to be an independent entrepreneur and you work 100% of your 355 00:22:48.440 --> 00:22:53.400 time for Uber, it's not exactly independent commercial regulations. 356 00:22:53.580 --> 00:22:56.120 The right to exercise the activity of taxi, 357 00:22:56.820 --> 00:22:59.880 you bypass a low and then you go to the court. 358 00:23:00.790 --> 00:23:02.520 What about obstruction of justice? 359 00:23:03.190 --> 00:23:07.440 Because the company had plenty of legal problems in a number of countries. 360 00:23:07.440 --> 00:23:12.360 Sometimes the police was visiting the officers of the company and then 361 00:23:12.360 --> 00:23:17.240 the company was doing something, which is kill switch. Kill, switch. 362 00:23:17.350 --> 00:23:18.183 Stem is what? 363 00:23:18.350 --> 00:23:22.240 It's exactly the same in manufacturing as the emergency stop button. 364 00:23:22.940 --> 00:23:24.920 So you see the police, which is getting in the office, 365 00:23:25.060 --> 00:23:29.800 you push the button and then the data system, the information system, 366 00:23:29.860 --> 00:23:33.680 the computers, everything is frozen, and of course you say, oh, 367 00:23:33.680 --> 00:23:35.120 we have to protect the data. 368 00:23:35.860 --> 00:23:40.800 Is it protecting the data or is it making sure that nobody can look at what is 369 00:23:40.820 --> 00:23:42.920 on the screen abstraction? 370 00:23:43.610 --> 00:23:46.920 There are many reported cases of this kind of abstraction, 371 00:23:47.170 --> 00:23:49.960 which is not very much in favor of the reputation of the company. 372 00:23:50.340 --> 00:23:53.000 The company also did a lot of political lobbying. 373 00:23:53.310 --> 00:23:56.560 There's nothing wrong with that. You want to convince the authorities. 374 00:23:56.780 --> 00:24:00.680 You want to convince the lawmakers that what you are doing is good for the 375 00:24:00.680 --> 00:24:03.400 country, it's good for the happiness of the citizens. 376 00:24:04.020 --> 00:24:08.840 You are selling the merits of your business model. How do they do that? 377 00:24:09.190 --> 00:24:13.000 They're promoting competition, competitive practices, 378 00:24:13.300 --> 00:24:15.880 and then you improve the competitiveness of the economy. 379 00:24:16.180 --> 00:24:19.040 You reduce costs for citizens, you improve the quality of service, 380 00:24:19.420 --> 00:24:20.180 and that's great. 381 00:24:20.180 --> 00:24:25.000 The problem was about how they actually did the lobby being there were some 382 00:24:25.520 --> 00:24:29.800 questionable practices and financial incentives such as, um, 383 00:24:30.380 --> 00:24:35.240 you buy some shares of a company and the value of the shares is 384 00:24:35.240 --> 00:24:40.080 much more than what you pay a bit bolder line or behind the 385 00:24:40.080 --> 00:24:44.000 border. Academic justification is quite interesting as well. 386 00:24:44.820 --> 00:24:49.720 You do some contracted research with some prestigious prophecies 387 00:24:49.720 --> 00:24:54.120 and economists working in reputable institutions worldwide now, 388 00:24:54.420 --> 00:24:57.520 and these people, they are writing papers. Of course, 389 00:24:57.700 --> 00:25:02.400 in the papers they mentioned that their research has been financed 390 00:25:02.580 --> 00:25:03.413 by Uber. 391 00:25:03.740 --> 00:25:08.000 The conclusion of the paper is that Uber is working for the country 392 00:25:08.780 --> 00:25:12.000 in favor of the country in favor of the citizen. Why? 393 00:25:12.020 --> 00:25:14.560 All because you improve the competitiveness and so on, 394 00:25:14.580 --> 00:25:17.560 and then you reduce the cost and is great for everybody. 395 00:25:17.940 --> 00:25:22.840 And then you say that this is demonstrated by the data which were provided by 396 00:25:22.950 --> 00:25:25.400 Uber and which are confidential data, 397 00:25:25.660 --> 00:25:28.640 so unfortunately you cannot disclose the data. 398 00:25:29.620 --> 00:25:34.560 You understand that there are some doubts about the independence of the 399 00:25:34.920 --> 00:25:39.440 researchers. This reminds me a very interesting and funny story. 400 00:25:40.300 --> 00:25:44.600 You may be, remember, inside Jobs a documentary about the subprime crisis. 401 00:25:45.020 --> 00:25:45.853 At the moment, 402 00:25:46.600 --> 00:25:51.600 a very well-known professor working and teaching in a very respected institution 403 00:25:52.020 --> 00:25:54.480 was interviewed and you know, 404 00:25:54.860 --> 00:25:58.080 he had published a report before the Supreme Crisis, 405 00:25:58.330 --> 00:26:03.160 which was absolutely demonstrating that the Iceland banking system 406 00:26:03.220 --> 00:26:08.080 was extremely robust. Of course, it collapsed, as you know, but interestingly, 407 00:26:08.180 --> 00:26:12.760 the same report with exactly the same content was in his 408 00:26:13.020 --> 00:26:16.360 own biography, but with exactly the opposite title. 409 00:26:17.060 --> 00:26:18.240 The content is the same, 410 00:26:18.460 --> 00:26:23.200 but the title is why the Icelandic Banking System is about to Collapse. 411 00:26:23.940 --> 00:26:28.720 He had been paid 150,000 US dollars to produce a report. 412 00:26:29.830 --> 00:26:32.560 Last but not least, the internal management culture. 413 00:26:33.340 --> 00:26:37.960 The culture inside the company is an extremely aggressive management accusations 414 00:26:38.020 --> 00:26:41.280 of sexual harassments. The list is extremely long, 415 00:26:41.580 --> 00:26:44.120 but of course the company says, oh, it was before, 416 00:26:44.940 --> 00:26:49.200 it was before 2017. It was under the leadership of Mr. 417 00:26:49.620 --> 00:26:53.560 Kanick. Travis Kanick had established a set of values, 418 00:26:53.770 --> 00:26:58.360 leadership values, 14 of them. This is a list of the values. 419 00:26:59.230 --> 00:27:03.000 What do you read, hustling, confrontation, 420 00:27:03.650 --> 00:27:07.080 super pomp ness, et cetera, et cetera. Of course, 421 00:27:07.830 --> 00:27:12.000 obsession with a customer was, she's quite good, optimistic leadership. 422 00:27:12.070 --> 00:27:16.440 This is great. Bold betts, no problem. Celebrate C. Yes, 423 00:27:16.940 --> 00:27:20.720 but with a management style and a confrontation between people, 424 00:27:21.050 --> 00:27:24.040 which is definitely a TAF culture. 425 00:27:25.500 --> 00:27:26.600 In 2017, 426 00:27:27.260 --> 00:27:32.000 Kanick is out of his c e o job and is replaced by 427 00:27:32.200 --> 00:27:37.160 a gentleman coming from Iran, an Iranian immigrant, now US citizen. 428 00:27:37.460 --> 00:27:42.320 He left Iran because of the revolution. His name is Dara Koro Shahi, 429 00:27:43.180 --> 00:27:47.720 and he's going to be extremely different than his predecessor. 430 00:27:48.700 --> 00:27:53.520 I'm not going to tell you the whole story, but the vote on appointing, 431 00:27:53.780 --> 00:27:54.280 uh, 432 00:27:54.280 --> 00:27:58.880 Koro Shahi as a new c e o was itself a kind of fantastic 433 00:27:59.010 --> 00:28:00.680 movie. Forget about that. 434 00:28:00.950 --> 00:28:04.960 He's a very highly effective c e o at Expedia. 435 00:28:05.020 --> 00:28:08.240 It boasted the performance of the company. He's hired. 436 00:28:08.550 --> 00:28:13.320 He's a new c e o and he's introducing a new management culture with values. 437 00:28:13.820 --> 00:28:17.840 No more 15 values, less eight, but a little bit different, 438 00:28:18.260 --> 00:28:19.320 at least for some of them. 439 00:28:19.820 --> 00:28:24.440 The cultural norms at Uber and why do you read? Oh, 440 00:28:24.820 --> 00:28:29.000 global, local, that's fine. Everybody's doing the same. But cities, 441 00:28:29.310 --> 00:28:33.600 communities, we are very much involved because we are about mobility, 442 00:28:34.880 --> 00:28:38.040 customer obsession in both case, which is quite normal. 443 00:28:38.260 --> 00:28:42.880 The celebration of differences is probably a little bit better with the new c e 444 00:28:42.880 --> 00:28:45.920 o rather than with the old one doing the right thing. 445 00:28:46.070 --> 00:28:51.000 There's a very interesting value ideas over hierarchy, so more or less, 446 00:28:51.000 --> 00:28:53.040 what does it mean? If you have a good idea, 447 00:28:53.380 --> 00:28:57.880 you have the right to bypass your hierarchy or to go through the hierarchy to 448 00:28:57.880 --> 00:29:01.560 bring the idea to the top. Now, under Nic's leadership, 449 00:29:01.980 --> 00:29:06.560 it was tip two, so you are walking on the toes of your hierarchy. 450 00:29:06.580 --> 00:29:11.280 Now you have ideas. These are great ideas. Promote them and big, 451 00:29:11.630 --> 00:29:16.160 bold betts, okay, that's normal. If you want to create something, 452 00:29:16.300 --> 00:29:20.120 you have to take Betts and you have to be bold. Now, eventually, 453 00:29:20.190 --> 00:29:25.120 what was the outcome of this period? 20 17, 20 23 Success. 454 00:29:25.470 --> 00:29:28.960 Fantastic success. Back to performance. Gross. 455 00:29:29.500 --> 00:29:34.120 The company went through the Covid pandemic demonstrating its robustness. 456 00:29:34.390 --> 00:29:37.120 It's a global company and now it's profitable. 457 00:29:37.140 --> 00:29:41.480 The company says we want to pursue profitable growth 458 00:29:41.870 --> 00:29:45.640 because of course, a company now is positive in the p and l, 459 00:29:46.660 --> 00:29:51.640 but you could say also, wow, you are now all generating a profit, 460 00:29:51.730 --> 00:29:53.680 which is a little bit positive. 461 00:29:54.620 --> 00:29:57.400 How do you evaluate the financial return for the shareholders? 462 00:29:57.700 --> 00:30:01.640 Net earnings divided by equity. When their earnings are marginal, 463 00:30:01.900 --> 00:30:04.120 the return on equity is marginal. 464 00:30:04.980 --> 00:30:08.800 Now it's no more about being proud of being positive. In terms of p and a, 465 00:30:08.950 --> 00:30:10.880 it's about increasing the profit. 466 00:30:11.150 --> 00:30:13.640 It's about transforming the profit into free cash flow, 467 00:30:13.940 --> 00:30:17.320 and then you understand that when the return on equity is new, 468 00:30:17.980 --> 00:30:22.760 the 45 is transformed into 46. If you want to double the 46, 469 00:30:23.260 --> 00:30:25.760 you have to pursue profitable growth. 470 00:30:25.950 --> 00:30:29.200 It's a difference between book profit and financial performance. 471 00:30:30.370 --> 00:30:31.120 Thank you very much.