LT Weekly: May 09, 2025

It Was An Almost Across The Board FQ2 Beat For Disney…Revenue Performance In Both Linear Networks and DTC Were The Lone Areas Of Weakness Vs Street Expectations

• Headline beats…
  • Total consolidated FQ2 revs were up +7% y/y (vs +5% y/y in FQ1) and topped cons by +2.3%
  • Op income (up +15% y/y) was +12.3% ahead of cons (following a +17% beat last qtr)
  • Adj EPS (+20% y/y) was +22% ahead of cons (following a +21% beat last qtr)

• On the top-line, Experiences & Sports posted the biggest % upside vs the Street (like last qtr)
  • Experiences revs beat by +1.9% and op income beat by +4.7%
  • Sports revs beat by +4.7% and op income beat by +5%

• A HUGE beat in Entertainment operating income (+31% above cons) was a standout
  • Entertainment DTC op income improved +$289mn y/y to $336mn

Overall Segment Growth Trends & FY25 Outlook

• Entertainment – FQ2 headline performance & outlook
  • Rev rose +9% y/y
  • Op income grew +61% y/y given strong results at DTC and Content Sales/Licensing and Other
    • Maintained FY25 guidance – Expect DD y/y increase

• Sports – FQ2 headline performance & outlook
  • Revs grew +5% y/y, w/ +7% increase at domestic ESPN driven by domestic ad revs growth of +29% y/y (reflected a 16ppt benefit from a change in the College Football Playoff format, airing 3 addtl College Football Playoff games in the qtr vs last yr, and an addtl NFL game due to timing)
  • Op income fell -12% due to higher programming and production costs and a write-off of Venu
    • Raised FY25 guidance – expect ~+18% y/y increase: Incls a comparison to a $636mn adverse impact to FY24 Sports results from Star India (up from prev +13% y/y growth guidance)

• Expériences – FQ4 headline performance & outlook
  • Rev rose +5.9% y/y
  • Op income +9% y/y: Results included $35mn in pre-opening expenses and FY pre-opening expects for Disney Cruise lines will be $200mn, with $40mn in FQ3 and $50mn in FQ4
    • Maintained FY25 guidance – Expect +6-8% y/y increase

Raised FY25 Adj EPS Growth Guidance To Well Above Consensus & Are “Monitoring” The Macro

• Raised FY25 adj EPS to ~$5.75 which is +16% y/y vs the prior guidance of ~+hsd% y/y (after maintaining adj EPS guidance last qtr despite a strong EPS beat as well)
  • This is much higher than Street consensus at $5.43, which originally reflected +9.3% y/y growth
  • Long term 3-year guidance for DD EPS growth “remains intact”

• “Monitoring macroeconomic development for potential impacts to our business and recognize that uncertainty remains regarding the operating environment for the balance of the fiscal year”
  • Bookings at the domestic parks remains strong as of now (see Parks section below)

Domestic Parks Is Not Seeing A Slowdown In H2 Bookings But Maintained Experiences Segment Op Income Growth Guidance Despite Tracking Well Ahead

• “Outstanding” performance from Domestic Parks & Experiences
  • Domestic Parks & Experiences revenue rose +9% y/y
  • Domestic Parks & Experiences op income grew +13% y/y (after being flat y/y last qtr), with growth mostly driven by Domestic Parks
  • Domestic Park margins were up 110bp y/y
• Despite the op income beat in the qtr, maintained Experience op income growth guidance of 6-8% for FY25 but said it will be at the higher end (the guidance implies H2 growth of +11% y/y at the mid-pt)
• Positive comments on H2 WDW bookings
  • WDW bookings right now for FQ3 are up +4% (about 80% in) and for FQ4 are up +7% (btw 50-60% at this point); “So certainly looking very optimistic” and that is factored into the higher guidance
• Seeing some softness in China…Attendance is good but per cap spending is tough
• International attendance at the domestic parks has not gotten back to pre-COVID levels, but it is still “in the double-digits”
  • International Parks & Experiences revenue fell -5% y/y
  • International Parks & Experiences op income fell -23% y/y – due to weaker Shanghai Disney Resort and HK Disneyland Resort reflecting the softness they continue to see in China
  • Macro impact? The Co has seen “a bit of an impact, but it’s literally like in terms of the mix, 1% to 1.5% and what I would expect going-forward is something similar to that”; But they are making up for that w/ strong domestic attendance, “so attendance [overall] at the parks has been terrific”

• There was a lot of focus on the annc’d new theme park in Abu Dhabi
  • Why there? 
    • Consumers there want to engage w/ Disney & the location is not cannibalistic
    • 500mn income-qualified people live w/in 4 hrs
    • 120mn people will come through Dubai and Abu Dhabi this year alone
    • Abu Dhabi estimates that 39mn tourists will visit Abu Dhabi by 2030
  • Economic model: Disney will get a royalty and Abu Dhabi is putting in the capital

• Other key Parks & Experiences updates
  • Cruise lines saw strong demand for recently launched Disney Treasure (2nd full qtr of operations); 2 more cruise ships will join the fleet later this year
  • Have more expansion projects underway around the work than any other time in their history

Core D+ Subs Adds Topped Projections Though ARPU Disappointed 

• Disney+ subscriber adds topped expectations
  • D+ core reached 126mn vs cons 123mn with upside in both domestic and international
  • Hulu embedded in D+ and sports content is having a positive impact with engagement up and churn down
    • FQ3 outlook – Expect a modest increase in D+ subs vs FQ2
• Though D+ core APRU was lower than expected given domestic ARPU missed by -3%
• Intl has seen success with investing in local content…focused on UK, Korea, Japan and Mexico
  • Aligning Originals w/ 3P content to improve breadth international

• Continue to innovate with the user experience 
  • Last week, intro’d Streams on D+ w/ programmed playlists
  • Improving customization and personalization
  • A lot on the ad-tech side
  • “And much more coming”

• Just kicked off paid-sharing with Hulu

The New Flagship DTC ESPN Will Be Launching In A Few Months 

• The Co will unveil the name and pricing for the upcoming flagship ESPN offering and they are a “few months” away from launching the new service
  • If you are subscriber of linear ESPN, you will automatically get ESPN flagship, so will have the option to watch either
  • But the ESPN linear service will not have the bells & whistles of the addtl features that the DTC svs will
  • Subscribers of Disney+ and Hulu and ESPN DTC will have a seamless experience

• Some addtl color on the launch plans
  • The plan is to still be somewhat agnostic from a subscriber perspective, so Disney can “do our best to preserve the multichannel ecosystem, but at the same time, obviously want to grow our DTC business”
  • Will try to upsell Disney+ and Hulu subscribers

• Sports viewership trends remain strong: ESPN delivered its most watched Q2 in primetime ever w/ viewership among 18-49 demo up 32% y/y
  • ESPN+ has its most streamed qtr ever based on reach (but ESPN+ sub adds missed cons)

Disney Is Seeing a “Robust” Advertising Upfront…Raised Full Year Ad Growth Guidance 

• The ad market is “quite healthy” and live sports are doing well with ESPN
  • ESPN advertising for the quarter was up over 20%
  • See “robust” demand in the upfront
  • Seeing considerable ad demand from restaurants and healthcare
• But have been more challenged on the DTC supply side given new entrants at the beginning of the year
• Regardless, Disney raised its ad growth expectations for FY25: Previously, indicated that ad growth would be up +3% y/y (similar to last year) now “expect it to be in excess of what we indicated back at the beginning of the year”
  • “So overall, the advertisers are certainly demanding what we can offer”

The Co’s Film Slate Is “As Strong As Anything I Have Seen”

• The Co has seen strong recent successes
  • Mufasa: The LionKing has earning $720mn+ in the global box office
  • Thunderbolts had a strong opening last week

• Disney has a strong pipeline over the next year+: “Have a lot of confidence on upcoming slate…As strong as anything I have seen”
  • This year: Lilo & Stitch (Memorial Day weekend), Elio (June), The Fantastic Four: First Steps (July), Freakier Friday, Zootopia 2, Avatar: Fire & Ash
  • Next year: Avengers, Mandalorian, Toy Story and Moana live-action

• The Disney Wheel is working…in looking at the Moana franchise:
  • Moana 2 garnered 139mn+ hours streamed on D+ since March 12
  • Earned $1bn+ in global box office
  • The original Moana remains the most streamed film on D+ with 1.4bn+ hours streamed
  • In the parks biz, Moana is seen w/ Journey of Water at Epcot, a new stage show on the Disney Treasure, and character meet and greets

There are 2 sections below…1) on Warner Bros. Discovery (WBD) and 2) on Paramount Global (PARA)

1) Warner Bros. Discovery (WBD)

WBD – Q1 Was A Mixed Bag Across The Top & Bottom-Line / Overall Rev Missed, But Profitability Beat 

• Q1 consolidated revs MISSED by -6.4%: Down -10% y/y (vs down -1% y/y in Q4)
  • Studios and Streaming both missed, while Networks beat

• Q1 adj EBITDA BEAT by +3.7%: Flat y/y (vs up +11% y/y in Q4)
  • Both Streaming and Networks beat, while Studios missed

• FCF came in at $302mn, well below cons $405mn 
  • Noted that Q1 is typically their seasonally lowest qtr

WBD – There Was A Lot Of Focus On A Potential Spin But Mgmt Declined To Speculate on Capital Structure Post-Reorg, Though Highlighted Optionality & Readiness to Act Quickly On Potential Future Opptys

• “I don’t want to speculate on capital structures for hypothetical…parts of the company…we believe that we are now properly structured to take advantage of whatever opportunities may arise”
• “It [the re-org] shows you kind of how we look at the business. But also, you know, gives us full optionality having done that work now…we can move quickly…if we decide to change and make a determination on restructuring”

-> Post the conference call, there was a report out from CNBC that WBD is moving towards a potential breakup; Per CNBC’s David Farber, “What would that split look like? Well, most likely, or almost definitely, it’s the linear cable networks and then you have the studio coupled with Max,” citing unnamed sources and “conversations” (link/link)

WBD – On Macro Impact – “So Far, So Good” 

• “For the past five weeks or so, we’ve been tracking very, very closely all the indicators internally and externally…And the reality is, we’re not seeing any impact whatsoever to that point”
• Advertising “would be at risk to some extent” but mgmt has NOT seen any impacts
  • Q2 is tracking “pretty much exactly in-line” w/ Q1
  • Expect that upfront discussions are going to “start a little slower this year” BUT “at the same time we see that being offset by pretty strong scatter at this point”
• “We’ve managed through turbulent times…we will manage our cost base appropriately for a potentially more turbulent environment here to make sure that we’re ring fencing our financial performance”

WBD – Streaming Profitability Outperforms Despite Rev Miss / Max Leaning Into Global Expansion, ARPU Levers, & Quality Content To Drive Long-Term Growth 

• Q1 Streaming rev was below expectations, but profitability beat
  • Rev MISSED by -3.4%…: Increased +8% y/y (accel from +6% y/y in Q4)
  • …but adj. EBITDA BEAT by +19.0%: Came in at $339mn, which is down from $409mn in Q4 but up from $86mn in the yr-ago qtr
• Q1 DTC ARPU missed by -4.9%: $7.11 vs cons $7.48
  • Levers for ARPU growth looking ahead?
    • Ad-supported tier rollout (now rolled out in 45+ mkts): “That’s obviously at a lower distribution revenue impact… but the advertising piece… is growing”
    • New monetization efforts like extra member charges and password sharing crackdowns
    • Price increase: “Some markets [are] slightly below where we think there’s opportunities”
    • Sports upsells, especially in Europe:
    • Engagement and product improvement, which will translate to move time spent and in turn more monetization 
  • Lower ARPU from wholesale deals is offset by stronger retention, making them accretive on a lifetime value basis
• Reiterated 2025 Streaming adj EBITDA guidance of “at least” $1.3bn…: “We are firmly on track”
• …as well as “surpass” 150mn subs by 2026: Reflecting some incr’d optimism from last qtr’s “at least” 150mn guidance
• Expect “no significant step-up in content spend that’s associated with this strategy evolution for streaming”: Growth will “moderate” and “over the coming years”, w/ “no dramatic step changes”
• Q1 streaming ad revs growth accelerated to +35% y/y (vs +27% y/y in Q4), primarily driven by an increase in ad-lite subs (similar commentary last qtr)
  • Looking ahead into the upfront – “we’ll be emphasizing the streaming inventory on Max”
    • “There’s a lot of demand, specifically for specific title, and to be associated with the quality of content”
    • Also “have our films coming and the ability to affiliate with those films on ad-lite”

• Max added +5.3mn subs in Q1 to reach 122.3mn (beat by +2.4%): Down from +6.4mn in Q4 and +7.2mn in Q3
  • “Much of that subscriber growth originated from international markets, reflecting recent launches and growing penetration”

• What are the long-term drivers for Max? 
  • Globalization: Have 3 of the biggest mkts (Germany, UK, and Italy) coming online beginning of next yr
  • Deeper market penetration via ad-lite tiers and price-sensitive offerings
  • ARPU uplift through better ad monetization and password sharing crackdowns (i.e., Extra Member Add-On)
  • Stronger content slate: Content curated over the next 18-24 month “is stronger than anything we’ve ever had and more consistent”
  • Product improvements to enhance user experience
  • Strategic bundling which lowers churn, boosts marketing efficiency, and improves consumer satisfaction 

• On “Extra Member” oppty –
  • Rollout is currently limited to US retail subscribers and is in a soft launch phase tied to password-sharing efforts
  • “It’s going to increase and really be a more…12 to 18-month initiative as it rolls out [to] more subscriber cohorts here in the US [and] globalizes later in the year and into 2026”

• On content strategy – “the future of Max is quality, quality, quality”

WBD – Studios Significantly Missed In Q1 but Long-Term $3bn EBITDA Roadmap Remains Intact / Have High Expectations For Q2 Film Slate

• Q1 Studios missed on both rev and adj. EBITDA   
  • Rev MISSED by -17.9%: Up +18% y/y (vs +16% y/y in Q4)
  • Adj EBITDA MISSED by -22.3%: Up +41% y/y (vs +78% y/y in Q4)
• Expect “strong” y/y improvement in full year 2025 Studios adj. EBITDA 
• Reiterated plans of getting the Studios biz back to $3bn in EBITDA…: 
  • “What we’re not going to see is perfect consistency. It’s a hit driven business. But I have no doubt that we’re going to see much greater upside in success and much less downside in the inevitable areas where we’re going to miss at times”

• Content Spotlight – 
  • The White Lotus averaged 25mn+ global viewers per episode, pacing more 40%+ ahead of season 2
  • The Pitt has avg’d 12mn+ viewers worldwide across each of its 15 episodes 
    • B/c of the success, have greenlit S2, which will be out Jan 2026
    • WBD broke into the medical drama category w/ the release and are now in active development to produce other elevated procedural dramas for Max

• Q1 film slate “underperformed expectations” but WB Motion Pictures is “demonstrating strong momentum”
  • Driven by performance of A Minecraft Movie, which has grossed ~$900mn in current global box office proceeds (making it the top grossing box office film of 2025 to date), and Sinners, which has grossed ~$250mn
  • Looking into Q2 film slate expectations – “we’re looking at a blowout second quarter” 

• Warner Bros. Motion Pictures “mix” strategy of IP-based blockbusters and new originals “is gaining traction and delivering results”
  • Demonstrated by the recent “big” success of A Minecraft Movie and Sinners
  • Final Destination, which is launching next week, is “trending very strong”

• Making progress on 10-yr plan to “reignite” DC brand globally and drive long-term franchise value
  • Superman is coming in July – “In the coming months, the full power of WBD will be on display across platforms in every market to drive awareness and anticipation”
  • Wrapping on Supergirl
  • “Deep into production” on Lanterns

WBD – Doubling Down On Strategic IP Control, Balancing Select Licensing With Long-Term Asset Building 

• “We’re a high quality provider and more and more of the content is coming to us… it’s important for us to be able to sell our content to third parties…”
  • I.e. Scooby Doo and Netflix – “that can get very broad acceptance in the marketplace. And then we can follow it with a Scooby-Doo movie and that would be a real win-win for us that will take that piece of IP and grow it to a point where it’s even more valuable for us”

• BUT there are “many that are really just for Warner Bros”
  • I.e., major characters being developed as part of 10-yr plan around DC is to build asset value for them globally w/ Wonder Woman, Batman, Superman, Supergirl, etc.; Same w/ Harry Potter
  • “There’s some premium global IP that’s recognizable…those belong to us and they’ll only belong to us forever” b/c “we’re building big assets and a global differentiated strategy around that”
• Had gotten rid of a lot of content when they first bought the Co two years ago and “you’re seeing the fruits of that strategy and us doubling down on it”
• Have continually increased the share of Warner Bros. output that they’re using internally
  • “Every dollar of intercompany profit that we take out in intercompany eliminations is really…building asset value. That is future streaming profit in waiting. And we have built that internal asset in a pretty significant way”
• “It’s all about harvesting our IP, but recognizing that the most important IP that differentiates us from everybody in the industry will be used to build asset value”

WBD – “Cost-Conscious” On Sports Streaming / Views Sports As A “Rental Business” And Shifting More Focus To Investing In Owned IP 

• Sports strategy on Max – oppties to license new IP going forward, given reliance on existing linear partnerships?
  • Internationally, seeing “meaningful demand” for sports on Max, esp when bundled w/ HBO and local content; In many markets, sports is offered as an add-on or separate tier
  • In the US, approach is more experimental and are testing different models to see what works financially: “It is hard still to find a business model in streaming alone that makes these premium sports rights…profitable and successful and driving those two metrics”
  • Will continue to experiment with sports but remain cost-conscious: “We’re going to continue to experiment in a smart way…see how we evolve the model to make it successful and profitable at the same time”
  • “In the end, sports is a rental business” and owned IP is “the core…so that’s where I think we’ll be spending more of our money and being less dependent on sport” 

• Sports rights costs will peak in 2025 before declining sharply post-NBA exit in 2026 
  • Q1 and Q2 costs would have down “significantly” w/o the NBA, but did not quantify “because there are so many different factors playing into it”
  • In 2025, expect a ~$300mn increase in sports rights costs due to overlap between expiring and new rights deals`
    • Q2 is going to take a “big” part of that, as The French Open and NASCAR will debut on TNT Sport, which is on top of the annual escalation for existing sports rights
    • “There’s going to be a little bit of a headwind in Q3”
    • But then from Q4 it should turn into a “moderate” tailwind
    • Then going to see a “very” significant improvement in sports rights expenses w/ NBA coming out in 2026
  • Despite the NBA being a profitable property, were able to successfully renew affiliate deals without it: “The NBA was a very profitable property for us, partly because of its value for affiliate discussions… we were able to renew these deals without the NBA”

WBD – Global Linear Networks Outperform in Q1 Despite Declines, As WBD Prioritizes Cash Flow and Pay-TV Bundling Levers

• Q1 Global Linear Networks beat on both rev and adj. EBITDA   
  • Rev BEAT by +2.4%: Down -7% (vs -4% y/y in Q4)
  • Adj. EBITDA BEAT by +0.7%: Decreased -15% y/y (vs -13% y/y in Q4) to reach $1.8bn
• Remain focused on optimizing Networks performance and maximizing cash flows through cost discipline and “prudent” content investment 
• Partnering w/ distributors to enhance the value of pay-TV subscribers: Whether it’s offering pay-TV subscribers authenticated access to the Max ad-lite tier or providing incremental bundling and packaging flexibility

2) Paramount Global (PARA)

PARA – Q1 Easily Beat Across The Top-Line 

• Total revs fell -6% y/y, but ex the Super Bowl LVII comp, rev grew +2% y/y (+1.4% beat)
  • TV Media and Filmed Entertainment drove the overall rev beat, as DTC missed

• Total adj OIBDA fell -30% y/y to $688mn (+5.2% beat) 
  • Reflects y/y improvements in DTC and Filmed Entertainment, while results at TV Media were “heavily impacted” by the comparison to last year’s Super Bowl

• FCF was $123mn which was significantly ahead of cons -$28mn (included $108mn in payments for restructuring and other initiatives)
  • Q2 outlook – expected to look “similar” to last yr, including cash restructuring payments of ~$100mn

PARA – Have NOT Seen A “Meaningful” Impact Due To Macro Uncertainty But Highlighted Some Potential Cautiousness Later In The Yr   

• “Priorities for the full year have not changed” – Continue to work towards FY outlook “strong” OIBDA growth and FCF growth 
• BUT growing macro uncertainty, particularly in advertising, has the potential to impact results later in the yr
• “It’s premature to try to quantify the impact of that on earnings and cash flow until we have more clarity on how all the macro stuff will unfold”

PARA – Overall DTC Growth Accelerated Seq & Paramount+ In Particular Saw “Record Breaking” Viewership And Engagement / Reaffirms 2025 DTC Domestic Profitability Target

• Q1 overall DTV revs grew +9% y/y (accel from +8% y/y) and DTC adj OIBDA improved +$177mn y/y (reflecting “healthy” sub rev growth + continued expense mgmt)   
  • DTC subscription rev grew +16% (vs +7% y/y in Q4), driven by subscriber growth for Paramount+

• Global viewing hours incr’d +31% y/y across Paramount+ and Pluto TV
• Q1 Paramount+ highlights – 
  • Paramount+ rev was up +16% y/y (accel from +8% y/y in Q4), driven by y/y subscriber growth and improvements in churn
  • Paramount+ subs reached 79mn (slightly below cons 79.2): Grew +11% y/y (decel from +14% y/y in Q4)
    • Added +1.5mn net subs in the qtr (down from +5.6mn adds in Q4)
  • Global watch time per user increased +17% y/y (decel from +20% y/y in Q4)
  • Churn was up +130 bps (accel from +100 bps in Q4)

• Q1 was another “record breaking” qtr in viewership and engagement for Paramount+ 
  • Paramount+ once again ranked as a top three SVOD service in Original Series hours watched domestically

• Pluto TV delivered its highest consumption by total hours both domestically and globally
  • Reaches more countries than any other FAST svs

• Q2 DTC rev outlook – continue to expect “healthy” rev growth at Paramount+, driven by an acceleration in ARPU
• Q2 DTC subscribers outlook – will decline given the combination of content, seasonality and the termination of an intl hard bundle partnership
• 2025 outlook – reiterated expectations to deliver Paramount+ domestic profitability for 2025 
  • Growth driver is “very clear. It is continued subscriber growth”
  • Driven by improvement in churn and ARPU, which ultimately drive rev growth
  • The fixed-cost nature of streaming supports continued margin improvement as scale increases

• Seeing “great momentum” in executing their “differentiated” content strategy of “fewer bigger breakthrough original series”
  • Landman remained the #1 new streaming original series for the second straight qtr and joined 1923 as 2 of the top 10 streaming originals in Q1
  • MobLand was the biggest global series premiere ever on Paramount+
  • Yellowjackets’ premiere broke records in the qtr as the most streamed episode in the series
  • Internationally, Yellowstone continues to be the #1 engagement and start driver

• Always take an “opportunistic” look at different opptys w/ bundling, partnerships, etc.

PARA – TV Media Faced Super Bowl Comp In Q1 

• Q1 TV Media fell -13% y/y (vs -4% y/y), including a 10% impact from the comparison against CBS’s broadcast of Super Bowl LVIII in Q1:24
  • TV Media affiliate & subscriptions revs fell -9% y/y (vs -7% y/y in Q4), driven principally by subscriber declines as well as the impact of recent renewals
  • TV Media licensing and other revs increased +4% y/y (vs -3% y/y in Q4)

• Q1 TV Media adj OIBDA fell -36% y/y (vs -17% y/y in Q4), primarily reflecting the comparison against the broadcast of the Super Bowl, as well as the decline in affiliate rev
• Sports programming continued to attract audiences, most notably the AFC Championship Game on January 26 that averaged 57.4mnviewers
  • Set the all-time record for the AFC and the largest overall conference championship in 15 yrs

• On FCC chatter around affiliates and reverse comp – “the relationship between CBS and our affiliate partners is really a mutually beneficial one. We provide valuable content and our affiliates provide scale distribution”
  • CBS invests “heavily” in premium content (sports, primetime)
  • If that dynamic shifts, “it would be difficult for us to continue to foot that bill”, which would harm both affiliates and viewers
  • BUT Paramount has a strong track record with renewals (60 affiliates renewed in the past yr), and that is expected to continue

PARA – Feel Comfortable With Current Sports Portfolio, But Open To Acquiring New Rights If It Makes Sense 

• Believe they have a “very robust” sports portfolio and “feel very good about it” BUT “we’re always going to be open and opportunistic”
• “We’ll continue to take a disciplined approach and our goal will always be to ensure that we have the optimal sports portfolio”
• “We’re always looking for sports rights that really matter and that really drive audience and scale”

PARA – Q1 Ad Revs Declines Were Largely Due To Super Bowl Comp And (To A Much Lesser Extent) Digital Softness / Expect Similar Ad Trends In Q2 Given Sports Landscape That Is “A Little Lighter”   

• Q1 total ad rev fell -19% y/y, reflecting a 19ppt point impact from CBS’s broadcast of Super Bowl LVIII in the yr-ago period
  • Ex Super Bowl, Q1 ad rev was unchanged y/y 

• Q1 DTC ad rev decr’d -9% y/y (vs +9% y/y in Q4), principally reflecting an 8% impact from the comparison against Super Bowl LVIII in Q1:24
  • Ex Super Bowl, DTC ad rev was down -1% y/y, largely due to increased supply in digital video, which disproportionately affected Pluto TV, which has the greatest exposure to the indirect marketplace

• Q2 digital advertising outlook – trends in Q2 expected to look similar to the underlying trends in Q1
• Q1 TV Media ad revs fell -21% y/y (vs -4% y/y) due to the Super Bowl
  • Ex the Super Bowl, TV Media ad rev was flat y/y, and they saw improvement compared to the underlying trends in Q4

• Q2 TV Media outlook – will reflect a lower volume of sports versus Q1, which is consistent w/ last yr’s trends
  • “Sports demand continues to be robust”

• Linear strength offset digital ad softness in Q1 
  • CBS Sports and hit broadcast programming “helped us make up for some softness in the digital space”
  • Digital advertising remains pressured, as new entrants have expanded inventory and impacted pricing
  • Haven’t seen improvement yet, but expects supply-demand dynamics to normalize over time
  • Continued high engagement on Paramount+ and Pluto, fueled by “hit volume and content”, continues to drive increased engagement and will translate into stronger digital monetization over time

• Early look into upfronts – “we feel really good about the conversations and discussions that we’ve been having” 
  • Scatter is up double digits y/y
  • “Macro is certainly on people’s mind, but everyone is giving us great feedback”
  • “We continue to hear good things, particularly around the unique set of assets and the volume of hits and the really strong sports portfolio”

PARA – Q1 Filmed Entertainment Grew On Strength Of Recent Hits / Q2 Set for Major Boost from Mission: Impossible Launch, Though Profitability to Dip Due to Heavy Marketing

• Q1 Filmed Entertainment revs were up +4% y/y (vs +67% y/y in Q4)
  • Theatrical revs were down -3% y/y (
    • Q1:25 benefited from continued success of Q4:24 releases of Sonic the Hedgehog 3 and Gladiator II and the late Q1:25 release of Novocaine, while the yr-ago qtr benefited from the releases of Bob Marley: One Love, Mean Girls and Miramax’s The Beekeeper
  • Licensing and other rev increased +6% y/y
    • Driven primarily by higher home entertainment rev from recent theatrical releases

• Q1 Filmed Entertainment adj OIBDA of $20mn was up from yr-ago qtr’s -$3mn, driven by the success of Sonic the Hedgehog 3
• Gladiator II and Sonic the Hedgehog 3 drove acq on Paramount+
  • Ranked among the top 5 most viewed movies in the platform’s history
  • Gladiator II was the most-viewed film ever on Paramount+

• Q2 outlook – expected “strong” rev contribution from the release of Mission: Impossible – The Final Reckoning BUT given the timing of marketing spend for the film, anticipate that the segment will generate an OIBDA loss for the qtr  
• Looking ahead – “Holistically, we built our slate this year to balance the scope and scale of a film like Mission: Impossible, with other titles that span genres and budget levels, which better positions the studio for profitability”
  • Includes Edgar Wright’s The Running Man, a reboot of the comedy The Naked Gun, starring Liam Neeson and family animation titles, Smurfs and The SpongeBob Movie: Search for SquarePants, “with the goal of driving profitability”

PARA – Licensing Strategy – Prioritizing Owned Platforms While Monetizing IP Through Select Deals

• Content licensing is a growth biz for the biz, particularly their secondary licensing biz
  • “Our content is valuable and it drives demand for us”

• BUT “we believe in using our most valuable IP to grow our owned and operated assets”
• Does NOT mean they will not continue to license their products, but more on a co-exclusive basis or after it premieres on one of their owned and operated stations 

PARA – Update On Skydance Transaction

• Anticipated to close in H1:25
  • Subject to regulatory approvals and customary closing conditions

• Until then, Paramount continues to operate the normal course of business   

Q1 Headline #s Were Mixed Vs Expectations – Gross Bookings And Rev Underwhelmed, But Profitability and FCF Fared Better 

• Q1 total gross bookings MISSED by -0.5%: Grew +14% y/ or +18% y/y ex-FX (decel from +18% y/y or +21% y/y ex-FX in Q4), “with balanced growth across Mobility and Delivery”
  • Trips beat by +1.9%: Grew +18% y/y (in-line w/ Q4) to 3.04bn 
    • Gross Bookings grew in line with trips…we see this as robust, healthy growth; growth that’s coming from engagement and frequency, not just price”
  • Users beat by +1.7%: MAPCs (Monthly Active Platform Consumers) grew +14% y/y (in-line w/ Q3) to reach 170mn (slightly down from 171mn in Q4)
• Q1 rev MISSED by -0.8%: Increased +17% y/y (vs +20% y/y), modestly slower than Gross Bookings growth given geographic mix impacts
• FX was a headwind of $1.7bn y/y or ~4.5ppts
• Q1 adj EBITDA was another all-time high and BEAT by +1.0%: Grew +35% y/y (vs +44% y/y in Q4) 
  • Adj EBITDA margin was 4.4% of Gross Bookings: Up from 4.2% last qtr and 3.7% in year-ago qtr 
• Q! FCF BEAT by +21%

Q2 Guidance Was Just Ahead Of Estimates / No Changes To 2025 Growth Initiatives

• Q2 Gross Bookings guidance beat by +1.5% at the midpt: $45.75bn-$47.25bn vs cons $45.8bn (implied +16-20% y/y growth ex-FX vs +18% y/y this qtr)
  • Outlook assumes a ~1.5ppt currency headwind to total reported y/y growth, including a ~3ppt currency headwind to Mobility

• Adj EBITDA guidance beat by +1.5% at the midpt: $2.02bn-$2.12bn vs cons $2.04bn
• Reaffirmed FY25 guidance –
  • SBC: $1.7bn-1.9bn
  • D&A expense: $600mn-700mn

• “Continue to execute on our key 2025 growth initiatives” – 
  • Making the platform more affordable
  • Unlocking lower-density markets
  • Scaling their growth bets
  • Advancing their AV strategy

Not Seeing Any Impact From Macro Uncertainty 

• Macro is “absolutely something that we’re watching, but we don’t see any signal, as of yet, in terms of the consumer”
  • Audience growth and frequency are consistent w/ Q4
  • “We are looking to modulate price increases, and you saw that in our results as well”
  • Basket size is continuing to increase
  • NOT seeing trade down in the kinds of restaurants customers eat at

• “The categories that we operate in, these are restaurants, transportation, grocery, tend to be categories that are quite consistent, even during periods of macro uncertainty”

Underlying Platform Dynamics Are Strong, With Lots Of Runway Ahead 

• Reached a record 8.5mn active drivers and couriers globally: Up +20% y/y; Earned $18.6bn (+18% y/y) in aggregate in Q1
• Retention rates are at or near all-time highs globally 
• “We remain very bullish about the opportunity ahead”
  • Current MAPCs represent only ~5% of the adult population in Uber’s operating footprint,
  • Approx half of Uber’s consumers use its apps 1-2x/month vs a global avg of 6
  • <20% of adults 18+ use the platform on a regular basis

MOBILITY – Healthy Trends Across Mobility Biz (Particular Emphasis On Narrowing Gap B/w Trips & Gross Bookings Growth) / Suburbs And Sparse Mkts Is A Key Investment Focus Area

• Mobility delivered a third consecutive qtr of +19% y/y trip growth
  • Looking ahead – “our indication is that Q2 is going to be in a similar vein”

• Mobility gross bookings growth grew +20% y/y (decel from +24% y/y in Q4)
• Mobility adj EBITDA margin grew seq to 8.3% of gross bookings, up from 7.8% in Q4
• Mobility take rate of 30.7% beat expectations of 30.4%     
• Active driver growth “remains steadily ahead” of Mobility Gross Bookings growth
• On price elasticity – “so far…so good”
  • Elasticity they’re seeing is similar to the past – small price increases slightly reduce demand
  • Insurance headwinds did “ease a little bit…and hopefully we’ll keep that going”
  • Mix shift in trips – saw “a bit more” growth internationally than in the US – esp in the travel sector, that impacted overall price/mix

• Gap between trips and Gross Bookings has been narrowing, driven by – 
  • Passing along lower insurance costs, primarily in the US: Reiterated expectation of better insurance costs this year, and that’s exactly how it’s turning out”
  • A “slightly higher” mix of intl trips, which is “a bit due to that lower inbound US travel, which comes with lower Gross Bookings per trip”

• Competitive dynamics remain fairly consistent both in the US and overseas
• Uber Reserve is helping drive growth in suburbs and other sparse markets 
  • Expect frequency to be a headwind (i.e., car ownership is higher in suburbs) but price will be a tailwind, especially as it relates to Reserve
    • 40% of Reserve volume is now unrelated to airport travel, “signaling the Reserve use case for everyday transportation needs”
  • Sparser markets is growing faster than the core biz and represent 20%+ of Mobility trips, “and we expect to grow our city count by several hundred in 2025”
  • “Obviously, there’s an investment period before we achieve those more continuity-level margin profiles, but that’s all part of the growth opportunities that we see in front of us”

• Continue to work on “goal of getting every taxi on Uber”: Launched taxis in 40+ cities across the US, Turkey, Brazil, Italy, Japan, and Poland, with landmark launches in Rio de Janeiro, Florence, and Nagoya
  • Taxis now represent 10%+ of Mobility trips in EMEA
  • Taxis on Uber are now in 38 countries and 500+ cities, generating $3.5bn+ in annualized Gross Bookings in Q1, up 60%+ y/y 

• Expanded Uber Shuttle to more airports in the US, adding routes to and from some of the busiest airports in the world like JFK, Newark, and Atlanta

Making Progress In Managing Insurance Costs Through Easing Inflation, Tech-Driven Safety Improvements, And Favorable Policy Momentum

• Insurance costs expected to be “very modest” headwind of HSD through 2025, which is “meaningfully lower” than what they’ve seen in the last 2 yrs, driven March CPI print came in lower-than-expected 
  • Will create some leverage that they will pass onto consumers, given the rate of growth for the US Mobility biz

• Taking steps to improve safety to drive insurance cost savings 
  • Expanded Driver Insights dashboard across the US, which gives drivers a score based on their driving behavior (like speeding or harsh braking/acceleration) and shares tips on how to drive more safely
    • In turn, drivers who maintain a certain driving score get access to higher earnings opportunities and improved matching
  • “Over time, we expect the improved safety on our network to result in insurance cost savings”

• “Getting some great momentum” on the policy side to help drive down insurance costs
  • Tort reform bill in Georgia, which is awaiting the Governor’s signature, which if it goes through, will help us continue to drive down insurance costs over time”
  • “We have other bills in other states, like Nevada and Texas, and continue to have some good discussions in other areas”
  • “US drivers are not less safe than drivers internationally” but US insurance costs are disproportionately higher: “We’re hoping that policymakers can work with us to bring prices down for consumers and more of the fares going into the drivers’ pockets”

DELIVERY- Rising Margins, Improved Unit Economics & Accelerating Cross-Platform Underscore Q1 Delivery Momentum / But Work Remains to Scale G&R, Retail, and AI to Sustain Competitive Edge 

• Delivery trip growth was up +15% y/y 
• Delivery gross bookings grew +18% y/y (in-line w/ Q4), driven by membership growth and increasing G&R mix
• Delivery adj. EBITDA margin continued to step up to 3.7% of gross booking, which was up from 3.6% in Q4, 3.4% in Q3 and 3.2% in Q2
  • Margin expansion is primarily driven by advertising and OpEx leverage they get from scale

• Delivery take rate of 18.5% was a tad below cons 18.6% 
• Cost per trip “continues to show great improvement”, declining both q/q and y/y 
  • Benefitting from scale

• Cross platform and membership advantage continues to drive Delivery acquisition, engagement, retention 
  • In Q1, ~1/3 of new Uber Eats customers came from the Uber app
  • Uber One is “our highest long-term ROI lever by far”
    • Now drives 60% of Delivery Gross Bookings
    • In “best-in-class countries”, drives 70%+ of Delivery Gross Bookings
  • Seeing evidence that consumers who order from retail merchants have higher overall platform engagement

• “Our efforts over the past decade have built a global powerhouse in restaurant delivery”…
  • Fulfill 2bn+ orders in ~30 countries
  • Have category-leading positions in 8 of their top 10 markets
  • Restaurant delivery business is now “solidly profitable”, with profit margins now only “modestly” lower than our UberX profit margins

• …but “we know that the Delivery opportunity in front of us is massive” and specifically think “that the partnership model is the right one for Uber”
  • “That’s why we are cultivating a network of partners—like Instacart, OpenTable, and Toast—to bring best-in-class services to our customers and merchants, with more to come”

• Competitive dynamics in Delivery landscape – “we can’t rest for a second”
  • “The US market is highly competitive”
  • Seeing both organic and inorganic consolidation in the food delivery sector – “that’s to be expected in markets that are as large and as competitive as ours”
  • “Because of our global position and because of the unique platform that we have, we think we can hold our own and then some”

• Uber mgmt. is not worried DoorDash’s annc’d acq of Deliveroo impacting their European mkt position…“We didn’t have to buy our way into glory”
  • “We’re really, really happy about our results in Europe…we’re seeing very encouraging trends”; Recently reached #1 category position in the UK with Eats “entirely organically
  • “Frankly, it’s not a surprise to see some of our competitors look to expand there inorganically. We like organic expansion more. We’ve been investing for years in these marketplaces. And I think it shows in our results.”

• “Very focused on affordability as it related to Delivery”, driven by –
  • Memberships
    • Penetration of membership continues to increase on Delivery – “it’s over 60% now. And in certain markets, it’s at the 70-plus percent mark as well”
    • “Members tend to have higher retention” and also spend 3x more than non-members
    • Membership program has reached 30mn
  • Merchant-funded offers…i.e., buy-one-get-one deals
    • “Merchants like those discounts because…they get to kind of use the cost of food as the discount. And they can enjoy a margin on their food”
    • “We’re seeing higher and higher percentages of merchant-funded offers in the marketplace”
  • “We’re seeing growth in both. And we think that is partially responsible for the consistently high Gross Bookings growth that we’re seeing in Delivery, both in the US and internationally as well”

• G&R is at a $10bn annualized Gross Bookings run rate…: “Roughly” the scale of Uber’s restaurant food delivery business in 2018, “so there’s a lot of runway ahead”
  • Only 18% of Delivery monthly users place G&R orders each month
  • “Just as our foundational excellence in Mobility powered the rise of restaurant delivery on Uber Eats, our platform will drive consumer adoption of G&R globally”

• G&R biz has now started to accrete at variable contribution level in Q1, after hitting breakeven for variable contribution in Q4
• “Doubling down” on retail categories, like home improvement, pets, and beauty
  • In Q1, added merchants like The Home Depot, Sally Beauty, Fresh Direct, 1-800-Flowers.com, and Petco
  • Unlike restaurant delivery, much of retail spend is driven by seasonal moments and holidays
    • Investing “heavily” in better selection and in-app merchandising for these moments and seeing “strong” results so far: Hit their best day ever for G&R (and overall Delivery) Gross Bookings this past Valentine’s Day, driven by flower sales
  • In Uber’s leading countries, over half of G&R consumers already order from retail categories every month

• Investing in AI-driven customer experiences but “very, very early in experimentation phase”
  • On LLMs – “we’re very, very early in terms of the development…of the models and their application to consumer experience or enterprise technology”
  • Experimenting to enhance customer experience by using AI to improve search, recommendations, and personalized interactions
  • Working w/ “OpenAI’s the world and other leading LLMs” but still in early stages, focused on building “delightful” consumer experiences

Actively Pursuing Autonomous Vehicle (AV) Oppties Across All Biz Segments   

• Have reached an annual run-rate of 1.5mn Mobility and Delivery AV trips on Uber’s network
• The March launch of Waymo exclusively on Uber in Austin “exceeded our expectations” 
  • “Very, very encouraging early days”
    • Opt-in rates are very, very healthy
    • Ratings are “healthy”
    • “When the Waymo’s are available for rides, they are very, very busy”
    • “Seeing a very high utilization of the vehicles in terms of trips per vehicle per da”
    • Avg Waymo is now now busier than over 99% of all drivers in Austin in terms of completed trips per day
  • Plan to scale to “hundreds” of vehicles over the coming months 
  • Right now, goal “isn’t necessarily for incremental trips…it’s just to make sure that every single ride is the perfect ride”

• Also gearing up for Waymo launch in Atlanta in early summer
  • Riders in Atlanta can join the Interest List in their Uber app to get updates on their plans

• Competitive environment in SF and LA given Waymo operations? It’s “pretty stable”
• Have reached 18 AV partners globally, w/ 5 new or expanded Mobility AV partnerships within just the last week
  • In the US –
    • Partnering with Volkswagen to deploy their fully autonomous vehicles on Uber, with testing set to begin in Los Angeles later this yr
    • Expect a similar timeline for deployment with Avride in Dallas, as well as Uber’s new partner May Mobility in Arlington, Texas
  • Outside of the US –
    • Expanded existing partnership with WeRide to 15 addtl cities over the next five years
    • Welcomed new partners Momenta (deploying in Europe early next year) and Pony.ai (deploying in the Middle East this year)
  • “Waymo is definitely the leader there, but there are many other players investing in the space. And we expect to see a number of successful companies in the space, hopefully partnering with us”

• Continued to expand autonomous deliveries to more US cities, through partnerships with – 
  • Coco in Chicago and Miami
  • Serve in Miami and Dallas
  • Avride in Jersey City
  • “While still early, sidewalk robots are already creating savings for consumers”

• Also on the freight side – partnered w/ Aurora to deploy a fully autonomous freight trip on public roads with no safety driver last week
• Bullish on the shift toward generalizable, AI-powered autonomous systems.
  • AV tech is evolving from rule-based heuristics to large transformer models, which improves scalability and cost-efficiency
    • Also helps separate the software stack from the hardware stack, allowing AV systems to work across different sensors and hardware without being tied to specific configurations
  • Waymo’s partnership with Toyota is “just indicative…of where AV is going”, where software-first companies provide Level 4/5 solutions to OEMs globally.
  • Envision a future where all new vehicles are AV-enabled, lowering capital costs and enabling high-utilization monetization via platforms like Uber
  • Next-gen AI players like Wayve, Waabi, and Momenta are pushing the boundaries, with end-to-end models showing strong promise in both pace and versatility.

Growth In The High Margin Ads Biz Continues Over-Index

• Ad rev crossed a $1.5bn annual run-rate, growing +60% y/y
• Mobility ad biz “continues to significantly outpace” overall ad growth, driven primarily by Journey Ads in the Uber app, which continue to expand globally
• Restaurant delivery advertising is now approaching 2% of Delivery Gross Bookings and continues to grow 60%+ y/y, with “steady” growth in both advertiser count and budget per advertiser
  • “We continue to be positively surprised by the strong appetite”
  • Annc’d a partnership w/ Instacart’s Carrot Ads solution in the US in Q1 to help extend the reach of Sponsored Items to 7k+ CPG brands of all sizes

• “By partnering with third parties for our G&R (Grocery & Restaurant) adtech platform, we have been able to prioritize investments in restaurant delivery and our nascent Mobility ads business” 

Also To Flag – Uber Is Acquiring A Controlling Stake in Trendyol GO 

-> On Tuesday (a day before reporting earnings), Uber announced that it would be acquiring an 85% stake in Turkish food delivery platform Trendyol GO for ~$700mn in cash; The deal, subject to regulatory approval, is expected to close in H2 (link)

• Expect the transaction to be accretive to Uber’s growth post-integration
  • To note, Trendyol GO generated $2bnin Gross Bookings in 2024

• “We estimate that Türkiye represents our third-largest untapped delivery market globally (after India and Brazil), with strong growth and underlying fundamentals”
• Uber’s mobility biz in the country is also “scaling quickly, and we look forward to bringing the power of the Uber platform to Turkish consumers, improving their product experience and supercharging business growth in the years ahead”

Q1 Results And Q2 Guidance Were Both Mostly Underwhelming 

• Q1 results mostly missed vs consensus expectations…     
  • Revenue – MISSED by -2.2%: Grew +21% y/y (decel from +25% y/y in Q4)
  • Adj. EBITDA – ~INLINE: Grew +59% y/y (accel from +56% y/y in Q4)
  • Total Orders – ~INLINE: Grew +18% y/y (decel from +19% y/y in Q4)
  • Marketplace GOV – BEAT by +0.8%: Grew +20% y/y (decel from +21% y/y in Q4)
  • Contribution Profit – MISSED by -1.0%: Grew +36% y/y (decel from +41% y/y in Q3)

• …and Q2 guidance was also a mixed bag  
  • Adj. EBITDA – MISSED by -2.1% at the midpt: $600-$650mn vs cons $638.6mn  
  • Marketplace GOV – beat by +0.8% at the midpt: $23.3-23.7bn vs cons $23.31bn 
  • Reiterated expectation of adj. EBITDA as a % of Marketplace GOV will increase from Q2 to Q3

Take Rate Dips In Q1 On Seasonality, Mix Shifts And Strategic Investments, But Expected To Rebound In Q2 And H2

• Q1 take rate of 13.1% was down q/q from Q4’s 13.5%…: Driven by –
  • “Some natural seasonality in the business”
  • Leaning into Dasher acq – “Both Q4 and Q1 tend to be really good from a growth perspective, and we lean into supply to ensure that we can drive strong quality”
  • Made strategic investments in affordability and selection in Q1 that drove both GOV and order growth
  • Mix shift impact as more categories scale
  • “I would not read too much into it…Q1 [is] typically a seasonal quarter for us where you see strong volume growth”

• …but is expected to rebound to 13.3% in Q2: Driven by – 
  • Seasonal improvement in Dasher supply 
  • Continued improvement in unit economics   
  • Ongoing growth in the ads business

• Overall – Expect Q2 take rate to be higher than Q1, and H2 take rate to be higher than H1
  • Driven by volume in H2 is going to be higher than volume in H1, unit economics are going to increase, and typical seasonality in the biz 
  • “2025 is going to be no different than 2024 or 2023”

• Emphasized that “our goal has not been to optimize margin percentage. We’re trying to grow profit dollars.”

Hardware Updates And Autonomous Efforts Drove Increase In CapEx In Q1

• Did a refresh of tablets for some merchants in Q1 “because we’re trying to improve the hardware experience, the software experience, because ultimately, we think that drives merchant satisfaction”

• Also “starting to see some impact” from investments in autonomous in Q1 (but no big announcements – “we’ll have more to share later”) 
  • “That marriage of the operations and the technology…is really what’s going to be key in unlocking the possibility of autonomous delivery in a way that is highly scalable, that increases or improves the value proposition of the product experience today and builds us towards the future”
  • Success depends on solving the “first and last 10 feet” challenge of placing items into and retrieving them from vehicles
  • Right-sizing vehicle form factors: Autonomy doesn’t require large vehicles; Lighter, purpose-built delivery units are more appropriate for smaller payloads
  • “Super excited about… the partnership ecosystem that is developing as well” 

• What will CapEx levels look like for the rest of the yr? “Think of it in terms of the overall D&A guidance that we’ve given, similar level, sort of what you would expect in Q2 for the rest of the year”

NOT Seeing Any Effects From Tariffs

• “We haven’t seen any changes in consumer behavior, even if there are changes in consumer sentiment”
  • YTD Marketplace demand has “remained strong” w/ engagement across different consumer cohorts and types that they believe is consistent with typical seasonal patterns

• Historically resilient through post-COVID and inflationary periods: During both the post-COVID recovery and peak inflation in 2021–2022, food and convenience delivery remained one of the most frequent and resilient categories of consumer spending

• “We’re going to focus on what we can control”: Increasing the selection of merchants and items they offer, invest behind affordability, quality and svs initiatives 

Deliveroo Acq Is To Expand Scale, Unlock Profit Pools, and Strengthen European Local Commerce

• Annc’d acq of Deliveroo for $3.9bn or ~£2.9 equity value (link/link/link)
  • The terms of the Acquisition imply:
    • Equity value of ~£2.9bn: Based on 180 pence/share in cash for all issued and to be issued Deliveroo shares
    • Enterprise value of ~£2.4bn: Adjusted for Deliveroo’s net cash position
  • The 180 pence/share offer represents:
    • 44% premium to Deliveroo’s closing price on April 4 (last business day before DASH’s initial offer letter)
    • 29% premium to Deliveroo’s price on April 24 (last biz day before the formal offer period began)
    • 40% premium to Deliveroo’s 3-month VWAP up to April 24
  • Terms imply an EV / EBITDA multiple of ~13.4x, based on the midpoint of Deliveroo’s FY2025 adjusted EBITDA guidance range of £170–190mn
  • DoorDash said it would not increase its offer, but reserved a right to do so if a third party emerged with a competing offer for Deliveroo

• Combination w/ Deliveroo is about – 
  • “Adding more scale to the same continent” (Europe)
    • Have a “strong” track record teaming up with Wolt for 3+ yrs, “where we’re leading in a majority of our markets”
  •  Laying the foundation to introduce the local commerce products they are building
  • “Hopefully hav[ing] the biggest positive impact to the entire European local economy”

• Will be able to unlock “even greater profit pools” in Deliveroo’s markets by “investing wisely” in the partnership and leveraging scale economies
  • If the deal closes, would operate in ~30 countries in Europe, and ~45 globally 
  • While Deliveroo may appear as a market laggard at the aggregate level, it holds “leading positions in the strongest profit pool places” of Western Europe
    • “Which may suggest that they’ve concentrated their efforts in a different way than other players and allow them to set up in a way in which if they had extra firepower, then they can actually take a leading position”

• Plan to operate Deliveroo w/ the same approach as the core biz: Focusing on improving unit economics, driving better retention and order frequency, and using that scale to grow profitability

SevenRooms Acq “Is Really About Adding To Our Platform Business”

• DoorDash also annc’d the acq of restaurant booking platform SevenRooms in a $1.2bn deal
  • The all-cash acquisition of SevenRooms is expected to close in H2:25 (link/link)

• SevenRooms enhances DoorDash’s restaurant-focused software offerings and expands potential in marketing-as-a-service
  • Deepens their “depth” in restaurant svs, particularly within the DoorDash Commerce Platform
  • Although SevenRooms is still restaurant-focused, there is potential to expand to other verticals over time
  • That said, execution is about “sequencing” — balancing focus with the ability to scale across verticals

• “You can almost view this as marketing as a service and adding more intelligence into what the restaurant owners can do in order to build their strong direct relationships with guests”

 “Everything That We’re Announcing Today To Me Really Is Business As Usual And…Something That We’re Investing In Because We’re Seeing Success In The Five Business Lines That We Have”

• Are there any updates to working capital strategy given recent acquisitions? “Our view on capital allocation in general has not changed” and biz remains FCF generative
  • DoorDash maintains ~$1bn as a minimum cash threshold for working capital purposes  
  • Any excess cash is deployed toward investments aimed at long-term free cash flow per share generation
    • Acquisitions reflect their commitment to reinvesting in value-accretive oppties that meet internal IRR thresholds

• On overall M&A strategy – “The bar continues to remain high” 
  • Two main focuses when looking at oppties remain the same: Whether it will expand DoorDash’s addressable market or portfolio, and whether DoorDash has a proven ability to execute in the space

Performance Of New Verticals In Q1 Was “Very Strong” And “Continues To Grow” / Reiterated That “We Expect To Be Volume Share Leaders In The Course Of The Next Year”

• Increased # of MAUs across New Verticals 
  • ~25% of MAUs ordered both grocery and restaurants in Q4 and that “continues to increase” in Q1 and Q2

• Margins have continued to improve and overall margin performance of the biz is “pretty promising”
• Product quality has improved vs a yr ago, contributing to order volume and y/y share gains
• Avg order frequency inc’d to an all-time high in Q1, with an increasing percentage of MAUs engaging across multiple categories
  • Grocery is becoming a larger component of the overall biz, which is starting to impact overall Co AOV
  • Restaurant AOV has been “relatively stable” over the last several qtrs

• As “cohorts continue to habituate they’re ordering more with us” across both restaurants and grocery
  • Using DoorDash for more use cases 
  • Continue adding more selection, which is a “key differentiator” – have the majority of the top 20 grocers on the platform and will continue to add, even in regional mkts 

• No change in competitive dynamics in grocery biz and “very pleased” w/ category share gain: Gained a “healthy” amount of share in Q1 y/y and continue to gain share q/q  
  • But added that “we don’t really focus on the competitive intensity”

• “Starting to see evidence” that online grocery experience can eventually exceed the in-store experience, but getting the fundamentals right remains the current focus
  • Key priorities for investment include order accuracy, affordability, delivery quality, and customer support
    • Highlighted a product like DoubleDash, which users to shop from multiple stores in one go
  • BUT “there’s still a long ways to go before we can actually build a product that is 10 times better than the current leading product, which is shopping inside of a grocery store yourself”

• Will continue to drive scale by reinvesting efficiency gains across both restaurant and grocery bizs 
  • “Customers are always going to want greater affordability, more selection, better service, higher quality. And that’s something that we’ve been investing in since day one of the company. It’s something we’ll continue to invest in, irrespective of external factors. And we’ve continued to see gains across the board”

Growth In Intl Biz Is Outpacing That Of The United States 

• Y/Y growth in international MAUs continued to grow at a double-digit pace throughout Q1:25 (comp?)
• In Wolt branded countries, more than doubled Wolt+ members exiting Q1:25 vs end of Q1:24

• Y/Y growth in Total Orders across international Marketplace in Q1:25 remained “well above” Y/Y growth in Total Orders in their US Marketplace

Building On DashPass Momentum, with A Vision for Expanding Utility

• Q1 growth in DashPass accelerated q/q (did not share specific #s)
  • Reached all-time high in # of subscribers, which continues to grow
  • Order frequency also continues to grow   
  • Saw incr’d trial memberships and reduced churn among paid members in Q1, both of which contributed to the overall growth in overall members

• “Main focus continues to be the same, which is to keep improving the products such that people want to use DoorDash more”
• “DashPass has the potential to be the membership program in which you would derive the most utility from”
  • While it began with food, the broader goal is to maximize the number of ways it connects local businesses to consumers
  • Focus remains on increasing product utility by enhancing current offerings and building new ones to deepen consumer value

Regulatory Updates on DoorDash’s Positions on Delivery Cap Fees and Portable Benefits

• Impact from New York City Council raising delivery cap fees? “That’s something that we’re always in discussions with cities about”
  • “Our take has always been that a lot of the policies, especially in cities like New York, not only sometimes are questionable from a legal perspective, but they almost always do the opposite of what they’re intended to do”
    • Harm the # of oppties for Dashers
    • Lower the sales for small, medium, and large businesses within that city
    • Exclude consumers b/c of the higher prices that usually get passed on as a result of these fees 
  • “We’re working with the city to see if we can enact some common-sense policies” 
    • Sometimes we get very productive outcomes. Other times we face headwinds. But over the long run, we’re really optimistic in finding common-sense ways to work with common-sense elected officials” 

• Portable benefits is “definitely something that we’re really, really excited about”
  • Started the effort in Pennsylvania with support from Governor Shapiro and now talking w/ other states to further expand
  • “This is really coming directly from the Dashers themselves, that they want the flexibility of the work that we provide, but they also want to have access to benefits which we believe in” 
  • “Excited that we have leading states who are kind of the tip of the spear…we see momentum and excitement now possibly at the federal level”

TTD Crushes Q1 Results & Execution Is Back On Track

• Total revenue & adj EBITDA exceeded expectations by +7.1% & +41.1%, respectively
  • Rev grew +25.4% y/y, an acceleration from +22.3% y/y in Q4 
  • Adj EBITDA margin reached 33.8% which topped cons 25.6% 
  • Adj EPS beats cons by 32%

• CTV cont’d to gain momentum and was the largest and fastest growing advertising channel 
  • Video, which includes CTV, represented a high 40s% (and continues to grow as a % of mix)
  • Mobile represented a mid-30s %
  • Audio represented ~5%
  • Display represented a low double-digit %

• What helped drive the turnaround from the disappointing Q4 and will sustain the momentum?
  • More efficient engineering teams: Product & engineering teams were more collaborative and effective than they’ve been in yrs
  • Simplified go to-market teams and their org structures: Still in early stage, witnessing initial signs of growth
  • Growing pipeline of joint business plans: The number of JBPs in active contract negotiations were at all-time highs
  • Appointed a new COO: Hired Vivek Kundra…he has spent several yrs at Salesforce and was a key driver of growth at a time when they were pretty much the same size and scale as TDD

Mgmt Remains Confident In The Core Business But Large Clients Are Planning Contingencies Depending On The Direction Of The Economy

• Q2 guidance was in-line w/ consensus for revs, while beating adj EBITDA
  • Implies revenue growth of +17% y/y vs +25% in Q1 (also impacted by comps with leap year and political ad spend, which contributed ~1% toward Q2 2024 revenue)
  • And implies 37.9% adj EBITDA margins vs cons 37.5%
  • Guidance assumes a “stable” environment

• Will invest in core areas like infrastructure and talent to support long-term growth
  • Focus on maintaining a balanced and efficient expense base, allowing them to stay agile and well positioned to capture share, while retaining flexibility in dynamic macro conditions

• Mgmt flags that large global brands (primary clients) have seen more pressure in Q1, but TTD remains confident in the core factors driving its rev growth, particularly considering the proven ability to capture market share during times of economic uncertainty (as it did in COVID)
  • The Co is assisting CMOs and CFOs in planning various paths depending on macro scenarios
  • Brands turn to programmatic advertising during volatile times given its agility, precision, and impactful result; CMOs can do more with less

• The Co expects to either take more mkt share or accelerate growth

Recent Industry Developments Will Accelerate The Open Internet & TTD’s Prospects

• Recent legal actions against tech giants are key positive catalysts for the open internet
  • Google being declared a monopoly in two separate US cases in 2025 will change their behavior
  • Meta’s auction practices are under scrutiny
  • A few days ago, US federal judge ruled that Spotify can have a payment relationship directly w/ the consumer that is not mediated via Apple
    • This establishes a precedent for dismantling walled gardens

• What do they expect the Google verdict to be? The courts will be slow, but “Google is already beginning to turn down and turn-off some of the draconian and illegal practices of the past”: This will create a fairer marketplace
  • “While these changes impact the buy side less than the sell side, I expect that the supply-chain will be more competitive, which is good for both the buy and the sell sides of the supply chain”
  • Expect Google to focus more on their other businesses like search and YT businesses
  • “This would be a “major victory” for the open internet

• Google not eliminating 3P cookies on Chrome is another positive in that while cookies are a small part of TTD’s business, the reversal is helpful for display advertising and browser-based advertising
  • It also slows down Google’s control over identity and targeting, giving TTD more time to scale its alternative solutions

• Walled garden’s business models are “inherently flawed”
  • “Over the long-term, their fiduciary duty to grow for shareholders is at odds with what is in the best interest of agencies and advertisers, which is to objectively buy media from all over a competitive, massively scaled digital media landscape where no single company can possibly own all of the good media”

• TTD believes that if they can win share in an “unfair” marketplace as it has been, they can even win more share if the marketplace was “fair”
• The TAM is massive and there will be a lot of room for several players, but objective DSPs will win “the lion share” of mkt overtime and there is it doesn’t think Amazon will be a winner
  • Don’t consider Amazon as a competitor as they don’t see them focused on the open internet
  • “They have a buying tool for Prime video”

Uptake On Kokai Was A Key Driver To Q1 Growth & OpenPath Is Improving Supply Efficiency

• Adoption of Kokai is ahead of expectation & accelerated exiting December / Adoption growth should remain strong: This is being fueled by the cont’d shift away from linear TV & the expanding programmatic capabilities of the world’s largest media companies
  • Two-thirds of clients are currently utilizing Kokai, and most of the spending on TTD’s platform is now processed through it
    • Outlook: Anticipates that all clients will be using Kokai by YE
  • Plans to unveil the final major components of Kokai later this yr, including a “groundbreaking” new method for understanding & managing deal performance, which is crucial for maximizing the value of programmatic advertising
    • “I’m confident that by the end of this year, we will reflect on Kokai as the most powerful buying platform the industry has ever seen”
  • The Co continues to integrate AI and Machine Learning tools into the platform for greater campaign performance
  • Improving lower funnel KPIs for advertisers with 24% lower cost per conversion and 20% lower cost per acquisition
  • Integration of Sincera’s data into Kokai is being carried forward to provide clients w/ the maximum amount of data and insights on ad performance
    • Have plans to relaunch their product and offer a new version of Sincera called OpenSincera

• Continue to focus on making the supply chain more efficient w/ OpenPath (reducing middlemen and unnecessary taxes) to better compete with walled gardens who control the whole chain
  • Gaining widen adoption in the industry
  • “So in order to compete with [walled gardens], we need a supply chain that is quite efficient. So even though we’re just early in the process [with OpenPath], and we’re using that to some extent, as a stalking horse as well a canary in the coal mine, if you will, the results have been phenomenal.”

• “Another massive upgrade we have made to improve the supply chain was the acquisition of Sincera”: It’s a metadata Co that crawls the internet looking for insights about the supply chain of advertising, and seeks to shine a light of transparency on that supply chain

See CTV As The Driver For The Creation Of The Best Ad-Funded TV Experience “In History”

• Because of the “pressure on consumers over the last 2 qtrs, CTV and streamers have invested more into advertising…this dynamic makes for more of a buyer’s market…But additionally, this is having a great impact on market dynamics”
•  CTV companies are once again leading the supply dynamics of the open Internet
  • They are plugging directly into TTD demand
  • They are also describing their supply in greater detail than ever
  • “Nearly every” scaled player has adopted UID2 and those that have not “are under monetizing their inventory”

• These market dynamics are going to create the best ad-funded TV experience for consumers in the history of television
  • Consumers will see fewer ads
  • The ads will be personally relevant
  • And these fewer ads will make “more money for content owners than linear and broadcast ever did”
  • And they will perform better for advertisers per dollar than “spray and pray”

• “CTV is the kingpin of the open Internet and the open Internet is where all of the most beloved content of the Internet exists”