12 ms·

Uber Says Sales Growth Outpaces Losses

109 points by spuiszis 9y ago

pdog 9y ago
> Uber said it uses generally accepted accounting principles. Revenue includes only the portion Uber takes from fares, except in the case of its carpooling service; the company counts the entire amount of an UberPool fare as revenue. Does this mean Uber technically recognizes more revenue from from a $6 UberPool ride than a $20 UberX ride?
- jressey 9y ago
  That sentence seems like its intention is to confuse the reader. To me it means for UberX: Fare - Cost = Revenue, and for UberPool: Fare = Revenue.
  - c3534l 9y ago
    Fare less costs should be profit, not revenue. The only way this makes sense is if uber believes they are charging drivers for getting them customers, but believes that they directly operating the carpool. There's probably some language somewhere in codification that says "significant involvement" or "more than not" or something like that requiring them to treat them differently.
- mbose 9y ago
  I think so!
- acchow 9y ago
  Can someone explain how GAAP would consider only Uber's share of an UberX revenue, but the entirety of an UberPool as revenue? This doesn't really make sense to me.
  - ryanworl 9y ago
    Drivers are charged a percentage-fee for Uber's share of the ride in UberX. In Uber Pool, the driver is paid by Uber (as opposed to just through Uber) a variable amount that is not as easy for us on the outside to calculate as the percentage model.
    - acchow 9y ago
      Ah. So a driver doesn't just get a simple 75% cut of an UberPool fare. That actually makes a lot of sense. Thanks.
    - MichaelGG 9y ago
      Didn't the article the other day about how Uber is "cheating" drivers show the drivers are paid distance+time and not just a % of the rider's fare?
    - cwilkes 9y ago
      And that somehow justifies Uber saying that all UberPool money collected is revenue? Because the math is hard? This company is like a Russian nesting doll shell game. There's more in each layer and every layer is a distraction.
      - Eridrus 9y ago
        I don't think there's anything hard about computing this, but in the normal case companies report all the money they collect as revenue, and then subtract costs to show their profits. In the marketplace case this is deceitful because the marketplace owner doesn't really have a way to bring the costs of the product down, so it's much more realistic to only consider their margin as revenue. In the UberPool case I think there's a reasonable argument to be made that since they are paying drivers a flat fee, but charging users based on dynamic pricing and packing a variable number of people in each vehicle Uber has more flexibility in terms of how it provides the service to customers, the top line number of how much they are charging users is more reasonable. Uber cuts their costs on an UberPool ride in half every time they put two groups in the same car. You would really want to see the data broken out by category if you were an investor, since mixing the two types in the revenue number is sort of meaningless since we don't know the split, but we're not exactly in a position to demand financials. Still, I think this data shows a much rosier picture than HN wants to paint about how "Uber is losing money on every ride"/"Selling 2 dollar bills for $1" etc. the 2.8B loss is huge, but when you look at it compared to the $20B bookings number, you can see that they're not significantly subsidizing rides, but rather using their war chest to compete on price. They only need a 15% price increase to become profitable, which shows their prices are in the right ballpark, even if they're not profitable right now. I do wonder if this is essentially a move to try and compete more effectively for talent that, besides being outraged, may be starting to believe HN about how likely Uber is to fail.
  - eldavido 9y ago
    I think it's a question of Uber's role in the transaction, and whether they're considered an "Agent" of the seller (the driver), or the transaction's principal. I think this is a matter of accounting judgment. I'm not an accountant, but I remember reading somewhere that pure agency transactions have different accounting treatment vs. "principal" transactions where the party in question assumes more risk and is not acting strictly as a representative of another party (the UberX driver). [1] http://www.journalofaccountancy.com/news/2015/aug/fasb-proposes-clarification-principal-vs-agent-201512935.html http://www.journalofaccountancy.com/news/2015/aug/fasb-propo...
- aetherson 9y ago
  This is probably basically about the fact that driver portion is more complicated in UberPool than in the rest of their services. It's to Uber's credit that on an ordinary ride, they don't try to claim that they have revenue equal to the entire fare. That would be an easy way for them to make their top-line financials look way more palatable than they actually are (ie, that they lost about $3B on $20B, rather than $3B on $7B). But it may be genuinely hard to report on just the share of UberPool revenue that does not go to the driver, as my understanding is that the calculation is much more complicated in that case.
  - nebabyte 9y ago
    Uh, that seems like something they'd get called out on pretty quickly if they tried, and would make them look worse off with the actual number than if they just opened with it Uber's gotten away with a lot of stuff but I doubt even they could pull a 'whoops, forgot our expenses' sleight of hand. Especially since they try and frame drivers as 'contractors' and not employees
    - aetherson 9y ago
      Revenue, not profit. They wouldn't be saying that they forgot about expenses, just that their expenses come out of $20B in revenue, not $7B in revenue.
  - pfarnsworth 9y ago
    Probably not to their credit, it's something their auditors wouldn't accept because it's fairly straightforward accounting.
    - aetherson 9y ago
      These aren't security filings or for their investors. It's to the press. Nobody external is forcing them to account for anything in any particular way that's not blatantly fraudulent.
- ryanworl 9y ago
  Yes, and they would take a corresponding gross margin hit as the driver's payment comes from revenue rather than being accounted for before it. I do not think this a shell game to make the revenue number larger. The way drivers are paid while driving UberX vs. Uber Pool is different, and that probably has accounting rule impact.
  - iaw 9y ago
    GAAP doesn't have to include stock based compensation as a normal expense. If you throw in the fact that Uber compensates at 50% in stock this is probably a shell game.
    - wintermute2001 9y ago
      That's not true: https://www.fool.com/investing/2017/04/14/okta-inc-ipo-what-investors-need-to-know.aspx https://www.fool.com/investing/2017/04/14/okta-inc-ipo-what-.... If you're using GAAP, you have to include stock-based compensation as a cost. There are, however, a lot of tech companies that try and spin non-GAAP earnings by removing stock-based compensation, which can paint a very different picture (e.g., Salesforce)
- paulddraper 9y ago
  Uber drivers are contractors (or, at least that's what Uber claims), who are paid by customers and give Uber a cut. In the car of Pool, Uber hires the driver.
acchow 9y ago
“We’re fortunate to have a healthy and growing business" $2.8bn "adjusted net loss" on $6.5bn revenue is healthy?
- nebabyte 9y ago
  In the same way that going down the street kicking dogs is 'healthy', in that it's a good leg work out. It's not sustainable, as sooner or later you'll go to jail, but they didn't say sustainable :)
- georgespencer 9y ago
  The naivety on HN is staggering sometimes. Imagine your parents give you a $10 loan to start a lemonade stand. You think you need six years to make them an above market return on their investment of 2x. You're gonna buy cups, lemons, sugar, and water. In the first year you think you're going to spend $3 and make $0. So you have $7 in the bank. In the second year you think you're gonna spend $2, and make $1. So you have $6 in the bank. In the third year you think you're gonna spend $6, and make $4. So you have $4 in the bank. In the fourth year you think you're gonna spend $6, and make $6. So you still have $4 in the bank. In the fifth year you think you're gonna spend $6 and make $10. And now you're profitable. In the sixth year you spend $6 and make $50. You pay back 2x your parents' money. As long as you were hitting your targets, that loan looks like smart business from you and your parents are pleased that their investment outperformed the market and generated a huge return. If you had trouble hitting your targets, or needed to raise more money unexpectedly, your parents might have said that they'd want a higher return or more security (equity) in the business. But if you're executing on your plan, then that's not gonna happen. Businesses operate with debt all the time. Some businesses are lossmaking for a long time. Some businesses are lossmaking on billions of dollars of revenue. They have high central costs. They have high R&D costs. They have marketing strategies which require them to subsidise entry-level products and upsell. The business is healthy provided the following things are true: 1. They've agreed a strategy and milestones with their investors and board, 2. They are hitting those milestones by executing on that strategy. 3. They aren't running out of money ahead of schedule, or running out of money on specific instruments ahead of schedule (for example they have debt financing with Goldman which I'm assuming is being used to acquire smaller companies or subsidise driver fares since that would be expensive to do out of equity). 4. The investors are prepared to honour their agreement to fund the company and truly believe in the milestones and objectives the board has voted on. Uber has raised $15 billion to date. In 2012 it lost $20m, in 2013 $15m, in 2014 it lost around $650m, in 2015 it lost $1.5bn, in 2016 it lost $2.8bn. The business has burned $5bn give or take, or 33% of its total capital raise to date. Let's say that the losses are understated and they've actually lost closer to $7bn. They have ~$8bn in the bank or on credit. They have a team of 6,700 which let's say is 45% engineering, R&D, product and the remainder have a linear relationship to the busyness and scale of the business. They don't have to think about raising money until the middle or end of next year. They could cut their workforce if they needed to get to profitability quickly for some reason. You or I might not be comfortable running a business with a $2.8bn loss, but nobody on here bats an eye when a YC company loses a a million dollars on a couple of million of revenue with a few million more in the bank. But as soon as it's a b and not an m, people lose their minds.
pchristensen 9y ago
"We'll make it up in volume!"
- JimboOmega 9y ago
  Seriously. We can double the size of a loss making business! We can lose money twice as fast! Actually it looks like losses relative to revenues are smaller than they were, but that's still not impressive. Especially when it's non-GAAP anyway. How much money do they have? How did they raise so much without giving any control away and not going to the public markets? I mean... a billion here, a billion there, sooner or later it adds up... right?
  - georgespencer 9y ago
    They've raised $15bn in total and their last valuation was about $70bn. In total they've lost around $6bn, meaning that between cash and credit facilities they have around $8-9bn in the bank.
    - codecamper 9y ago
      And when they need to make profit they can easily fire about 90% of their workforce & keep the machine humming in place.
      - cmahler7 9y ago
        can they? Their valuation is entirely based on self-driving cars, if they fire everybody and give up on that it's over for them.
        georgespencer 9y ago
        I think he's being sarcastic. But it looks like they only need to increase price by 15% to achieve profitability, so it doesn't require firing 90% of their staff to get there.
- 9y ago
jish 9y ago
Didn't all of the "scandals" start in Q4 2016 in the first place? This is basically saying, look we were on a good trajectory from Q3-Q4. But the question is, what happened after that?
- cavisne 9y ago
  Does anyone seriously think those scandals have hurt revenue?
  - deleted 9y ago
    [deleted]
- pfarnsworth 9y ago
  No, it started in Feb 2017.
- TeMPOraL 9y ago
  There were "scandals" almost continuously, every other month since 2014 or earlier. For some reason though, a lot more people started paying attention only after the Susan Fowler debacle. None of that seems to have impacted Uber anyway, not meaningfully.
slackstation 9y ago
Sales growth in commodity product that is loosing money on ever sale? I'll never understand this. Uber won't own the market. There is zero lock-in. If Lyft is cheaper this week, I'm riding Lyft. I sold my car over a year ago and use a mix of ridesharing and rentals for transportation. Uber and Lyft's greatest competition in my life is a small Google product where people pick up people on their daily commute to and from work and the drivers are compensated only for gas money. Locally, there is a company that will allow you to rent an electric car for free for two hours (it has an electronic billboard on the ceiling). In the future, cheap electricity and efficient manufacturing might make a world where rides of a certain distance would be free or extremely low cost in exchange for advertising. Transportation is a commodity. For a short ride, I don't care that much about the differences, whether I'm sitting in a Toyota Corolla or Mercedes S-Class. It gets me from point A to point B. In this environment, I think the VCs pouring billions of dollars into Uber are throwing their money away subsidizing Uber's leadership in commodity market. Cheaper wins. I get to choose on each ride. There's no lock-in, there's really no reason for brand loyalty. Whatever is cheaper wins. If it's free, whomever gets here first wins. If they are both available right now, it's who has the nicer seat. This is a race to the bottom and as a customer I'm only going to remember negative experiences with the brand. Lyft is better by encouraging themed cars but, they've stopped doing that from what I've seen. There's a good chance that Lyft and Uber might face huge backlash for bait and switching drivers when they roll out driverless cars. I'm bearish on Uber in the long term.
- nebabyte 9y ago
  *losing, every Yeah, it's actually kind of amazing how many 'traditional' checkboxes Uber seems to miss with its 'rapid growth'. Little network effect lockin, low (ish) barrier to entry (with the hardest thing being brand recognition, with news of new/cheaper/'better' ridesharing plats potentially spreading like wildfire), opportunistic customers (and even drivers) without brand loyalty. If Kalanick implements some sort of amazing plan to pull them through despite all of that (not counting the moonshot of expediting SDCs into the market) he'll be a walking testament to the whole 'market doesn't care who you are as a person, but if you can get the job done' maxim. I'm not necessarily bearish - I'm not expecting an upset like that, but I'm not particularly invested in Uber so am more keeping an eye on it for the entertainment than anything.
code4tee 9y ago
Uber is demonstrating that they can sell $2 bills for a buck and that there's demand for that. They've not demonstrated they can establish a real business here in what has turned into a pure commodity market. In competitive markets a lot of "me too" competitors pop up all the time. When you see consumers just picking the one that's the cheapest (i.e. with the most VC cash subsidizing the ride) and drivers rocking up with multiple phones on the dashboard as they too game these companies it's clearly all a fools game. This industry is a race to the bottom, but at least people get to enjoy cheap VC-subsidized rides while the party's still on!
- georgespencer 9y ago
  > Uber is demonstrating that they can sell $2 bills for a buck and that there's demand for that. I think the consensus is that rides are subsidised by around twenty cents on the dollar. Ubers bet is autonomous cars. They pay a 75% fee to the driver. When autonomous fleets launch in the next few years they'll normalise prices at around 50%, meaning your $10 ride costs you $5, and each ride has wafer thin profitability (the additional 5% margin will be chewed up a little by maintenance costs). And let's be real: Lyft did $600m of sales in 2016. Uber did $5.5bn. This isn't just a race to the bottom on price, it's about building a brand.
  - true_religion 9y ago
    Autonomous cars are not going arrive for 10 to 15 years. If Uber can't reduce costs by 20% or increase prices by 20% or some combination of the two, then they are making the wrong kind of bet's. Personally, I believe their bet is on not needing a large advertising budget once enough people know about their service.
    - georgespencer 9y ago
      > Autonomous cars are not going arrive for 10 to 15 years. Tesla believes its cars are already equipped with the necessary hardware and that the software, including Tesla Network (their announced autonomous Uber competitor), will be going live at the end of 2017. At this point five years seems like a long time horizon for autonomous cars being on the road.
codecamper 9y ago
hackernews.. the place for uber quarterbacking.
- AndrewKemendo 9y ago
  For what it's worth, comments like these here on HN tend to be seen as "sore loser" comments and find their way to the graveyard. Congratulations on your foresight, however I think the chorus you should expect from this audience is "they did it better than you, so get over it."
  - codecamper 9y ago
    second post.. why can't I delete the whole tree?
    - AndrewKemendo 9y ago
      I'm actually a DNN that can recognize social patterns based on sentiment analysis of text in the context of HN. ;) Seriously though, this is a super common thing that happens on HN all the time. This community is actively hostile to people who aren't winners and talk about why they should have won if only they were "given a chance" or did something differently. Pretty typical recipe for the bottom of the page. I'll note that I didn't vote either way on your comment so as to not bias it. Though simply posting my comment might actually sway people to vote it up - there is also a very strong contrarian trend on HN as well.
      - codecamper 9y ago
        bye bye HN. going to get some work done.
        AndrewKemendo 9y ago
        Actually, I'm on your side here, which I why I wrote the FYI so you could understand why this would (likely) not get much love.
hawkice 9y ago
Losses up 6% and they're celebrating. I've been at companies like this. "We're losing money faster than ever, if I keep saying words after that you might be confused as to whether that matters." And if you have new or growing product lines that incorporate into both revenue and expenses like Uber Pool does, you'd see exactly this shift _without a change in the underlying unit economics_. Which means that, not only are they losing money faster than ever, but they have no mechanism to stop the bleeding.
mankash666 9y ago
What a sham! Instead of spinning BS, just go public if your fundamental finances are sound.
nickcrowley81 9y ago
There has never been an above razor thin profit line for fleet vehicle operations. Uber is a subsidized taxi company. They charge people from A TO B and take a cut of the fare. The fares are so low compared to taxis because of this subsidization. The only way they survive as this app form of a taxi is by drastically raising fares. They will be too far behind the driverless car race and crash there as well. Let alone the truth of the matter is, the technology is waaaaaaaay farther away on driverless. Read Financial Times 7 part series on Uber. They're the only ones truly on top of this sham of a company.
- arjunrc 9y ago
  Do you have the link to the FT series? I can't find anything on Google.
  - pktgen 9y ago
    The parent poster is probably referring to the Naked Capitalism series, not FT. That series is now up to 9 parts: Part 1: http://www.nakedcapitalism.com/2016/11/can-uber-ever-deliver-part-one-understanding-ubers-bleak-operating-economics.html http://www.nakedcapitalism.com/2016/11/can-uber-ever-deliver... Part 2: http://www.nakedcapitalism.com/2016/12/can-uber-ever-deliver-part-two-understanding-ubers-uncompetitive-costs.html http://www.nakedcapitalism.com/2016/12/can-uber-ever-deliver... Part 3: http://www.nakedcapitalism.com/2016/12/can-uber-ever-deliver-part-three-understanding-false-claims-about-ubers-innovation-and-competitive-advantages.html http://www.nakedcapitalism.com/2016/12/can-uber-ever-deliver... Part 4: http://www.nakedcapitalism.com/2016/12/can-uber-ever-deliver-part-four-understanding-that-unregulated-monopoly-was-always-ubers-central-objective.html http://www.nakedcapitalism.com/2016/12/can-uber-ever-deliver... Part 5: http://www.nakedcapitalism.com/2016/12/can-uber-ever-deliver-part-five-addressing-reader-comments-and-questions.html http://www.nakedcapitalism.com/2016/12/can-uber-ever-deliver... Part 6: http://www.nakedcapitalism.com/2017/01/can-uber-ever-deliver-part-six-bleak-pl-performance-while-stephen-levitt-makes-indefensible-claims.html http://www.nakedcapitalism.com/2017/01/can-uber-ever-deliver... Part 7: http://www.nakedcapitalism.com/2017/01/can-uber-ever-deliver-part-seven-ubers-narrative-vox-stratechery-critiques-naked-capitalisms-uber-series-defending-uber-requires-ignoring.html http://www.nakedcapitalism.com/2017/01/can-uber-ever-deliver... Part 8: http://www.nakedcapitalism.com/2017/02/can-uber-ever-deliver-part-eight-brad-stones-uber-book-upstarts-prpropaganda-masquerading-journalism.html http://www.nakedcapitalism.com/2017/02/can-uber-ever-deliver... Part 9: http://www.nakedcapitalism.com/2017/03/can-uber-ever-deliver-part-nine-1990s-koch-funded-propaganda-program-ubers-true-origin-story.html http://www.nakedcapitalism.com/2017/03/can-uber-ever-deliver...

109 points by spuiszis 9y ago

pdog 9y ago

> Uber said it uses generally accepted accounting principles. Revenue includes only the portion Uber takes from fares, except in the case of its carpooling service; the company counts the entire amount of an UberPool fare as revenue. Does this mean Uber technically recognizes more revenue from from a $6 UberPool ride than a $20 UberX ride?

jressey 9y ago
That sentence seems like its intention is to confuse the reader. To me it means for UberX: Fare - Cost = Revenue, and for UberPool: Fare = Revenue.
- c3534l 9y ago
  Fare less costs should be profit, not revenue. The only way this makes sense is if uber believes they are charging drivers for getting them customers, but believes that they directly operating the carpool. There's probably some language somewhere in codification that says "significant involvement" or "more than not" or something like that requiring them to treat them differently.
mbose 9y ago
I think so!
acchow 9y ago
Can someone explain how GAAP would consider only Uber's share of an UberX revenue, but the entirety of an UberPool as revenue? This doesn't really make sense to me.
- ryanworl 9y ago
  Drivers are charged a percentage-fee for Uber's share of the ride in UberX. In Uber Pool, the driver is paid by Uber (as opposed to just through Uber) a variable amount that is not as easy for us on the outside to calculate as the percentage model.
  - acchow 9y ago
    Ah. So a driver doesn't just get a simple 75% cut of an UberPool fare. That actually makes a lot of sense. Thanks.
  - MichaelGG 9y ago
    Didn't the article the other day about how Uber is "cheating" drivers show the drivers are paid distance+time and not just a % of the rider's fare?
  - cwilkes 9y ago
    And that somehow justifies Uber saying that all UberPool money collected is revenue? Because the math is hard? This company is like a Russian nesting doll shell game. There's more in each layer and every layer is a distraction.
    - Eridrus 9y ago
      I don't think there's anything hard about computing this, but in the normal case companies report all the money they collect as revenue, and then subtract costs to show their profits. In the marketplace case this is deceitful because the marketplace owner doesn't really have a way to bring the costs of the product down, so it's much more realistic to only consider their margin as revenue. In the UberPool case I think there's a reasonable argument to be made that since they are paying drivers a flat fee, but charging users based on dynamic pricing and packing a variable number of people in each vehicle Uber has more flexibility in terms of how it provides the service to customers, the top line number of how much they are charging users is more reasonable. Uber cuts their costs on an UberPool ride in half every time they put two groups in the same car. You would really want to see the data broken out by category if you were an investor, since mixing the two types in the revenue number is sort of meaningless since we don't know the split, but we're not exactly in a position to demand financials. Still, I think this data shows a much rosier picture than HN wants to paint about how "Uber is losing money on every ride"/"Selling 2 dollar bills for $1" etc. the 2.8B loss is huge, but when you look at it compared to the $20B bookings number, you can see that they're not significantly subsidizing rides, but rather using their war chest to compete on price. They only need a 15% price increase to become profitable, which shows their prices are in the right ballpark, even if they're not profitable right now. I do wonder if this is essentially a move to try and compete more effectively for talent that, besides being outraged, may be starting to believe HN about how likely Uber is to fail.
- eldavido 9y ago
  I think it's a question of Uber's role in the transaction, and whether they're considered an "Agent" of the seller (the driver), or the transaction's principal. I think this is a matter of accounting judgment. I'm not an accountant, but I remember reading somewhere that pure agency transactions have different accounting treatment vs. "principal" transactions where the party in question assumes more risk and is not acting strictly as a representative of another party (the UberX driver). [1] http://www.journalofaccountancy.com/news/2015/aug/fasb-proposes-clarification-principal-vs-agent-201512935.html http://www.journalofaccountancy.com/news/2015/aug/fasb-propo...
aetherson 9y ago
This is probably basically about the fact that driver portion is more complicated in UberPool than in the rest of their services. It's to Uber's credit that on an ordinary ride, they don't try to claim that they have revenue equal to the entire fare. That would be an easy way for them to make their top-line financials look way more palatable than they actually are (ie, that they lost about $3B on $20B, rather than $3B on $7B). But it may be genuinely hard to report on just the share of UberPool revenue that does not go to the driver, as my understanding is that the calculation is much more complicated in that case.
- nebabyte 9y ago
  Uh, that seems like something they'd get called out on pretty quickly if they tried, and would make them look worse off with the actual number than if they just opened with it Uber's gotten away with a lot of stuff but I doubt even they could pull a 'whoops, forgot our expenses' sleight of hand. Especially since they try and frame drivers as 'contractors' and not employees
  - aetherson 9y ago
    Revenue, not profit. They wouldn't be saying that they forgot about expenses, just that their expenses come out of $20B in revenue, not $7B in revenue.
- pfarnsworth 9y ago
  Probably not to their credit, it's something their auditors wouldn't accept because it's fairly straightforward accounting.
  - aetherson 9y ago
    These aren't security filings or for their investors. It's to the press. Nobody external is forcing them to account for anything in any particular way that's not blatantly fraudulent.
ryanworl 9y ago
Yes, and they would take a corresponding gross margin hit as the driver's payment comes from revenue rather than being accounted for before it. I do not think this a shell game to make the revenue number larger. The way drivers are paid while driving UberX vs. Uber Pool is different, and that probably has accounting rule impact.
- iaw 9y ago
  GAAP doesn't have to include stock based compensation as a normal expense. If you throw in the fact that Uber compensates at 50% in stock this is probably a shell game.
  - wintermute2001 9y ago
    That's not true: https://www.fool.com/investing/2017/04/14/okta-inc-ipo-what-investors-need-to-know.aspx https://www.fool.com/investing/2017/04/14/okta-inc-ipo-what-.... If you're using GAAP, you have to include stock-based compensation as a cost. There are, however, a lot of tech companies that try and spin non-GAAP earnings by removing stock-based compensation, which can paint a very different picture (e.g., Salesforce)
paulddraper 9y ago
Uber drivers are contractors (or, at least that's what Uber claims), who are paid by customers and give Uber a cut. In the car of Pool, Uber hires the driver.

acchow 9y ago

“We’re fortunate to have a healthy and growing business" $2.8bn "adjusted net loss" on $6.5bn revenue is healthy?

nebabyte 9y ago
In the same way that going down the street kicking dogs is 'healthy', in that it's a good leg work out. It's not sustainable, as sooner or later you'll go to jail, but they didn't say sustainable :)
georgespencer 9y ago
The naivety on HN is staggering sometimes. Imagine your parents give you a $10 loan to start a lemonade stand. You think you need six years to make them an above market return on their investment of 2x. You're gonna buy cups, lemons, sugar, and water. In the first year you think you're going to spend $3 and make $0. So you have $7 in the bank. In the second year you think you're gonna spend $2, and make $1. So you have $6 in the bank. In the third year you think you're gonna spend $6, and make $4. So you have $4 in the bank. In the fourth year you think you're gonna spend $6, and make $6. So you still have $4 in the bank. In the fifth year you think you're gonna spend $6 and make $10. And now you're profitable. In the sixth year you spend $6 and make $50. You pay back 2x your parents' money. As long as you were hitting your targets, that loan looks like smart business from you and your parents are pleased that their investment outperformed the market and generated a huge return. If you had trouble hitting your targets, or needed to raise more money unexpectedly, your parents might have said that they'd want a higher return or more security (equity) in the business. But if you're executing on your plan, then that's not gonna happen. Businesses operate with debt all the time. Some businesses are lossmaking for a long time. Some businesses are lossmaking on billions of dollars of revenue. They have high central costs. They have high R&D costs. They have marketing strategies which require them to subsidise entry-level products and upsell. The business is healthy provided the following things are true: 1. They've agreed a strategy and milestones with their investors and board, 2. They are hitting those milestones by executing on that strategy. 3. They aren't running out of money ahead of schedule, or running out of money on specific instruments ahead of schedule (for example they have debt financing with Goldman which I'm assuming is being used to acquire smaller companies or subsidise driver fares since that would be expensive to do out of equity). 4. The investors are prepared to honour their agreement to fund the company and truly believe in the milestones and objectives the board has voted on. Uber has raised $15 billion to date. In 2012 it lost $20m, in 2013 $15m, in 2014 it lost around $650m, in 2015 it lost $1.5bn, in 2016 it lost $2.8bn. The business has burned $5bn give or take, or 33% of its total capital raise to date. Let's say that the losses are understated and they've actually lost closer to $7bn. They have ~$8bn in the bank or on credit. They have a team of 6,700 which let's say is 45% engineering, R&D, product and the remainder have a linear relationship to the busyness and scale of the business. They don't have to think about raising money until the middle or end of next year. They could cut their workforce if they needed to get to profitability quickly for some reason. You or I might not be comfortable running a business with a $2.8bn loss, but nobody on here bats an eye when a YC company loses a a million dollars on a couple of million of revenue with a few million more in the bank. But as soon as it's a b and not an m, people lose their minds.

pchristensen 9y ago

"We'll make it up in volume!"

JimboOmega 9y ago
Seriously. We can double the size of a loss making business! We can lose money twice as fast! Actually it looks like losses relative to revenues are smaller than they were, but that's still not impressive. Especially when it's non-GAAP anyway. How much money do they have? How did they raise so much without giving any control away and not going to the public markets? I mean... a billion here, a billion there, sooner or later it adds up... right?
- georgespencer 9y ago
  They've raised $15bn in total and their last valuation was about $70bn. In total they've lost around $6bn, meaning that between cash and credit facilities they have around $8-9bn in the bank.
  - codecamper 9y ago
    And when they need to make profit they can easily fire about 90% of their workforce & keep the machine humming in place.
    - cmahler7 9y ago
      can they? Their valuation is entirely based on self-driving cars, if they fire everybody and give up on that it's over for them.
      - georgespencer 9y ago
        I think he's being sarcastic. But it looks like they only need to increase price by 15% to achieve profitability, so it doesn't require firing 90% of their staff to get there.
9y ago

jish 9y ago

Didn't all of the "scandals" start in Q4 2016 in the first place? This is basically saying, look we were on a good trajectory from Q3-Q4. But the question is, what happened after that?

cavisne 9y ago
Does anyone seriously think those scandals have hurt revenue?
- deleted 9y ago
  [deleted]
pfarnsworth 9y ago
No, it started in Feb 2017.
TeMPOraL 9y ago
There were "scandals" almost continuously, every other month since 2014 or earlier. For some reason though, a lot more people started paying attention only after the Susan Fowler debacle. None of that seems to have impacted Uber anyway, not meaningfully.

slackstation 9y ago

Sales growth in commodity product that is loosing money on ever sale? I'll never understand this. Uber won't own the market. There is zero lock-in. If Lyft is cheaper this week, I'm riding Lyft. I sold my car over a year ago and use a mix of ridesharing and rentals for transportation. Uber and Lyft's greatest competition in my life is a small Google product where people pick up people on their daily commute to and from work and the drivers are compensated only for gas money. Locally, there is a company that will allow you to rent an electric car for free for two hours (it has an electronic billboard on the ceiling). In the future, cheap electricity and efficient manufacturing might make a world where rides of a certain distance would be free or extremely low cost in exchange for advertising. Transportation is a commodity. For a short ride, I don't care that much about the differences, whether I'm sitting in a Toyota Corolla or Mercedes S-Class. It gets me from point A to point B. In this environment, I think the VCs pouring billions of dollars into Uber are throwing their money away subsidizing Uber's leadership in commodity market. Cheaper wins. I get to choose on each ride. There's no lock-in, there's really no reason for brand loyalty. Whatever is cheaper wins. If it's free, whomever gets here first wins. If they are both available right now, it's who has the nicer seat. This is a race to the bottom and as a customer I'm only going to remember negative experiences with the brand. Lyft is better by encouraging themed cars but, they've stopped doing that from what I've seen. There's a good chance that Lyft and Uber might face huge backlash for bait and switching drivers when they roll out driverless cars. I'm bearish on Uber in the long term.

nebabyte 9y ago
*losing, every Yeah, it's actually kind of amazing how many 'traditional' checkboxes Uber seems to miss with its 'rapid growth'. Little network effect lockin, low (ish) barrier to entry (with the hardest thing being brand recognition, with news of new/cheaper/'better' ridesharing plats potentially spreading like wildfire), opportunistic customers (and even drivers) without brand loyalty. If Kalanick implements some sort of amazing plan to pull them through despite all of that (not counting the moonshot of expediting SDCs into the market) he'll be a walking testament to the whole 'market doesn't care who you are as a person, but if you can get the job done' maxim. I'm not necessarily bearish - I'm not expecting an upset like that, but I'm not particularly invested in Uber so am more keeping an eye on it for the entertainment than anything.

code4tee 9y ago

Uber is demonstrating that they can sell $2 bills for a buck and that there's demand for that. They've not demonstrated they can establish a real business here in what has turned into a pure commodity market. In competitive markets a lot of "me too" competitors pop up all the time. When you see consumers just picking the one that's the cheapest (i.e. with the most VC cash subsidizing the ride) and drivers rocking up with multiple phones on the dashboard as they too game these companies it's clearly all a fools game. This industry is a race to the bottom, but at least people get to enjoy cheap VC-subsidized rides while the party's still on!

georgespencer 9y ago
> Uber is demonstrating that they can sell $2 bills for a buck and that there's demand for that. I think the consensus is that rides are subsidised by around twenty cents on the dollar. Ubers bet is autonomous cars. They pay a 75% fee to the driver. When autonomous fleets launch in the next few years they'll normalise prices at around 50%, meaning your $10 ride costs you $5, and each ride has wafer thin profitability (the additional 5% margin will be chewed up a little by maintenance costs). And let's be real: Lyft did $600m of sales in 2016. Uber did $5.5bn. This isn't just a race to the bottom on price, it's about building a brand.
- true_religion 9y ago
  Autonomous cars are not going arrive for 10 to 15 years. If Uber can't reduce costs by 20% or increase prices by 20% or some combination of the two, then they are making the wrong kind of bet's. Personally, I believe their bet is on not needing a large advertising budget once enough people know about their service.
  - georgespencer 9y ago
    > Autonomous cars are not going arrive for 10 to 15 years. Tesla believes its cars are already equipped with the necessary hardware and that the software, including Tesla Network (their announced autonomous Uber competitor), will be going live at the end of 2017. At this point five years seems like a long time horizon for autonomous cars being on the road.

codecamper 9y ago

hackernews.. the place for uber quarterbacking.

AndrewKemendo 9y ago
For what it's worth, comments like these here on HN tend to be seen as "sore loser" comments and find their way to the graveyard. Congratulations on your foresight, however I think the chorus you should expect from this audience is "they did it better than you, so get over it."
- codecamper 9y ago
  second post.. why can't I delete the whole tree?
  - AndrewKemendo 9y ago
    I'm actually a DNN that can recognize social patterns based on sentiment analysis of text in the context of HN. ;) Seriously though, this is a super common thing that happens on HN all the time. This community is actively hostile to people who aren't winners and talk about why they should have won if only they were "given a chance" or did something differently. Pretty typical recipe for the bottom of the page. I'll note that I didn't vote either way on your comment so as to not bias it. Though simply posting my comment might actually sway people to vote it up - there is also a very strong contrarian trend on HN as well.
    - codecamper 9y ago
      bye bye HN. going to get some work done.
      - AndrewKemendo 9y ago
        Actually, I'm on your side here, which I why I wrote the FYI so you could understand why this would (likely) not get much love.

hawkice 9y ago

Losses up 6% and they're celebrating. I've been at companies like this. "We're losing money faster than ever, if I keep saying words after that you might be confused as to whether that matters." And if you have new or growing product lines that incorporate into both revenue and expenses like Uber Pool does, you'd see exactly this shift _without a change in the underlying unit economics_. Which means that, not only are they losing money faster than ever, but they have no mechanism to stop the bleeding.

mankash666 9y ago

What a sham! Instead of spinning BS, just go public if your fundamental finances are sound.

nickcrowley81 9y ago

There has never been an above razor thin profit line for fleet vehicle operations. Uber is a subsidized taxi company. They charge people from A TO B and take a cut of the fare. The fares are so low compared to taxis because of this subsidization. The only way they survive as this app form of a taxi is by drastically raising fares. They will be too far behind the driverless car race and crash there as well. Let alone the truth of the matter is, the technology is waaaaaaaay farther away on driverless. Read Financial Times 7 part series on Uber. They're the only ones truly on top of this sham of a company.

arjunrc 9y ago
Do you have the link to the FT series? I can't find anything on Google.
- pktgen 9y ago
  The parent poster is probably referring to the Naked Capitalism series, not FT. That series is now up to 9 parts: Part 1: http://www.nakedcapitalism.com/2016/11/can-uber-ever-deliver-part-one-understanding-ubers-bleak-operating-economics.html http://www.nakedcapitalism.com/2016/11/can-uber-ever-deliver... Part 2: http://www.nakedcapitalism.com/2016/12/can-uber-ever-deliver-part-two-understanding-ubers-uncompetitive-costs.html http://www.nakedcapitalism.com/2016/12/can-uber-ever-deliver... Part 3: http://www.nakedcapitalism.com/2016/12/can-uber-ever-deliver-part-three-understanding-false-claims-about-ubers-innovation-and-competitive-advantages.html http://www.nakedcapitalism.com/2016/12/can-uber-ever-deliver... Part 4: http://www.nakedcapitalism.com/2016/12/can-uber-ever-deliver-part-four-understanding-that-unregulated-monopoly-was-always-ubers-central-objective.html http://www.nakedcapitalism.com/2016/12/can-uber-ever-deliver... Part 5: http://www.nakedcapitalism.com/2016/12/can-uber-ever-deliver-part-five-addressing-reader-comments-and-questions.html http://www.nakedcapitalism.com/2016/12/can-uber-ever-deliver... Part 6: http://www.nakedcapitalism.com/2017/01/can-uber-ever-deliver-part-six-bleak-pl-performance-while-stephen-levitt-makes-indefensible-claims.html http://www.nakedcapitalism.com/2017/01/can-uber-ever-deliver... Part 7: http://www.nakedcapitalism.com/2017/01/can-uber-ever-deliver-part-seven-ubers-narrative-vox-stratechery-critiques-naked-capitalisms-uber-series-defending-uber-requires-ignoring.html http://www.nakedcapitalism.com/2017/01/can-uber-ever-deliver... Part 8: http://www.nakedcapitalism.com/2017/02/can-uber-ever-deliver-part-eight-brad-stones-uber-book-upstarts-prpropaganda-masquerading-journalism.html http://www.nakedcapitalism.com/2017/02/can-uber-ever-deliver... Part 9: http://www.nakedcapitalism.com/2017/03/can-uber-ever-deliver-part-nine-1990s-koch-funded-propaganda-program-ubers-true-origin-story.html http://www.nakedcapitalism.com/2017/03/can-uber-ever-deliver...