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No doubt they are struggling to show a path to profitability, but $3.9B of that is a one-time recognition of all their stock comp which makes look much worse th

No doubt they are struggling to show a path to profitability, but $3.9B of that is a one-time recognition of all their stock comp which makes look much worse than it should (Assuming that a 1.3B loss is more "normal")

munk-a 7y ago
I am confused at how that 3.9B could be said not to matter - I'm not familiar with what precisely "recognition of stock comp" means, but I'm going to assume it was either squaring a previously deferred liability - or directly needing to pay out some sort of stock based compensation. Assuming the compensation was for a business need (like hiring labour or purchasing something necessary) then I don't see how that should be isolated or differentiated from regular costs of running the business - assuming it wasn't a business need (and was more of a way to game the stock price) then I'd assume whoever made the decision to take such an action when Uber is already losing money hand-over-fist is just trying to get out some loot while they can... which is potentially an even more extremely bad scenario to accept.
- umeshunni 7y ago
  Stock based compensation doesn't affect cash flow. It's newly issued stock granted to employees. I'm not sure when the accounting laws changed to include SBC (probably post-financial crisis), but it's weird to include it in an income statement as if it was a cash expense. You can find articles from accounting experts arguing both ways if you are curious. e.g. http://aswathdamodaran.blogspot.com/2014/02/stock-based-employee-compensation-value.html http://aswathdamodaran.blogspot.com/2014/02/stock-based-empl...
  - berberous 7y ago
    People disagree on this. Warren Buffet for example famously argues that SBC is a real expense even if non-cash, just like depreciation. More to the OPs point, I'm guessing Uber had FB-style RSUs that don't settle until an IPO or Change of Control. I'm not sure how this all gets accounted for, but given the recent IPO, it sounds like they booked a very large SBC charge this quarter to account for the immediate hit of all the previously issued RSUs finally being settled. Going forward, the number of RSUs that settle each quarter would therefore presumably not be nearly as large. But I'm not an accountant so the above may be wrong.
    - adventured 7y ago
      > People disagree on this. Warren Buffet for example famously argues that SBC is a real expense even if non-cash, just like depreciation. There isn't much to disagree about. It's a real cost against shareholders (that's what Buffett is talking about) and it is not an expense against the business operations such that it depletes your cash or harms cash flow (the point a parent comment was making). Putting it broadly, stock compensation is primarily a hit against existing shareholder ownership. It debases their ownership of present or future profits. Uber could simultaneously produce $5 billion in positive cash flow from operations and issue $20 billion in stock every year to employees. They'd have a profitable business at the operational level and be drowning shareholders in dilution.
      - munk-a 7y ago
        > it is not an expense against the business operations Except it is, you're borrowing money from the future if your company would ever consider issuing more stock in a followup round - it also may damage your ability to court private investors, not just because you lowered your share price but because you're more likely to dilute it more in the future. The stock market is a generally viewed today as an absurd concept composed of abstract financial wizardry - but it is grounded in the concept of partial ownership in a company and the assets of that company.
  - ummonk 7y ago
    It doesn’t affect cash flow but it does affect earnings. One time loss is fine to ignore, but one should still look at the remaining 1.3 billion loss including routine stock based compensation.
  - kgwgk 7y ago
    Income statements show multiple non-cash expenses. There is a reason why both the income statement and the statement of cash flows exist. Stock-based compensation is included as an expense since 2004 (before it was optional to do so, so unsurprisingly companies relegated that disclosure to footnotes).
  - ghaff 7y ago
    Not an accountant and didn't really like my accounting courses very much :-) But mostly post dot-bomb. It's one of the reasons you see a lot of RSUs at bigger companies today rather than traditional options. FAS 123(r) was the first major rule. This came about because companies basically were treating stock options like they were free money from an accounting perspective.
- jcdavis 7y ago
  You can break that question into 2 parts. First, the 3.9B figure appears to represents all RSUs vested up to this point, aka many years worth ("(2) Q2 2019 includes $3.9 billion of stock-based compensation expenses, primarily due to RSU expense recognition in connection with our initial public offering"). That's why its slightly misleading - its many years worth of stock comp for employees which is all getting recognized this quarter (Happens in pretty much all the big tech IPOs) In general though, its very reasonable to associate that as an expense, which is why GAAP requires it. Where that gets complicated is that its not an immediate cash expense to the company, hence some fudging around with non-GAAP accounting which is seen by some companies.
  - munk-a 7y ago
    Ah thank you - yea it might not be directly coming out of the company as a cash expense but it certainly is depreciating the value of the company and considering that stock options of various types are often offered to supplement salaries (and let's just understand that nobody gives up money for free, so were these options not available they'd be paying higher labour costs) then it is logically an expense to the company by way of dilution to actually carry out their disbursement. I am pretty personally wary of stock based compensation in non-publicly traded companies since it's a gamble that the employee is accepting that is entirely controlled by the company - bad business decisions can cut your compensation through no fault of your own if the company goes bankrupt.
sachdevap 7y ago
I don't know how the headline could be anymore objective than this. And the loss numbers not withstanding, a company bleeding money like a unicorn growing only 14% in revenue is pretty bad no matter how you slice it.
throwaway_loss 7y ago
From their S-1: >We incurred operating losses of $4.0 billion and $3.0 billion in the years ended December 31, 2017 and 2018, and as of December 31, 2018, we had an accumulated deficit of $7.9 billion. Now they have accumulated a deficit of $13.1B. You might say, well they shrank their loss from $4B to 3B to $1.3B (giving you the extra $3.9B one-time stock comp). Except one has to keep in mind they cut expenses and raised fees in that stretch in anticipation of their IPO, so its literally the best they could do...only lose $13.1B over 3 years. Investors and Founders made their money, Uber is now for the plebs to figure out how to salvage and milk. It will just be a long and painful death from hereon out, but the market will remain irrational to allow Investors to save face so they can run the same Startup/IPO unicorn scam on the public to cash out. However, instead of the long painful death, an alternative now that the Investors are out, we may see the regulators finally "catch up" and properly classify Uber drivers as employees not independent contracts and the bottom give out.
- orangep 7y ago
  $4B and $3B is for the whole years of 2017 and 2018. $1.3B is just for this quarter.
deleted 7y ago
[deleted]

munk-a 7y ago

I am confused at how that 3.9B could be said not to matter - I'm not familiar with what precisely "recognition of stock comp" means, but I'm going to assume it was either squaring a previously deferred liability - or directly needing to pay out some sort of stock based compensation. Assuming the compensation was for a business need (like hiring labour or purchasing something necessary) then I don't see how that should be isolated or differentiated from regular costs of running the business - assuming it wasn't a business need (and was more of a way to game the stock price) then I'd assume whoever made the decision to take such an action when Uber is already losing money hand-over-fist is just trying to get out some loot while they can... which is potentially an even more extremely bad scenario to accept.

umeshunni 7y ago
Stock based compensation doesn't affect cash flow. It's newly issued stock granted to employees. I'm not sure when the accounting laws changed to include SBC (probably post-financial crisis), but it's weird to include it in an income statement as if it was a cash expense. You can find articles from accounting experts arguing both ways if you are curious. e.g. http://aswathdamodaran.blogspot.com/2014/02/stock-based-employee-compensation-value.html http://aswathdamodaran.blogspot.com/2014/02/stock-based-empl...
- berberous 7y ago
  People disagree on this. Warren Buffet for example famously argues that SBC is a real expense even if non-cash, just like depreciation. More to the OPs point, I'm guessing Uber had FB-style RSUs that don't settle until an IPO or Change of Control. I'm not sure how this all gets accounted for, but given the recent IPO, it sounds like they booked a very large SBC charge this quarter to account for the immediate hit of all the previously issued RSUs finally being settled. Going forward, the number of RSUs that settle each quarter would therefore presumably not be nearly as large. But I'm not an accountant so the above may be wrong.
  - adventured 7y ago
    > People disagree on this. Warren Buffet for example famously argues that SBC is a real expense even if non-cash, just like depreciation. There isn't much to disagree about. It's a real cost against shareholders (that's what Buffett is talking about) and it is not an expense against the business operations such that it depletes your cash or harms cash flow (the point a parent comment was making). Putting it broadly, stock compensation is primarily a hit against existing shareholder ownership. It debases their ownership of present or future profits. Uber could simultaneously produce $5 billion in positive cash flow from operations and issue $20 billion in stock every year to employees. They'd have a profitable business at the operational level and be drowning shareholders in dilution.
    - munk-a 7y ago
      > it is not an expense against the business operations Except it is, you're borrowing money from the future if your company would ever consider issuing more stock in a followup round - it also may damage your ability to court private investors, not just because you lowered your share price but because you're more likely to dilute it more in the future. The stock market is a generally viewed today as an absurd concept composed of abstract financial wizardry - but it is grounded in the concept of partial ownership in a company and the assets of that company.
- ummonk 7y ago
  It doesn’t affect cash flow but it does affect earnings. One time loss is fine to ignore, but one should still look at the remaining 1.3 billion loss including routine stock based compensation.
- kgwgk 7y ago
  Income statements show multiple non-cash expenses. There is a reason why both the income statement and the statement of cash flows exist. Stock-based compensation is included as an expense since 2004 (before it was optional to do so, so unsurprisingly companies relegated that disclosure to footnotes).
- ghaff 7y ago
  Not an accountant and didn't really like my accounting courses very much :-) But mostly post dot-bomb. It's one of the reasons you see a lot of RSUs at bigger companies today rather than traditional options. FAS 123(r) was the first major rule. This came about because companies basically were treating stock options like they were free money from an accounting perspective.
jcdavis 7y ago
You can break that question into 2 parts. First, the 3.9B figure appears to represents all RSUs vested up to this point, aka many years worth ("(2) Q2 2019 includes $3.9 billion of stock-based compensation expenses, primarily due to RSU expense recognition in connection with our initial public offering"). That's why its slightly misleading - its many years worth of stock comp for employees which is all getting recognized this quarter (Happens in pretty much all the big tech IPOs) In general though, its very reasonable to associate that as an expense, which is why GAAP requires it. Where that gets complicated is that its not an immediate cash expense to the company, hence some fudging around with non-GAAP accounting which is seen by some companies.
- munk-a 7y ago
  Ah thank you - yea it might not be directly coming out of the company as a cash expense but it certainly is depreciating the value of the company and considering that stock options of various types are often offered to supplement salaries (and let's just understand that nobody gives up money for free, so were these options not available they'd be paying higher labour costs) then it is logically an expense to the company by way of dilution to actually carry out their disbursement. I am pretty personally wary of stock based compensation in non-publicly traded companies since it's a gamble that the employee is accepting that is entirely controlled by the company - bad business decisions can cut your compensation through no fault of your own if the company goes bankrupt.

sachdevap 7y ago

I don't know how the headline could be anymore objective than this. And the loss numbers not withstanding, a company bleeding money like a unicorn growing only 14% in revenue is pretty bad no matter how you slice it.

throwaway_loss 7y ago

From their S-1: >We incurred operating losses of $4.0 billion and $3.0 billion in the years ended December 31, 2017 and 2018, and as of December 31, 2018, we had an accumulated deficit of $7.9 billion. Now they have accumulated a deficit of $13.1B. You might say, well they shrank their loss from $4B to 3B to $1.3B (giving you the extra $3.9B one-time stock comp). Except one has to keep in mind they cut expenses and raised fees in that stretch in anticipation of their IPO, so its literally the best they could do...only lose $13.1B over 3 years. Investors and Founders made their money, Uber is now for the plebs to figure out how to salvage and milk. It will just be a long and painful death from hereon out, but the market will remain irrational to allow Investors to save face so they can run the same Startup/IPO unicorn scam on the public to cash out. However, instead of the long painful death, an alternative now that the Investors are out, we may see the regulators finally "catch up" and properly classify Uber drivers as employees not independent contracts and the bottom give out.

orangep 7y ago
$4B and $3B is for the whole years of 2017 and 2018. $1.3B is just for this quarter.

deleted 7y ago

[deleted]