14 ms·

Uber Q3 Results

116 points by kgwgk 7y ago

kgwgk 7y ago
https://s23.q4cdn.com/407969754/files/doc_financials/2019/Q3/Quarterly-Earnings-Report-Q32019.pdf https://s23.q4cdn.com/407969754/files/doc_financials/2019/Q3...
mdorazio 7y ago
They're still losing money hand over fist - no surprise there. Looks like that is hitting the stock in after-hours for about -5%. Biggest takeaway for me is that gross revenue actually grew slower than total trips (30% vs 31%), which is an interesting trend.
- hn_throwaway_99 7y ago
  > Biggest takeaway for me is that gross revenue actually grew slower than total trips (30% vs 31%) But on a constant currency basis gross revenue grew at the same rate, so the only reason it was slower was due to exchange rate changes.
- deleted 7y ago
  [deleted]
- WisNorCan 7y ago
  Looks like Uber has two types of businesses. a) Ones that are slowing down, e.g. Rides with growth rate of ~20% and b) Ones that are growing faster by unsustainable economics, e.g. Freight -40% EBITDA. For Uber ever to thrive, they need a business that is growing fast with good economics. It doesn't look they have one anywhere on the horizon.
  - deleted 7y ago
    [deleted]
gok 7y ago
If they hadn't gotten into food delivery, freight, scooters, etc. they'd be profitable by now.
- scarface74 7y ago
  Only if you take their made up, non GAAP, financial measurement of “adjusted EBITDA” seriously. This is no better than WeWork’s “community adjusted EBITDA” and we see how that worked out. Adjusted EBITDA. We define Adjusted EBITDA as net income (loss), excluding (i) income (loss) from discontinued operations, net of income taxes, (ii) net income (loss) attributable to non-controlling interests, net of tax, (iii) provision for (benefit from) income taxes, (iv) income (loss) from equity method investment, net of tax, (v) interest expense, (vi) other income (expense), net, (vii) depreciation and amortization, (viii) stock-based compensation expense, (ix) certain legal, tax, and regulatory reserve changes and settlements, (x) asset impairment/loss on sale of assets, (xi) acquisition and financing related expenses, (xii) restructuring charges and (xiii) other items not indicative of our ongoing operating performance.
  - gok 7y ago
    Well ok first, there's a world of difference between the reasonably widespread practice of adjusted EBITDA and inventing your definition that does not account for the costs of marketing or leases. But I'm really not even commenting on these results precisely. They would have been in an entirely different position without all the distractions. Uber's ride business now makes a billion dollars a month in revenue. That's after paying drivers. If they had been laser-focused on making the ride business work, they could have grown a much lower-overhead business. They could have taken the company public years ago. An earlier IPO would have meant those huge stock-based compensation packages would be off the books by now. A just-get-me-a-car Uber would have been GAAP profitable by now.
    - scarface74 7y ago
      There is a reason we have a GAAP as a way of not letting companies just make up metrics. Any company can show a “profit” as long as you don’t count expenses that make you unprofitable. They leave out over a dozen expenses to claim some made up definition of “profitability”. From their numbers, how do you get that just the ride hailing business would make more money than it cost to run? Adjusted EBITDA is just a made up term. It is isn’t GAAP so by definition it isn’t Generally Accepted. Made up metrics are generally used by startups and non profitable public companies to justify their valuations to investors.
deleted 7y ago
[deleted]
georgeecollins 7y ago
You have to go past a lot of non-GAAP accounting to see that they actually lost $1.1B last quarter, almost all from operations. There is a nice chart showing all the things they are taking out to get their adjusted EBITDA of -0.5B. It seems like they are always taking out a bunch of one time charges to claim that there core business would be profitable. But every quarter they have those charges. I don't understand how people say their ride sharing business is profitable. I mean maybe it is and I just don't understand how people think that. I would love it if someone would walk me through that.
- Animats 7y ago
  Someday, I want to see a financial statement where the non-GAAP accounting makes the company look worse than GAAP accounting. Statistically, that should happen half the time. It doesn't.
  - austhrow743 7y ago
    Non-GAAP accounting shown to the general public/investors is marketing material. Of course it's going to make them look good. That doesn't mean it's the only non-GAAP accounting being done. They're just using the useful stuff internally. The criteria for figures you use is audience dependent. Report creation 101. Decision makers, regulators, investors are all different audiences.
  - Narkov 7y ago
    > Statistically, that should happen half the time. Uhh...no. Non-GAAP is financials manipulated against accounting standards to show a better picture. No company wants to show a worse picture.
    - wil421 7y ago
      Reminds me of the time when Uber’s lawyer said they are not a ride sharing company they are provide a marketplace (the app).
  - btown 7y ago
heyflyguy 7y ago
I'd love to hear some smart people opinions on this idea: "Uber doesn't need to be profitable, they just need to survive until their autonomous cars are deployed"
- treis 7y ago
  IMHO, autonomous cars actually breaks Uber's model. It changes it from taking a % off the top of a market to a capital and maintenance intensive business. Only seems to work if they end up with some sort of franchise model. Sort of like how Coke has a bunch of distributors.
  - Animats 7y ago
    That's about right. Running a fleet of autonomous vehicles is an expensive proposition, and probably will be for years after they start working. Waymo outsources some of that to Avis Rent-A-Car, which already has garages, maintenance facilities, parking lots, car washes, etc. It's quite possible that when automomous vehicle operations start working, the big players will be car rental companies. It's a natural extension to their business.
    - malandrew 7y ago
      I have a hard time believing that anyone on HN legitimately things that companies like Hertz and Avis will be able to become efficient in the ridesharing market before one of the two TNCs become efficient in the fleet management market (which is a subset of the rental car market that overlaps with TNCs once they choose to have their own fleet. One set of businesses here has modern engineering practices and the other set are dinosaurs. Furthermore, rental companies have more employees dedicated to sales than to fleet management and their entire current customer base is rental car consumers. They literally need to redirect money to R&D long term where that R&D serves no benefit to their current customer base. Wall Street will punish the stock of rental car companies short term for spending R&D on becoming ridesharing businesses that serve a customer they don't yet even have mindshare with. With the TNCs however, wall street won't see any problem with them building out their own fleet. The only condition where wall street looks down on the idea of own fleet management is if they believe a franchise model with third party fleet managers make sense. Either way the TNCs own the relationship with the customer and therefore has all the power.
ganitarashid 7y ago
Having new “one-time” charges every quarter means those are not one-time charges. They’re part of the business, which means the business doesn’t work. One of Ubers biggest problems is that they have zero brand loyalty. For a company that sells a utility (get me, or my food, from A to B) rather than an experience (like a cool vacation in a unique mansion), I will always pick the cheapest option. Whether that’s Uber or Bobs Taxis it doesn’t matter. That means this whole business is a race to the bottom. Profits will stabilize at approximately zero for everyone in that business. The second huge problem is that nothing about providing this utility (neither the driving itself, nor the human labor required of the driver) has decreased since Uber came into existence. Driving a car from A to B still costs the same per mile (gas or electricity and wear and tear), and the driver still costs the same per hour (at least minimum wage). Uber has only made finding the ride more efficient but it has not made the actual ride itself more efficient. So in the best case, Uber can be as profitable as a taxi company. But ONLY if it raises its prices to taxi company levels. And then it’s a taxi company. Taxis are expensive for a reason, because without a VC subsidy they have to be profitable to exist. And what if there are robot drivers? Wouldn’t that eliminate at least the human cost? It would. But it would do so for every other transport company as well, and by the same amount. Since there is no customer loyalty for a transport like this, Uber would still be fighting the same competitors in a similar race to the bottom. In summary, nothing can save Uber.
- MuffinFlavored 7y ago
  > I will always pick the cheapest option. My friend's sister got hospitalized after her Uber driver ran a red light because they were not privy to traffic queues most normal people would have caught on to (like stopping when a light is turning red) I will gladly spend a couple extra bucks the ~20 times I need to Uber a year so that I am not getting into a screaming metal death trap with an unfit driver.
  - deleted 7y ago
    [deleted]
  - 1123581321 7y ago
    It’s not clear what you are spending extra money on or how you are evaluating driver aptitude. What about Uber’s driver requirements doesn’t work for you?
dzonga 7y ago
if uber, wasn't doing business on an uber scale. then maybe, instead of lighting money, they would be printing money. correct ideas, but wrong execution. but alas, a holoi polloi like me will enjoy the VC subsidized rides
- skinnymuch 7y ago
  Another user, gok, has a point that if they were just doing ride sharing, they could possibly be break even or profitable. https://news.ycombinator.com/item?id=21450647 https://news.ycombinator.com/item?id=21450647
fancyfish 7y ago
For those interested in the world of non-GAAP accounting, there are a wealth of resources (particularly from the Big 4 accountancies who are eager to consult on such matters). Broadly, the use of non-GAAP has grown to a point where the SEC ramped up enforcement measures (sending letters to companies regarding their presentation of non-GAAP measures)[1]. Particularly, GAAP measures need to be presented "with equal or greater prominence" to their non-GAAP counterparts. From a Deloitte piece[2]: "A study published by Audit Analytics noted that 97 percent of S&P 500 companies used non-GAAP measures in earnings releases during 2017. Further, the number of non-GAAP measures used per filing has almost tripled from 2.35 in 1996 to 7.45 in 2016. In addition, a study published by FactSet indicated that for the second quarter of 2018, 77 percent of the companies in the Dow Jones Industrial Average reported non-GAAP earnings per share and 61 percent of these companies reported non-GAAP earning per share that exceeded GAAP earnings per share." [1] https://corpgov.law.harvard.edu/2019/02/07/sec-scrutiny-of-non-gaap-financial-measures/ https://corpgov.law.harvard.edu/2019/02/07/sec-scrutiny-of-n... [2] https://www2.deloitte.com/us/en/pages/audit/articles/a-roadmap-to-non-gaap-financial-measures.html https://www2.deloitte.com/us/en/pages/audit/articles/a-roadm...
glofish 7y ago
Basically they lost 10% of their gross bookings. Does this mean that raising the price by 10% has them breaking even? Maybe. It does show the immense potential though, their bookings are so large that 10 percent change would net them billions more. They are booking 1 billion dollars worth of rides every week.
- rauchp 7y ago
  > their bookings are so large that 10 percent change would net them billions more. Kind of a hot take, but this is why I'm long Uber. They're processing an insane amount of orders, and getting a huge amount of people using their app. If Lyft dies, or if a merger occurs, then we have a large ride share company that is still a lot more than 10% better than taxis. Most customers will still be taking Ubers, regardless of that 10% price hike. Of course, this is just for the ride share business. I don't see how food delivery will be profitable long-term. Maybe it'll be just a loss leader for them?
  - deleted 7y ago
    [deleted]
  - kn0where 7y ago
    No way a Lyft merger could be approved in any kind of sane society. It would turn a duopoly into a monopoly.
    - rauchp 7y ago
      If both companies are approaching bankruptcy trying to outlast the other, wouldn't the lesser evil be a world with a ride-share monopoly rather than a world without (large scale) ridesharing? With the amount of people that use these rideshare companies as their primary job or to make their daily commute, it seems hard to imagine going back to the pre-Uber/Lyft days. Not that the government or any regulatory body would see it this way. I just think consumers are better off with a monopoly here. Plus, whatever rideshare service that survives will still have to compete with local taxi companies.
countryqt30 7y ago
Warren Buffett famously said: "When you read EBITDA, you should think BULLSHIT". The only reliable metrics are EBIT (if you precisely know the debt and tax situation of the company, which is usually laid open in the reports), and NET PROFIT. Remember just 1 month ago, when WeWork tried to FRAUD everyone with their "we invented our own EBITDA"-metric, which they called 'EBIT adjusted for consciousness, because we sell consciousness, so we factor in the amount of consciousness we generate per square mile!!!!' ?
- Waterluvian 7y ago
  What the frick is consciousness?
  - icotyl 7y ago
    That's not an actual quote, FYI. They peddled something called "community-adjusted EBITDA."
ganitarashid 7y ago
There's another thing that needs to be said. Uber is receiving a lot of criticism here, but whether they eventually make it as a company or not, Uber is doing one important thing: Showing that a business model and profits matter. This has been neglected in the last decade or so. If bringing back that awareness is Uber's only contribution, then no matter the company's outcome, it will have done a good thing.

116 points by kgwgk 7y ago

https://s23.q4cdn.com/407969754/files/doc_financials/2019/Q3/Quarterly-Earnings-Report-Q32019.pdf https://s23.q4cdn.com/407969754/files/doc_financials/2019/Q3...

mdorazio 7y ago

They're still losing money hand over fist - no surprise there. Looks like that is hitting the stock in after-hours for about -5%. Biggest takeaway for me is that gross revenue actually grew slower than total trips (30% vs 31%), which is an interesting trend.

hn_throwaway_99 7y ago
> Biggest takeaway for me is that gross revenue actually grew slower than total trips (30% vs 31%) But on a constant currency basis gross revenue grew at the same rate, so the only reason it was slower was due to exchange rate changes.
deleted 7y ago
[deleted]
WisNorCan 7y ago
Looks like Uber has two types of businesses. a) Ones that are slowing down, e.g. Rides with growth rate of ~20% and b) Ones that are growing faster by unsustainable economics, e.g. Freight -40% EBITDA. For Uber ever to thrive, they need a business that is growing fast with good economics. It doesn't look they have one anywhere on the horizon.
- deleted 7y ago
  [deleted]

gok 7y ago

If they hadn't gotten into food delivery, freight, scooters, etc. they'd be profitable by now.

scarface74 7y ago
Only if you take their made up, non GAAP, financial measurement of “adjusted EBITDA” seriously. This is no better than WeWork’s “community adjusted EBITDA” and we see how that worked out. Adjusted EBITDA. We define Adjusted EBITDA as net income (loss), excluding (i) income (loss) from discontinued operations, net of income taxes, (ii) net income (loss) attributable to non-controlling interests, net of tax, (iii) provision for (benefit from) income taxes, (iv) income (loss) from equity method investment, net of tax, (v) interest expense, (vi) other income (expense), net, (vii) depreciation and amortization, (viii) stock-based compensation expense, (ix) certain legal, tax, and regulatory reserve changes and settlements, (x) asset impairment/loss on sale of assets, (xi) acquisition and financing related expenses, (xii) restructuring charges and (xiii) other items not indicative of our ongoing operating performance.
- gok 7y ago
  Well ok first, there's a world of difference between the reasonably widespread practice of adjusted EBITDA and inventing your definition that does not account for the costs of marketing or leases. But I'm really not even commenting on these results precisely. They would have been in an entirely different position without all the distractions. Uber's ride business now makes a billion dollars a month in revenue. That's after paying drivers. If they had been laser-focused on making the ride business work, they could have grown a much lower-overhead business. They could have taken the company public years ago. An earlier IPO would have meant those huge stock-based compensation packages would be off the books by now. A just-get-me-a-car Uber would have been GAAP profitable by now.
  - scarface74 7y ago
    There is a reason we have a GAAP as a way of not letting companies just make up metrics. Any company can show a “profit” as long as you don’t count expenses that make you unprofitable. They leave out over a dozen expenses to claim some made up definition of “profitability”. From their numbers, how do you get that just the ride hailing business would make more money than it cost to run? Adjusted EBITDA is just a made up term. It is isn’t GAAP so by definition it isn’t Generally Accepted. Made up metrics are generally used by startups and non profitable public companies to justify their valuations to investors.

deleted 7y ago

[deleted]

georgeecollins 7y ago

You have to go past a lot of non-GAAP accounting to see that they actually lost $1.1B last quarter, almost all from operations. There is a nice chart showing all the things they are taking out to get their adjusted EBITDA of -0.5B. It seems like they are always taking out a bunch of one time charges to claim that there core business would be profitable. But every quarter they have those charges. I don't understand how people say their ride sharing business is profitable. I mean maybe it is and I just don't understand how people think that. I would love it if someone would walk me through that.

Animats 7y ago
Someday, I want to see a financial statement where the non-GAAP accounting makes the company look worse than GAAP accounting. Statistically, that should happen half the time. It doesn't.
- austhrow743 7y ago
  Non-GAAP accounting shown to the general public/investors is marketing material. Of course it's going to make them look good. That doesn't mean it's the only non-GAAP accounting being done. They're just using the useful stuff internally. The criteria for figures you use is audience dependent. Report creation 101. Decision makers, regulators, investors are all different audiences.
- Narkov 7y ago
  > Statistically, that should happen half the time. Uhh...no. Non-GAAP is financials manipulated against accounting standards to show a better picture. No company wants to show a worse picture.
  - wil421 7y ago
    Reminds me of the time when Uber’s lawyer said they are not a ride sharing company they are provide a marketplace (the app).
- btown 7y ago

heyflyguy 7y ago

I'd love to hear some smart people opinions on this idea: "Uber doesn't need to be profitable, they just need to survive until their autonomous cars are deployed"

treis 7y ago
IMHO, autonomous cars actually breaks Uber's model. It changes it from taking a % off the top of a market to a capital and maintenance intensive business. Only seems to work if they end up with some sort of franchise model. Sort of like how Coke has a bunch of distributors.
- Animats 7y ago
  That's about right. Running a fleet of autonomous vehicles is an expensive proposition, and probably will be for years after they start working. Waymo outsources some of that to Avis Rent-A-Car, which already has garages, maintenance facilities, parking lots, car washes, etc. It's quite possible that when automomous vehicle operations start working, the big players will be car rental companies. It's a natural extension to their business.
  - malandrew 7y ago
    I have a hard time believing that anyone on HN legitimately things that companies like Hertz and Avis will be able to become efficient in the ridesharing market before one of the two TNCs become efficient in the fleet management market (which is a subset of the rental car market that overlaps with TNCs once they choose to have their own fleet. One set of businesses here has modern engineering practices and the other set are dinosaurs. Furthermore, rental companies have more employees dedicated to sales than to fleet management and their entire current customer base is rental car consumers. They literally need to redirect money to R&D long term where that R&D serves no benefit to their current customer base. Wall Street will punish the stock of rental car companies short term for spending R&D on becoming ridesharing businesses that serve a customer they don't yet even have mindshare with. With the TNCs however, wall street won't see any problem with them building out their own fleet. The only condition where wall street looks down on the idea of own fleet management is if they believe a franchise model with third party fleet managers make sense. Either way the TNCs own the relationship with the customer and therefore has all the power.

ganitarashid 7y ago

Having new “one-time” charges every quarter means those are not one-time charges. They’re part of the business, which means the business doesn’t work. One of Ubers biggest problems is that they have zero brand loyalty. For a company that sells a utility (get me, or my food, from A to B) rather than an experience (like a cool vacation in a unique mansion), I will always pick the cheapest option. Whether that’s Uber or Bobs Taxis it doesn’t matter. That means this whole business is a race to the bottom. Profits will stabilize at approximately zero for everyone in that business. The second huge problem is that nothing about providing this utility (neither the driving itself, nor the human labor required of the driver) has decreased since Uber came into existence. Driving a car from A to B still costs the same per mile (gas or electricity and wear and tear), and the driver still costs the same per hour (at least minimum wage). Uber has only made finding the ride more efficient but it has not made the actual ride itself more efficient. So in the best case, Uber can be as profitable as a taxi company. But ONLY if it raises its prices to taxi company levels. And then it’s a taxi company. Taxis are expensive for a reason, because without a VC subsidy they have to be profitable to exist. And what if there are robot drivers? Wouldn’t that eliminate at least the human cost? It would. But it would do so for every other transport company as well, and by the same amount. Since there is no customer loyalty for a transport like this, Uber would still be fighting the same competitors in a similar race to the bottom. In summary, nothing can save Uber.

MuffinFlavored 7y ago
> I will always pick the cheapest option. My friend's sister got hospitalized after her Uber driver ran a red light because they were not privy to traffic queues most normal people would have caught on to (like stopping when a light is turning red) I will gladly spend a couple extra bucks the ~20 times I need to Uber a year so that I am not getting into a screaming metal death trap with an unfit driver.
- deleted 7y ago
  [deleted]
- 1123581321 7y ago
  It’s not clear what you are spending extra money on or how you are evaluating driver aptitude. What about Uber’s driver requirements doesn’t work for you?

dzonga 7y ago

if uber, wasn't doing business on an uber scale. then maybe, instead of lighting money, they would be printing money. correct ideas, but wrong execution. but alas, a holoi polloi like me will enjoy the VC subsidized rides

skinnymuch 7y ago
Another user, gok, has a point that if they were just doing ride sharing, they could possibly be break even or profitable. https://news.ycombinator.com/item?id=21450647 https://news.ycombinator.com/item?id=21450647

fancyfish 7y ago

For those interested in the world of non-GAAP accounting, there are a wealth of resources (particularly from the Big 4 accountancies who are eager to consult on such matters). Broadly, the use of non-GAAP has grown to a point where the SEC ramped up enforcement measures (sending letters to companies regarding their presentation of non-GAAP measures)[1]. Particularly, GAAP measures need to be presented "with equal or greater prominence" to their non-GAAP counterparts. From a Deloitte piece[2]: "A study published by Audit Analytics noted that 97 percent of S&P 500 companies used non-GAAP measures in earnings releases during 2017. Further, the number of non-GAAP measures used per filing has almost tripled from 2.35 in 1996 to 7.45 in 2016. In addition, a study published by FactSet indicated that for the second quarter of 2018, 77 percent of the companies in the Dow Jones Industrial Average reported non-GAAP earnings per share and 61 percent of these companies reported non-GAAP earning per share that exceeded GAAP earnings per share." [1] https://corpgov.law.harvard.edu/2019/02/07/sec-scrutiny-of-non-gaap-financial-measures/ https://corpgov.law.harvard.edu/2019/02/07/sec-scrutiny-of-n... [2] https://www2.deloitte.com/us/en/pages/audit/articles/a-roadmap-to-non-gaap-financial-measures.html https://www2.deloitte.com/us/en/pages/audit/articles/a-roadm...

glofish 7y ago

Basically they lost 10% of their gross bookings. Does this mean that raising the price by 10% has them breaking even? Maybe. It does show the immense potential though, their bookings are so large that 10 percent change would net them billions more. They are booking 1 billion dollars worth of rides every week.

rauchp 7y ago
> their bookings are so large that 10 percent change would net them billions more. Kind of a hot take, but this is why I'm long Uber. They're processing an insane amount of orders, and getting a huge amount of people using their app. If Lyft dies, or if a merger occurs, then we have a large ride share company that is still a lot more than 10% better than taxis. Most customers will still be taking Ubers, regardless of that 10% price hike. Of course, this is just for the ride share business. I don't see how food delivery will be profitable long-term. Maybe it'll be just a loss leader for them?
- deleted 7y ago
  [deleted]
- kn0where 7y ago
  No way a Lyft merger could be approved in any kind of sane society. It would turn a duopoly into a monopoly.
  - rauchp 7y ago
    If both companies are approaching bankruptcy trying to outlast the other, wouldn't the lesser evil be a world with a ride-share monopoly rather than a world without (large scale) ridesharing? With the amount of people that use these rideshare companies as their primary job or to make their daily commute, it seems hard to imagine going back to the pre-Uber/Lyft days. Not that the government or any regulatory body would see it this way. I just think consumers are better off with a monopoly here. Plus, whatever rideshare service that survives will still have to compete with local taxi companies.

countryqt30 7y ago

Warren Buffett famously said: "When you read EBITDA, you should think BULLSHIT". The only reliable metrics are EBIT (if you precisely know the debt and tax situation of the company, which is usually laid open in the reports), and NET PROFIT. Remember just 1 month ago, when WeWork tried to FRAUD everyone with their "we invented our own EBITDA"-metric, which they called 'EBIT adjusted for consciousness, because we sell consciousness, so we factor in the amount of consciousness we generate per square mile!!!!' ?

Waterluvian 7y ago
What the frick is consciousness?
- icotyl 7y ago
  That's not an actual quote, FYI. They peddled something called "community-adjusted EBITDA."

ganitarashid 7y ago

There's another thing that needs to be said. Uber is receiving a lot of criticism here, but whether they eventually make it as a company or not, Uber is doing one important thing: Showing that a business model and profits matter. This has been neglected in the last decade or so. If bringing back that awareness is Uber's only contribution, then no matter the company's outcome, it will have done a good thing.