Uber Announces Results for Fourth Quarter and Full Year 2019
investor.uber.com
investor.uber.com
* They put up $1.2B as collateral for some kind of insurance (looks like rider insurance, but it's unclear). From the footnotes: "In Q4 2019, James River Group withdrew all funds held in trust as collateral for current and future claim settlement obligations under the indemnification agreement. The $1.2 billion of operating cash outflow for 2019 represents this withdrawal of collateral from restricted cash. This change in the form of collateral had no impact on our claim settlement obligations or insurance reserves." Sounds like maybe their insurer dropped them?
* Under "Reconciliations of Non-GAAP Measures" -- the driver incentives are unreal. To deliver $734M of gross revenue on Eats in Q4, they paid out $315M in driver incentives. From the "Segment Adjusted EBITDA" at the top, Eats had EBITDA of (461). As a SWAG, for $1 in sales, they pay out about $0.42 in driver incentives and another $1.20 in all other costs (ie. the restaurant's cut for the food itself, operations support, marketing, normal driver's fees, etc).
* As a counter point to the above, to render $3B in rides revenue they paid $0.007B in driver incentives.
Uber also tripled it's R&D budget, which may be a good sign for the company, but it looks like it's primarily stock-based compensation.
Didn’t realize Airports would be such big business.
Overall it seems Uber is growing >20% in rides, trips and active users.
I remember when Facebook was valued at 100B without profits and I thought it was absurd. Now they’re a money raining machine with 500B valuation.
Year 2019
Total trips: 6.9 Billion Total bookings: $65 Billion Net revenue: $12.8 Billion
So they’re taking ~20% cut from every trip.
If Uber can reduce burn and be profitable this year, I’m willing to bet $1000, they’ll be >100B by end of 2021.
Uber eats and freight grew 70%. Wow!
Overall I think if Uber can maintain their market dominance for another decade or so while self driving cars really become viable and people trust them, I can see Uber easily being as large as Facebook.
Typically, I can expense rides to and from airport if I'm traveling for work, so I can be more generous and order a better car.
Dunno why the receipts are ~500kb though.
In both cases, they are so ubiquitous that they aren't really after new users, just increased engagement/usage. And I'd bet Uber's per-user usage growth exceeds Facebook's right now.
What I'm reading is I can order an Uber to two blocks away and say to the driver that I actually want to go to the other side of town, Uber says it's 50$ from which he'll get 40$, so how about I pay him 45$ in cash. We both win.
It’s still good to see that 20% number on their earnings report.
It would be a lot higher percentage if I didn't just use a pre-arranged private car for my home airport. (I live far enough outside the city that Ubers for early-morning pickups, especially for an hour drive into the city, are very thin on the ground.) It would probably also be higher if fewer cities I traveled to had decent transit in from the airports.
But, otherwise, I have pretty much zero reason to use Uber/Lyft/taxis day-to-day.
I spend a few thousand dollars a year on airport transportation but very little of that goes to Uber.
The argument with FB is diff, FB relies on network effects and a social graph, literally winner take all, you could argue that exists in localized taxi markets, but again, I think of Warren Buffet and "the cirlce of competence". How many investors are reading CH Robinsons annual reports and comparing said numbers? Just some thoughts. Remember, interest rates and capital markets the way they are today, may not be the way they are tomorrow. - WB
My appreciation from Uber comes from my Travels. While Uber faces significant competition in US with lyft for rides, DoorDash, caviar, etc for food delivery, Convoy and tons of other companies for Freight, they are a global company.
I use the same Uber app for US, Australia, Dubai, Kenya, India. In a whole bunch of countries they’ve bought out the competition e.g Careem in Dubai and they’re operating like a monopoly. Multiple brands but Uber still owns the big pie.
They’re running operations at a massive scale. The operational costs bring customer support, software ops. Looks like a software company that way. They don’t own cars and drivers are contractors (sure changing in California) but remember Uber is a global company. A decent chunk of their revenue is non-US.
They may be negative in acquiring new drivers and customers but for their active base, they make a decent profit.
Freight right now is a very paper/pen based inefficient business with a bunch of middlemen. Uber is making that efficient just as they did to Taxis.
Let’s see how this all plays out but I am somewhat bullish on them.
For food delivery, we get overpriced (upcharged) food, plus a delivery fee, for cold food that takes forever to show up.
I think there's an incentive for bike riders so I don't report it (not like they're paid well anyway) but it is odd.
This is just based on my recollection from a friend of mine doing Postmates a few years back.
The optimal method of transporting them was to never seal them (!!), turn your car heater on full blast, and put them right in front of a vent.
... if you survive driving a car that smells like french fries, while hungry, apparently they turn out pretty decent.
If I live 10 minutes and 2 miles from a pizza place, a round trip is $1 in fuel and depreciation, and $4 salary at minimum wage - if the driver is driving constantly, never has to wait for the food to be ready or sit around waiting for orders to come in.
If the driver sometimes has to wait around for the food to be ready, and there are quiet times at the start and end of the evening, and the driver gets health insurance, holiday/sick leave and a pension, delivery could easily cost $10.
Too bad the NYC bicycle delivery model doesn’t scale.
Previously (outside of NYC and other major metro areas) your choices for easy delivery were pizza and.... pizza. Everywhere else either didn't offer delivery, or it was offered on a very ad hoc basis (one employee who might be able to deliver for very large orders, and you had to ring the store, and pay in cash).
Now the majority of restaurants offer delivery, it costs a lot more than domino's pizza but no one cares.
- Uber Eats
- DoorDash
- SkipTheDishes
- Foodora
- Fantuan
- HungryEats
And there were at least two more that were previously available but seem to have been acquired: Just Eat (by SkipTheDishes), and Nomme (by DoorDash).
It's ridiculous how many companies are fighting over a market that doesn't even seem to be close to profitable for anyone.
Time for the narrative of Uber burning VC money/subsidizing rides/selling-$2 bills-for-$1 to die?
Amazon breaking even is very different from Uber lighting cash on fire to keep the lights on. Amazon was working towards something - becoming the best online shopping place possible (and building the logistical infrastructure to make that happen, allowing them to offer better services such as guaranteed fast shipping). Uber is just continually rearranging the chairs hoping to keep it going as long as they can.
There is nothing about Uber that scales without losing more money. If there were, they would have figured out how to make money by now. It's not like they haven't had enough time and money.
Unless you think that Uber is somehow going to pull a high margin non related business out some type of way, it’s really a horrible comparison.
Uber was certainly technologically innovative a decade ago. But a lot of the mobile and geo stuff is now off-the-shelf or as-a-service tech. Now that they're not subsidizing rides, even in this discussion we see people feeling the pinch. Uber's going to have to extract a lot of profit to reward investors and pursue growth. I think they're becoming vulnerable to low-cost competitors who just want to get by. E.g., driver co-ops and local specialty companies grabbing market niches.
Those reasons have nothing to do with Uber being unable to charge more for the rides than the cost to provide, which is not true and a widely held misconception.
An investor should care about "can they make money selling rides". That business unit can always be broken off from orthogonal ventures.
So instead the question becomes how long they can keep exploiting workers like this. AB5 suggests that the answer is not "forever".
But I've also been riding much less.
This levels of concerns warms my blood.
I would have paid $200 or more for that Uber if it was fast.
At the beginning, surge rates of 3x-10x were common at busy times. I don’t even think surge had a limit initially.
Essentially, you want to charge what the market will bare/bear (I literally can’t recall which :) Beer? ;) ), but what the upper end of the market will pay is higher than the middle (obviously), but you need volume to make profit so you have to target the average user. If you offer a “premium” option, then you can make more money off those users who are willing, while still claiming that it’s purely a market driven price.
I am curious whether drivers are aware of which bracket the rider is in?
Scroll to the GAAP section, earnings are under "CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS".
The GAAP loss per quarter is $1.096B, which comes out to $0.64 per share.
The way they are breaking out segments seems to imply that theres heavy losses in non-North America so of they were to shut off the rest of world stuff maybe it looks better.
But I'm not intimately familiar with this stock.
I think a fairly good portion of car services were making money charging monopoly rates to customers who had no choice but to take a taxi. It sustained the car services, but sucked for everyone else (as anyone who taxied in SF pre-Uber will tell you, or waited on an hour-late pre-booked taxi to arrive in NZ to go into town on Friday night, or took a chance with an "unlicensed" [some random guy] taxi in London because the black cabs were nowhere to be seen)
For example: tourists, people who can't or don't drive for some reason, people who've been out drinking, etc...
I take a private car service to the airport. There are a number of different services I could choose from but the one I use is reliable and competitive with competing service when I've checked. Yes, they're quite a bit more than Uber but they're reliable, including in situations where Uber would not be (very early morning pickups well outside of a major urban area).
Adjusted EBITDA is just a funny way to say "we found a way to make us look profitable by shifting whatever we want in the cost lines". Unless you know specifically what they are doing to manipulate it, it's basically a bullshit metric to make a company look better than it really is. Often you'll see investment bankers make adj. EBITDA claims and its the buyers job to sniff out really what is going on.
Even EBITDA (which is a standard measure with standard calculations) is considered by many to be a bullshit metric:
https://www.forbes.com/sites/brentbeshore/2014/11/13/ebitda-...
For all companies, FCF and to some extent, DCF.
They have $742m of "Adjusted" EBITDA, which is a metric they made up to make themselves look good, similar to WeWork's "Community EBITDA".
In the real-world, they lost $1.1B in Q4 and $8.5B for 2019. Revenue is growing and their margins are getting slightly better as they do massive layoffs and raise their prices, but they're still hemorrhaging money.
EBITDA is a terrible accounting metric that people use to hide REAL costs to doing business.
(Note there are reasons to use EBITDA, but in non-comparison environment [ie, an environment where you're talking about absolute metrics], it makes no sense.)
Really? That's pretty much how I and everyone I know talks about compensation.
Maybe this is a regional thing?
But net salary is what people often mention or look at when considering offers.
So, my net salary / take home pay is $X is what is normally talked about between people etc.
What are those reasons? I've taken several accounting and "business from legal pov" classes in my life, and still I don't really understand why it's such a prominent metric. Like, either you use proper profit, or you use turnover - EBITDA has always seemed such an artificial inbetween to me.
It is largely bogus when discussing the overall metrics of a business, or using it in isolation.
Uber shot itself in the foot in two ways in regard to that big percentage going towards driver incentives
A. Uber trained people not to tip so only 10% of them do.
B. Uber drivers do both ride share and Eats in the same app. They can turn off one or the other or do both. There often aren't enough Eats drivers as a result (more to follow)
A cont... ~~~~~~ People always used to tip taxi drivers, but Uber said "hey you don't need to tip on Uber" and implied or outright said tips are included. Often rides are not profitable without a tip, so drivers refuse them or cancel them. For example, driving 10 miles to give someone a 2 mile ride. So Uber has to gamify and pay incentives for consecutive rides or whatever (I ignore the games, because I do Lyft as well. I make more doing both, rather than playing the games)
Here's what Uber has said over the years about tipping:
March 30, 2014 https://web.archive.org/web/20140330002844/https://www.uber.... From the rider landing page: CASHLESS & CONVENIENT You don't need cash when you ride with Uber. Once you arrive at your destination, your fare is automatically charged to your credit card on file – no need to tip. We’ll also e-mail you a receipt.
From the help: Tipping Drivers Being Uber means there is no need to tip.
Mar 31, 2017 https://web.archive.org/web/20170331040415/http://www.uber.c... Do I need to tip? The Uber app cannot include a tip when billing you for a trip fare... In most cities, Uber is a cashless experience. Tipping is voluntary. Tips are not included in the fare, nor are they expected or required. As a rider, you are not obligated to offer your driver a gratuity in cash. If you decide you would like to tip, your driver is welcome to accept.
Today Can my driver ask for a tip? Drivers may request tips at their discretion. Drivers care about rider ratings and do their best to create an ideal trip experience. While Uber does not require riders to offer drivers a tip, you are welcome to do so in cash, through the app, on riders.uber.com, or from your emailed trip receipt. Please note that the trip fare charged to your payment account does not include a gratuity.
B cont... ~~~~~~ By doing UberEats in the same app and subjecting Eats drivers to the more stringent standards required of passenger carrying drivers (nice car, spotless background check) they eliminate a lot of Eats drivers, who may have an older car or minor traffic citation. Not only that, but why do Eats when Uber rideshare is busy? (and Lyft is busy, since most drivers do both) With Eats, you have to get out of the car, fight your way into a busy restaurant (Fri,Sat night) deal with surly restaurant personnel. Then, drive to some apartment complex, get out and look for the apartment in the maze, or drive to a house on a dark street and look for the right house number, which is barely visible in the dark or doesn't exist. Then try to find the front door (some will come out and meet you, but not many) Then on top of that not get a tip. You don't have to tip Uber, remember. Eats tip rate is a little higher.
Conclusion: Because Uber had told people that they didn't have to tip and that got into the zeitgeist, only 10% of them tip. Uber has to offer bigger driver incentives as a result. Would less people use Uber if they felt they had to tip? Yes, that's why Uber said people don't have to tip. At the time, there were less drivers and I hear anecdotally from other drivers that the money was better than now, even without the tips. Waiters, Bar tenders, many others make good tip money, but that horse has left the barn for Uber and now they can't retrain people to tip.
UberEats is a second class job for Uber/Lyft drivers. It would be better as it's own app with less stringent rules. There would be more drivers and they would get there faster.
If I am wrong about any of this, I welcome someone pointing that out. Thanks for reading.
There doesn't need to be an existing shortage of drivers for this to be beneficial.
Most of the money Uber is burning is to recruit drivers. If there are more drivers around, there's less of a reason to burn $100MMs to recruit drivers.
And during a recession it has been shown that people eat more fast food. So I imagine overall the business may not be so exposed.
I wouldn't really call that diversification. I mean, I take your point about fast food, but during a recession, it's probably about cheap eats, which Uber Eats is not. And time should be more plentiful, so there's less need for delivery. And UE is a tire fire of a business from these numbers, so that would hardly be a blessing for Uber.
There's some data hidden away in the middle of this news story that matches what I've heard elsewhere: Uber Eats is such a huge percentage of restaurant revenue here now, stores can't afford not to be on there anymore (and being on Menulog instead isn't cutting it):
Shade Cafe took over from previous tenants, a Greek restaurant, in September last year because 60 per cent of its business was coming through UberEats, and they couldn't justify renting such a big, expensive space. “People aren’t forced to go out," Carey said. "The amount of UberEats coffees we do is amazing, it’s crazy. It’s hard to get people out of the house.
https://www.smh.com.au/business/the-economy/the-happy-shops-...
I certainly would go carless if I lived in a city, but it hadn't crossed my mind that convenient food delivery could be the tipping point in car ownership vs not. But it makes sense -- as, for many, (commute) transport is solved.