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Comment by misun78 | Hacker News Reader

"Rides produced $742 million in EBITDA, up some 281%"

Time for the narrative of Uber burning VC money/subsidizing rides/selling-$2 bills-for-$1 to die?

It's "Adjusted EBITDA" which being a non-GAAP measure in this case excludes Corporate G&A and Platform R&D. This line item was -644 million.

Source?

The OP link, of course.

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.

Cash flow from operations was negative 3 billion excluding the "cash held by insurer" and capex was 0.5 billion. This puts unlevered free cash flow at closer to negative $3.5B.

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.

Does this imply a ~1 year runway considering $11B cash/cash equivalents on hand?

I believe that was an annual number. Not sure runway makes sense for an entity this big. They recognized billions of stock comp. There's enough enterprise value to generate cash in a variety of ways. The company might kick and scream to not do anything dilutive but its hard to see a scenario where they couldn't access the capital markets if backed against the wall (albeit at maybe an expensive rate).

But I'm not intimately familiar with this stock.

You're comparing all their lines of business but the OP talks specifically about the Rides business which they said generated a large EBIDTA profit and was more than enough to cover all G&A and R&D. It doesn't look like they break out G&A and R&D by line of business so it looks like the Rides business specifically is profitable even after paying everyone's salary at the company. Seems like the meme that they'll never be profitable has been disproven.

I know it's SOP for Silicon Valley to see massive losses for years while a business is established, but it seems like Uber has absolutely no reason to not be profitable within a year or less. Uber is, for all intents and purposes, a platform for user acquisition and operational cost savings for a decades-old industry (taxis) that are able to be profitable on a small scale all over the world. Car services were all making money charging sustainable rates to willing customers. If the model was just to normalize pricing a bit, gain efficiency at scale and smooth the customer experience with technology, it should be an absolute gimme to be profitable. I have a hard time understanding why their business isn't 90% smoke and mirrors.

> Car services were all making money charging sustainable rates to willing customers

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 don't know about monopoly rates.

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).

I think you're right that Uber could easily be profitable as the jitney cab service it is. The problem is that being a modestly profitable grey-market business doesn't pay back the hundreds of millions your investors have sunk into you.

PE-focused guy here. I see EBITDA daily.

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-...

Look at WeWork's "Community-Adjusted EBITDA" for another example of the same thing. In their case, they back-loaded contracts on both sides, leasing and sub-leasing, then amoritized the sub-leasing revenue and didn't amoritize the leasing costs, showing huge positive net income at the start of the leasing terms.

There's a difference between GAAP EBITDA and made up EBITDA. A significantly positive GAAP/actual EBITDA means that the business is long term viable. Existing shareholders and/or creditors might get wiped out, but in the event that happens a viable business should rise from the ashes.

Community-Adjusted EBITDA was an absolute joke when WeWork came out with it. However, I kinda get what WeWork was trying to say, it was just stupid to term it that way. Either way, any analyst worth their salt sniffs that stuff out pretty easy. It's basically a PR attempt for (future) public markets, who have less sophisticated investors.

If so, what are some important metrics you usually look at?

For software companies...gross margin tells me everything (assuming they've calculated COGS correctly)

For all companies, FCF and to some extent, DCF.

Maybe. Uber has more than doubled in price for me for just about any given fare over the last year. I use it much less than I used to. I'd like to see rides up as well as revenue from those rides.

Uber costs 2 to 3 times as much for me as it did 4 years ago, so yeah, I think that's changed.

But I've also been riding much less.

Is it a flat rise or just new tricks like late night fees for "faster" matching ?

Wait, Uber is now selling cuts in line? I hope the ghosts of their kindergarten teachers haunt them as they sleep.

What do you mean “now”? That’s what surge pricing always was. The intent hasn’t changed, just the mechanisms.

Well that how I understood their "communication". They were so concerned about me waiting in a crowded area at night that they gently offered to take 3-4x times my money just to be sure a driver comes faster.

This levels of concerns warms my blood.

As bad as that sounds, there are some nights where I'd just pay that. Two years ago on July 4th I ended up stuck far from home and mass transit and had to walk a few miles and still wait 90 minutes to get an Uber.

I would have paid $200 or more for that Uber if it was fast.

If you use Uber as an ambulance you would pay. And it would still be relatively cheap.

I've seen it in base prices.

How is this different than surge pricing? Sounds like a marketing change and maybe a new option to not pay surge pricing in exchange for a longer wait (like traditional taxis)?

At the beginning, surge rates of 3x-10x were common at busy times. I don’t even think surge had a limit initially.

I think it’s functionally tiered surge pricing.

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?

For privacy reasons, it’s unlikely drivers are aware. Uber restricts what drivers can see, especially after the trip is over when Uber removes the address they went to.

You might have been riding much less but they are booking more rides (20% more than last year). So it's not that bad.

In which regions though?

Uber has got much more expensive to me too. I remember riding in chicago was cheaper than taking the L. But I’m still using it often, I don’t have a car.

Given you work for you Uber, I don't think it's an accident that you misquoted it and left out a key word: "Adjusted".

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.

It hasn't been true for a while. On a per-ride basis in their developed service areas they have been profitable for a long time.

And yet they are still losing money. Odd, that.

growth tends to do that.

How long does a company need to grow for? They are 11 years old and there is arguably only 1 competitor.

Exactly.

Amazon was essentially break even for longer than that. Worked out ok there.

Amazon was building expensive infrastructure and improving their brand, whereas people are increasingly coming to associate Uber as tarnished (don't pay their drivers enough, don't screen for rapists, dumpster fire politics, killed a pedestrian testing their self-driving cars recklessly, continue to hemorrhage money after a decade of operations).

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.

why Is the one outlier always used as an example? But even with that outlier it’s still not a great example. Amazon Retail is a low margin, low profit business. 75% of Amazon’s profit comes from AWS.

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.

Arguably one competitor if you just consider North America and exclude taxis or anything outside of their rideshare business.

And those competitors are also subsidizing rides. In many cases they are also paying drivers better to the point you'll get uber drivers recommending other services. The winner is whoever can pump more investor money in the longest, and even the can be disrupted by new rounds of investors.

They operate in so many markets though, many competitors in many markets. For example in Australia Ola is generally cheaper (especially so when there is Uber surge pricing). It probably isn't sustainable for Ola either, but at the same time, can Uber afford to give up those users, even in the short term?

But what sort of growth are they spending money on - and is what they're spending money on worth it? If you're spending money on free rides, you might be getting users that aren't going to be profitable long term. If you're spending that money on r&d moonshots like developing your own self driving cars, then it's not looking so good for you when tesla/waymo/etc are so much further ahead. And if economies of scale begin working against you, where as you get more and more drivers, they begin to organize and lobby and push to become classified as employees and raise your costs, then you might be facing a reconing very soon.

They're subsiding geographies that haven't yet reached critical mass for economy of scale to kick in. In mature markets they're profitable, so eventually when the other markets become mature for uber they'll also be profitable. The evidence is there. The money is put to good use. The only question mark is waymo/tesla/etc competition otherwise Uber would be a good bet.

I think another question for me is how much their "mature" markets have any real moat. Uber intentionally killed of most of their competition, hoping for monopoly rents. But rideshare strikes me as a very low barrier to entry.

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.

So just like how Uber had to spend billions to subsidize markets to maturity, it's the same with any future competitor, low cost isn't a thing. Yet if Uber is already there the end market wouldn't look like how it currently is, it would be a mutually assured destruction with Uber where nobody wins. So spending billions to achieve nothing makes that possibility remote. Any competitor would have to bring disruptive technology.

It is not the same. I don't think there's a need to spend billions at all. The market exists. The technology exists. Drivers are already driving. I think it could be pretty easy to switch them to something that's a better deal for them.

The reason why Uber subsidies so much is because if there's not enough drivers people would need to wait a long time, or the price is very high and that creates a shitty experience that won't be able to compete. Conversely drivers don't have enough passengers. Initially, when you're just starting, that's just going to be a fact. Until you nurture the market to maturity the market doesn't exist. Don't look at what Uber has already built through years of huge spending and take it for granted.

Because of unrelated, ride-count-independent costs. For example, massively unprofitable self-driving car and food delivery businesses.

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.

Depends on who you think of as paying the costs. One of Uber's "innovations" is to get the key capex, cars, off their balance sheet. Along, of course, with major opex contributors like repairs. Instead, those burdens now fall on individual drivers. It's really not clear to me if Uber would be truly profitable if they had to pay a reasonable wage plus the actual costs.

So instead the question becomes how long they can keep exploiting workers like this. AB5 suggests that the answer is not "forever".

I've yet to hear a good argument for how they're exploiting workers. Tons of companies are always hiring yet people chose to work for Uber. Most people hate their job and wish they were paid more but Uber is the only company that will welcome you back with open arms if you don't show up for a month without notice.

I would suggest Google. There's a ton of discussion around California's AB5 that explains the issues.

I have many issues with Uber, but at least in the UK the argument that they’re pushing costs of fuel/repairs on to the drivers isn’t really a valid one. Most taxi drivers in the UK are self-employed, and pay a fee to one of the local cab companies in return for jobs getting pushed out to them, and they’re responsible for all the associated costs of running a taxi and remaining licensed to do so.

So who buys and repairs the cabs? In the US, it's mostly the cab companies. Drivers just have to pay a fixed night's rental, plus fuel. If,say, the transmission fails, the driver just swaps to a different cab; it's the cab company that's on the hook for the thousands in repairs.

Typically the driver does. I’m sure there are a few can firms running there own fleets and leasing them out, but in most cases it’s the driver who has responsibility for everything, right down to paying for the meter to be checked once a year.

Marketing costs in new markets have to be expenses immediately. This isn’t saying they are wildly profitable, just that some traditional metrics miss value in high growth companies.

they were already profitable on rides in their most mature cities

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