Uber Misses on Revenue as Loses Widen in Q2 2019 Earnings

Aug 8
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Uber Technologies Inc. (NYSE:UBER) was $200 million light on revenue and lost $5.24 billion in Q2 2019 mostly attributed to stock compensation.

Growth Focused

Uber Technologies Inc., since going public has been focused on growth above all other metrics even before their IPO earlier this year. The platform, as a result, posted 31% YoY increase in bookings revenue reaching $15.8 billion for the quarter, after accounting for currency exchanges at the rate of the previous period their growth looked even better at 37% YoY.

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The growth experienced came at the cost of profit on the quarter, analysts were expecting to lose roughly $3.12 per share, but the company reported $4.72 instead. The losses from operations in the quarter were $5.4 billion with an EBITDA loss of $656 million. During the quarter, Uber had stock-based compensation of $3.9 billion stemming from their IPO earlier in the year and mostly in the form of restricted stock units (RSU).

Below are some breakdowns of Uber’s financials from their investor relations:

Source

Uber Rewards and Uber Pro

The company launched Uber Rewards and Uber Pro in the United States this year as measures to increase ridership and now claims 100 million monthly active platform consumers for July 2019 and 1.7 billion trips for Q2 2019. An important note that Uber provided about Uber rewards is “Enrolled consumers earn points and rewards for Ridesharing and Eats and are twice as likely as unenrolled consumers to be active on both Rides and Eats.” Uber reward is a good example of Uber using their scale to bring in consumers across multiple platforms which could have tremendous upside in future quarters.

Uber Earnings Call

In Uber’s earnings call CEO Dara Khosrowshahi answered questions from analysts about earning a profit, he did not give a date but did claim over the next few years the company will more efficiently use resources globally. The Uber team on the call specifically noted that once growth has increased, they could consolidate marketing efforts to drive down costs in markets that Uber has higher ridership. Due to the global reach of Uber they have many competitors in different markets (with Lyft (NASDAQ:LYFT) being the biggest direct competitor in the United States), they took a page from Netflix (NASDAQ:NFLX) and claimed their biggest competitor is car ownership, and will focus on partnerships with other transit providers to “be there any way you want to get around the city”.

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Looking Forward

There is no immediate horizon for profitability for the company, although investors were not even remotely expecting it, the losses were almost 30% higher than expected for the quarter and took an immediate 10% off the stock price in after-hours trading, then rose on the outlook for remaining 2019. In a conversation with CNBC Dara Khosrowshahi claimed:

“We think that 2019 will be our peak investment year and we think that 2020, 2021, you’ll see losses come down. I think our break even is something that we can push the company to break even if we really wanted to frankly… no doubt in my mind that the business will eventually be a break even and profitable business”

Source

With the rewards and stock compensation aside, much of the earnings sounded the same as Q1 2019, but at a wider scale. There is no doubt that Uber investors will be patient for a profit which was a very successful strategy for Amazon.com (NASDAQ:AMZN) that continued to grow before a profit and became the third-largest company in the world by market cap.

 

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