Uber Eyes 2021 Profits, Uber Eats Notches 64 Pct Growth

3Q earnings

Growth, yes, but perhaps not enough, at first blush, at least for some observers.

Profits, yes – on the horizon, according to management.

In terms of headline numbers, Uber’s third-quarter numbers beat analyst estimates.  But the $1 billion in red ink sent the stock lower, even as the company reported growth in newer segments such as Uber Eats and Uber Freight that were in the high double-digit percentage ranges.

Revenues of $3.8 billion were better than the $3.7 billion expected, up 30 percent year over year.

And looking at the bottom line, the net loss of $1.1 billion included $400 million in stock-based compensation. The total net loss came in at 68 cents a share, better, in fact, than the 81 cents a share loss expected by the Street. Investors sent the share down about 5 percent after hours.

The newest results bring the cumulative net loss at more than $7 billion in the current fiscal year. And during the post-earnings conference call with analysts, CEO Dara Khosrowshahi said that the firm will continue to leverage technology that helps users save money — but not necessarily through the discounting that had been a hallmark in the past. Uber users, instead, will be able to save on rides by, for example, walking to a pre-determined pickup location (through Express Pool). The discounting and the pursuit of growth alone now stands in contrast to a backdrop where the CEO said “priorities are changing.”

The company said that across the five segments it now reports:  There are 103 million monthly active platform customers, up 25.6 percent. The take rate stood at 21.5 percent.  Gross bookings came in at $16.5 billion, up 29 percent.

Notably, the revenues for Uber Eats, the food delivery option was 64 percent, year over year,  standing at $645 million. Similarly, Uber Freight logged high double-digit percentage growth, at 78 percent, to $218 million.  The company said in supplemental materials that the take rates for Rides, which were up 19 percent to $2.9 billion, were up 128 basis points (quarter over quarter) and were up 43 basis points in Eats (quarter over quarter).

With a bit more granular detail on the core ride business, the company’s monthly trips per monthly active platform customers were up 3.6 percent to 5.7.  Total trips across the platform were up 31 percent to 1.7 billion.

Other Bets showed $38 million in contributions to the top line, and this is the segment that showed traction from $3 million a year ago.

The CEO said in remarks that the company should be profitable on an EBITDA basis by 2021.

And in remarks to analysts, Khosrowshahi said the ride-hailing business hit two milestones in the quarter. He said that during the quarter, the company hit $1 billion in weekly gross bookings.  Notable growth markets include Japan, where growth has been above 60 percent.

And in addition, the rides segment generated positive adjusted EBITDA of $631 million, which he said covers corporate overhead.

Eats and the One-App Strategy  

Khosrowshahi said on the call that, in terms of the Eats business, in general, other firms “have been trying to use cheap capital to buy their way to growth. We’ve seen the capital is getting more expensive and can run dry, whereas platform leadership is both far cheaper and more permanent.”

He said, too, showing Rides, Eats and Other Services “side-by-side in one app” allows for cross-pollination of offerings.

In terms of Uber Rewards, the company has logged 18 million subscribers domestically in the first six months post launch.

Touching on the regulatory climate, California represents nine percent of rides and Eats gross bookings but a “negligible amount” of EBITDA.

And with a nod toward Freight, management said on the conference call that the segment has seen load volume increases of more than 100 percent despite soft market conditions.

Analysts on the call asked about the recently announced Uber Money. CFO Nelson Chai said “for many of our drivers, it’s how we get them paid quicker….by creating the Uber Wallet and allowing them to have the opportunity have a Uber debit card. We’re working on tools that allows them to get paid every day or after every trip. “