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Company earningsNewsTruckload

Uber Freight continues to grow network, but losses widen

Will third-quarter performance alleviate pressure on stock as lock-up expiration approaches?

Uber Technologies, Inc. (NYSE: UBER) reported a net loss of $1.16 billion in the third quarter of 2019, ahead of the consensus expectation calling for a $1.5 billion loss. Excluding stock-based compensation expense, the loss was $761 million, better than the company’s second-quarter loss of approximately $1 billion, which excluded stock-based compensation and one-time driver awards.

Uber announced it will now report its financial performance through five reportable segments: Rides, Eats, Freight, Other Bets, and Advanced Technologies Group (ATG) and Other Technology Programs.

The company’s digital freight brokerage division, Uber Freight, reported a $100 million increase in gross bookings to $223 million. Loads in the freight division increased by more than 100% year-over-year, however the actual number of loads handled by Uber Freight was undisclosed.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) was a loss of $81 million in the quarter, $50 million worse on a year-over-year basis. Previously, the company reported Uber Freight’s results through its Other Bets division, which saw a second-quarter 2019 net loss of $122 million.

Uber’s Key Performance Indicators

The company reported that the freight division grew the network to more than 50,000 carriers and made reference to having some of the nation’s largest carriers as users of the app.

The press release noted that although the Uber Freight app is only 2 years old, more than 50,000 carriers have used it. “Several of the top-10 national carriers are already regular participants in our network and our shipper list includes several Fortune 50 customers.”

Prior to the third-quarter earnings report, revenue in Other Bets consisted primarily of Uber Freight. Other Bets generated $373 million in revenue during 2018.

On a consolidated basis, total revenue was up 30% year-over-year at $3.8 billion, compared to the consensus estimate of $3.68 billion. Gross bookings increased 29% year-over-year to $16.5 billion. Monthly active platform consumers increased 26% in the quarter to 103 million. Uber’s active users surpassed the 100 million threshold in July. Adjusted EBITDA was a loss of $585 million, $127 million worse than the same period last year but better than the $656 million EBITDA loss recorded in the second quarter of 2019.

Uber now expects an adjusted EBITDA loss of $2.8 billion to $2.9 billion in 2019. The company’s prior guidance called for a loss of $3.2 billion to $3 billion.

“Our results this quarter decisively demonstrate the growing profitability of our Rides segment. Rides Adjusted EBITDA is up 52% year-over-year and now more than covers our corporate overhead. Revenue growth and take rates in our Eats business also accelerated nicely. We’re pleased to see the impact that continued category leadership, greater financial discipline, and an industry-wide shift towards healthier growth are already having on our financial performance,” said Uber CEO Dara Khosrowshahi.

Most investors remain focused on the company’s lock-up period that ends Wednesday, Nov. 6. Lock-up periods prevent restricted shares, typically issued to the company’s executives and other interested parties, from being sold on public markets for a set period of time following the company’s initial public offering. Analysts have expressed concern that as much as 90% of the company’s outstanding shares will be eligible for trading on the public market once the lock-up period expires, potentially placing downward pressure on the stock if a large percentage of those shareholders look to liquidate their position.

Shares of Uber and its ride-hailing competitor Lyft (NASDAQ: LYFT) have been under pressure since the passage of California’s Employee and Independent Contractors bill, otherwise known as AB5, which goes into effect next year. AB5 essentially lowers the threshold for classifying a worker as an employee versus an independent contractor and threatens the wage-and-benefit cost structure of service providers using a contractor model in the state. Uber and Lyft are seeking to put a ballot proposal in front of California voters in efforts to upend the new legislation.

Lyft beat analyst forecasts last week, losing more than $460 million in the third quarter, more than half of which was related to stock-based compensation and payroll tax implications. Lyft expects to post positive EBITDA by the end of 2021, a year ahead of analyst expectations.

Uber expects to see full-year EBITDA profitability in 2021.

UBER Stock Price Chart – SONAR: STOCK.UBER

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Todd Maiden

Based in Richmond, VA, Todd is the finance editor at FreightWaves. Prior to joining FreightWaves, he covered the TLs, LTLs, railroads and brokers for RBC Capital Markets and BB&T Capital Markets. Todd began his career in banking and finance before moving over to transportation equity research where he provided stock recommendations for publicly traded transportation companies.

13 Comments

  1. Needham analyst Brad Erickson wrote in a note :

    Quote:
    ” We think the market misperceives what Uber’s efforts around driver incentives really aim to accomplish over the longer term,” Erickson wrote

    Another apparently shares my point of view !

    In my humble opinion ……………….

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