Uber’s Q3 guidance was 0.6% behind estimates on bookings and 0.6% ahead of estimates on EBITDA. Its guide includes $400 million in recently added foreign exchange (FX) headwinds. Without this incremental challenge, its bookings guidance would have been slightly ahead. It sees mobility FX neutral (FXN) bookings growth remaining in the mid-20% range in Q3.

Uber trades for 31x 2024 EPS and 70x 2024 GAAP EPS. EPS is expected to grow by 10% Y/Y (lapping 155% Y/Y growth) and by 59% Y/Y next year. GAAP EPS is expected to be flat Y/Y (lapping 120% Y/Y growth and some legal charges) and by 136% Y/Y next year.

As a global marketplace, Uber must nurture both sides of its network to make sure systems are working optimally. Leading driver supply fosters lower surcharge rates, faster wait times and more delivery batching opportunities to juice margin. It’s great for customer delight & Uber cash flow. Win, win. At the same time, leading customer supply means more earnings and happier drivers. Both sides of the equation must be strong to spin the compelling flywheel.

Fortunately for Uber, that’s absolutely the case. Overall bookings rose 21% FXN while mobility bookings growth accelerated from 26% Y/Y FXN last quarter of 27% this quarter. In delivery, 17% Y/Y FXN bookings growth matched its fastest expansion in over a year. Growth was driven by more customers (+14% Y/Y) and engagement (+6% Y/Y), rather than less structural items such as price hikes. It’s outperforming formidable competition across all geographies, with market share gains Y/Y in delivery across its 10 largest markets and in most of its largest mobility markets too. Brazil, India and Australia were highlighted as its strongest countries.

“Our ability to grow faster than the category while increasing margins reflects the quality of our execution and speed of our innovation, as well as the compounding power of our global platform.”

CEO Dara Khosrowshahi

The best ways Uber can drive demand, aside from adding new customers, are via engagement and retention. These are directly tied together. 35% of Uber customers are using multiple products vs. 31% Y/Y and Uber One continues to enjoy strong membership growth. Those members spend more and stick around longer compared to non-members.

From a supply point of view, Uber added 300,000 new drivers for the 3rd straight quarter to reach 7.4 million total. Active driver growth led bookings growth and driver earnings rose 23% Y/Y FXN. Mobility supply hours per driver also set a new all-time high. As part of its recently announced BYD partnership, it will be placing 100,000 of that affordable Chinese EV-maker’s cars across Latin America and Europe. This is one way that it hopes to juice accessibility for drivers.

Tech-based investments continue to up-level Uber’s service quality. In travel, new matching algorithms with better pick-up instructions are making that experience much easier. Uber XXL, which offers added room for suitcases, is also a new travel product that’s off to a great start. Uber for Business enjoyed accelerating Y/Y growth to reach 200,000 clients. To support that momentum, the company added delegate profiles to allow executive assistants to manage accommodations for their bosses. Its Moto product, which is doing especially well in Brazil, is still seeing a notable 40% of all users up-sell to more products.

The growth engine here is still in its early innings. Just 20% of its serviceable consumers across its 10 biggest markets are monthly users. And among monthly users, half of them only take 1-2 mobility trips per month. It has ample opportunity to find more riders, delight them with superior service and sell them more bookings.

Order growth was healthy across all income cohorts and first time customer growth was higher than at any point during the past 5 quarters. There was building analyst concern that economic headwinds would hurt this consumer-facing business. Uber is not seeing that in mobility or the even more discretionary delivery category. That is notable and pleasantly surprising when compared to Airbnb’s results discussed in section 2.

“The Uber consumer is in great shape. While our consumers are higher income, we are not seeing any softness or trading down across any cohort… I think we can thrive in upturns and downturns.”

CEO Dara Khosrowshahi

What’s driving this resilience? First, Uber’s customers are relatively affluent. That inherently makes them less sensitive to macrocycles. Furthermore, macro fragility drives more supply growth. This supply growth lowers average surcharge rates, drives affordability gains and helps Uber offset budget constraints from consumers. For more affordability relief, its Uber One membership also offers material discounts for consumers and is rising a proportion of overall business. It’s also continuing to find success in cheaper mobility products like motorcycles and shared rides.

Even as it drives affordability through these items and 70% Y/Y merchant-funded promotion growth (more later), it’s enjoying material margin expansion. That’s thanks to more driver supply cutting miles to fulfill and adding to order batching potential, as well as efficiency gains in payments and other back-office costs. It’s also just the byproduct of economies of scale and rising multi-product usage, engagement and retention.

The Uber Eats Instacart partnership is going quite well. It’s driving incrementality in suburban areas where Uber wanted to establish a deeper presence. Furthermore, the average basket size from these orders is 20% larger than for Uber Eats orders. Uber continues to see a clear path to EBITDA here and is enjoying robust overall delivery margins despite these more nascent products.

Ads crossed a $1 billion, high margin revenue run rate. Its upgraded targeting, attribution and reporting tools, as well as the continued build-out of its sales team, are all helping it win and retain large brand budgets. Spend per advertiser is up, and it just added Google and The Trade Desk to its roster of partners that can tap into its impressions. While sponsored listings are higher margin for Uber vs. merchant-funded offers, it’s still eager to lean into these offers. They drive better affordability, which lowers Uber’s own external marketing intensity needs and raises conversion rates.

As recently announced, BYD is partnering with Uber in its work on autonomous vehicle technology. Uber prefers to go about this driverless evolution in an asset light way, and this is its way of accomplishing that. The company is adamant that its ability to optimize capacity utilization for fleets will lead to it being the demand aggregator of the future – similarly to Expedia for travel sites or Airbnb for hosts. It knows it can maximize margin for these providers and knows its driver network will be needed to supplement autonomous supply for at least another decade. It’s wildly expensive to build fleets to service peak demand when those fleets will be sitting on lots doing nothing during all other times of the day.

Uber’s drivers will plug that gap in a more malleable way; Uber’s massive consumer network will ensure carriers are profitable and that Uber is part of this equation. That’s what it thinks, and I agree.

This argument relies on there not being one autonomous tech provider to rule them all. Some think Tesla will be the monopoly, but Google, Amazon and countless other private players are pushing hard here. I don’t think any one player will win the entire market and I don’t think any will command the kind of market power that Uber has in demand aggregation. McDonald’s, Chipotle and massive restaurant brands all use Uber to augment demand levels. I think autonomous car makers will too. I could be wrong here, which is another reason why I like the new Alphabet position so much; it’s also a hedge against autonomy displacing Uber.

This was a strong showing. Uber’s business is more macro resilient than I think most assume it is. Despite ramping consumer headwinds, its business keeps accelerating and its margins keep expanding. This company has built a massive two-sided network that I think has real staying power, while its subscription continues to uplift its revenue quality and margin ceiling. The runway remains massive, new products continue to work, market share continues to rise and Uber continues to win.

I have no plans to trim any shares.

For the third quarter, revenue guidance missed by 3.5% and EBITDA guidance misused by 8.5%. Marketing spend growth will lead revenue growth due to timing and investments in under-penetrated markets. Marketing spend is flat Y/Y so far in 2024, but growth will accelerate through the end of the year. It reiterated annual 35%+ EBITDA margin expectations.

Airbnb cited a weakening demand environment in the USA and shorter booking lead times as the reasons for the misses. Interesting to compare that to what Uber had to say about the consumer, but different sector. Encouragingly, last minute bookings growth remains quite strong, which does point to demand still being there… it just may be more delayed, more hesitant, or both.

“[In June], we are seeing shorter booking lead times globally in some signs of slowing demand from U.S. Guests. And our Q3 outlook incorporates these recent trends. We're watching these trends closely, along with the impact any macroeconomic pressures might be causing… last minute bookings remain extremely strong.”

Founder/CEO Brian Chesky

“The silver lining with regard to the trends that we see right now, is that it’s not that consumers are not necessarily going to book that trip for Thanksgiving or Christmas. It just appears that they have not booked it yet.”

CFO Ellie Mertz

Airbnb has not cut 200,000 low quality listings from its base since it updated its hosting quality system last year. It has also made it easier to find the most popular listings with its previously announced “Guest Favorites” tab. This has now crossed 150 million total nights booked just a few quarters into launch. Airbnb has been hard at work on cutting the host cancellation rate, which fell 30% Y/Y to drive better reliability for guests.

Overall, it now has 8 million active listings, but did remove language from the release pertaining to supply growth continuing to accelerate. It’s been about 2 years since it started sharing that disclaimer, and growth cannot accelerate forever. Active listings from its highest quality “Superhosts” rose 26% Y/Y.

There are two pieces to newer bets for Airbnb: newer markets and new services. On the newer market front, it continues to enjoy faster nights booked growth in expansion markets vs. its core markets. It’s adding a few new markets to its focus list, which contributed to the Q3 EBITDA guidance miss. On the new services front, we were again told very little about plans for its “Icons” (landmark listings to spend time with celebrities) project. All it told us is that the page has 40 million views and that it expects the initiative to open the door for expanding into more product categories down the road. It will add more Icons listings in 2025. It will also debut a consolidated host marketplace that allows experience and home options to be in one place.

Airbnb has been talking about experience expansion for 4 years, and we’ve seen very little progress here as of today. It’s pretty incredible that the firm has built such a massive business with one product. And while this product’s runway is quite long, it is not endless. Experiences will eventually need to find traction. It thinks better pricing, discovery and selection are the main items to improve on to make this happen.

“We're now beginning to prepare the next chapter of Airbnb. And I want Airbnb to be one of the most important companies of our generation. And to do that, we're going to need to do more than one thing. We're going to have to do multiple new things… Next year we’re going to begin to expand Airbnb truly beyond the core business. We’re going to relaunch experiences.”

Founder/CEO Brian Chesky

North America saw a modest acceleration in Y/Y nights booked growth compared to last quarter. Non-urban, short term, entire home and big group bookings led overall growth and average guests per reservation rose considerably. This led to nights booked on a per-guest basis outpacing actual nights booked growth by 400 bps. Average daily rate (ADR) in North America rose 4%, which was largely due to FX and mix shift. Without these price tailwinds, ADR rose 1% Y/Y. Importantly, North America skews to long term stay volume. Airbnb is still comping over a fee reduction for long term stays, which is a growth headwind, especially here. California regulation implemented on July 1st to make cancellation grace periods less favorable for hosts is also impacting things just a bit.

 In Europe, Y/Y nights booked growth was stable compared to last quarter. ADR did rise 3% Y/Y when excluding FX and mix shift, which was powered by general listing inflation. The same growth standouts for North America were standouts in Europe too.

LatAM and APAC nights booked growth was 17% and 19% Y/Y, respectively. It’s “encouraged by the recovery in outbound China travel.” Still, that recovery remains slow and has a long way to go.

Airbnb is dabbling with adding more hotels to its marketplace. It fixates on supply uniqueness, which this flies in the face of. Still, it knows some people really just want a hotel with a doorman, gym and room service. And because hotels have 9x the booking volume of Airbnb, it wants to take a piece of that pie. It’s very focused on improving listing reliability through some of the other products already mentioned, but hotels will remain the preference for a large cohort of customers.

“And when we look at market share on that basis, what we see is that in Q2, consistent with prior quarters, we continued on a year over year basis to gain market share in terms of total nights stayed over the universe of hotel and other travel accommodations.”

Founder/CEO Brian Chesky

Airbnb recently tweaked its mobile website to nudge users to its app. This prompted a 25% Y/Y spike in downloads, with even faster growth in the USA. Nights booked through the app rose 19% Y/Y to reach 55% of total vs. 50% Y/Y.

On the special events front, the 4th of July holiday in the USA was its largest revenue week in North America ever. Paris nights booked doubled Y/Y for the Olympics and cities hosting Euro Cup games enjoyed 20%+ Y/Y nights booked growth.

June bookings from co-travelers doubled Y/Y thanks to its new shared wishlists product. This also requires all users on the list to make an account, which should support Airbnb’s overall account growth. And once these people are in the ecosystem, it is much easier to sell them more listings.

Tough operating environment for the company. The quarter was fine and the guide was underwhelming. I don’t think the weakness is based on anything besides macro weakness. This is not a byproduct of competitive market share losses or its product falling out of favor. They are the monopolistic verb. This is simply a more hesitant consumer spending a bit less on discretionary travel.

At 16x-17x 2024 FCF and 21x 2024 GAAP EPS, this 10%-15% revenue compounder, with its fortress balance sheet, is interesting to me. I struggle mightily with grasping short term rental regulation risk as a response to housing scarcity and inflation. Still, New York City threw a wrench in its business with their own rule changes, and that has had very little impact on financial results.

The big wildcard I see here is how big experiences can be. Airbnb is and can continue to be historically successful with its single product. Merging that with a marketplace to transact talents and time could turn this into the mega cap that Chesky wants it to be. The traction in experiences to date has been non-existent, but it’s great to see them put a more concrete timeline on re-introducing the product. Results were both uninspiring and changed nothing about the long term investment case.

Max Subs —

I’m adding this back to my watch list. Don’t be surprised if this makes its way into my portfolio in the near future.

Celsius revenue beat estimates by 2.4%. Its U.S. multi-outlet + convenience (MULOC) revenue rose by 36.5% Y/Y for the quarter. Revenue this quarter was offset by a little more than $20 million in Pepsi inventory level resets vs. its expected $25 million. These resets could continue into Q3, but that’s uncertain at this point. Without this help, the revenue beat would have been around 2%. It should now be through this Pepsi revenue headwind.

Raw material prices and its promotional plans led to it maintaining its high 40% to 50% GPM for the rest of the year. It plans to spend more on talent and go-to-market to support growth and its market share amid a tougher backdrop. More on this later. This is about as expected compared to 48.7% estimates. It sees G&A as a source of leverage for 2024 and again hinted at hiking prices in the near future.

As you can see above, Celsius growth has materially slowed over the last few quarters. That’s largely related to macroeconomic headwinds and a broad category slowdown. For context, the sector’s unit sales volume was flat vs. CELH 31% Y/Y growth and the sector’s 2%-3% Y/Y revenue growth compares to 23.3% for Celsius. Furthermore, it noted a large convenience store change that recently cited a 4% decline in their own same store sales for the same period. Still, Celsius made up 47% of the entire category’s revenue growth during the quarter as it continued to reasonably overcome headwinds.

“We also began to feel the effects of the same macroeconomic factors that are pressuring same-store sales and affecting consumer purchasing habits.”

CEO John Fieldly

Aside from consumer-based pressures, there were some positives and negatives within market share and competitive dynamics. Starting with the positive, multi-outlet + convenience (MULOC) share for the 4 weeks ending July 14th was 11.0% vs. 9.6% Y/Y. It gained 35% more retail shelf space during this year’s (delayed) resets and grew average SKUs at those stores from 15 to 20 Y/Y. Circana, which is what CELH cites, added a new MULO+ category, which includes online retailers and the club channel segment. Share there rose from 10.69% to 12.04% Y/Y. Furthermore, in gas stations and convenience stores, it gained 2.5 points of Y/Y market share to reach 34%.

“This season's strong shelf resets are tailwinds for us to capture greater share.”

CEO John Fieldly

On the negative side of things, market share gains were less positive when looking at Q/Q trends. For MULOC, it lost about 0.5 points of Q/Q market share, with MULO+ falling 0.27 Q/Q as CELH fared better online and in club stores. It “responded to these pressures” and saw  MULO+ market share rebound M/M from June to July. It also briefly fell back below Monster in Amazon market share, but regained that top spot through July with 22.1% share vs. Monster’s 21.5%. It also called out strong Red Bull product launches that helped that brand. This is how it explained why its growth rates are leading the category by such a wide margin, yet it is losing some share recently. Red Bull gained a bit of momentum, and its massive base of revenue meant that fostered modest market share losses.

It sees long term share gains as continuing, but with short term blips also continuing. It “moved aggressively to gain more momentum,” and thinks it has great programs for the 2nd half of the year to support its trajectory. Macro will stay poor (it thinks), but more marketing programs, incentives and a continued international push should help it overcome this. And again, its gross margin guidance does point to considerable expansion despite these margin headwinds to support revenue.

Whether it’s Red Bull launches, the Pepsi inventory resets, promotional pressures from struggling competitors or something else, market share trends must be closely paid attention to. I think the inventory resets across MULOC players are hurting it a lot too. CELH is gaining more shelf space Y/Y than anyone else, so those gains being pushed back by a few months would obviously be a larger headwind for it than others. Not a longer term issue, but a reasonable explanation for this short term negative market share trend. It’s not alarming to see a share dip here and there as long as the overall trend is at least stable. If declines become a multi-quarter theme, that would certainly be an issue.

Depending on how well new marketing initiatives go, Celsius plans to continue leaning into spend to support its long term growth story and more market share gains. For now, it has grown its field marketing team by 50% Y/Y and its field sales team by 150% Y/Y in a bid to expand its go-to-market presence. It thinks it has the product, brand and customer loyalty to be the largest energy drink brand in the world (Monster’s market cap is 5x Celsius). Younger consumers want sugar free energy drinks, and that is perfect for Celsius. Now? It needs the distribution muscle, beyond just Pepsi’s elite supply chain, to maximize its traction.

“I think the back half of this year will be exciting times for Celsius.”

CEO John Fieldly

Many assumed that Celsius would start international expansion and immediately explode across the world from there. Two notes on this. First, that is not how it tries to operate. It will run the exact same playbook that served it so well in the states. it  will start with gyms and fitness communities, build some traction and use distribution partners to turbo-charge its reach. Secondly, not every U.S. product works abroad. Ask Domino’s how its business in Italy is going. Tastes are different; lifestyles are different; preferences are… different. What works here does not always work across the pond. Luckily for Celsius, things do seem to be working. Revenue trends in the UK and Ireland are tracking ahead of internal expectations, just like its Canadian launch did. It will launch in Australia, New Zealand and France later this year.

This past March, Celsius launched a new Pepsi incentive program to “align shared interests.” This is essentially Celsius adding more financial perks to motivate Pepsi to deliver more growth for it. This is still being implemented, and will be fully rolled-out by the end of this year. At that time, it expects Pepsi to “lean in” with them.

“We have a lot of great innovation planned for 2025, which we're really excited about. And we actually just started initial discussions with a variety of key retailers for next year, so that has been fairly positive.”

CEO John Fieldly

It also included some research on the health impacts of its product. This was likely in response to the Wall Street Journal article calling out potential, unvetted issues with excessive consumption:

This quarter was fine. It’s great to see overall market share turning positive M/M, its Amazon rebound and also strong international momentum. The margins were the standout, but revenue was much better than depressed estimates feared. This company seems to still be the disruptor and king of the space. It’s just dealing with significant macro headwinds, and is combating them better than the rest of its category.

I think the energy drink category rebounding is inevitable. Growth for the sector didn’t just mysteriously halt for good; macro soured. The real question is whether or not market share trends have bottomed and where they can go from here. I’m pretty optimistic, but more proving to do and channel data throughout the quarter will be vital to track (I’ll do it for you). As consumer discretionary rebounds, comps get easier, global growth picks up and its marketing plans are implemented, I expect growth to rebound. And that should happen in tandem with strong margin maintenance, given all of the operating efficiencies being realized.

Max Subs –

As you know, I’ve recently started a position in this name and have built it out rather quickly amid the extreme volatility. I’m sitting on my hands and doing nothing following this report. I had no interest in trimming, and not enough interest in adding to make the move.

As an important caveat, I have not had time to listen to the call yet. I wanted to tuck this into tonight’s article, given tonight’s share price reaction. While I don’t really see my opinion here changing, it’s always possible after I read the transcript.

This was the third bad earnings report in a row for Progyny. It slashed full year revenue guidance by over 5% and by 10% compared to its original 2024 outlook. It cut EBITDA guidance by 7.7% and cut EPS guidance from $1.64 to $1.57.

It called out stabilizing utilization rates, but falling revenue per member, which it doesn’t exactly know the reason for. Leadership thinks the “business remains healthy and well-positioned, based on progress,” and I’m a tad torn on whether or not I agree with them.

On one hand, the guidance revision is awful. The last handful of quarters have featured a hodgepodge of excuses — ranging from med shortages, to treatment mix shift, to abortion news hurting utilization — to explain the disappointment. This quarter, the new excuse was treatment monetization, which the team doesn’t know the true source of. It’s very hard to model both macro and human biology, so I understand how they could struggle. Regardless, investors rightfully demand some level of visibility and this team clearly doesn’t have any. There’s no sugar-coating any of that.

On the other hand, early success in its selling season for 2025 is actually pacing above this past year, and its newest products have been successfully cross-sold to a notable 1 million (16%) of its members. That is undeniably impressive and expands its addressable market materially. It continues to print cash, has no debt and just added the equivalent of another 5% of its market cap in buybacks. It is the clear financial and clinical leader in its space. It saves its members, clients and carrier partners money and vastly uplifts patient outcomes across all categories. It boasts near-100% client retention and trades for about 14× 2024 earnings. Finally, it has an investor day next week. Companies generally don’t schedule these unless they have good things to say to investors.

I can’t buy this dip, as I don’t think this team knows how to level-set expectations. I can’t sell this company because it does create so much value and is deeply profitable. It should compound revenue at 15% during normal times and is oh so very cheap. I’m going to sit on my hands and do nothing. Perhaps I’m being too patient, but holding losers is a far less damaging mistake than selling future winners too early. Either they turn a fundamental corner like every single thing tells me they should, or this dwindles further and further down as a % of my portfolio.