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Uber Q2 2023 Earnings Review
Digesting the results of this Transportation Disruptor
Beat bookings estimates by 1% and beat its bookings guidance by 0.3%.
Missed revenue estimates by 1.1%.
Met 20%+ Y/Y trip growth guidance with 21.9% Y/Y growth.
Mobility take rate was 26.6% vs. 28.9% Q/Q (seasonality) & 29.3% Y/Y.
Delivery take rate was 19.6% vs. 20.6% Q/Q (seasonality) & 19.6% Y/Y.
Bookings growth was 18% Y/Y FX neutral (FXN).
Mobility bookings up 25% Y/Y (28% FXN).
Delivery bookings up 12% Y/Y (14% FXN).
Freight bookings down 30% Y/Y. Revenue per load and volume headwinds hitting the sector and segment for Uber.
Revenue rose 17% Y/Y FXN.
Mobility revenue up 38% Y/Y (40% FXN).
Delivery revenue up 14% Y/Y (17% FXN).
North America revenue up 4% Y/Y, LatAm up 30% Y/Y, Europe up 31% Y/Y, APAC up 31% Y/Y.
Trips per active platform consumer of 5.6 rose 9% Y/Y.
Beat EBITDA estimates by 8.5% and beat its EBITDA guidance by 11.3%.
Beat GAAP EBIT estimates by a whopping 165%.
Beat FCF estimates (limited sample size) by 86%.
Beat -$0.01 GAAP EPS estimate by $0.19.
*GAAP net income was helped by equity investment gains and hurt by equity investment losses in the Y/Y period. GAAP net income was still positive without the equity investment help this quarter.*
FCF for this business is somewhat lumpy.
Incremental EBITDA margin as a percent of gross bookings (not as a % of revenue which would make it look much better) was 12.2%.
Corporate G&A + Platform R&D fell 10 bps as a % of bookings.
3. Next Quarter Guidance
EBITDA guidance beat estimates by 8.3%.
Bookings guidance beat estimates by 1.5%.
Freight bookings to reverse negative Q/Q trend with growth set to be 0%.
Cash flow next quarter to be hit by a more than $400 million one time tax payment to the U.K. Tax Authority due to its business model change in that country. As a reminder, these changes included:
Charging riders directly vs. previously charging drivers a service fee as the U.K. determined drivers were employees and not contractors.
Began collecting tax on its fees charged. This direct tax collection role had the impact of reducing driver earnings and raising Uber’s take rate.
“We expect to demonstrate further operating leverage in the coming quarters.” -- Outgoing CFO Nelson Chai
4. Balance Sheet
$5.5B in cash & equivalents.
$9.3B in debt.
Stock based compensation fell from 132% of FCF to 44% of FCF Y/Y. Good progress. Stock comp dollars rose 7% Y/Y.
Added $250 million to a credit revolver to raise its capacity to $2.5 billion.
Headcount fell 1% Q/Q.
Will look to return excess cash to shareholders in the coming quarters.
May look to sell more equity stakes.
Focused on investment grade credit to ensure lowest cost of capital in the space to drive relative investment efficiency.
5. Call & Release Highlights
Uber’s drivers & couriers crossed 6 million this quarter vs. 5.7 million Q/Q. Earnings for these workers rose 17% Y/Y to power improving churn and a 33% Y/Y rise in active drivers. Better supply and demand balance in its marketplace led to briskly falling wait times and surcharges for consumers. Uber now feels like it has addressed its supply scarcity issue from the last several quarters. It sees its two-sided ecosystem as balanced which will embolden it to invest more aggressively into growth (and becoming GAAP profitable will too).
Mobility in North America is now all the way back to pre-pandemic levels. Still, the runway remains very long with its most mature markets just 10% saturated. Newer markets including Spain, Japan, Hong Kong, Korea and Germany saw 135% Y/Y FXN bookings growth to cross $3 billion annually.
During the quarter, Uber extended its Upfront Fares & Destination products to LatAm. It also brought its latest pricing algorithm to that region. These upgrades resulted in a 28% drop in unfulfilled tip rate as pricing & route transparency improved. Furthermore, it debuted earnings alerts for drivers to make more on the platform.
“Category positions in the U.S. & globally are constructive.” -- CEO Dara Khosrowshahi
Market share positions improved in most of its top markets as it set new market share leads in Australia and Japan. Basket inflation easing is helping to boost demand as deliver trip growth was the highest it has been in 6 quarters. The post-pandemic hangover is ending. Like for mobility, ETA, cost per trip and supply hours are all materially improving.
The previously announced Domino’s partnership will be exclusive to Uber Eats for a year.
New verticals crossed $6 billion in annual bookings for 10% of total delivery volume. 13% of Delivery users are using new verticals vs. 10% Y/Y.
Uber One launched in Costa Rica, South Africa and Sri Lanka to bring its total footprint to 15 countries today. Uber One bookings are now 27% of total volume vs. 25% 6 months ago. These loyalty members spend more with Uber, churn less frequently and deliver more profits for the company. Emerging products also enjoyed 80% Y/Y volume growth.
This is why healthy balance sheet & margins vs. alternatives is so vitally important. It gives it the flexibility to debut compelling, relevant new products. These products bolster cross-selling to make Uber One members more profitable for the firm and give its subscription a larger value lead over more mono-line competition. To juice membership further, it’s now offering cash back rewards for mobility. 14% of this cash back is being redeemed on delivery purchases as a sign of Uber One driving the desired cross-selling impact. Here’s another interesting chart on how new products are driving cross-selling:
Uber launched video ads across its products and debuted sponsored item listings for Uber Eats brands. It also released longer form video ads. As of today, its annual advertising revenue run rate sits at $650 million while it rapidly races to its $1 billion+ goal. It has 400,000 advertiser customers vs. 345,000 Q/Q.
AI & Autonomy:
Will use Serve’s delivery robots across new U.S. markets this year and Cartken’s robots in Virginia.
Rolled out GitHub Copilot for its software engineers and is working on its own large language models to create better marketplace efficiency.
Waymo Driver to be available on Uber across all available markets this year for delivery and ride-sharing.
“We believe Uber is the natural choice for autonomous vehicle (AV) operators like Waymo looking to deploy their technology in the real world… scale means we bring unparalleled consumer demand, in addition to relationships with hundreds of thousands of merchants. That means our AV partners will ensure their vehicles are highly utilized, resulting in better economics for them.” -- Dara
Uber Reserve added the ability to request a car with a car seat or one that is pet friendly.
Launched teen accounts to let families add a teen account to its overall profile.
Uber Taxi launched in several more cities across Europe.
Added UberX Share to 18 more markets to reach 50 as the “most widely available shared rides product in the World.”
Extended its Ford partnership for more flexible driver leases with its Ford Mustang Mach-E car in California markets.
Added the ability to book a flight in the U.K.
Uber Car sharing to expand into North America (Boston and Toronto first).
Added Group Grocery delivery.
Freight continues to struggle with the flip side of supply chain shortages: gluts. Its spot rates and volume growth are very challenged just like for the sector. Still, it believes in the segment longer term. This quarter, it signed Kimberly Clark and a “top 5 global food service company” as new freight broker service clients.
This quarter was fine for Uber. Margins and profits were excellent while demand was solid and largely in line with estimates. Continued Uber One penetration should continue to raise this firm’s margin ceiling along with ads and cost controls. Incremental margins point to that clearly being the case. That paired with easy 15% revenue compounding should lead to explosive cash flow compounding for the next few years. This quarter was the first major step in building that trend… many more to come. Growing supply leads, growing demand leads, thriving new products, and promising new partnerships to insulate it from autonomous risk. This company is executing.
As it has doubled in the last 12 months, I’m holding off on accumulating for now. I’d look to add (and average up) as it approaches roughly $42 per share. That price represents 22x my updated 2023 EBITDA estimates (25x current estimates which will surely rise).
Have a great day!