Uber Earnings: What Happened with UBER


Key Takeaways

  • EPS was -$1.70 vs. the -$0.81 analysts expected.
  • Gross bookings for Rides declined year over year for the first time ever, though by less than analysts expected.
  • Revenue matched expectations.
  • Uber laid of 3,700 full-time employees to cut costs, roughly 14% of its total corporate workforce.

What Happened

Uber reported significantly greater losses per share than expected on May 7, 2020. Uber has always struggled with profitability and took some tough steps to try to reach profitability, laying off 3,700 of its employees, about 14% of the total. Revenue was roughly in line with expectations, but gross bookings for its “Rides” segment fell year over year for the first time. All of this comes as California’s Attorney General, Xavier Becerra, is suing Uber and Lyft. The suit alleges that the ride-hailing companies are misclassifying their drivers as contractors under California’s Assembly Bill 5.

(Below is Investopedia’s original earnings preview, published 5/5/20.)

What to Look for

Uber Technologies Inc. (UBER), the ride-hailing service that went public in 2019, has posted a long string of losses, and this year’s coronavirus pandemic is not likely to help the matter. People have been hailing far fewer cabs amid shelter-in-place measures aimed at limiting the spread of COVID-19, a concern that helped push Uber’s stock down more than 60% off its 2020 high earlier this year. Investors will be looking at how Uber’s ride-hailing business has been affected when it reports Q1 2020 earnings on May 7, 2020 after the market close. Despite the negative impact of the pandemic, analysts expect the company to report a significant narrowing of losses YOY even as revenue growth slows sharply.

Investors also will focus heavily on the company’s Gross Bookings in rides, a key metric used by Uber to gauge the total number of rides being provided to customers via its Rides segment. Analysts expect Uber to report the first decline in this metric in at least 8 quarters. Due to the uncertainty arising from the pandemic, the company announced several weeks ago that it was withdrawing its 2020 guidance for overall Gross Bookings as well as its adjusted net revenue and adjusted EBITDA.

Uber has largely been a disappointment to investors since going public in one of the most highly-anticipated initial public offerings (IPOs) last year. Its shares have underperformed the broader market with a total return of -34% compared to the S&P 500’s total return of about -1% over the past 12 months.

Source: TradingView.

Uber has posted four consecutive quarters of adjusted losses per share in the past year. The good news was that adjusted earnings per share (EPS) in both Q3 and Q4 of 2019 were not as bad as analysts expected, and reversed a three-quarter trend of accelerating losses that began before Uber officially went public. Adjusted EPS was -$0.68 and -$0.64 in Q3 and Q4, respectively, compared to -$4.72 in Q2.

By contrast, revenue was showing positive momentum, growing 29.5% and 36.8% in the third and fourth quarter, respectively. Those were the highest rates of revenue growth Uber has posted since Q3 2018.

The outlook for Q1 is mixed. Analysts expect both earnings and revenue growth to worsen in Q1 2020 compared to the previous quarter, which is Q4 2019. To be sure, adjusted EPS, forecasted at -$0.81, would be a dramatic improvement compared to -$2.23 in Q1 2019. But revenue growth is expected rise at the slowest pace over the past two years, by 11.4% year-over-year (YOY).

Uber Key Metrics
  Estimate for Q1 2020 Actual for Q1 2019 Actual for Q1 2018
Adjusted Earnings Per Share ($) -0.81 -2.23 7.89
Revenue ($B) 3.5 3.1 2.6
Gross Bookings ($B) 10.7 11.4 9.4

Investors will also be focusing on another key Uber metric, which is Gross Bookings from its rides business. That metric is defined as the total dollar value, including applicable taxes, tolls, and fees, generated from Uber’s Rides segment. The metric excludes any consumer discounts and refunds, as well as driver earnings and incentives. Uber Rides comprises 75% of total Gross Bookings, as of the final quarter of 2019.

The lockdowns introduced to limit the spread of COVID-19 means that people are moving about less than they normally would be. That means fewer cabs are being hailed and Uber’s Gross Bookings in rides is likely to be negatively affected. However, the damage could be worse in Q2 2020 because lockdown measures were only introduced in the final weeks of Q1.

Gross Bookings in rides reached a high of $13.5 billion in Q4 2019. But growth has been decelerating over the past two years, rising by 17.7% YOY in Q4 2019 compared to a 44.1% increase YOY in Q1 2018. Now, analysts expect Gross Bookings in rides to fall in Q1 2020 by 6.7% YOY to $10.7 billion. That’s the lowest Gross Booking level in at least 5 quarters, since Q3 2018.

On a positive note, the company’s Uber Eats delivery business may actually receive a boost in Gross Bookings. That’s because many sheltering-in-place consumers may find it more convenient to use Uber’s food delivery service than to venture out to the local grocer. However, Uber Eats was just 24% of the total share of Gross Bookings in Q4 2019. That means it’s unlikely that food delivery can offset a possible major decline in Uber’s core ride-hailing business.

Original Source