
Uber Q3 Results - kgwgk
https://investor.uber.com/news-events/news/press-release-details/2019/Uber-Announces-Results-for-Third-Quarter-2019/default.aspx
======
ganitarashid
Having new “one-time” charges every quarter means those are not one-time
charges. They’re part of the business, which means the business doesn’t work.

One of Ubers biggest problems is that they have zero brand loyalty. For a
company that sells a utility (get me, or my food, from A to B) rather than an
experience (like a cool vacation in a unique mansion), I will always pick the
cheapest option. Whether that’s Uber or Bobs Taxis it doesn’t matter. That
means this whole business is a race to the bottom. Profits will stabilize at
approximately zero for everyone in that business. The second huge problem is
that nothing about providing this utility (neither the driving itself, nor the
human labor required of the driver) has decreased since Uber came into
existence. Driving a car from A to B still costs the same per mile (gas or
electricity and wear and tear), and the driver still costs the same per hour
(at least minimum wage). Uber has only made finding the ride more efficient
but it has not made the actual ride itself more efficient. So in the best
case, Uber can be as profitable as a taxi company. But ONLY if it raises its
prices to taxi company levels. And then it’s a taxi company. Taxis are
expensive for a reason, because without a VC subsidy they have to be
profitable to exist. And what if there are robot drivers? Wouldn’t that
eliminate at least the human cost? It would. But it would do so for every
other transport company as well, and by the same amount. Since there is no
customer loyalty for a transport like this, Uber would still be fighting the
same competitors in a similar race to the bottom. In summary, nothing can save
Uber.

~~~
cavisne
At least for me uber has huge brand loyalty, it’s sitting in the dock of my
iPhone.

If I need to go somewhere, or get home, Uber has never let me down. Likewise
with food delivery, I certainly have been let down on that but Uber does the
best job of letting me track the order and get a refund if needed.

Sure Lyft is an alternative, I have it on my phone but simply never use it.

It’s incorrect that nothing has changed about the cost of a ride. Taxi
medallions used to be 500k-1m and require essentially taking out a mortgage.
Now they are worth effectively $0.

And cost was never the core issue with Taxi’s, it was the unpredictability of
the cost, having to pay in cash because the drivers incentive is to skim from
the owner, having to find one or call for one, having to put your trust in a
random driver in a random country with no idea if you are going the right way.

Look to NYC where they seem to have set the goal of making Uber as expensive
as possible (10s of dollars in random fees per ride). It’s still popular - in
a city with some of the best taxi options.

~~~
greggman2
I switched to Lyft a few years ago because of Uber's evil ways. I've had zero
problems.

If people won't stop using a company that is so blatantly bad we're in
trouble.

~~~
pavlov
For the past 25 years there has constantly been at least one tech company
which is perceived in techie forums as so bad that it's incredible anyone
would voluntarily use their products.

Those companies have been Microsoft, Apple, Google, Facebook and Amazon.

Financially you could have done amazingly well in the stock market simply by
buying whatever big stock techies hate at the moment.

(Not saying Uber will necessarily continue this pattern. Even though they have
the brand, I don't see how they intend to fix the enormous losses. That's very
different from the optimized zero profit Amazon was making for years.)

~~~
usrusr
Sorry for being the hn stereotype, but that's pure survivor bias. That "buy
the hated" strategy would have left you with lots of worthless Unisys shares
for example, they are down >> 90% from back when the GIF patent was putting
them in the spotlight of unpopularity.

------
georgeecollins
You have to go past a lot of non-GAAP accounting to see that they actually
lost $1.1B last quarter, almost all from operations. There is a nice chart
showing all the things they are taking out to get their adjusted EBITDA of
-0.5B.

It seems like they are always taking out a bunch of one time charges to claim
that there core business would be profitable. But every quarter they have
those charges. I don't understand how people say their ride sharing business
is profitable. I mean maybe it is and I just don't understand how people think
that. I would love it if someone would walk me through that.

~~~
Animats
Someday, I want to see a financial statement where the non-GAAP accounting
makes the company look worse than GAAP accounting. Statistically, that should
happen half the time. It doesn't.

~~~
btown
Having worked with investment bankers: Statistically speaking, bankers develop
various hypotheses re: what "adjustments" might be added to a financial model
to make the company look better to investors. They tell their junior analysts
to run the numbers, this flows down the chain, and many late nights and
Seamless orders ensue. Experienced bankers have pretty good priors, so most of
these hypotheses make the company look better. Even so, all but the best
outcomes are rejected, and the analysts whose analyses ended up being useless
complain to each other over copious amounts of alcohol.

Essentially, it's as if p-hacking were codified as an industry standard, which
is to say, it's exactly p-hacking.

~~~
nabla9
During the late 90's stock market boom, the CEO of the biggest bank in Finland
made the company bottom line to match his personal phone number as a joke.

Getting first two numbers right was the hard part :)

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fancyfish
For those interested in the world of non-GAAP accounting, there are a wealth
of resources (particularly from the Big 4 accountancies who are eager to
consult on such matters). Broadly, the use of non-GAAP has grown to a point
where the SEC ramped up enforcement measures (sending letters to companies
regarding their presentation of non-GAAP measures)[1]. Particularly, GAAP
measures need to be presented "with equal or greater prominence" to their non-
GAAP counterparts.

From a Deloitte piece[2]:

"A study published by Audit Analytics noted that 97 percent of S&P 500
companies used non-GAAP measures in earnings releases during 2017. Further,
the number of non-GAAP measures used per filing has almost tripled from 2.35
in 1996 to 7.45 in 2016.

In addition, a study published by FactSet indicated that for the second
quarter of 2018, 77 percent of the companies in the Dow Jones Industrial
Average reported non-GAAP earnings per share and 61 percent of these companies
reported non-GAAP earning per share that exceeded GAAP earnings per share."

[1] [https://corpgov.law.harvard.edu/2019/02/07/sec-scrutiny-
of-n...](https://corpgov.law.harvard.edu/2019/02/07/sec-scrutiny-of-non-gaap-
financial-measures/) [2]
[https://www2.deloitte.com/us/en/pages/audit/articles/a-roadm...](https://www2.deloitte.com/us/en/pages/audit/articles/a-roadmap-
to-non-gaap-financial-measures.html)

------
glofish
Basically they lost 10% of their gross bookings.

Does this mean that raising the price by 10% has them breaking even? Maybe.

It does show the immense potential though, their bookings are so large that 10
percent change would net them billions more. They are booking 1 billion
dollars worth of rides every week.

~~~
rauchp
> their bookings are so large that 10 percent change would net them billions
> more.

Kind of a hot take, but this is why I'm long Uber. They're processing an
insane amount of orders, and getting a huge amount of people using their app.
If Lyft dies, or if a merger occurs, then we have a large ride share company
that is still a lot more than 10% better than taxis. Most customers will still
be taking Ubers, regardless of that 10% price hike.

Of course, this is just for the ride share business. I don't see how food
delivery will be profitable long-term. Maybe it'll be just a loss leader for
them?

~~~
kn0where
No way a Lyft merger could be approved in any kind of sane society. It would
turn a duopoly into a monopoly.

~~~
rauchp
If both companies are approaching bankruptcy trying to outlast the other,
wouldn't the lesser evil be a world with a ride-share monopoly rather than a
world without (large scale) ridesharing?

With the amount of people that use these rideshare companies as their primary
job or to make their daily commute, it seems hard to imagine going back to the
pre-Uber/Lyft days. Not that the government or any regulatory body would see
it this way. I just think consumers are better off with a monopoly here. Plus,
whatever rideshare service that survives will still have to compete with local
taxi companies.

~~~
femto113
If both Uber and Lyft go bankrupt we’d have a new rideshare service (or 20)
before the ink was dry on the court papers. The public value is embodied in
the concept, not in the companies.

~~~
skinnymuch
There is a good chance suburban areas would not have ride sharing for a long
time if that happened. All the alternatives popping up would be in cities and
dense urban areas for a long time. Or if they get them, they might just be
priced worse than the taxis.

~~~
wasdfff
Suburban areas already suck for ride shade. Try hailing a lyft in the proper
suburbs, should take you over a half hour.

~~~
skinnymuch
What is a proper suburb to you? Ride sharing is great for me in suburban areas
of Delaware before as one example. Wait can be 15-20 min sometimes. Though it
shouldn’t be like that all the time. You can still see where the driver is,
etc, via app. The price is cheap (I’d be willing to pay more). The experience
is far better than hailing taxis used to be.

Suburban life is also different from city life. A 15-20 min isn’t that bad in
suburbs.

Life has become a lot more convenient currently for me in suburbs knowing ride
sharing is around. I almost shivered thinking about the last time I used a
taxi a decade ago in suburbs.

------
mdorazio
They're still losing money hand over fist - no surprise there. Looks like that
is hitting the stock in after-hours for about -5%. Biggest takeaway for me is
that gross revenue actually grew slower than total trips (30% vs 31%), which
is an interesting trend.

~~~
WisNorCan
Looks like Uber has two types of businesses. a) Ones that are slowing down,
e.g. Rides with growth rate of ~20% and b) Ones that are growing faster by
unsustainable economics, e.g. Freight -40% EBITDA. For Uber ever to thrive,
they need a business that is growing fast with good economics. It doesn't look
they have one anywhere on the horizon.

------
ganitarashid
There's another thing that needs to be said. Uber is receiving a lot of
criticism here, but whether they eventually make it as a company or not, Uber
is doing one important thing: Showing that a business model and profits
matter. This has been neglected in the last decade or so. If bringing back
that awareness is Uber's only contribution, then no matter the company's
outcome, it will have done a good thing.

------
kgwgk
[https://s23.q4cdn.com/407969754/files/doc_financials/2019/Q3...](https://s23.q4cdn.com/407969754/files/doc_financials/2019/Q3/Quarterly-
Earnings-Report-Q32019.pdf)

------
heyflyguy
I'd love to hear some smart people opinions on this idea:

"Uber doesn't need to be profitable, they just need to survive until their
autonomous cars are deployed"

~~~
treis
IMHO, autonomous cars actually breaks Uber's model. It changes it from taking
a % off the top of a market to a capital and maintenance intensive business.
Only seems to work if they end up with some sort of franchise model. Sort of
like how Coke has a bunch of distributors.

~~~
Animats
That's about right. Running a fleet of autonomous vehicles is an expensive
proposition, and probably will be for years after they start working. Waymo
outsources some of that to Avis Rent-A-Car, which already has garages,
maintenance facilities, parking lots, car washes, etc.

It's quite possible that when automomous vehicle operations start working, the
big players will be car rental companies. It's a natural extension to their
business.

~~~
malandrew
I have a hard time believing that anyone on HN legitimately things that
companies like Hertz and Avis will be able to become efficient in the
ridesharing market before one of the two TNCs become efficient in the fleet
management market (which is a subset of the rental car market that overlaps
with TNCs once they choose to have their own fleet.

One set of businesses here has modern engineering practices and the other set
are dinosaurs. Furthermore, rental companies have more employees dedicated to
sales than to fleet management and their entire current customer base is
rental car consumers. They literally need to redirect money to R&D long term
where that R&D serves no benefit to their current customer base. Wall Street
will punish the stock of rental car companies short term for spending R&D on
becoming ridesharing businesses that serve a customer they don't yet even have
mindshare with. With the TNCs however, wall street won't see any problem with
them building out their own fleet. The only condition where wall street looks
down on the idea of own fleet management is if they believe a franchise model
with third party fleet managers make sense. Either way the TNCs own the
relationship with the customer and therefore has all the power.

~~~
vladimir_prus
I would not be so sure. Avis, in particular, is actively pushing for a flow
where you book online, use "secret" promo code to get full insurance for
basically zero, pick up car directly on parking lot with keys inside, and
drive away. It takes literally 5 minutes and a single employee to check your
driving license and contract. Hertz is trying to do same, though less
effectively. Their websites and apps are still horrible, and it's perplexing
why, but the cost of building decent apps will be immaterial compared to the
cost of the vehicles, and from that, building actual on-demand short-term
rental network does not seem so unlikely.

------
gok
If they hadn't gotten into food delivery, freight, scooters, etc. they'd be
profitable by now.

~~~
scarface74
Only if you take their made up, non GAAP, financial measurement of “adjusted
EBITDA” seriously. This is no better than WeWork’s “community adjusted EBITDA”
and we see how that worked out.

 _Adjusted EBITDA. We define Adjusted EBITDA as net income (loss), excluding
(i) income (loss) from discontinued operations, net of income taxes, (ii) net
income (loss) attributable to non-controlling interests, net of tax, (iii)
provision for (benefit from) income taxes, (iv) income (loss) from equity
method investment, net of tax, (v) interest expense, (vi) other income
(expense), net, (vii) depreciation and amortization, (viii) stock-based
compensation expense, (ix) certain legal, tax, and regulatory reserve changes
and settlements, (x) asset impairment /loss on sale of assets, (xi)
acquisition and financing related expenses, (xii) restructuring charges and
(xiii) other items not indicative of our ongoing operating performance._

~~~
gok
Well ok first, there's a world of difference between the reasonably widespread
practice of adjusted EBITDA and inventing your definition that does not
account for the costs of marketing or leases.

But I'm really not even commenting on these results precisely. They would have
been in an entirely different position without all the distractions. Uber's
ride business now makes a billion dollars a month in revenue. That's after
paying drivers. If they had been laser-focused on making the ride business
work, they could have grown a much lower-overhead business. They could have
taken the company public years ago. An earlier IPO would have meant those huge
stock-based compensation packages would be off the books by now. A just-get-
me-a-car Uber would have been GAAP profitable by now.

~~~
TheCoelacanth
EBITDA is a wipespread (though still somewhat sketchy) practice. "Adjusted
EBITDA" is just making up fairy-tale numbers.

~~~
scarface74
I didn’t realize the EBiTDA wasn’t GAAP. But you are absolutely right.

[https://www.investopedia.com/terms/e/ebitda.asp](https://www.investopedia.com/terms/e/ebitda.asp)

~~~
gok
There are legitimate reasons to report non-GAAP numbers next to the required
GAAP numbers. When it was required to recognize revenue phone sales over 2
years, Apple included non-GAAP numbers to give investors a better sense of how
sales were actually growing, and reported it as "Adjusted Sales" and "Adjusted
Net Income." These were completely made up terms, but they did give a vastly
more accurate image of where the company was going than the GAAP numbers did.

------
countryqt30
Warren Buffett famously said: "When you read EBITDA, you should think
BULLSHIT". The only reliable metrics are EBIT (if you precisely know the debt
and tax situation of the company, which is usually laid open in the reports),
and NET PROFIT.

Remember just 1 month ago, when WeWork tried to FRAUD everyone with their "we
invented our own EBITDA"-metric, which they called 'EBIT adjusted for
consciousness, because we sell consciousness, so we factor in the amount of
consciousness we generate per square mile!!!!' ?

~~~
Waterluvian
What the frick is consciousness?

~~~
icotyl
That's not an actual quote, FYI. They peddled something called "community-
adjusted EBITDA."

------
dzonga
if uber, wasn't doing business on an uber scale. then maybe, instead of
lighting money, they would be printing money. correct ideas, but wrong
execution. but alas, a holoi polloi like me will enjoy the VC subsidized rides

~~~
skinnymuch
Another user, gok, has a point that if they were just doing ride sharing, they
could possibly be break even or profitable.
[https://news.ycombinator.com/item?id=21450647](https://news.ycombinator.com/item?id=21450647)

