You mentioned Uber Third quarter earnings A profitable ride-hailing and delivery company is showing progress despite slowing growth in some sectors, Tuesday showed.
The company reported revenues of $9.3 billion, an increase of 11% year over year. Investors were expecting Uber to report revenue of about $9.5 billion (FactSet, Refinitiv), meaning that although the company has grown, it has fallen short of estimates. Turning to profitability, Uber reported net income of $221 million in the third quarter, or 10 cents per share, compared to a net loss of $1.2 billion, or 61 cents per share, in the same quarter last year. Once again, the company failed to meet expectations that it would earn 12 cents per share.
Looking ahead, Uber expects total bookings to reach $36.5 billion to $37.5 billion, up just 6% on the high end from the third-quarter result.
Following the reports, Uber shares rose 1.6% in trading, after a volatile morning of stock trading.
Against a backdrop of macroeconomic uncertainty, a startup’s past results can be viewed as an indicator that its business model has matured and is now in a stable, profitable and cash-generating position. On the other hand, underperforming demand results from a global company like Uber could indicate that consumer spending is lower than expected.
For startups in the transportation and on-demand sectors, Uber’s profits represent the zeitgeist of the information age. So let’s work to understand where Uber’s revenue came from in the third quarter, and how each of its key sources converted — or didn’t — to the bottom line.
Where does the money come from?
In the third quarter, Uber saw total bookings rise from $29.1 billion to $35.3 billion, an increase of about 21%. In terms of business segment, Uber generated $17.9 billion in ride-hailing bookings (+31% year-over-year), and $16.1 billion in ride-hailing bookings (+18%). These key business groups at the company generated revenue of $5.1 billion and $2.9 billion, respectively, during the September quarter.
There is a nuance in the revenue numbers that we need to take into account because the respective rule changes affect startups operating in the relevant categories. On the passenger transportation front, Uber told its investors that its revenues in the third quarter of 2023 were “adversely impacted by business model changes in some countries that classified certain sales and marketing costs as corresponding revenues of $161 million.” This wasn’t the only legal change that changed the shape of Uber’s results. Under its delivery business results, the company added that its revenue result was “adversely impacted by business model changes that classified certain sales and marketing costs as corresponding revenue in the amount of $360 million.”
The combined effect of these two items was 8 percentage points of growth.
Profit perspective
From bookings to revenue to profits: How did key parts of Uber’s business produce black ink?
Turning to what Uber calls “segment-adjusted EBITDA,” it’s not hard to see how the company was able to collect more income last quarter. Adjusted earnings for ride-hailing services rose to $1.29 billion, up 43% from $898 million in the same quarter last year, while delivery service saw its profitability surge from $181 million in the third quarter of 2022 to $413 million in the period. Recent financials.
Uber spent more during the third quarter of 2023 than its results in the third quarter of 2022, but the 5% increase in “company general and administrative costs and platform R&D” to $595 million was much less than the gains we saw above. Therefore, Uber’s adjusted EBITDA rose from $516 million in total to $1.09 billion in the third quarter of this year.
Of course, adjusted EBITDA is profit since the hidden heel on men’s shoes is high, so we want some harder numbers as well. In the third quarter, Uber achieved operating revenue of $394 million and net income of $219 million. Mix in $966 million in positive operating cash flow, and Uber looks very healthy since all of the numbers in this paragraph were improvements on its results a year ago.
But while food delivery and city exploration were profitable for Uber this quarter, the last major part of its business had a more lackluster quarter.
Drop shipping
One area that continues to pressure Uber is its shipping business.
While Uber’s ride-hailing and delivery business saw a slight rise in total bookings in the third quarter, Uber’s freight business saw a 27% decline year over year. As a result, revenues saw a similar decline.
The business unit reported revenue of $1.3 billion in the third quarter, down 27% from the same period last year. On a quarterly basis, Uber Freight posted a 1% increase in revenue.
The results don’t improve once we move to net income. On an adjusted basis, Uber Freight lost $13 million in the third quarter compared to a profit of $1 million in the same quarter last year.
Uber said the dismal year-over-year revenue results for its freight business were driven by lower revenue per load and volume. Both are the result of a difficult freight market cycle.
Uber Freight is not alone. New entrants to the shipping and logistics industry such as Flexport and Convoy have struggled this year. In Convoy’s case, the company was forced to close after its assets were acquired by Flexport.
Uber Freight continues to operate, despite these economic headwinds. The question is whether Uber believes in the long-term monetization potential of shipping.
so what?
When discussing Uber’s results internally, our feeling was that it is a very profitable and healthy company today, even though it is not growing as quickly as the market had hoped. The fact that Uber’s stock price is rising as we write this suggests that investors are so far content to excuse small mistakes in the third quarter and keep their eyes more focused on year-over-year improvements and future guidance. More when we get the Lyft numbers.