Uber Technologies, Inc. — Q3 2019 Form 10-Q
Reporting period: Three and nine months ended September 30, 2019; unaudited. Amounts are in U.S. dollars. Uber operates a global platform spanning rides, meal delivery, freight, micromobility and developing technology programs.
Financial and operating performance
| Metric | Q3 2019 | Q3 2018 | Nine months 2019 | Nine months 2018 |
|---|---|---|---|---|
| Revenue | $3.813B | $2.944B | $10.078B | $8.296B |
| Net income (loss) attributable to Uber | $(1.162)B | $(986)M | $(7.410)B | $1.884B |
| Adjusted EBITDA (non-GAAP) | $(585)M | $(458)M | $(2.110)B | $(1.030)B |
| Net cash used in operating activities | Not provided for quarter | Not provided for quarter | $(2.522)B | $(860)M |
- Q3 revenue grew 30% year over year; constant-currency growth was 31%. MAPCs rose 26% to 103 million, Trips rose 31% to 1.77 billion, and Gross Bookings rose 29% (32% constant currency) to $16.465 billion.
- Q3 Adjusted Net Revenue, a non-GAAP measure, increased 33% to $3.533 billion. Rides revenue was $2.895 billion (+19%); Eats $645 million (+64%); Freight $218 million (+78%).
- Q3 cost of revenue was 49% of revenue versus 51% a year earlier. GAAP operating loss was $1.106 billion, or 29% of revenue, versus $763 million, or 26%. Adjusted EBITDA loss was 4% of Gross Bookings in both periods.
- Q3 segment adjusted EBITDA: Rides profit of $631 million; Eats loss of $316 million; Freight loss of $81 million; Other Bets loss of $72 million; ATG and Other Technology Programs loss of $124 million. Rides profit covered corporate G&A and Platform R&D, according to management.
- At September 30, cash and cash equivalents were $12.650 billion; including restricted cash, total cash was $14.641 billion. Current assets were $15.153 billion and current liabilities $5.372 billion.
- Long-term debt, net of current portion, was $5.711 billion; reported total debt principal was $5.797 billion. Uber had no revolver balance and reported compliance with debt covenants. Operating lease liabilities totaled $1.656 billion.
Changes, notable items and management commentary
- Revenue growth reflected expansion in Rides and Eats, with particularly rapid growth in Eats and Freight. Eats and other non-Rides businesses continued to generate significant adjusted EBITDA losses.
- Q3 sales and marketing expense rose 42% to $1.113 billion, including $656 million of consumer discounts, loyalty expense, promotions, credits and refunds, up from $338 million. Management cited continued investment and higher corporate overhead as drivers of the larger Adjusted EBITDA loss.
- The nine-month 2019 net loss includes substantial IPO-related stock compensation: stock-based compensation was $4.353 billion, including $3.6 billion recognized upon the May IPO. The IPO raised approximately $8.0 billion net; a PayPal private placement added $500 million. IPO-related share withholding taxes were $1.514 billion in financing cash flows.
- The prior-year nine-month profit is not directly comparable: it included $3.208 billion of gains on divestitures and a $1.984 billion gain on debt and equity securities, including Didi. Those gains did not recur in 2019.
- Uber issued $1.2 billion of 7.5% senior notes due 2027. The IPO converted preferred stock and convertible notes into common stock. Uber ended the quarter with approximately 1.704 billion common shares outstanding.
- Management reported no specific financial guidance. It expected operating expenses to continue increasing and losses to continue in the near term, while stating that available funding was expected to cover anticipated needs for at least 12 months. Management also cited 20 million global subscribers to its consumer loyalty programs.
Risks, contingencies and subsequent events
- Driver classification remains a material risk. California AB5 takes effect in January 2020; Uber was evaluating legal and business responses and supporting a November 2020 ballot initiative. Driver misclassification could increase labor, tax, benefits and compliance costs and require business-model changes.
- Uber recorded $1.4 billion of accrued liabilities for probable and estimable legal, regulatory and non-income-tax matters. It reported expected payments of approximately $146–$170 million, including legal fees, under certain California and Massachusetts arbitration settlements; approximately $142 million had been paid by quarter-end.
- In the Google/Levandowski matter, Uber disclosed a possible loss of up to $65 million or more above the amount accrued, depending on the final award and timing. Other identified exposures include UK worker-status and VAT claims, regulatory proceedings and an Australian class action.
- Careem’s approximately $3.1 billion acquisition remained subject to approvals and was expected to close in January 2020. Qatar had blocked the acquisition there; other approvals remained uncertain. In October, Uber also agreed to acquire a controlling interest in Cornershop for up to approximately $459 million, subject to approvals and other conditions.
- In October 2019, insurer James River gave notice that it would cancel policies effective December 31, 2019 and withdrew $1.2 billion of collateral held in trust. The funds were recorded as restricted cash at quarter-end; Uber said it was working to replace the coverage. This creates insurance and claims-funding execution risk.
- Other material risks include intense competition and incentive spending, safety and data-privacy incidents, licensing and regulatory restrictions, uncertain insurance reserves, illiquid private-company investments, foreign-exchange exposure and ongoing operating cash use.
Most important facts for investors to verify
- Whether revenue and Gross Bookings growth can translate into improved operating margins and lower Adjusted EBITDA losses, particularly as Eats and Freight scale.
- How much of the reported loss and expense trend is attributable to IPO-related stock compensation and other unusual items, and how recurring cash costs are evolving.
- Cash burn, restricted-cash availability, insurance collateral and replacement coverage, and funding needs for debt service, leases and planned acquisitions.
- Developments under AB5 and other worker-classification proceedings, including potential effects on costs, revenue presentation and operating practices.
- Regulatory approvals, final transaction terms and funding requirements for Careem and Cornershop, and the ultimate exposure from significant legal and tax matters.