Uber Technologies, Inc annual report, FY2019

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Business context and reporting period

Uber Technologies, Inc. filed this Form 10-K for the fiscal year ended December 31, 2019, with quarterly data through Q4 2019. Uber operates a technology platform spanning rides, meal delivery (Eats), freight, New Mobility and autonomous-vehicle technology. The 10-K was filed March 2, 2020.

Financial and operating performance

  • Full-year revenue: $14.147 billion, up 26% from $11.270 billion in 2018. Gross Bookings were $65.001 billion, up 31% reported (35% constant currency); MAPCs reached 111 million and Trips were 6.904 billion.
  • Q4 revenue: $4.069 billion, compared with $2.974 billion in Q4 2018. Q4 2019 operating loss was $971 million and net loss attributable to Uber was $1.096 billion, versus $1.053 billion and $887 million, respectively, in Q4 2018.
  • Profitability: Full-year operating loss was $8.596 billion and net loss was $8.506 billion, compared with losses of $3.033 billion and net income of $997 million in 2018. The 2019 net loss included $4.596 billion of stock-based compensation, including $3.6 billion recognized when IPO-related vesting conditions were met. Adjusted EBITDA, a non-GAAP measure, was a loss of $2.725 billion versus a loss of $1.847 billion; Adjusted EBITDA margin on Adjusted Net Revenue was negative 21%.
  • Revenue mix and segment trends: Rides revenue was $10.745 billion (+14%); Eats, $2.510 billion (+72%); Freight, $731 million (+105%); Other Bets, $119 million; and ATG and Other Technology Programs, $42 million. Rides Adjusted EBITDA was positive $2.071 billion; Eats, Freight, Other Bets and ATG recorded losses of $1.372 billion, $217 million, $251 million and $499 million, respectively.
  • Margins and take rates: Cost of revenue excluding depreciation and amortization was 51% of revenue, versus 50% in 2018. Rides take rate declined to 21.4% from 21.9%; Eats take rate declined slightly to 9.5% from 9.6%. Management attributed pressure principally to incentives, delivery and restaurant payments, and discounts.
  • Cash flow: Net cash used in operating activities was $4.321 billion, compared with $1.541 billion in 2018. Investing activities used $790 million; financing activities provided $8.939 billion, principally reflecting IPO proceeds.
  • Liquidity and debt: At year-end, cash and cash equivalents were $10.873 billion, short-term investments $440 million, and working capital $8.286 billion. Principal debt outstanding was $5.791 billion; the $2.3 billion revolving credit facility had no balance drawn. Total assets were $31.761 billion and total liabilities $16.578 billion. Management stated available funding was expected to cover anticipated needs for at least the next 12 months.

Material changes versus prior comparable period

  • Revenue growth continued, led by Eats and Freight; Rides growth was slower. Gross Bookings increased by more than $15 billion for the third consecutive year.
  • Operating and net losses widened substantially. Management cited continued investment in non-Rides offerings and higher corporate costs; the IPO-triggered stock-based compensation charge was a major unusual contributor to GAAP expenses.
  • Adjusted EBITDA loss widened by $878 million. Rides Adjusted EBITDA improved, but Eats, Freight and Other Bets losses increased as those businesses expanded.
  • 2018 results benefited from approximately $3.2 billion of divestiture gains and a roughly $2.0 billion unrealized gain on the Didi investment; those gains did not recur in 2019. 2018 net income therefore is not a straightforward indicator of recurring profitability.
  • The May 2019 IPO raised approximately $8.0 billion net, and all preferred stock and outstanding convertible notes converted into common stock. Uber also received $1.0 billion from investors in ATG and issued $1.2 billion of 2027 senior notes.

Outlook, risks, contingencies and unusual items

  • Outlook: The filing gives no formal revenue, earnings or cash-flow guidance. Management expected near-term losses and continued spending on platform growth, incentives, new markets, research and development, and ATG. It also reported that Rides Adjusted EBITDA in Q4 covered corporate G&A and platform R&D, but did not provide a profitability timetable.
  • Driver classification: California AB5 took effect in January 2020; adverse reclassification could raise labor, tax and benefit costs and require changes to Uber’s business model. Uber reported a $20 million settlement of certain class actions and estimated $149–$170 million in payments and legal fees for individual arbitration settlements, with about $149 million paid by year-end. The filing said the potential AB5 loss range could not be reasonably estimated.
  • Regulation and litigation: Transport for London denied a new operating license in November 2019; Uber continued operating while appealing, with a hearing expected in mid-2020. Regulatory restrictions, lawsuits and investigations could lead to fines, operating limits or market exits. Accrued legal, regulatory and non-income-tax liabilities were $1.539 billion.
  • Other material exposures: Insurance reserves totaled $3.418 billion. The filing highlights safety incidents, data privacy and cybersecurity, competition, international and currency risks, and dependence on incentives and third-party payment, mapping, cloud and insurance providers. The 2016 data breach led to a $148 million state settlement and an FTC consent decree through 2038.
  • Transactions and unusual items: The January 2020 Careem acquisition had a maximum stated price of about $3.1 billion, including up to $1.7 billion in convertible notes due 90 days after issuance unless converted. Uber also agreed to acquire control of Cornershop, subject to approvals, and completed the sale of Uber Eats India to Zomato in January 2020. The 2019 Driver appreciation award was $299 million and recorded as a Driver incentive.
  • Contingent obligations: Contractual obligations totaled $11.021 billion, including $5.791 billion of debt, $3.792 billion of operating lease commitments and $857 million of financing obligations. The filing also describes unresolved legal and tax matters whose outcomes or potential losses may be uncertain.

Most important facts an investor should verify

  • Reconcile the $8.506 billion GAAP net loss and $4.596 billion stock-based compensation charge to underlying operating trends; assess the recurring costs excluded from Adjusted EBITDA.
  • Track operating cash burn, incentive spending and liquidity needs against management’s stated 12-month funding expectation and debt and lease obligations.
  • Monitor driver-classification developments, especially AB5 and related litigation, and evaluate potential effects on costs, revenue presentation and operations.
  • Follow the London license appeal and other major regulatory proceedings, plus the potential financial exposure from legal, tax and insurance contingencies.
  • Assess Eats, Freight, Other Bets and ATG growth against their segment losses, and determine whether Rides profitability can support group-wide investment.
  • Review the Careem integration, convertible-note repayment or conversion terms, remaining regulatory approvals, and the accounting and operating impact of the transaction.