Uber Technologies, Inc. — Q1 2019 Form 10-Q
Reporting period: Three months ended March 31, 2019; unaudited. Comparisons are against Q1 2018 unless stated otherwise. Uber operates its Core Platform (Ridesharing and Eats) and Other Bets (primarily Freight and New Mobility). The May 2019 IPO occurred after quarter-end and is not reflected in the March 31 financial statements.
Financial and operating performance
| Metric | Q1 2019 | Prior period / change |
|---|---|---|
| Revenue | $3.10 billion | $2.58 billion; up 20% |
| Gross Bookings | $14.65 billion | $10.89 billion; up 34% |
| MAPCs / Trips | 93 million / 1.55 billion | Up 33% / 36% |
| Operating loss | $1.03 billion | $478 million loss |
| Net loss attributable to Uber | $1.01 billion | $3.75 billion net income |
| Adjusted EBITDA loss | $869 million | $280 million loss |
| Operating cash flow | $(722) million | $(297) million |
Ridesharing revenue rose 9% to $2.38 billion, Uber Eats revenue rose 89% to $536 million, and Other Bets revenue increased to $145 million from $40 million, principally reflecting Freight growth. Core Platform Adjusted Net Revenue, a non-GAAP measure, increased 10% to $2.62 billion; Core Platform take rate fell to 18% from 21%. Core Platform contribution margin declined to negative 4.5% from positive 17.9%, as incentives and marketing investment weighed on economics.
Total costs and expenses increased 35% to $4.13 billion. Cost of revenue rose 45% to $1.68 billion, including $303 million of excess Driver incentives versus $129 million; sales and marketing rose 54% to $1.04 billion, reflecting higher promotions, discounts and advertising. Operating margin was approximately negative 33%, compared with negative 18%.
Cash and cash equivalents were $5.75 billion at March 31; including restricted cash, total cash was $7.68 billion. Current assets were $7.93 billion and current liabilities $4.71 billion. Debt principal totaled $7.51 billion; balance-sheet long-term debt, net of discounts and issuance costs, was $6.94 billion, with $27 million current. The $2.3 billion revolving facility had no borrowings outstanding. Investing activities provided $204 million, primarily from the Singapore vehicle-rental business sale; financing activities used $46 million.
Changes, unusual items, and subsequent events
- Q1 2018 earnings were unusually boosted by $3.16 billion in divestiture gains and a $1.98 billion unrealized gain on Didi securities. Their absence in 2019 was a major reason reported earnings moved from profit to loss; Q1 2019 other income was $260 million.
- Uber adopted lease accounting in January 2019, recording $1.32 billion in operating lease right-of-use assets and $1.40 billion in operating lease liabilities at quarter-end.
- The May 14 IPO raised approximately $8.0 billion net. Preferred stock converted into common stock and holders converted the 2021 and 2022 convertible notes into shares. Uber said it would recognize approximately $3.6 billion of stock-based compensation expense in Q2 upon the IPO-related vesting event; 29 million shares were withheld for about $1.3 billion in tax withholding. A separate $300 million one-time Driver appreciation payment was made in April and expensed in Q2.
- After quarter-end, PayPal invested $500 million in Uber common stock. The proposed Careem acquisition is valued at approximately $3.1 billion, including about $1.4 billion cash and up to $1.7 billion in convertible notes; closing was expected in January 2020, subject to regulatory approvals.
Outlook, risks, and contingencies
The filing provides no specific numerical revenue, margin, or profitability guidance. Management expects operating expenses to increase as it invests in platform growth, marketing, research and development, and new offerings; it also expects cost of revenue to rise with platform activity. The company reported continued losses and stated it expects near-term losses while investing. It identifies competition and subsidy spending, Driver supply and classification, regulation, safety, privacy and cybersecurity, insurance costs, international operations, and execution of acquisitions as significant risks.
Legal and regulatory matters include a proposed $20 million settlement of certain California and Massachusetts Driver claims, subject to court approval, and separate arbitration settlements expected to cost approximately $146–$170 million including attorneys’ fees; $132 million was reserved at quarter-end. Accrued legal, regulatory, and non-income tax liabilities totaled approximately $1.2 billion. Uber also disclosed an arbitration award against former employees for which it may have indemnification obligations, and significant worker-classification and tax exposures whose outcomes or amounts may be uncertain.
The company reported compliance with debt covenants and effective disclosure controls as of quarter-end. Nonetheless, management cautions that outcomes of legal, regulatory, tax, and investment valuation matters can differ materially from estimates.
Most important facts for investors to verify
- Whether revenue growth can translate into improving take rate, contribution margin, and cash generation while incentives and marketing remain elevated.
- The cash, dilution, and future compensation effects of the IPO, including the Q2 stock-based compensation charge and Driver payment.
- Post-IPO debt levels and liquidity after the convertible-note conversion, and funding needs for Careem and other investments.
- Final costs and outcomes of Driver-classification claims, regulatory matters, and other contingencies.
- Careem approval, closing, and integration assumptions, alongside progress and returns from Freight, New Mobility, and autonomous-vehicle investments.