Earlier this month, Uber posted some of their most disappointing financials yet with their 2019 Q2 earnings report.
Needless to say, investors were NOT pleased, and Uber’s stock price reflected that.
Since August 8th, the day Uber reported it’s latest earnings, the stock price has gone from a near high of $42.05 per share to a near low of $33.
If you’re an Uber investor, this is crucial information, but what about us drivers that aren’t necessarily directly affected by Uber’s lack of profitability or slowing revenue growth?
Well, we wanted to shed some light on a few key figures that every rideshare driver should keep a lookout for as they will give us an idea of how Uber has been treating its drivers, and how it plans to deal with drivers going forward.
So we’ve analyzed Uber’s latest financial statements and identified the figures and trends that matter to Uber drivers.
What reports should drivers be reading?
Uber releases a few items that drivers should take a look at including their latest financial statements, supplemental information, and an earnings call where Uber executives talk about the business to stock analysts. Check out links to these documents below:
Uber Reports Second Quarter 2019 Results
What are the most important figures drivers should be looking at?
Let’s start our analysis of Uber’s financial statements by listing the key figures that drivers should look for in every financial release from Uber.
Take rate increased to 21.3% from 18% in Q2 2019
UberEats Adjusted Core Revenue Increased to 337,000,000
Ridesharing Adjusted Core Revenue Increased to 2,314,000,000
Driver incentives decreased by $40 million since Q1 2019
Let’s dig into each one of these numbers and talk about what they could mean for drivers.
21% Take Rate
As a rideshare driver, the first number that you should look at every time you read about Uber’s earnings should be the take rate, because that is the amount of money that Uber makes from bookings (AKA takes from drivers). Uber defines take rate as follows:
We define Take Rate as Adjusted Net Revenue as a percentage of Gross Bookings. For purposes of Take Rate, Gross Bookings include the impact of our 2018 Divested Operations.
When Uber files it’s quarterly earnings report, the company doesn’t always explicitly state the take rate, but you can calculate it by simply dividing Adjusted Net Revenue by Gross Bookings.
So if we take a look at the financial results above, we can see that Uber’s Adjusted Net Revenue was $2.873 billion while gross bookings were $15.756 billion in Q2 2019.
So some quick math here looks as follows:
2018 Q1 Take Rate: 2.574/12.012 = 22.24%
2019 Q1 Take Rate: 2.761/14.649= 18.85%
2019 Q2 Take Rate: 2.873/15.756 = 18.84%
Great, so we see that the “take rate” stayed about the same and has decreased about 3.5% since last year, so Uber isn’t really taking more from drivers… right?
Maybe.
Let’s look at the adjusted net revenue and take rate for Uber’s ridesharing business and Uber Eats separately to get an even better understanding of what’s going on.
Ridesharing Adjusted Core Revenue Increased to 2,314,000,000
Uber’s defines it’s adjusted core revenue as platform revenue minus “excess driver incentives” and Driver referrals.
The term “excess driver incentives” is a bit vague, but it’s basically any payments to drivers that exceed the cumulative revenue that Uber recognizes from a driver with no future guarantee of additional revenue.
This essentially means that for one reason or another in many cases Uber is paying the driver more than it’s actually earning from the trip. This can happen if Uber is trying to aggressively take market share in a current city, so they pay drivers more to get them on board and mark prices as low as possible.
This is clearly not a sustainable strategy and not something that Uber would continue to do after they have “won” a specific city or market.
This is why Uber purposely breaks out what it pays drivers in excess incentives so that it can easily show investors what the impact on profit would be if it eliminated these incentives. And if it’s not clear by now, the plan is to certainly eliminate this expense as much as possible in order to become profitable.
As you can see in the table below from Uber’s Earnings Report, in Q2 of 2019, the purely ridesharing side of Uber’s business had an adjusted net revenue of $2,314.
This adjusted net revenue number includes just $9 million in Excess Driver Incentives and $25 million in driver referrals. This is down from $39 million and $29 million in the same quarter of 2018 respectively.
What’s not shown here, is that these numbers have decreased from $12 million and $29 million in Q1 of 2019 respectively.
So we can see that Uber is paying considerably less in these excess driver incentives in Q2 2019 than it has in recent history for its core ridesharing business.
So it looks like Uber drivers are getting paid less overall because Uber has stopped overpaying drivers instead of deciding to stop undercharging riders.
This, however, is a worldwide figure, so these decreases in driver incentives are not necessarily from major US cities. However, Uber is going to cut excess driver incentives in it’s most mature markets, which tend to be major US cities.
UberEats Adjusted Core Revenue Increased to 337,000,000
Uber defines it’s Adjusted Core Revenue for Uber Eats in basically the same way that it defines it’s adjusted core revenue for its ridesharing business. However, the company has historically paid much more in excess driver incentives to Uber Eats drivers in an attempt to quickly get drivers on the platform and grow the business.
According to Uber’s Earnings Report, the company paid 253 million in excess driver incentives, which is up from 124 million in the same period for 2019.
This shows Uber is spending more to get drivers on Uber Eats when compared to the previous year, but it doesn’t necessarily mean that it’s giving every driver more incentives, it more likely means that the company is opening Uber Eats in more locations around the country and around the world.
Excess Driver incentives decreased by $41 million since Q1 2019
It’s also important to note that excess driver incentives have actually decreased significantly across the board since Q1 2019.
See Q1 2019’s excess driver incentive figures:
Now compare that with last quarter’s excess driver incentive and driver referrals numbers:
Uber paid $38 million less in excess driver incentives to Uber Eats drivers and $3 million less in excess driver incentives to Uber drivers.
It’s hard to tell whether this is the result of a decrease in rates or a result of a decrease in bonus program rewards like Quests, but it’s clear that drivers across the board are getting paid less.
Key Takeaways
Driver incentives decreasing and expect this to continue
We’ve established that driver incentives have decreased significantly in 2019, which increase Uber’s Adjusted Net Revenue and their take rate. Clearly Uber is aiming to decrease this excess driver pay in an effort to improve its profitability.
I would expect that over the rest of 2019 Uber will do it’s best to continue to cut excess driver incentives. This is a number to keep your eye on.
Driver referrals are decreasing, expect this to continue.
We didn’t talk much about driver referrals, but these have also decreased both quarters over quarter and year over year. I would expect these bonuses to also continue to decrease.
This could mean fewer drivers coming onboard to Uber, which may be good for current drivers, but it also means that if you aren’t an Uber driver yet, your window to collect a sign-on bonus is closing.
So if you haven’t cashed in on an Uber bonus yet, now would be the time.
So now that we’ve laid out all of the facts, what do you think? Give us your thoughts in the comments below!
