Uber lost a whopping $1.2 billion in Q3 of 2019, and investors aren’t too happy about it.
Since November 4th, the day that Uber reported it’s Q3 earnings, the stock price has gone from 31.08 down to a new low of just $26.50 as of Wednesday, November 13th. That’s a near a record low and a far cry from it’s high of $47.08 from earlier this year.
As an investor, and as a driver, this earnings report and these stock numbers look grim. But are things really this bad at Uber? And more importantly, how does this affect Uber drivers?
In today’s blog post, we’re going to breakdown Uber’s latest earnings report and find out what Uber’s earning report really means for drivers.
Let’s start by explaining what reports drivers should be reading and sharing a few links so drivers can read this information themselves.
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:
Key Figures for Drivers to Know
Overall take rate increased to 21.5% from 20.1% (unadjusted) in Q3 2019
Rides take rate increased to 22.8% from 21.6% in Q3 2019
Uber Eats take rate increased to 10.7% from 10.2% in Q3 2019
Driver incentives decreased by $13 million in Q3 2019 while revenues increased by $647 million
This time I have just two takeaways that I want to focus on.
Take away #1: Uber isn’t doing THAT badly as a company… they’re actually in a pretty nice spot
Takeaway #2 Uber’s take rate has increased and is probably affecting your bottom line
Takeaway #1: Uber isn’t doing that poorly as a company
Yes, Uber did lose $1.2 billion last quarter and yes, it’s stock is almost half of it’s 2019 high and getting worse by the day.
But Uber as a company does not actually seem to be doing that poorly.
They didn’t really lose $1.2 billion
When you look at Uber’s income statement you will see a loss of $1.2 billion, however, what you don’t immediately see is that $400 million of that loss was from a one time $400 million dollar stock-based compensation charge.
In reality, Uber’s EBITDA, a key measure of a company’s operational performance, actually only shows a loss of $585 million, which is a $61 million dollar improvement from Q2.
Essentially, Uber’s profitability as measured by the EBITDA-to-Revenue ratio went from -27.47% this time last year, -15.34% in Q3 2019. Not great but profitability is improving and Uber’s CEO Dara has stated that they are targeting 2021 for profitability.
“While we haven’t finalized our planning, and it’s going to take a lot of hard work from a lot of folks, we are actually targeting 2021,” Khosrowshahi said. “So we know there is the expectation of profitability, and we expect to deliver” by that time, he said.”
Uber’s rides division is actually profitable
What may be surprising to many is that Uber’s core ridesharing business is already profitable.
If you look at the EBITDA of the rides division separately, you can see that it actually made $631 million which is enough to cover their Corporate G&A and Platform R&D.
What’s even more telling is that Uber has increased the profitability of its core ridesharing business. It’s EBITDA-to-Revenue ratio is now 22% which is up from 21.6% last quarter and 17.76% a year ago.
Uber Eats is already bigger than GrubHub and growing
A big chunk of Uber’s losses come from it’s Uber Eats division which saw an operational loss of 316 million on $392 million in Adjusted Net Revenue.
That works out to an EBITDA margin as a % of Gross Bookings of -8.6%, which is up from last quarter.
However, if you look at the EBITDA-to-Adjusted Net Revenue percentage, which takes into account increasing take rates, you’ll find that the company is just -80.61%. This is down from -84.87% last quarter and -168.48% this time last year.
Further, Grubhub’s recorded sales of $322 million in Q3 2019, so Uber Eats has already surpassed Grubhub in revenue by $70 million.
And since Grubhub has already figured out how to turn a profit, who’s to say Uber can’t as well? The blueprint is there.
Takeaway #2: How has Uber suddenly found a path to profitability? Boosting take rates
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.
See Uber’s historical take rates in the graph below.
As you can see, Uber’s take rate is steadily increasing.
This, in theory, is because Uber is taking more money from each ride, and taking more money from drivers.
If you dig even deeper into the financial statements, you can see that a big part of Uber’s increase in Take Rate is from a decrease in excess driver incentives that Uber pays.
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 to drive in certain areas and increase supply.
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.
See the graph below to see how “Excess Driver Incentives” have decreased over the last few quarters.
Now check out the table below that expresses excess driver incentives as a percentage of adjusted net revenue.
|Dec 31 ‘18||Mar 31 ‘19||Jun 30 ‘19||Sep 30 ‘19|
|Excess Driver incentives||-$292||-$303||-$263||-$259|
|Adjusted Net Revenue||$2,644||$2,761||$2,873||$3,533|
Excess net revenue is steadily decreasing as a percentage of Adjusted Net Revenue and it appears that this trend will continue. If Uber’s Excess net revenue as a percentage of Adjusted Net Revenue had remained constant at 9.15%, Uber would have lost an additional $64 million and saw a take rate of just 21.07% instead of 21.5%.
Keep in mind that Uber’s EBITDA grew by $71 million. That growth may be nearly entirely a result of decreasing excess driver incentives.
And make no mistake, drivers are feeling this in their pockets.
We analyzed 14 of our key markets across the US and saw that drivers are earning less each quarter in 10 of those markets.
|City||Median Earnings $/hr – Q1||Median Earnings $/hr – Q2||Q1 – Q2 % Delta||Median Earnings $/hr – Q3||Q2 – Q3 % Delta|
|Los Angeles, CA||$15.97||$17.70||10.83%||$16.57||-6.38%|
|New York, NY||$20.27||$23.13||14.11%||$19.15||-17.21%|
|New Jersey, NJ||$19.65||$18.21||-7.33%||$17.62||-3.24%|
In short, the data shows that drivers are indeed making less money.
What can drivers do?
Realize that you are empowered
AB-5 has the rideshare companies shook.
So shook that they have decided to come to the table with a plan that they call the Protect App-Based Drivers & Services Act that promises to pay drivers 120% of minimum wage and $.30 per mile for expenses with some health benefits.
This is a very solid start but it’s not enough.
If drivers can come together, they can negotiate with the big TNCs to get higher guarantees.
Leverage other sources of income
Rideshare drivers MUST understand how in demand we are.
That’s because there are dozens of companies that want to get their products in our hands and cars so they can market to the captive audience in our back seats.
And what do we say to companies that want to get in front of OUR captive audience?
There are multiple companies that drivers can leverage to maximize earnings with in car and out of car offers. Here are just a few.
PlayOctopus – With Play Octopus, drivers can add a game tablet to the back of their cars that passengers can play. This helps increase tip income and drivers can earn $100 per month from in game advertising income
Cirkul – Cirkul is a flavored water bottle company that is giving drivers a FREE water bottle and pays drivers to simply show the bottle to passengers and have a sign in your car.
Cargo – With Cargo, drivers get paid to distribute free snacks to passengers. You literally get paid to give away free snacks.
We have a complete list of these Earnings Boosters in our app on the “Promos” tab.
Perfect your driving strategy
So full transparency here, I’m going to plug Gridwise here. That’s because the smartest thing that a driver can do to earn more is to optimize their driving strategy, and using Gridwise is the best way to do that.
Do airport trips the smart way
Not every rideshare driver is the type to wait in the airport queue, but every driver finds themselves driving passengers to the airport at least a few times a month. So when you find yourself at the airport, it MAY make sense to wait there for a ride that is likely going to be a long trip.
To find out if it’s worth your time to wait at the airport, take 15 seconds to open up Gridwise and see how many passengers are flying in and how many drivers in sitting in the queue.
If there is a peak in arrivals and not too many drivers in the queue, then it’s probably worth your time to wait at the airport.
Know Your Event Calendar
Every driver at one point on another finds themselves searching for riders.
It happens to the best of us.
You can minimize the times that you’re in these situations by simply knowing what’s going on in your city. That way, when things start to get dry, you know where there will be passengers.
Again, you can quickly check your free Gridwise app to understand what’s going on in your city.
This DOES NOT mean surge chasing, this means surge predicting.