Huge profit gains in Uber's third quarter

Uber reported profits in the third quarter showing a profitable transportation and delivery company that is moving forward despite slowing growth in some sectors.

The company reported revenue of $9,3 billion, an increase of 11% year over year. Investors were expecting revenue of around $9.500 billion (FactSet, Refinitiv), meaning that despite the company's growth, it missed estimates. Turning to profitability, Uber reported third-quarter net income of $221 million, or 10 cents per share, compared with a net loss of $1.200 billion, or 61 cents per share, in the same quarter of the year. past. Once again, the company missed expectations that it would generate 12 cents in earnings per share.

Looking ahead, Uber anticipates gross bookings of between $36.500 billion and $37.500 billion, an increase of just 6% on the high end from its third-quarter result.

After reporting, Uber shares rose 1,6%, after a day of ups and downs in stock trading.

Against a backdrop of macroeconomic uncertainty, the former favorite startup's results can be seen as an indication that its business model has matured and is now in a stable, profitable and cash-generating position. On the other hand, poor-performing demand results from a company as global as Uber could indicate that consumer spending is being lower than expected.

Where does the money come from?

In the third quarter, Uber saw its total bookings increase from $29.100 billion to $35.300 billion, a gain of about 21%. In terms of business segment, Uber generated $17.900 billion in ride-sharing bookings (+31% year-over-year) and $16.100 billion in delivery bookings (+18%). Those key company business groups generated $5.100 billion and $2.900 billion in revenue, respectively, during the September quarter.

There are nuances to the revenue figures that need to be considered, as the rule changes in question affect startups operating in related categories. On the ride-sharing front, Uber told its investors that its third-quarter 2023 revenue was “negatively impacted by business model changes in some countries that classified certain sales and marketing costs as against revenue of $161 million.” of dollars". That wasn't the only legal change that led to Uber's bottom line. Regarding the results of the delivery business, the company added that its revenue results "were negatively affected by business model changes that classified certain sales and marketing costs as against revenue by $360 million."

The combined impact of those two elements was 8 percentage points of growth.

The profit outlook

From bookings to revenue and profits: How did they impact key parts of Uber's business?

Looking at what Uber calls “segment-adjusted EBITDA,” it's not hard to see how the company managed to rack up more revenue in its most recent quarter. Adjusted ride-hailing earnings rose to $1.290 billion, up 43% from $898 million in the year-ago quarter, while delivery profitability soared from $181 million in the third quarter of 2022. to $413 million in its most recent fiscal period.

Uber spent more during Q2023 2022 compared to its Q5 595 result, but the 516% profit on “general and administrative expenses and platform research and development” to $1.090 million was much lower than the earnings discussed. previously. Thus, Uber's adjusted EBITDA increased from $XNUMX million in total to $XNUMX billion in the third quarter of this year.

Of course, the adjusted EBITDA is to generate positive results, since the hidden increases are to gain height, so more specific figures are also required. In the third quarter, Uber generated $394 million in operating income and $219 million in net income. Add to that $966 million of positive operating cash flow, and Uber looks very healthy given that all the numbers in that paragraph were improvements over its results from the previous year.

But while food delivery and city transportation were profitable in the quarter, the latter part of the business was more lackluster.

Freight transport declines

One area that continues to hurt Uber is its freight business.

While Uber's transportation and delivery business saw an increase in gross bookings in the third quarter, Uber Freight saw a 27% drop year over year. As a result, revenue took a similar drop.

The business unit reported revenue of $1.300 billion in the third quarter, a 27% drop from the same period last year. Quarterly, Uber Freight had a 1% increase in revenue.

The results don't improve once we turn to net income. On an adjusted basis, Uber Freight lost $13 million in the third quarter compared to a profit of $1 million in the same quarter last year.

Uber said its freight business's dismal year-over-year revenue results were due to lower freight revenue and volume. Both are consequences of the challenging freight market cycle.

Uber Freight is not alone. Other newer entrants into the transportation and logistics industry, such as Flexport and Convoy, have struggled this year. In the case of Convoy, the company was forced to close and Flexport closed with its assets swallowed up by Flexport.

Uber Freight continues to move forward, despite these economic obstacles. The question is whether Uber believes in the long-term revenue potential of freight transportation.

Consequences…?

When discussing Uber's results internally, the feeling is that today it is a very profitable and healthy company, although it is not growing as fast as the market expected. The fact that Uber's stock price is rising indicates that investors are so far content to excuse the small mistakes of the third quarter and keep their eyes more focused on its year-over-year improvements and future guidance. A good comparison can be made when Lyft's numbers are known.