Putting Uber/Lyft Earnings Announcements in Perspective

Recently, Uber and Lyft announced their second quarter earnings results, and the results were interesting to say the least. Who is up and who is down, and what does this mean for drivers? Senior RSG contributor John Ince breaks down all the news for us below.

Uber and Lyft’s earnings announcements were keenly awaited this week by both investors and analysts as big questions still surround both companies.  Are they viable companies? Do they justify the huge valuations that investors so far have been willing give? Do their business models make sense after years of astronomical losses?

The supposed panacea was supposed to be driverless cars, but nearly everybody now recognizes that the initial expectations there were unrealistic. So where does that leave the companies? They have two options: they can either increase revenues, or cut back on expenses and investments in still unproven markets and technologies. Both companies seem to have squeezed almost everything they can can out of the relationship with the drivers. In the midst of all this, one big question hovers over everything – how are the companies going move down this elusive “path to profitability”?

For years both companies have been subsidizing passenger fares in the interest of gaining market share, and the result has been impressive growth at the expense of near term profitability.  Long term this can’t continue. Fare hikes in the future are an inevitability.  One possible resolution would seems to be some form of detente between Uber and Lyft. But any collaboration or collusion between the companies risks violating antitrust laws, so they have to be very careful. 

So anticipation was high this past Wednesday, August 7 (Lyft’s earning report) and Thursday, August 8 (Uber’s earning’s report). Unfortunately, the reports raised more questions than they answered.   

Lyft appears to be making stronger progress towards profitability than Uber.  Their rate of growth slowed slightly, but not as much as Uber.  Thursday, the stock prices for both companies were up, until Uber announced earnings, a staggering $5 billion loss, more money lost in a quarter than all but 3 public companies lost in the whole year. Here’s what this all looks like and how it could potentially affect drivers.

Reactions to Lyft’s Earnings

Lyft’s second quarter was way better than Wall Street expected [Business Insider]

Sum and Substance: Lyft on Wednesday released its second-quarter earnings report, which beat Wall Street’s expectations on revenue and boosted guidance for 2019.  Shares of the company surged as much as 10% in after-hours trading following the news.  Lyft on Wednesday reported second-quarter earnings that topped Wall Street’s expectations, while boosting its guidance for the full year.

Here are the important numbers:

Revenue: $867 million ($809 million expected)
Losses per share: $0.68 (adjusted) vs. $1.74 expected
Active riders: 21.8 million

My Take:  That’s what this game is all about – tamping down expectations so that you beat Wall Street’s estimates.  On that point, where do these analysts come up with these estimates? It’s all a funny, funny game – unless you happen to believe what they’re saying – in which case you can lose a lot of money.

Lyft Joins the Litter of Unicorn Disappointments [Bloomberg]

Sum and Substance:  Investors are not embracing richly valued startups with a string of question marks.  The lackluster performance isn’t a great setup for other elites itching to go public.  Lyft Inc.’s rocky road as a public company should be a warning for other highfliers hoping to hit it off with stock investors. It is ugly out there for the elite startup superstars.

Lyft said in its second-quarter earnings report on Wednesday that the rate of revenue growth slowed less than it had forecast and that losses weren’t as bad as investors expected. Still, even the company’s slightly raised forecast for 2019 revenue growth of as much as 62% would represent a comedown from last year, when Lyft’s revenue was doubling or more year-over-year…

For all the hype about the post-2008 class of high-profile, highly valued and highly disruptive technology startups, many of the biggest “unicorns” that have gone public so far have been stinking up public stock markets like a skunk waddling into a picnic. In addition to the decline in shares of Uber and Lyft, the prices for Snapchat, Dropbox Inc., Spotify Technology SA and China’s Xiaomi Corp. and Meituan Dianping are also below their IPO levels.

My Take:  First, Bloomberg wins the prize for the best line about Uber/Lyft IPOs: “so far have been stinking up public stock markets like a skunk waddling into a picnic.”  Seems to me that Bloomberg is perhaps too respectable a media outlet to call Uber/Lyft out for what they are: investor plays that have made a few early investors and employees obscenely rich.  The IPOs (and Uber’s Softbank deal) were the exit vehicles. Basically the people who made these companies what they are are now happy campers, whatever happens to the companies. All we’re getting now in these earning calls is posturing for companies that are pretending to be what they promised investors.

Lyft posts losses despite revenue growth, improves outlook [Washington Post]

Sum and Substance:  Lyft continued to bleed money in its second quarter but says it expects to stem some of those losses, raising its outlook for 2019.

The ride-hailing company on Wednesday posted revenue of $867.3 million, up 72% from the same time last year.

But the San Francisco-based company lost $664.2 million in the quarter, which was worse than the $445 million loss that analysts polled by FactSet expected.

More than a third of the loss, or $296.6 million, came from stock-based compensation Lyft paid out after its initial public offering in March. The company also lost $141.1 million due to changing requirements for liabilities for insurance.

Even so, the company improved its outlook for 2019. Lyft now predicts it will lose between $850 million and $875 million after expenses such as interest, taxes, depreciation and amortization in 2019, an improvement from the previous predicted loss of $1.15 billion to $1.175 billion.

With the revised guidance, the company estimates that 2018 may have been the peak loss year, and expects to lose less money in 2020, said Brian Roberts, chief financial officer, in a conference call with investors.

My Take:  Basically everything reported in this earning call could be said about every other earnings announcement from the company for the last several years – with the caveat that this time Lyft managed expectations better.

Reactions to Uber’s Earnings

Uber’s Q2 losses were bigger than total 2018 losses for all but three S&P 500 companies [CNBC.com]

Sum and Substance: Uber’s $5.2 billion second-quarter loss is big on its face.

But it seems even bigger when you consider this — only three companies in the S&P 500 lost that much money in all of 2018.  The ride-hailing company, which held its stock market debut in May, attributed most of its quarterly deficit to stock-based compensation. Excluding that expense, Uber’s losses were around $1.3 billion, or roughly 30% wider than the prior period.

High stock-related compensation costs are normal for Silicon Valley companies. Equity packages are the price of luring talented engineers who could otherwise command bigger salaries at more established companies. Eventually those options and restricted stock units vest, and the companies then have to account for the costs.

Snap recorded a $2 billion expense in its first post-IPO earnings report in 2017. On Wednesday, Lyft reported a $296.6 million stock-compensation expense following an $894 million cost in the previous quarter.

My Take:  Notice Uber CEO Dara Khosrowshahi’s careful choice of words and the spin it puts on staggering losses: “2019 will be our peak investment year, and … you’ll see losses come down.”  For those who were paying attention, Travis Kalanick said much the same thing over 5 years ago.  He, of course, resigned in disgrace and is now counting his billions, with no measure of accountability for the fanciful tales he spun when he was in charge.

Uber Could Be Driving in Reverse Friday as Traders React to Q2 Results [TheStreet.com]

Sum and Substance: Uber Technologies (UBER) is the “Stock of the Day” at Real Money after posting a $5.2 billion loss for Q2. UBER was trading about 3% lower in pre-market activity. Media reports say that things were “weighed down by heavy competition in Latin America and elsewhere, as well as a large expense related to its initial public offering”. Ah, fundamentals. Let’s see what the charts and indicators might look like this morning.

UBER is a relatively recent new issue or IPO so like most IPO’s I have a data problem – trying to get a “read” on a stock with little price history. Still let’s see what we can glean from the bar chart and X’s and O’s.

In this daily bar chart of UBER, below, we can see some wide daily swings in May when this much anticipated company went public. Prices settled down in June and July, but we can see a decline in late July and early August perhaps driven by traders reducing positions ahead of the Q2 figures.

The slope of the 20-day moving average line is negative but the daily On-Balance-Volume (OBV) line turned up recently and the Moving Average Convergence Divergence (MACD) oscillator has narrowed towards a possible cover shorts signal.

The $43-$46 area is likely to represent resistance and the $39-$38 area may give us some minor support. Again, not a lot of information to work with here.

My Take:  For the wonks out there, this article and accompanying charts will provide some satisfaction.  I suspect most drivers don’t care about that stuff.  All they care about is their next paycheck and the good news here is that even after this $5 billion loss, Uber still increased its cash on hand – with something approximating a $10 billion cushion.  At this rate, that would last at least six months, but Uber won’t have any more losses like this one.  Khosrowshahi is playing the Wall Street game – getting the bad news out of the way here.  At least, that what everyone hopes.  Stay tuned.

Uber has 99 million active consumers on its platform in Q2, but revenue misses [ZD.net]

Sum and Substance: Uber’s ability to expand its business into food delivery and freight pays off somewhat, but Lyft’s more focused approach on ride sharing shows some early returns.

… Uber said that it had 99 million active consumers on its platform for Uber Eats and ridesharing, but its revenue fell short of expectations.

The company, which is billing itself as a mobile technology platform that can extend into logistics and other transportation areas, reported a second quarter net loss of $5.24 billion, or $4.72 a share, on revenue of $3.17 billion, up 14% from a year ago.

Wall Street was looking for revenue of $3.66 billion with a net loss of $3.19 a share.

Uber’s net loss includes $3.9 billion in stock-based compensation expenses and $298 million in driver appreciation awards related to its IPO. Uber said it made 1.677 million trips in the quarter, up 35% from a year ago.

… By the numbers:

Uber Eats monthly active platform consumers were up 140% from a year ago.
Uber Freight saw a 10x year-over-year revenue jump from a year ago from a small base.
Research and development costs for the six months ended June 30 were $3.47 billion.
US and Canada were Uber’s biggest market by revenue followed by EMEA and Latin America.

Some notable quotes from Khosrowshahi include:

On ride sharing pricing:

The competitive environment and our position in the ridesharing space continues to be stable to improve. We will take some of that improvement to continue to lean into our Eats business, where we see plenty of competition and significant capital investment but incredible potential.

While you often have to make trade-offs in life, we believe that we can continue to invest aggressively in growth while driving efficiencies from scale by building great tech to improve effectiveness and from good old-fashioned focus on the bottom line…

Uber Eats:

We launched several Eats product features during the quarter including pilots, the test subscription, pricing strategies with our most engaged users. We continue to work on improving restaurant onboarding efficiency by reducing friction including point-of-sale integrations through partnerships such as Olo and custom integration via our own APIs. And lastly, we enabled even more ways for restaurants to engage Eats customers through new options like dine-in, pick-up and the ability to use their own delivery personnel.


I think that we can make the trade-offs where we can scale expenses and/or get far more efficient in our marketing and incentive spend while improving the bottom line of the company. And listen, we’re very confident that this company at maturity can be cash flow positive, and the team is focused on being able to drive big-time growth at the top line while getting more efficient on all parts of the business.

My Take:  For those scratching their heads as to what DK was talking about when he says, “we have a business in the rides area that has a 20-plus percent take rate, which is a very, very strong take rate,” here’s what it is. The take rate refers to the number of users that take action on an offer.  It’s not surprising that Uber’s take rate is so high, when they’re pricing their service well below cost.  It’s a good snappy response to the “meme” circulating that Uber will never be profitable. But it still doesn’t address the issue of profitability. Khosrowshahi appears to still be focused on growth, while savvy investors want to see profits.


Many consider Warren Buffet the greatest investor of all time.  The Oracle of Omaha is famous for investing on the basis of the strength of the brand.  If we were to apply this principle, then Uber’s damaged brand would make for risky investment.

Lyft’s stronger public image would position it better in the future, and that’s exactly what happened this week. Lyft’s stock price was increasing after earnings while Uber’s tanked – down almost 7% on Friday.  If I were a betting man, I’d be following Warren Buffet’s advice on this one – but I’d probably steer clear of ridesharing altogether, unless and until a clear path to profitability emerges.

Readers, what do you think about the latest earnings reports from Uber and Lyft?

-John @ RSG