This hoped-for fake “profitability” isn’t profitability, but “Adjusted EBITDA,” Uber’s own homemade creature.
By Wolf Richter for WOLF STREET.
Uber – which announced another round of mass-layoffs this week of 3,400 folks or 14% of its staff – reported another classically horrendous quarterly loss this evening.
Revenues rose 14% in the first quarter, ended March 31, to $3.5 billion. But operating expenses, despite cost cuts and the series of layoffs, jumped by 16% to $4.8 billion. And there were “other expenses” of $1.8 billion and interest expenses of $118 million, a tax benefit, and a couple of other things. And the net loss tripled to $2.94 billion.
It’s astounding that investors don’t throw in the towel on a company that is over 10 years old and has many thousands of employees but still loses nearly $3 billion on $3.5 billion in revenues.
In Q1 2019, its last pre-IPO quarter, Uber lost $1 billion on $3.1 billion in revenues, according to its earnings report today. In Q1 2020, it lost $3 billion on $3.5 billion in revenues. This is not a propitious trend.
It has just been a quarterly horror show. In its pre-IPO S-1 filing at the time, Uber disclosed that it had lost $10 billion on its operations over the prior three years. In its IPO quarter, Q2, it had lost another $5.2 billion on $3.2 billion in revenue.
But it’s not going to run out of cash soon. In today’s report, it shows an “accumulated deficit,” which roughly reflects the losses in its lifetime, of $19 billion. But it has raised $31 billion in capital in its lifetime and still has about $9 billion in cash ready at hand to throw into its cash-burn machine.
Q1 revenues were only impacted by the pandemic during the last two weeks of March. The rest of Q1 was pre-pandemic. Q2 will show the brunt of the pandemic on its revenues. Its Rides business is getting “hit hard” now, it said, but Uber is trying to make up for it with its food delivery business Eats.
In Q1, the Rides business, which was stagnating even in pre-pandemic times, generated 3 times the revenues of the Eats business, and over 10 times the revenues of its Freight business. What’s growing are the latter two, but they’re small. But the Rides business, the biggie, is taking the big hit. In other words, Q2 will be a doozie because the costs will still be high, and the revenues will be a lot lower.
But CEO Dara Khosrowshahi threw markets some red meat in form of the vaguest of vague statements to make up for the prospect of many billions more in actual losses: “We are encouraged by the early signs we are seeing in markets that are beginning to open back up.”
He told analysts that Uber is trying to cut fixed costs by $1 billion, including marketing expenses, capital expenditures, and the layoffs announced this week – though the problem is that Uber has been announcing cost cuts and layoffs for a year, and costs just keep rising.
“Reaching profitability as soon as possible remains a strategic priority for us,” he said.
But this “profitability” isn’t profitability. It’s “Adjusted EBITDA,” Uber’s own homemade creature, which, according to Uber, is net income (loss), minus…
- income (loss) from discontinued operations net of income taxes
- net income (loss) attributable to non-controlling interests, net of tax
- provision for (benefit from) income taxes
- income (loss) from equity method investment, net of tax
- interest expense
- other income (expense), net
- depreciation and amortization
- stock-based compensation expense [a BIGGIE]
- certain legal, tax, and regulatory reserve changes and settlements
- goodwill and asset impairments/loss on sale of assets
- acquisition and financing related expenses
- restructuring charges
- other items not indicative of our ongoing operating performance, including COVID-19 response initiatives related to payments for financial assistance to Drivers personally impacted by COVID-19 and the cost of personal protective equipment distributed to Drivers.
And even under this fanciful BS metric of “Adjusted EBITDA,” Uber still lost $612 million. In other words, those 13 items above that were excluded from its loss amounted to $2.3 billion.
And this fanciful “Adjusted EBITDA profitability” has now been pushed out further, Khosrowshahi said, but not by years, “by a matter of quarters.” It was supposed to happen this year pre-crisis, and it’s now moved into next year, and it’s really easy to move the goal post, as they did today. And even if Uber hits it eventually, it will still only be “Adjusted EBITDA profitability” which will still be a big-fat net loss under GAAP.
Sure, Uber provides a taxi and delivery service that is appreciated by a lot of people. But investors have been subsidizing this service to the tune of $19 billion so far, and they will continue to have to subsidize it because there is no sign that there will ever be real and significant annual profitably under GAAP.
Driven by Lyft – which yesterday reported an equally mind-boggling loss of $400 million on $955 million in revenues, followed by some blah-blah-blah from the executives – the shares of both companies soared today: Lyft +22% and Uber +11%. Afterhours today, upon the quarterly horror show, Uber’s shares jumped another 5%. Good lordie. Who programmed these algos?
Nobody knew what would trigger the next financial crisis, but just about everyone knew it would involve the record pile of corporate debt. And so it happened. Now the Fed fixed it (transcript of my podcast). Read... Nothing’s Fixed: What’s Behind the Corporate Debt Bailout
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