After a short hiatus, The Exchange is back. We’ll spend part of this week digging into the global venture capital scene’s Q1 performance, but today, we’re kicking off with a quick dive into Uber, Lyft, Deliveroo and DoorDash — and the ability of on-demand companies of various stripes to generate profit.
Uber is our lodestone today because it dropped a new SEC filing that includes some notes on its recent performance. And, most critically, a piece of guidance for investors concerning its ability to make money this year.
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By “make money,” we don’t mean traditional net income on a GAAP — generally accepted accounting principles — basis. We mean Uber is providing its public investors with notes on its future adjusted profitability. Real profits are still somewhere out in the uncharted future.
So let’s parse Uber’s latest, vet its profit promise, consider its rivals and their performance, and then ask ourselves if the great ride-hailing and food-delivery booms will ever make back the money they cost to scale.
Uber’s planned profits
In 2019, Lyft told investors to expect positive adjusted EBITDA by the final quarter of 2021; at the time, Uber said it would generate full-year positive adjusted EBITDA. Those are slightly different (if related) promises. Later, Uber moved up its profitability promise to Q4 2020, but that was not to be.
After Uber changed up its profitability timeline, COVID-19 came. The pandemic forced the American ride-hailing company to revert to its previous adjusted profitability promises.
Uber and Lyft took huge revenue hits as their core ride-hailing businesses dried up faster than water on a Texas sidewalk after COVID-19 lockdowns took effect. In response, Uber fell back on its Uber Eats business, while Lyft had to get by without a second business line.
Both Uber and Lyft lost gobs of money last year. But believers expected the ride-hailing market to come back, which gave them some breathing room on the stock market. That faith may be rewarded.
Today Uber dropped a new SEC filing detailing performance gains that should delight those willing to back the company during the pandemic’s darker periods (emphasis: TechCrunch):
Uber Technologies, Inc. (“Uber”) today announced that in March 2021 total company Gross Bookings reached the highest monthly level in the company’s nearly 12-year history. The company’s Mobility business posted its best month since March 2020, crossing a $30 billion annualized Gross Bookings run-rate, with average daily Gross Bookings up 9% month-over-month. The company’s Delivery business set another all-time record, crossing a $52 billion annualized Gross Bookings run-rate in March, growing more than 150% year-over-year.
As vaccination rates increase in the United States, we are observing that consumer demand for Mobility is recovering faster than driver availability, and consumer demand for Delivery continues to exceed courier availability. On April 7, Uber announced that it is increasing investments in driver incentives to improve driver availability in the near-term. We continue to believe that Uber is on track to reach quarterly Adjusted EBITDA profitability in 2021.
To summarize: Last month was Uber’s best in history in terms of gross sales on its platform. That’s good, but not as good as you might think.
Uber Eats has scaled massively, meaning that the company’s overall revenue mix has shifted toward food delivery in the last year, but it is far less profitable than Uber’s main business. So, the company has reached a new gross bookings — total platform spend — record, but it’s made up of less profitable revenue than before.
We’re not hating. We’re merely observing!
What matters most is that final line. Uber still expects “quarterly Adjusted EBITDA profitability in 2021.” That’s good. Uber shares are up around 2% this morning on the news. Lyft shares are off 1.4% at the same time.
Why do we care about all of this? Because DoorDash went public recently, and it still loses money. Deliveroo went public recently, and it still loses money. GoPuff has yet to go public, but we presume it still loses money. Instacart has yet to go public, but we presume that it isn’t regularly profitable. And so on.
The fact that Uber has reaffirmed its profit promise is modestly good news for a host of private and public companies that stretch from direct competitor to loose comp. Sure, Uber merely sticking to its old promises is only so good. But imagine if Uber told the markets yet again that it would not reach heavily adjusted profits in yet another calendar year.
At some point, you’d have to give up hope!
So today’s Uber news is good for Uber. It’s somewhat good for Lyft, pretty good for Deliveroo and DoorDash, and probably all right for GoPuff. It’s excellent news for no one, however. What would have been great news for each of the companies we’ve listed would have been GAAP net income from Uber years ago. But we’re here instead, and Uber managing to generate Diet Coke profits by the end of 2021 is better than nothing.
The Exchange is back to the startup beat tomorrow morning!