Uber easily topped Wall Street’s trailing expectations for the three months that ended June 30th, but it’s what happening in July and August and beyond that with the emergence of the delta variant that is most concerning right now.
Officially, the San Francisco based transportation company posted a surprise profit of 58 cents per share on total revenue of $3.9 billion for the quarter. That easily beat Wall Street’s target of a 51 cent loss on sales of $3.7 billion.
The company also reported net income of $1.1 billion in the quarter, due in a large part to unrealized gains of $1.4 billion in Didi and another $471 million in Aurora. However, Uber still posted an operating loss of $1.19 billion, while its adjusted EBITDA loss, which refers to earnings before interest, taxes, depreciation and amortization, came to $509 million, down $150 million from the previous quarter.
Uber officials said the loss was due to heavy spending on its part to lure back drivers. That caused analysts to raise concerns over long-term reliability of Uber’s labor model, and the company’s stock was down more than 4% after-hours, extending a six month decline that has lowered its market value by almost one-third.
“We invested in recovery by investing in drivers, and we made strong progress,” Uber Chief Executive Officer Dara Khosrowshahi said in a call with analysts.
The quarter underlined how Uber has been taking advantage of the ongoing COVID-19 pandemic to expand its business beyond its original rides service. Nowadays, deliveries of food and packages actually drive the lion’s share of revenue for the company. When COVID first emerged, people stopped eating out and instead turned to food deliveries. Uber’s Delivery business consequently saw massive growth, and the company said today it has remained strong even as COVID restrictions around the world are eased.
Uber’s Delivery business took off in 2014, but the pandemic gave it a huge boost. Uber said the Delivery business generated gross bookings of $12.96 billion in the quarter, up 85% from a year ago and outperforming its core Mobility segment. The Mobility business contributed $8.6 billion in gross bookings, up 184%.
The company also reported that its number of delivery merchants now exceeds 750,000.
Khosrowshahi said on a call the Delivery business has struggled with supply and demand imbalances due to a lack of drivers. That has resulted in prices surging and increased wait times for customers that fall below the company’s targets, he said.
To remedy this, Khosrowshahi said the company made heavy investments that helped to add 30% more drivers to its U.S. operations from June to July. He didn’t provide an exact number of drivers.
“The good news is we’re now in a good place where we’re able to pull those investments back, Khosrowshahi said. “The investments were big, but they were worth it.”
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Khosrowshahi made an interesting observation on the call about how deliveries are boosting the company’s overall business. He pointed out the Delivery business is now actually driving customer acquisition for the Mobility segment, as opposed to the other way round. He said this is because in many markets, especially suburban areas and smaller towns, Uber Eats increasingly tends to be the first way customer engage with Uber.
“In Q2, over 20% of Mobility’s first-time riders in the US, and more than 40% of first-time riders in the UK, were existing Delivery consumers, with this contribution rapidly growing over the last year,” the CEO explained.
With this in mind, Uber has been seeking to expand its Delivery business with an aggressive string of acquisitions that began with its $2.7 billion deal to buy Postmates in June 2020. Last month, Uber announced it had bought out the remaining shareholders of Cornershop, a company it already held a majority stake in, to become its sole owner. Uber has said that once the deal is finalized, it will expand Cornershop’s grocery delivery business beyond Mexico, Chile, Canada and Peru and into other regions around the world.
“We are beginning to broadly roll out grocery powered by Cornershop in the US, having doubled our footprint to more than 400 cities in the last few weeks, and expect this to be the next pillar of growth for Uber,” Khosrowshashi said in the call today.
Later that month Uber announced a key partnership in the U.S. with Walgreens. That made it possible for people to order the pharmacy’s products directly from the Uber Eats app. That move signal’s Uber’s ambition to expand beyond just grocery and food deliveries.
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Uber also provided an update on its smaller Uber Freight business, saying it grew by a healthy 64% in revenue terms with sales of $348 million. The Uber Freight app pairs truckers with merchants that need to ship out their goods. Merchants use the app to source vehicles to deliver their products at more affordable rates.
Khosrowshashi said the business is increasingly powering “first and middle-mile logistics” and that it was notable how 50% of its freight volume comes from grocery and consumer staples shippers.
Uber officials believe the Freight division, despite its modest size at this time, holds a lot of promise. To grow its market position, the company recently doled out $2.2 billion to acquire a company called Transplace.
That deal is designed to expand Uber’s presence in the logistics segment especially. Transplace provides logistics management services for the automotive, chemical, consumer packaged goods, electronics and technology, energy, manufacturing, oil and gas, and retail industries. By acquiring Transplace, Uber said it will broaden the scope of its platform towards more actively managing freight itself.
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“We believe there is a large opportunity to be the preferred end-to-end logistics partner for shippers,” Khosrowshashi said on the call. “With the pending acquisition of Transplace, we have the potential to create the first end-to-end digital logistics platform that could one day power the movement of goods all the way from the point of production to the consumer.”