Uber's food-delivery business continues recording massive growth. But its higher-margin ride-sharing business is still having a pretty rough time.
After the bell on Thursday, Uber reported Q2 revenue of $2.24 billion (down 29% annually) and GAAP EPS of negative $1.02. Revenue topped a $2.08 billion FactSet consensus, but EPS missed a negative $0.81 consensus.
Gross bookings fell 35% annually to $10.22 billion and missed a $10.53 billion consensus.
Adjusted net revenue (ANR), which backs out driver referral payments and "excess" driver incentive payments while adding Uber's COVID-19-related financial assistance payments, came in at $1.92 billion, down 33% and above a $1.85 billion consensus.
Uber's stock fell 2.7% in after-hours trading to $33.79, while rival Lyft (LYFT) , which reports on Aug. 12, fell 3.2% to $31.32. Here are some notable takeaways from Uber's Q2 report and call.
1. Ride-Sharing Activity Is Improving, But Still Down Sharply
In line with comments shared during a July 6 call about its planned acquisition of Postmates, Uber's ride-sharing segment -- now referred to as its "Mobility" segment -- saw gross bookings drop 75% annually in Q2 to $3.05 billion. Segment GAAP revenue fell 67% to $790 million, while ANR fell 66% to $793 million.
On the call, CEO Dara Khosrowshahi disclosed that Mobility bookings were down 53% annually in July in constant currency. He added that markets such as Hong Kong and New Zealand have had days where bookings have topped their pre-COVID highs, and that declines in European markets such as Germany, France and Spain are now at 35% or less.
However, in the U.S., where research firm Second Measure estimates Uber has a 70% ride-hailing share, demand is weaker. Khosrowshahi said bookings remain down 50% to 85% in "top" U.S. markets, with New York City among the cities doing relatively well.
2. Uber Eats' Momentum Isn't Letting Up
Uber's "Delivery" segment -- for now it consists almost entirely of Uber Eats, but going forward will also include Uber's nascent retail goods and P2P delivery businesses -- saw bookings rise 106% to $6.96 billion, or 122% excluding exited markets such as India. GAAP revenue rose 103% to $1.21 billion, while ANR rose 162% to $885 million.
With COVID-19 fears still running high in many regions, it doesn't look as if Eats activity is cooling much for now: Khosrowshahi said that Delivery bookings rose 134% in July in constant currency. He also noted that 55% of Q2 Delivery bookings came from outside the U.S., and that Eats' average basket size, orders per customer and customer retention rate were all up annually.
3. Take Rate Trends Are Mixed
With Uber paring back incentive spending, its Mobility take rate -- defined as Mobility ANR divided by its gross bookings -- improved to 26% from 22.8% in Q1 and 21.6% in Q2 2019.
However, on the call, CFO Nelson Chai guided for Uber's Mobility take rate to drop to a range of 22% to 24% in Q3, as it once again dials up its incentive payments. Khosrowshahi later added that Uber is seeing fewer drivers return to ride-sharing in the U.S. than in other parts of the world, and that unemployment insurance benefits could be a factor.
Delivery take rate -- structurally pressured by the fact that Uber has to pay drivers and restaurants for Eats transactions -- was 12.7%, up from 11.3% in Q1 and 10.3% in Q2 2019. Chai note that Delivery take rate received a 0.8-point boost from an accounting change.
With Uber's revenue mix shifting strongly towards Eats relative to ride-sharing, its total take rate fell to 18.8% from 20.6% in Q1 and 20.1% in Q2 2019.
4. Spending Cuts Helped Keep Losses in Check -- Up to a Point
Though Uber's revenue fell by about $1.3 billion sequentially to $2.24 billion, its GAAP operating loss only rose by $344 million, thanks to major layoffs and other spending cuts, as well as the fact that more than two-thirds of Uber's costs are variable.
Nonetheless, Uber's op. loss still totaled $1.61 billion, and its operating cash flow was negative $1.07 billion. And though Uber was eager to stress that the Mobility segment generated $50 million in positive adjusted EBITDA, it's worth noting that this figure excludes not only interest payments, taxes and depreciation/amortization expenses, but also all G&A and R&D spend that helps support more than one segment. Such G&A/R&D spend totaled $492 million in Q2.
The Delivery segment posted (in spite of its triple-digit growth) a $232 million adjusted EBITDA loss. Its three other segments -- Freight, Other Bets and ATG and Other Technology Platforms -- collectively posted a $163 million adjusted EBITDA loss.
While the ride-sharing business was moderately profitable prior to March after accounting for its fair share of G&A/R&D expenses, the same wasn't true of Uber Eats. On the call, Khosrowshahi insisted Uber expects its Delivery segment "will be profitable in the vast majority of the countries in which we operate" in a couple of years (on a segment adjusted EBITDA basis, that is).
Chai, meanwhile, said that Uber is still confident that it can achieve positive company-wide adjusted EBITDA "sometime in 2021."
5. Asia-Pacific Was the One Region That Saw Revenue Growth
Uber's GAAP revenue fell 36% annually in the U.S. and Canada to $1.25 billion, 44% in Latin America to $232 million and 21% in the EMEA region to $401 million.
However, Asia-Pacific revenue rose 30% to $358 million. The fact that Asia-Pac includes markets that have seen relatively mild ride-sharing declines helped, as did the fact that Delivery bookings rose about 400% annually in Japan.
