Uber Turns the Tide and Generates Huge Pile of Free Cash Flow in Q2

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The question of whether Uber could be self-sustaining was at least partially answered on Tuesday by a company spokesperson. second quarter earnings report.

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In its Q2 digest, the US food delivery giant reported positive free cash flow, indicating it can now be self-funded, dispelling — at least in today’s market — lingering fears that one day he runs out of cash. .

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The former unicorn, now a public company, traded sharply higher in pre-market trading following the release of its second-quarter financial results. Shares are up 14.4% as of 10:30 am ET.

That Uber was able to generate free cash flow in the second quarter should come as no surprise; The company’s first-quarter performance included positive operating cash flow and sharply smaller negative free cash flow. Operating cash flow measures how much a business’s operations consume or generate cash, while free cash flow is the same metric, minus capital expenditures.

Free cash flow is not profitability in the traditional sense, as other costs come into play, including the non-cash value of share-based employee compensation and changes in the value of equity investments.

Uber was unprofitable in terms of net income in the second quarter. That said, positive free cash flow and other signs of health were more than enough to give Uber wind in its sails—gasoline in its tank? electrons in his battery?

Let’s talk about the results.

Second Quarter Uber

In the three months ended June 30, Uber’s gross bookings – the value of all business transactions made on its platform – rose 33% to $29.1 billion from $21.9 billion in the second quarter of last year. Of that total, Uber generated $8.1 billion in revenue, up 105% from a year ago’s revenue of $3.9 billion in the same period.

The company notes that the growth in the company’s revenue was affected by “a change in the business model of our mobile business in the UK and the acquisition of Transplace by Uber Freight.” salt.

Despite this, the increase in the company’s gross order volume and related revenue growth provided operating leverage. Uber’s adjusted EBITDA rose from -$509 million in Q2 2021 to $364 million in Q2 2022. Similarly, Uber’s free cash flow rose from -$398 million in last year’s quarter to $382 million in the second quarter of 2022.

Travel vs Shipping

Remarkably, Uber’s growth engine has been flipped again. Before the pandemic, Uber’s ridesharing business was its flagship division. However, in the early quarters affected by COVID-19, Uber’s food delivery business became a growth driver.

Now that the pandemic has subsided economically, the company’s expansion driver has changed hands once again: gross taxi bookings are up 120% in the second quarter compared to last year, and gross food delivery orders are up even more. modest 7%.

Delivery still leads the way in terms of bookings, slightly ahead of ridesharing and well ahead of its cargo division. Total orders for delivery in the second quarter were $13.87 billion, taxi services $13.36 billion and freight orders $1.8 billion.

The slower growth of its delivery efforts doesn’t mean that Uber’s job of getting you lunch is unprofitable under the adjusted terms. Every notable Uber business segment posted positive adjusted EBITDA in the second quarter of 2022, with taxi services generating $771 million, delivery $99 million, and its nascent trucking $5 million; The company’s spending cut that figure by $511 million on an adjusted EBITDA basis, but the overall health of Uber’s growth drivers looks strong.

Yes, but

Aside from rosy non-GAAP numbers like adjusted EBITDA or cash flow, Uber was a huge loss in the second quarter, losing $2.6 billion in the second quarter of 2022.

Factors behind this loss, compared to its adjusted EBITDA, included depreciation and amortization of $243 million, share costs of $470 million and other expenses of $1.7 billion.

Drivers are back

One of the biggest challenges in the taxi world has been attracting and retaining drivers. Initially, Uber used incentives to lure drivers out of those quieter days of the COVID-19 pandemic. But now it seems like the company is ditching that and using in-app improvements instead.

Uber even noted that part of the year-on-year improvement in adjusted EBITDA margins was due to a “significant reduction in investment in driver supply.”

Those app improvements that CEO Dara Khosrowshahi listed in the letter shareholders, includes showing drivers what they will earn and where they are going before agreeing to travel. This program, known as Upfront Fares, will roll out across much of the US in the coming months.

Investment resistance

Perhaps the biggest hurdle to Uber’s bottom line has been its stakes in other companies, notably the autonomous vehicle tech company Aurora, Grab and Zomato.

Lest you forget, Uber sold his autonomous car Uber ATG to Aurora back in December 2020.

The complex deal did not include a cash payment to Aurora for Uber ATG, a company that was valued at $7.25 billion after a $1 billion investment from Toyota, DENSO and SoftBank’s Vision Fund. Instead, Uber transferred its stake in ATG and invested $400 million in Aurora, giving it a 26% stake in the combined company.

Aurora has since become a public company. after the merger with a special acquisition company. Aurora’s share price peaked at $17.11 in November and has since dropped 84%.

This stake, along with Uber’s investments in Zomato and Grab, had a rather negative impact on its results.

In the second quarter, Uber lost $1.1 billion due to investments in Aurora, $520 million due to Grab and $245 million due to Zomato. Uber also said a $1.4 billion loss on its investment in Didi in the first quarter was partially offset by a $259 million gain in the second quarter of 2022.

Credit: techcrunch.com /

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