Uber: Fearless of recession, "the American Didi" nailed it!

Before the U.S. stock market opened on the evening of August 6th Beijing time, the "international DiDi" Uber released its financial report for the second quarter of 2024. Overall, the core ride-hailing and food delivery business order amount growth rate remained basically stable compared to the previous quarter, and the main profit indicator adj.EBITDA profit margin continued to slightly increase. Although there were no big surprises, there were some small fortunate performance highlights, detailed points are as follows:

1. For the order amount indicators of the two core businesses of ride-hailing and food delivery, although the year-on-year growth rate for this quarter seems to have decreased by 1.6~1.8 percentage points compared to the previous quarter, it was mainly affected by the appreciation of the U.S. dollar. Excluding the impact of exchange rates, the growth rate of the ride-hailing business actually accelerated by 1 percentage point compared to the previous quarter, while the growth rate of the food delivery business remained stable. In other words, there is no sign of slowdown in the growth of the two core businesses, and both are slightly higher than market expectations.

2. In terms of the price and volume driving factors of the order amount, the order volume of the core business was about 1.9% higher than expected, with a year-on-year growth rate of 21%, remaining stable compared to the previous quarter without slowing down. The average order value decreased by 1.5% year-on-year to $14, which was 1.5% lower than expected. This shows an increase in volume but a decrease in price. We believe that, on the one hand, it may be due to weakening consumer purchasing power (tending towards lower-priced products), but it may also be simply due to the appreciation of the U.S. dollar, leading to a decrease in the average price after conversion for overseas business.

3. In terms of revenue indicators, the revenue growth rate of the ride-hailing business was 25.3%, slowing down by nearly 5 percentage points year-on-year, but after excluding the impact of exchange rates, it actually only slowed down by 2 percentage points. The reasons for the slowdown in growth include that after excluding the impact of the 1P and 3P model changes, the comparable monetization rate decreased slightly by 0.1 percentage point to 23.5% compared to the previous quarter.

The revenue of the food delivery business was 3.29 billion, an 8% year-on-year growth, accelerating by 4 percentage points compared to the previous quarter. The accelerated revenue growth is mainly attributed to the comparable monetization rate (after excluding the impact of changes in criteria) increasing by 0.3 percentage points to 15.4% compared to the previous quarter. Dolphin Research believes that the increase in monetization rate is mainly due to the growth of Uber's advertising business. According to the company's disclosure, the current annualized revenue from advertising has reached $1 billion.

4. Uber's total revenue this quarter was $10.7 billion. From the perspective of deviation from expectations, this is mainly attributed to the ride-hailing business exceeding expectations, with total revenue exceeding expectations by about $200 million. From the perspective of growth rate, due to the improvement in the food delivery business monetization rate, the total revenue actually accelerated by 2 percentage points to 17% compared to the previous quarter after excluding the impact of exchange rates.

Gross profit increased by 13.4% year-on-year, accelerating by 2.2 percentage points compared to the previous quarter, which is basically consistent with the speed of revenue growth and slightly higher. This is also attributed to the increase in monetization rate driven by the advertising revenue of the food delivery business.

5. From the perspective of expenses, this quarter the company's overall operating expenses ended the trend of year-on-year decreases for the past four consecutive quarters, with a year-on-year increase of about 1%, and actual expenses slightly higher than expected by about 1.1%. This led to the company's operating profit for the quarter under GAAP being basically in line with expectations and not exceeding expectations.

After adjusting for stock incentive and other non-cash expenses, adj.EBITDA for this quarter is 1.57 billion, slightly exceeding expectations by 70 million. Looking at the different business segments:

1) Food delivery business adj.EBITDA exceeded expectations by nearly 5%, being the most surpassing among all segments. The profit margin as a percentage of order amount increased by 0.2 percentage points compared to the previous period; 2) Ride-hailing business's adj.EBITDA exceeded expectations by nearly 30 million, but the profit margin as a percentage of order amount decreased by 0.3 percentage points compared to the previous period, likely due to a decrease in average order value.

Overall, the proportion of total adj.EBITDA to total order amount increased from 3.7% to 3.9% compared to the previous period, with the profit margin continuing to improve.

6. Looking ahead to the third quarter, the company guided for total order amount between 40.25 billion and 41.75 billion, including the market expectation of 41.3 billion. The mid-point of the guidance represents a year-on-year growth rate of 16%, slightly lower than this quarter by about 2.4 percentage points. However, this quarter's guidance includes a 4% impact from exchange rate headwinds. Excluding the exchange rate factor, the comparable growth rate is similar to this quarter.

From a profit perspective, adj.EBITDA guidance is between 1.58 billion and 1.68 billion, exceeding the market expectation of 1.62 billion. The mid-point of the guidance corresponds to a 0.1 percentage point increase in profit margin (as a percentage of total order amount) to 4%.

Dolphin Research's Viewpoint:

As mentioned earlier, the growth of core business shows no signs of slowing down in terms of current performance or next quarter's guidance, while the trend of improving profit margins continues (although at a slower pace). The satisfactory performance with no flaws in revenue growth and profit release is clearly pleasing to investors.

Moreover, due to the recent weak U.S. consumer data and the Friday employment data shock causing Uber's stock price to temporarily fall to $50, it presented an attractive price level. Although there has been a noticeable rebound in the past few days, the current valuation is no longer visibly cheap. However, based on the company's guidance for a 30% to 40% growth in adj.EBITDA, we believe the company's current valuation remains in a relatively reasonable range. If sentiment or macro factors lead to a valuation pullback, it could present a good opportunity.

Below is a detailed interpretation of this quarter's financial report:

I. Q2 continued the growth trend from the previous quarter without further signs of slowing down

In terms of the key indicator reflecting the actual operating conditions, Gross Transaction Value (GTV), the cornerstone ride-hailing (Mobility) business recorded an order amount of approximately 20.6 billion this quarter, slightly exceeding expectations by 1%. The year-on-year growth rate is 22.9%, seemingly continuing to slow down by 1.7 percentage points compared to the previous quarter , but in reality, after excluding the drag from the appreciation of the U.S. dollar, the growth rate under constant exchange rates is 27%, showing an increase of 1 percentage point compared to the previous period.

This indicates that Uber's ride-hailing business is not showing signs of slowing down, and it can be inferred that the growth in international markets such as South America this quarter should be relatively strong (regional growth data will be disclosed in the subsequent 10Q document).

Similarly, Uber Eats food delivery business had an order amount of approximately 18.1 billion RMB this quarter, which is basically in line with expectations. It increased by 17.8% year-on-year, although it seems to have slowed down by 1.6 percentage points compared to the previous quarter, but after excluding the impact of exchange rates, the actual growth rate remained flat on a quarter-on-quarter basis. In other words, there are no signs of a slowdown in Uber's food delivery business either.

Combining ride-hailing and food delivery businesses, the total core business order amount reached 38.7 billion RMB, slightly exceeding the expected 3 billion RMB. The year-on-year growth rate is also almost unchanged from the previous quarter.

In terms of core driving factors, from a volume perspective (food delivery + ride-hailing), the core business order volume is about 1.9% higher than expected, with a year-on-year growth rate of 21%, remaining flat on a quarter-on-quarter basis without deceleration. From a price perspective, the average order value has decreased by 1.5% year-on-year to $14, which is 1.5% lower than expected.

Looking at the combination of price and volume, it shows a situation of increasing volume but decreasing price. We believe that, on the one hand, this may be due to weakening consumer purchasing power (tending towards lower-priced products), but it may also be mainly due to the appreciation of the US dollar, leading to a decrease in the average price after conversion for overseas business.

In terms of user metrics, this quarter's monthly active users reached 1.56 billion, and the year-on-year growth rate and quarter-on-quarter growth rate are basically in line with past seasonal changes. The average monthly active user places orders 17.7 times per quarter, with a 6.4% year-on-year growth, showing steady improvement in user stickiness.

II. With the contribution of advertising revenue, revenue growth has increased rather than decreased

Due to legal reasons, some of Uber's businesses in regions such as the UK and Canada have transitioned from a platform model to a self-operated model. The company's confirmed revenue has also changed from net commission to total payment amount, leading to an increase in revenue. Therefore, most of the following analysis is based on the performance after excluding the impact of accounting changes.

Based on the higher-than-expected order amount in the mini-supermarket, the revenue of the ride-hailing business outperformed expectations by 2.9%. The revenue growth of the ride-hailing business is 25.3%, a year-on-year slowdown of nearly 5 percentage points, but after excluding the impact of exchange rates, the actual slowdown was only 2 percentage points.

Excluding the impact of the 1P and 3P model changes, the comparable monetization rate this quarter is 23.5%, slightly down by 0.1 percentage points from the previous quarter. With the business volume growth rate stabilizing, there is no significant change in the platform's commission.

Food delivery business revenue for this quarter was 3.29 billion, an 8% year-on-year increase, accelerating by 4 percentage points from the previous quarter. The accelerated revenue growth is mainly attributed to the increase in monetization rate. Excluding the impact of the 1P and 3P model changes, this quarter's comparable monetization rate is 15.4%, an increase of 0.3 percentage points from the previous quarter. Dolphin Research believes that the increase in the monetization rate of the food delivery business is mainly attributed to the growth of Uber's advertising business. According to the company's disclosure, the current annualized revenue from advertising has reached $1 billion.

However, the market's expectations for the food delivery business are higher (possibly more optimistic about the advertising business), resulting in the actual food delivery revenue being 1.4% lower than expected.

As for Uber's freight business, revenue for this quarter is approximately 1.27 billion, slightly shrinking compared to the previous quarter. Although slightly better than expected, it has little impact on the company's overall performance and valuation.

Summing up all businesses, Uber's total revenue this quarter is $10.7 billion. From the perspective of expectation deviation, this is mainly attributed to the ride-hailing business exceeding expectations, with total revenue exceeding expectations by about $200 million. From the perspective of growth rate, due to the increase in the food delivery business's monetization rate, the total revenue actually increased by 2 percentage points to 17% after excluding the impact of exchange rates. **

III. Slight Outperformance in Gross Profit Growth Compared to Revenue

Due to the company's unstable revenue calculation, which continues to change, the indicator of gross profit/revenue ratio is not entirely comparable. Therefore, we mainly focus on the growth of gross profit amount. This quarter, the year-on-year growth of gross profit increased by 13.4% , accelerating by 2.2 percentage points compared to the previous quarter, and the speed of increase is basically consistent with that of revenue, slightly higher. The slightly higher growth rate of gross profit compared to revenue should also be attributed to the increase in monetization rate brought about by the food delivery advertising business.

IV. Food Delivery Business Boosts Overall Profit Margin

From an expense perspective, this quarter the company's overall operating expenses ended the trend of year-on-year decrease in the past four quarters, with a year-on-year growth of about 1% this quarter, actual expenditure slightly higher than expected by about 1.1%. Specifically, the company's research and development and sales expenses continued to decrease year-on-year, but management and operational support expenses have started to increase year-on-year.

Due to the actual expense slightly exceeding expectations, although revenue and gross profit were slightly stronger than expected, the company's operating profit this quarter under GAAP criteria is basically in line with expectations.

Excluding the expectation difference, although the total expense amount has increased again, it still belongs to the trend of being diluted by faster revenue growth. Adding back adjustments for equity incentives and other non-cash expenses, Uber's adjusted operating profit for this quarter is nearly $1.4 billion. The adjusted operating profit margin increased by 1.3 percentage points to 13.1% compared to the previous quarter.

The company's focus is on the adjusted EBITDA indicator for this quarter, which is $1.57 billion, slightly exceeding expectations by $70 million. Looking at various business segments:

1) Adjusted EBITDA for the ride-hailing business is $1.57 billion, nearly $30 million higher than expected, but the profit margin as a percentage of order amount decreased by 0.3 percentage points compared to the previous period.

2) The food delivery business achieved an adjusted EBITDA of $590 million, nearly 5% higher than expected, the most exceeding expectations among all segments. The profit margin as a percentage of order amount increased by 0.2 percentage points compared to the previous period.

3) As for the freight business, the loss for this quarter expanded to 0.12 billion, which is 0.01 billion less than expected, but it is not significant in the overall picture;

4) The loss at the group headquarters level was 570 million, showing a slight narrowing on a quarter-on-quarter basis.

Ultimately, the proportion of adj.EBITDA to total order amount for the group increased from 3.7% to 3.9% on a quarter-on-quarter basis, and the profit margin continued to improve.