eResearch | Uber Technologies Inc. (NYSE: UBER) and Lyft Inc. (NASDAQ: LYFT), the two largest ride-sharing companies competing to be the leader in the global markets, just released its Q4/2019 earnings, which both beat analyst estimates for revenue although both companies incurred higher net losses year-over-year.
Focusing on 2020, both Uber and Lyft announced guidance for sustainable paths towards profitability, with each company expecting to have positive adjusted EBITDA by the end of 2020.
Uber
After piling losses quarter after quarter and then terminating its CEO/Co-founder due to unethical internal issues, Uber has just started to get back on its feet with its new CEO, Dara Khosrowshahi, who aims to bring Uber to profitability by the end of 2020 through streamlining processes and cutting unnecessary costs.
Through its new leadership, Uber has beat analyst revenue estimates in its most recent quarter, but Uber is still struggling to slow down losses while it also faces material business situations in California, London, and India.
In India, Uber has sold its Uber Eats food delivery business to local competitor Zomato, which brought criticism due to the high revenue potential from the food delivery business.
In London, Uber was banned due to safety reasons, with growing concerns in the U.S. after Uber released an internal research report showing an average of four sexual assaults per week on its platform.
To reach profitability, Uber is focusing on investing in product innovation such as its logistics platform and autonomous driving initiatives to achieve higher sustainable margins and better economies of scale.
Uber Q4/2019 Earnings Highlights
- Q4/2019 revenue grew to US$4.1 billion with total revenue for 2019 reaching US$14.1 billion, a 37% and 26% increase year-over-year, respectively, attributed to an increase in gross bookings of 28% year-over-year.
- Q4/2019 had a net loss of US$1.1 billion with total net loss for 2019 reaching US$8.5 billion, a 24% and 950% increase year-over-year, respectively, mainly due to increased annual marketing and R&D expenses to US$4.6 billion and US$4.8 billion, respectively.
Uber 2020 Guidance
- 2020 adjusted revenue between US$16 billion and US$17 billion, with an annual growth rate between 24% and 32%.
- 2020 adjusted EBITDA loss between US$1.45 billion and US$1.25 billion.
Lyft
Lyft, the smaller but main competitor of Uber, is focusing on just ridesharing within North America compared with Uber who operates globally with additional freight and food delivery services, but just like Uber, Lyft is also incurring heavier losses amidst beating revenue estimates.
In the latter half of 2019, in an effort to increase profitability, Lyft reduced its rider incentives below the industry average, which ended up having a higher negative tradeoff for its business. Lyft has now restored its incentive offerings and changed its strategy to focus promotions on riders who actively use its application.
Nevertheless, similar to Uber, Lyft has also announced a plan to hit profitability by the end of 2020 by focusing its marketing spend and organically growing its business, but investors were disappointed by the little change in profits for Lyft’s 2020 guidance.
Lyft Earnings Highlights
- Q4/2019 revenue grew to US$1 billion, bringing total revenue for F2019 to US$3.7 billion, a 52% and 68% increase year-over-year, respectively, mainly attributed to an increase in active riders of 23% year-over-year
- Q4/2019 had a net loss of US$356 million with 2019 total loss reaching US$2.6 billion, a 43% and 188% increase year-over-year, respectively
- 2019 net loss was due to expenses including US$1.6 billion from stock-based compensation and related payroll tax expenses, and US$270 million from regulatory costs for liability insurance.
Lyft 2020 Guidance
- Q1/2020 revenue between US$1.05 billion and US$1.06 billion, with a 36% and 37% growth rate year-over-year.
- 2020 revenue between US$4.6 billion and US$4.7 billion, with an annual growth rate between 27% and 29%.
- Q1/2020 adjusted EBITDA loss between US$145 million and US$140 million, with 2020 adjusted EBITDA loss between US$490 million and US$450 million.
Uber and Lyft have now both gone through the harshest times in their growth phase after having two of the worst tech IPO performances in history last year. As both companies compete and announced plans for profitability by the end of F2020, it will be interesting to see which ride-sharing company meets expectations.
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