Discussing Ubers 2019 financial results with analysts last week, CEO Dara Khosrowshahi used the word focus six times, and the word discipline three times in his opening remarks alone. And he dropped profitability four times, most notably predicting that Uber would move into the black at the end of this yearat least when measured as earnings before interest, taxes, depreciation, and amortization, what analysts call EBITDA. Out of the chaos of Ubers international business, which ranges from shared to premium ride-hail trips, to e-bikes, to e-scooters, to buses, to on-demand staffing, to food delivery, Khosrowshahi promised some actual money.
One week later, that promise is being used as a bludgeon against smaller ride-hailing rival Lyft. On its own call with investors late Tuesday, Lyft executives stuck to a prediction made last year: that it would reach profitability on an EBITDA basis by the end of 2021. Analysts hassled the company for its spending on sales and marketing (which Lyft predicts will be 20 percent of revenue this quarter), and the fact that its still losing gobs on money on rides, its main product.
Uber shares jumped 9.5 percent the day after it reported its earnings, and have inched higher since then. Lyfts result topped Wall Streets expectations, but its shares fell 10 percent Wednesday.
The stock market moves highlight a key debate on strategy within the industry: Is larger Uber, with its international market and multiple product lines, likely to win in the end? Or will the more focused Lyft, which has stuck to the US and Canada and remained focused on transportation, become the more stable business?
On its own, Ubers rides business generated $742 million in adjusted earnings last quarter (not accounting for some operating and administrative expenses), nearly four times as much as the same period a year earlier. But while it grew its Eats business by 73 percent compared to last year, it lost some $461 million on the delivery service (again, not accounting for some expenses). Many analysts do generally approve the companys decision to sell its Eats business in India to local competitor Zomato, which they take as a sign that Khosrowshahi is serious about the discipline thing. Overall, Uber lost $1.1 billion last quarter, 24 percent more than in the same quarter a year earlier.
Lyfts quarterly revenue, meanwhile, hit $1 billion, and the company is moving more riders than ever. Still, Lyft lost $2.6 billion in 2019, more than double the year before. Chief Financial Officer Brian Roberts declined an analysts request to break that loss down by type of businessride-hail vs. scooters vs. bikes.
At this point, many see Lyfts smaller footprint and less diverse portfolio as a weakness. (The companys market cap is $14.5 billion, compared with Ubers $73 billion.) Lyft executives say it’s a strength. Just remember: With our focus, we’re not exposed to the uncertainty or volatility of emerging markets or non-transportation segments, Roberts said. We’re focused on our profitable growth across our business.
In both businesses, the days of growth at all costs seems to be over. (In fact, thats what Khosrowshahi told investors.) Its all about strategy, discipline, and making money now. In fact, Uber and Lyft seemed to have shifted perspectives in Silicon Valley, on Wall Street, and all over the globe. Investors seem more motivated to find companies with paths to profitability than they were, say, last springright before both ride-hail companies debuted on the public markets.