Uber says it’s on track to maybe turn a profit (if you squint)

Uber says it’s about to break even or make operating profit for the first time already ahead of schedule – you know, on paper, as long as you squint at the books in the Uber-approved way.

According to ReutersUber said on Tuesday it expects to break even this quarter, based on its definition of “adjusted EBITDA,” or earnings before interest, taxes, depreciation and amortization. It’s more or less a fancy way of saying that Uber claims to make money before taking all of these things into account, which historically means it wasn’t. Uber expects a profit at a loss of $ 25 million based on adjusted EBITDA for the third quarter of 2021, up from a previous estimate that it would continue to lose $ 100 million.

MKM Partners analyst Rohit Kulkarni told Reuters this was a “clear positive sign” for Uber. That’s right, because the company has, by normal accounting standards, lost billions over the years as if the dollars were fire ants trying to climb on their feet. As TechCrunch noted, in 2020, it lost $ 6.7 billion under normal accounting rules, but managed to reduce that number to $ 2.7 billion by applying its extremely generous definition of Adjusted EBITDA as follows:

We define Adjusted EBITDA as net income (loss), excluding (i) net income (loss) from discontinued operations, net of tax, (ii) net income (net loss) attributable to non-giving not control, net of tax, (iii) provision for (profit) of income tax, (iv) income (loss) from equity-accounted investments, (v) interest expense, (vi) other income (expenses ), net, (vii) depreciation and amortization, (viii) stock of remuneration charges, (ix) certain modifications and regulations of legal, fiscal and regulatory reserves, (x) goodwill and impairment losses / loss on sale of assets, (xi) acquisition and financing expenses, (xii) restructuring and related costs and (xiii) other items not indicative of our ongoing operating performance, including payments related to the COVID-19 response initiative for financial assistance to drivers persons personally affected by COVID-19, the cost of personal protective equipment distributed to drivers, reimbursement of drivers for their cost of purchasing personal protective equipment, costs related to free trips and food deliveries to workers in the health, the elderly and others in need, as well as charitable donations.

TechCrunch noted that it is extremely unusual for a company to list 12 separate categories of exclusion in Adjusted EBITDA, although breakeven by this measure has become Uber’s main argument for investors because it continuously fails to Actually make money. This mainly worked because the company’s speculative threshing machine allowed these investors to continue to pay out subsidies.

In the past, like the Wall Street Journal noted, Uber has only very rarely succeeded in recording profits through “one-off gains on certain investments and disposals”. These examples include merge operations in Russia and South Asia with competitors in 2018, or in Q2 2021, its investment in Chinese rideshare company Didi (which Uber was able to conveniently release just before Chinese regulators took action that slashed its actions more than 50%).

“EBITDA is sometimes used by companies with very large fixed assets, large intangible assets (such as goodwill acquired after a major merger) or large debt financing to give outsiders a rough idea of ​​the capacity of a company. company to meet its current financial obligations. Uber has none of these characteristics ”, Hubert Horan, transport analyst. written about naked capitalism in February 2020. “More importantly, EBITDA figures released by Uber exclude billions of expenses other than interest, taxes, depreciation and amortization.

Still, Uber says it cuts losses and increases revenue, and it must be admitted that the company has sheer inertia in its favor.

In a Filing with the Securities and Exchange Commission Submitted Tuesday, Uber predicted gross bookings of $ 22.8 billion to $ 23.2 billion for the current quarter, which CNBC reported is an adjustment from an estimate of the earlier profit call of $ 22 billion to $ 24 billion. In the previous second quarter, Uber had booked $ 8.6 billion for mobility (taxis, bikes and scooters) and $ 12.9 billion for food delivery to restaurants.

Horan, the Naked Capitalism analyst, was not impressed with the company’s recently released second quarter results.

“… It is impossible to estimate the separate profitability of carpooling and food delivery, or how each company’s profitability evolves over time from the very limited data Uber includes in its SEC records,” Horan added in an article this month. “… But despite major flaws in the metric used … food delivery appears to be a financial disaster that has dramatically reduced Uber’s GAAP [generally accepted accounting principles] net revenue. Even after excluding a large portion of the relevant costs, the contribution margin of food delivery was negative 10% in the first half of 2021 and was 30 points lower than that of carpooling. “

Some of the reasons Uber has come so close to making a sharply adjusted theoretical profit include massive layoffs, as well as skyrocketing costs for rides and breathtaking costs for food delivery. Note that despite relying on a vast network of human misery, all of this has so far only generated real profit for the executives and investors who cash in during its many stock market fluctuations.

Uber stock was up more than 12.5% ​​in early Tuesday afternoon as investors continued to roll the dice. Its price of nearly $ 45 per share was well below its highs of over $ 60 earlier in 2021, but at least much better than the start of the pandemic in the United States in March 2020, when it hit. less than $ 15 per share.