Uber is almost 14 years old, has 131mn customers and is building an advertising business to complement its huge revenues from ride-hailing, food deliveries and freight. So why is the San Francisco company still promoting adjusted profit figures?
Look at the presentation of its annual results and you will see prominent mention of adjusted ebitda — a figure that is climbing quarter on quarter and reached $1.7bn for the year. That compares favourably with Uber’s annual net loss, which was just over $9bn.
Uber calculates adjusted ebitda by excluding a laundry list of items from reported net income. These include income or losses from non-controlling interests, stock-based compensation, goodwill and impairments on sales of assets. Even personal protective equipment for drivers makes an appearance.
Some of these items are significant. Stock-based compensation was close to $1.8bn last year. This is a non-cash expense necessary to attract and retain staff in a competitive recruitment market. But it is a large and continuing expense for shareholders.
Uber’s non-controlling interests are hefty too. It has more than $5bn of investments in companies, including Chinese ride-sharing giant Didi and flying taxi start-up Joby. These are the legacy of Uber’s decision to close some operations and take a stake in similar companies.
Many of the businesses share the same high-growth, low-profit profile. Valuations can be volatile. Unrealised gains in equity investments in the last quarter helped Uber to report net income of $595mn. But revaluations over the full year, including a $3bn unrealised loss on investments in self-driving vehicle company Aurora, drove net income down.
Investors in Uber want to know whether the core business of rides and food delivery can be profitable on a sustainable basis. Uber says non-GAAP metrics allow for more transparency. But the huge variation between adjusted ebitda and net income creates confusion. There is no standard definition of adjusted ebitda either, making it hard to compare one company with another.
Thankfully, Uber expects to monetise some of its equity stakes in the future, which will boost cash. It should also reduce wild swings in net income.
Uber’s services are popular, with bookings ahead of pre-pandemic levels. Yet shares remain below their $45 listing price. The company should narrow the gap between its adjusted and non-adjusted figures. Investor confidence would strengthen accordingly.