UBER Uber Confirms Its Operating-Profit Milestone With a Second Straight Positive Quarter

The Operating-Profit Milestone Holds for a Second Quarter

Last quarter's Q2 2023 post flagged Uber's first-ever GAAP operating profit ($326 million) as a milestone worth confirming before treating it as durable rather than a one-quarter event. This quarter answers that: income from operations was $394 million, up from $326 million in Q2 and versus a $(495) million loss a year ago - the second consecutive positive GAAP operating quarter in company history. Adjusted EBITDA reached $1,092 million, up 112% year-over-year, the seventh straight positive quarter and a new high, crossing the $1 billion mark for the first time. Nine-month free cash flow reached $2,594 million, up 274% from $693 million in the first nine months of 2022; standalone Q3 free cash flow was roughly $905 million (nine-month total less the $1,689 million already reported through H1 2023), itself a new single-quarter high.

Net income attributable to Uber was $221 million, versus a $(1,206) million loss a year ago, despite the equity-stake mechanism turning unfavorable again this quarter: a $194 million unrealized loss on Aurora and a $97 million unrealized loss on the Joby Aviation stake, partly offset by a $132 million gain on Didi and a $59 million gain on Grab - a net loss of roughly $100 million across the four stakes. Unlike Q2 2023, this quarter's net income was not aided by the equity-stake swing; the profit came from operations. Mobility Adjusted EBITDA grew 43% to $1,287 million and Delivery Adjusted EBITDA grew 128% to $413 million, both new highs. Freight Adjusted EBITDA swung back to a loss, $(13) million from $1 million a year ago. The stock rose roughly 7% during the quarter, from $43.17 to $45.99, a fourth straight quarterly gain.

The Prescription

This quarter matters less for a new milestone and more for confirming an old one: GAAP operating income stayed positive for a second straight quarter, and this time without any help from a favorable equity-stake swing - in fact the equity stakes were a net drag of roughly $100 million this quarter, and operations still carried net income to a $221 million profit. That's a materially cleaner profit than Q2's, which leaned on a $386 million favorable stake swing. Readers should treat this quarter's result as the stronger evidence of the two that Uber's core business - not its portfolio of minority equity stakes - is now the source of its bottom line.

Freight's swing back to a loss after a single positive quarter (Q3 2022's brief $1 million profit was itself an exception in a chain of losses) is a reminder that the freight-brokerage macro cycle Uber has cited for over a year hasn't resolved. It remains the one segment that warrants caution rather than momentum.

Key Financial Metrics

Q3 2023 vs. Q3 2022 - consolidated, reported in USD

Metric	Q3 2023	Q3 2022	YoY
Revenue	$9,292M	$8,343M	+11%
Adjusted EBITDA»	$1,092M	$516M	+112%, seventh straight positive quarter
Income (Loss) from Operations	$394M	$(495)M	second straight positive quarter, GAAP basis
Net Income (Loss) attributable to Uber	$221M	$(1,206)M	swung to profit, despite a ~$100M net unrealized loss on equity stakes
Free Cash Flow (nine months)	$2,594M	$693M	+274%

Balance sheet: Dec 2022 vs. Sep 2023

Balance sheet metric	Sep 2023	Dec 2022	Change
Cash and Cash Equivalents	$4,448M	$4,208M	+6%
Total Assets	$35,949M	$32,109M	+12%
Total Liabilities	$25,430M	$23,605M	roughly flat, up 8%
Long-term Debt, net of current	$9,252M	$9,265M	roughly flat
Goodwill	$8,140M	$8,263M	roughly flat

Total assets grew a further 12% since year-end, continuing the recovery flagged last quarter. Accrued legal, regulatory and non-income tax liabilities were roughly flat at $1,558 million (from $1,573 million at year-end).

Uber's GAAP operating profit held for a second straight quarter - $394 million, up from Q2's $326 million - this time without help from the equity-stake swing that boosted Q2's net income, evidence the milestone reflects the core business rather than a one-off.

Segment Results

Segment Adjusted EBITDA, Q3 2023 vs. Q3 2022

Segment	Adj. EBITDA Q3 2023	Adj. EBITDA Q3 2022	Change
Mobility	$1,287M	$898M	+43%
Delivery	$413M	$181M	+128%
Freight	$(13)M	$1M	swung to a loss

Mobility and Delivery both set new quarterly highs for the second straight quarter. Freight posted its third loss in four quarters, continuing the macro-driven weakness flagged since Q1 2023.

Beyond the Usual

A Cleaner Profit Than Last Quarter's

Q2 2023's $394 million net income was aided by a $386 million favorable unrealized gain across Uber's equity stakes - without it, net income would have been roughly breakeven. This quarter's $221 million net income came despite the opposite: a combined $291 million of unrealized losses on Aurora ($194M) and the Joby stake ($97M), partly offset by $132M (Didi) and $59M (Grab) gains, netting to roughly a $100 million drag. With operating income of $394 million doing the real work this quarter, this is the cleaner of the two profitable quarters.

Stock Price Since Last Quarter

Uber's stock rose intra-quarter, then pulled back but still finished higher: from a June 30, 2023 close of $43.17, up to $49.46 in July, down to $47.23 in August, and $45.99 at the September 29, 2023 close (the last trading day of the quarter) - a gain of roughly 7% for the quarter, a fourth straight quarterly gain following Q1 2023's 28% and Q2 2023's 36% rises.

Target Valuation Range

Fairly-valued. Uber traded at an EV/Revenue multiple of roughly 3.2x against TTM revenue as of this quarter's close - roughly flat with Q2 2023's ~3.1x, as trailing revenue grew alongside the stock's further gain.

With approximately 2,057,858,230 shares outstanding as of November 2, 2023 (per the 10-Q's cover page) and a September 29, 2023 close of $45.99, Uber's market capitalization was approximately $94.6 billion. Against total liabilities of $25.43 billion and cash and cash equivalents of $4.45 billion, enterprise value was roughly $115.6 billion - up from the ~$107.5 billion calculated in the 2023-06 post, on the stock's further gain and added liabilities. Against TTM revenue of roughly $36.0 billion (FY2022's $31,877 million, less nine-month 2022 revenue of $23,270 million, plus this quarter's nine-month 2023 total of $27,345 million), that implies an EV/Revenue^» of roughly 3.2x.

	Sep 2023	Jun 2023
TTM Revenue	$36.0B	$35.0B
Enterprise Value	$115.6B	$107.5B
EV/Revenue	3.2x	3.1x

The core investment case strengthens further this quarter: two consecutive positive GAAP operating quarters, seven consecutive positive Adjusted EBITDA quarters, and nine-month free cash flow up 274% year-over-year to $2.6 billion. A full DCF still isn't attempted, but the operating-profit case that was "worth revisiting" as of last quarter's post is now confirmed rather than speculative - the valuation multiple hasn't re-rated to reflect that yet, which is itself worth watching.

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