More EBITDA Losses at Uber Freight but Ron Touts Brokerage-TMS Integration

Uber UBER Freight's earnings before interest, taxes, depreciation and amortization for the first quarter, released Wednesday as part of the parent company's earnings report, showed a loss of $21 million. That is $2 million better than the first quarter of 2023 but worse than every other quarter of 2023 as well as the fourth quarter of 2022. In 2022's third quarter, Uber Freight posted positive EBITDA of $1 million, the only quarter it has ended up in the black on an EBITDA basis.

Among other highlights in the quarterly earnings report, Uber Freight's revenue declined 8% to $1.28 billion, down from $1.4 billion. That revenue was flat sequentially.

Uber Freight announced its acquisition of Transplace in 2022, bringing together a leading provider of transportation management system technology with the digital brokerage. Despite the continued EBITDA losses, Ron said in the interview that the progress envisioned when the acquisition was made is on track.

"We are the largest transportation management and TMS provider in the industry" Ron said, measuring that by what he said was $18 billion of freight under management.

And even though the losses are growing rather than retreating, Ron said he likes where Uber Freight is now. "More than half the business has a very stable and growing revenue stream" he said. "It is more a SaaS (software-as-a-service)-like business that is completely separate from the ebbs and flows of marketplace pricing that brokerages are exposed to."

Highlighting the differences with Convoy

Prior to the collapse of digital brokerage Convoy last year, it was hard not to think of that company without immediately thinking of Uber Freight as the leading pair of digital brokerages. Ron acknowledges it but bristles at the comparison and pushes back quickly.

He again referred to the SaaS analogy and said Uber Freight's model "has nothing to do with pricing going up or pricing going down."

As a result of the transportation management capabilities of Transplace, Ron said, Uber Freight has a 96% retention rate with TMS customers. The relationships that develop as a result of that are "much more strategic with big Fortune 500 companies than any broker can ever aspire to because you are essentially their trusted logistics adviser." Being able to "upsell" various services through the capabilities for the legacy Transplace business "is not comparable to any broker" Ron said.

Those ties with a wider variety of shippers due to TMS capabilities and more midmarket truckload carriers because of the wide adoption of the Uber Freight platform, Ron said, mean Uber Freight can reduce its exposure to the larger enterprise customers, "who are going to be the most demanding in a market cycle like this one."

Asked if the structure of Uber Freight could be viewed as the brokerage activities of the company primarily supporting the transportation management activities, with the latter more of the company's core, Ron demurred and said the two businesses are supporting each other.

The level of integration

He said Uber Freight is "80% integrated" and "it's playing out exactly or even exceeding our expectations." He conceded there was no firm way to measure that 80%, but that it largely meant "we've done a lot of the hard stuff and we still have a lot of opportunity here."

"We've built the largest virtual fleet in the industry" Ron said, putting the number of truck owners who have downloaded the Uber Freight app at more than 2 million. "The market will continue to be more efficient as we continue to tap into the long tail of supply."

Uber Freight announced its acquisition of Transplace in 2022, bringing together a leading provider of TMS technology with the digital brokerage. Despite the continued EBITDA losses, Ron said the progress envisioned when the acquisition was made is on track.

In the interview prior to this month's earnings report, he said being part of a public company helps give Uber Freight "the ability to control our own destiny and invest for the long term while of course balancing the short-term needs of the business."

A public company's ability to access capital can be seen in the TMS technology investment announced last fall, Ron said, and going further back, in the $2.25 billion it spent to acquire Transplace.

Uber Freight announced last fall major improvements to its suite of offerings, driven by technology including AI. In a press briefing held at the same time as Uber Freight's Deliver user conference, Ron said the efforts led Uber Freight to "really reimagine what would it mean to mobilize the TMS system and take that to the next level." He said that the user interface was "super intuitive and super easy to use."

Ron hinted during his latest interview that new announcements of technological advances may be coming within weeks.

"It's really thinking about how to build a single carrier engagement platform so they can tap into the network" he said of what might be coming soon. What both sides of the divide between the carriers using the Uber Freight app and the shippers securing that capacity and using the Uber Freight TMS want is "volume and opportunities" he said. 

It's been awhile since questions were raised about whether Uber Freight fit in the Uber portfolio. It's not an afterthought, but a transcript of the Wednesday call with analysts shows no questions on the call about Uber Freight.

Ron said recent hires out of key competitors show the parent company is committed to Uber Freight. Those hires include Dan Annunziata out of C.H. Robinson CHRW. When Greenbriar Equity took a $500 million stake in Uber Freight in 2020, Ron declared at the time that Uber Freight was "here for the long haul."

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