Today I learned – 16th February 2020

There are a few things I learned after this informative clip by Al Jazeera Youtube channel

  • There is a conflict between Egypt and Ethiopia regarding the construction of the Grand Renaissance Dam
  • Nile is the only major river in the world that flows from South to North
  • A snapshot history regarding the rights to the water provided by the Nile
  • “Start Here” offers amazing video clips on complicated issues around the world, especially in the Arabic countries

I will continue to read more about the Grand Renaissance Dam conflict. If you haven’t heard about it before, this clip is a pretty good start

The cost of bad reputation

I came across this article on the fact that Japan is imposing stricter visa process for individuals from certain countries, including Vietnam

According to Nikkei Asian Review, Japan will also expand its list of countries subject to stricter visa checks. Currently, only students from seven countries, including China (excluding Hong Kong and other regions), Vietnam, Nepal, Sri Lanka, Myanmar, Bangladesh and Mongolia are under strict visa screening processes. Vietnam currently has the highest number of people overstaying their student visas, 3,065 in total.

It is really shameful to see my country included in such a list. Nonetheless, as I have lived abroad and seen actions by my fellow Vietnamese overseas, I am not surprised at all by the new policy from the Japanese government. I saw Vietnamese students take advantage of the trust by Finnish to avoid paying metro tickets. I heard about the distasteful actions by Vietnamese community in Prague and saw first hand how unfriendly a Vietnamese market was in the city. Hell, there is a lot of ambiguity on how much it costs for a citizen like myself to renew my passport. The fees will depend on one’s occupation and income.

The misdemeanor by a few tarnishes the reputation of a whole people. There is a certain degree of unfairness that some have to suffer by the actions of a few, but that’s just how it works. And Vietnamese people do suffer from having a bad reputation. We essentially need visas to travel anywhere except to a few countries in South East Asia, Africa and South America. My H1B is valid for 3 years, but the maximum length given to a Vietnamese passport is just one year. I do know that my Chinese colleagues get 5-year visas. The lack of credibility creates a great deal of inconvenience, time consumption and trouble. We, as a people, would save a lot of time and money on all the visa paperwork if we had better credibility and if our citizens thought about the overall impact of our actions.

Weekly readings – 15th February 2020

An interesting piece on Lyft vs Uber

An argument for the challenges that Google is facing

This is what a hearing should be. Not the kind that has taken place lately

Spotify is evolving

Oklahoma State’s new identity. In my opinion, the new logo doesn’t look bad at all

This article sheds some light on the secretive S team at Amazon

The government’s revenue depends significantly on the tax receipts from citizens and corporations. So the revenue projection depends much on the assumptions of economic growth which seem too optimistic. It’s important to take into account the feasibility of these assumptions; which the media may not capture fully or an average citizen cares enough about

Thoughts and notes on Uber's latest earnings

On 6th February 2020, Uber announced its Q4 FY2019 earnings. Below are some of the thoughts I had from reading their press release

Take Rate

Uber defines take rate as the result of adjusted net revenue divided by gross bookings. In a layman’s terms, it is the amount of Uber takes from what riders pay for rides, after paying drivers their share. In Q4 2019, the take rate reached 20.6% compared to 18.7% in Q4 2018. It meant that out of $100 taken from riders, Uber took in more money in 2019 than in 2018

Source: Uber

However, if we look at 2019 as a whole, take rate dropped to 19.8%, compared to 20.7% in 2018, almost a full 1% lower.

Source: Uber

Overall, in the second half of FY 2019, Uber had higher take rates overall, for Rides and for Eats individually than in the second half of FY 2018. However, the gain was sufficient to make up for the deficit of the first half of FY 2019 to the first half of FY 2018. As you can see from the graph above, Eats provided a terrible take rate, compared to Rides.

Driver Incentives and Driver Referrals

The incentives and referrals help reflect the health of the brand and business. Low payout for incentives and referrals means that Uber spent less money to recruit drivers and increase rides. Incentives and referrals are usually presented in this manner by Uber

Source: Uber

I calculated the ratio of Adjusted Net Revenue (ANR) over revenue in 2018 and 2019 for both Rides and Eats. The higher the figures, the better for Uber

Apparently, it keeps getting better and better for Rides. On the Eats side, Uber seemed to recover from the slump in Q3 and Q4 2018.

Rides

Rides continues to be the silver lining in the EBITDA area for Uber. It is the only segment with positive EBITDA in Q4 2019 or FY 2019 as a whole.

Source: Uber

It’s even better for Uber that YoY growth for Rides EBITDA (34%) is bigger than that for Rides Bookings (18%), Revenue (27%) and ANR (30%).

Eats

Eats registered the biggest loss among Uber’s segments in Q4 2019. Uber may find it encourage the fact that Eats’ Q4 loss is only 111% of ANR, compared to 168% in the same period last year.

Uber recently announced the divestiture of Uber Eats in India. Since Uber Eats was losing money and users in India, the decision looked a wise one and in line with the strategy pursued by the company.

Source: Atom Finance

CEO of Uber revealed on the earnings call that Uber Eats in the US made up almost 39% in gross bookings of the global Eats GB ($1.7 bn out of $4.374 bn). There are 400,000 active restaurants in the US on the Eats side, up by 78% YoY.

Freight

Freight’s Q4 loss was a tad more than 25% of its ANR, compared to a bit more than 18% of the same period last year. Not a trend that Uber would want in their quest to become profitable.

Cost structure

On a full year basis, only depreciation as % of revenue decreased in 2019, compared to 2018. Overall, operating cost and expenses increased significantly in 2019, reaching 161% of revenue in 2019. However, Q4 2019 provided a brighter picture for Uber. Only R&D as % of revenue went up in the quarter, compared to the same period last year, especially given that operating expenses as % of revenue in Q4 2018 were higher than those of FY2018.

Good bits of information here and there

  • Uber for Business’ Gross Bookings made up 9% of the total GB
  • In Q4 2019, Uber Rewards Program had 25 million subscribers from multiple markets, up from 18 million from the US alone reported in Q3 2019
  • Multiple-app users had almost 3 times the number of transactions as single users

Thoughts

Though challenges remain, including those posed by local authorities threatening to impose infavorable regulations, driver/rider safety and competition, Q4 2019 seemed to offer the team at Uber and bull investors something to be optimistic about.

In an ideal world, I would love to see more transparency regarding:

  • Margin of products such as Uber for Business, Airport, Helicopter, Comfort, Scooter
  • Margin of Eats in the US or products in the key market
  • More details on subscriptions
  • Engagement data regarding the use of multiple apps per user

My thought on Mitt Romney's decision

The impeachment hearing is over. The result is exactly what many who had been following this saga and I expected. The defendant was acquitted along the party line. Much of the noise that came out of the hearing was Mitt Romney’s decision to join Democrat senators to vote in favor of the article(s) of impeachment. Ever since, the former presidential candidate has received plenty of praise for the act.

I wouldn’t particularly get on that train and give him total credit. To be clear, I am in no position to speculate what was behind Senator Romney’s decision to support the impeachment. His coming out to support the Democrats was at the end of the hearing when it was mathematically impossible to remove the President from office. His decision came already too late and looked suspiciously a bit self-serving.

The main reason why I suspected the Senator’s motive was that he didn’t vote to subpoena evidence and witnesses. He already swore his oath at the beginning of the hearing and I believe in my heart, regardless of how I would have preferred the trial to turn out, that his duty was to be as impartial and fair as possible. Impartiality would involve getting as much information and truth to light as possible and that meant calling for evidence and witnesses. Had he come out in support of the subpoenas, other Republican senators on the fence would have had more leverage and support. Democrats would have had more momentum. THAT would have been a true and undisputed example of courage and upholding the faith that he talked about.

I believe that Senator Romney’s character played a role in his decision. I am not that paranoid or cynical. However, I would have believed him more if he had come out in the end and said: sorry everybody, I messed up on the subpoena votes, I am sorry and I now support the article(s) of impeachment. Or if he had voted on the call for witnesses or evidence. It’s exceedingly tough for me to overlook the fact that he went along with his party at the expense of the oath that he took.

Notes from Disney's Q1 2020 earnings call

Today, Disney announced its Q1 2020 results. There are a lot to unpack as the business is pretty diverse. I am just covering some of the stuff I mainly care about.

Overall, revenue increased 36% year over year. The effect from investments in Disney+ is reflected on operating income which increased only by 9% compared to last year

Parks made up 35% of Disney’s revenue, but more than 58% of its operating income. Parks also provided the largest margin at 32% among Disney’s segments, followed by Media Networks.

Subscribers

  • Disney+: 28.6 million paid subscribers as of 3rd February 2020 from US, Canada, Netherlands, Australia and New Zealand
  • ESPN+ 7.6 million paid subscribers as of 3rd February 2020
  • Hulu has 30.7 million paid subscribers as of 3rd February 2020

Given that Disney publicly set a target of 60-90 million paid subscribers worldwide and of profitability in 2024, it is a promising start to reach the 28-million mark already just a few months after launch. Bob Iger wisely tried to play down any enthusiasm from the figures by citing the inability to point out the reason for the growth and uncertainty in the key international markets where Disney+ will debut soon.

Average Revenue Per User

The dip in ESPN+ and Hulu SVOD APRU was attributed to the bundle that offers Disney+, ESPN+ and Hulu Ad Supported for $12.99/month. Regarding the Hulu APRU, it’s even higher the non-ads subscription of $11.99/month. Christine McCarthy, Disney’s CFO, had the following comment:

The ad supported, the product is priced at $5.99. And but the ad-supported part of the equation makes the ARPU come out even higher than the ad-free. Most of the subscribers subscribe to the ad-supported. So that’s a good balance of the ARPUs when you stack them up next to each other.

Source: Atom Finance

Regarding the APRU of Disney+, since the service is offered at different pricing tiers including the promotion with Verizon, the 3-year plan last year, the bundle and full price, it’s difficult as to what to make out of the figure. Below are a few things from the earnings call:

  • 50% subscribers came directly from disney.com
  • Bob Iger mentioned “20% of those subscribers” came from Verizon. The comment in the earnings call wasn’t clear, but he clarified it in this interview with CNBC
  • Most subscribers came from the US
  • Conversion from free-to-pay and churn rates were better than what Disney had expected
  • No significant churn after Mandalorian Season 1 ended

Other notes

  • “It was 65% of the people who watch Mandalorian watch at least 10 other things”
  • Each Disney+ subscriber spent 6-7 hours every week on the service
  • 18-22% guests to parks were international guests
  • “Attendance at our domestic parks was up 2% in the first quarter, and per capita guest spending was up 10% on higher admissions, merchandise and food and beverage spending. Per room spending at our domestic hotels was up 4%, and occupancy was 92%. So far this quarter, domestic resort reservations are pacing up 4% compared to this time last year, and booked rates at our domestic hotels are currently pacing up 10%.”
  • The fight between McGregor and Tyrone brough “1 million pay-per-view purchases and 0.5 million new subscribers”

Disclosure: I own Disney stocks in my personal portfolio