Uber filing today was not a surprise, after news broke earlier hinting that this would happen. Those same reports pegged Uber’s potential raise at $10 billion, and its potential value between $90 billion and $100 billion.
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The famous and highly-valued company’s IPO filing has been long-awaited by employees, investors, and the technology public as a whole, especially after rival ride-hailing company Lyft filed to go public last month with a thus-far disappointing debut.
Uber’s huge capital raises, quick growth, and persistent losses have made it a bellwether among the current cohort of companies which reached private-market valuations of $1 billion or more, colloquially known as “unicorns.”
The Big Numbers
Uber reported key metrics for 2018, and, we presume, will update its S-1 filing soon with results from Q1 2019. Until then, let’s keep it simple and start with its historical results, with information found on page 18 of the company’s S-1:
- Uber 2016 net revenue: $3.845 billion
- Uber 2017 net revenue: $7.932 billion (+106 percent from 2016)
- Uber 2018 net revenue: $11.270 billion (+42 percent from 2017)
Those figures say show Uber’s growth slowing as it scaled. Still, at Uber’s revenue scale, growing 42 percent is impressive. However, the pace of deceleration from 2017’s over 100 percent figure could provide pause to some investors looking at Uber’s results from a growth perspective. And, when examined quarterly, the company’s revenue deceleration is even starker.
Over the same time periods, let’s collate operating and net losses:
- Uber 2016 operating loss: -$3.023 billion
- Uber 2016 net loss: – $370 million
- Uber 2017 operating loss: -$4.080 billion (34 percent increase from 2016)
- Uber 2017 net loss: -$4.033 billion (98 percent from 2016)
- Uber 2018 operating loss: -$3.033 billion (34 percent decrease from 2017)
- Uber 2018 net loss: $997 million (248 percent increase from 2017)
The company’s operating losses decreased year over year from $4.1 billion to $3.03 billion. Improving net loss is a positive for Uber, but $3.03 billion is still a huge figure, particularly within the context of slowing growth.
If you’re wondering how in the world Uber posted a positive net income in 2018, look no further than one page later in its S-1. The company noted that $3.2 billion was gained from divestiture 1 in 2018. If that had not been the case, the company would have posted a net loss of -$2.2 billion, a 45 percent increase from the year prior, but still nowhere near profitability.
It’s worth considering its operating losses more closely than its GAAP results to determine the health of Uber as a company today. We care less about one-time results (like the divestitures that provided quite a lot of net income for the company) than we do about its operating results. Bear in mind that Uber is operating as we speak; it is not likely divesting its various arms to juice net income at the same time.
We now turn to the company’s quarterly results, which will give us insight into its last few quarters’ growth and net loss results. We’ll pay special attention to the most recent two quarters, as those are likely the best for telling us how quickly Uber is still growing.
In the second quarter of 2018, Uber’s revenue totaled $2.768 billion (we won’t round here for clarity-related reasons). In the third quarter of 2018, Uber had revenue of $2.944 billion. That figure represented sequential-quarterly growth of 6.4 percent. Finally, in the company’s most recently reported quarter (the fourth of 2018), Uber had revenue of $2.974 billion. That’s a mere 1 percent up from its third quarter result.
Recall that when we discussed Uber’s yearly results we said that its quarterly numbers might change its growth story slightly. Sure, the company posted a 42 percent overall yearly growth, a decline in growth from the previous year, but a closer look at those quarterly results indicates that the company is growing at a rate much slower than that yearly total.
What does that revenue growth look like within the context of operating losses? Uber’s losses have increased steadily from Q1 2018 to Q4 2018, with the company posting losses of $478 million, $739 million, $763 million and $1.1 billion, respectively. Its net margin increased from -33.4 percent to -29.8 percent in Q4 2018. Still, slimming growth combined with growing losses isn’t the best recipe for profitability.
Margins And Other Weedy Metrics
Not surprisingly, ride-hailing represented the vast majority of the revenue that Uber picked up in 2018. Revenue from ride-hailing increased by 33 percent from its previous total of $6.9 billion in 2017. At nearly $50 billion in gross bookings on the platform, just over $9 billion came from the company’s main service, representing about 81 percent of its total revenue for the year.
According to the filing, Uber Eats represented $1.46 billion, or about 13 percent, of the company’s total 2018 revenue. Uber Eats’ revenue grew by 149 percent from the previous year’s $587 million total. The company recorded $7.9 billion in gross bookings from the unit overall. In other words, Uber kept about 18 percent of the amount generated from Uber Eats.
What about Uber Freight, the division of the company that connects truck drivers to shipping companies? The company says that the service generated $359 million in gross bookings in 2018. Though the filing does not list specific revenue metrics from the Uber Freight division it does say that the increase in “Other Bets” revenue from $67 million in 2017 to $373 million in 2018 was “primarily related to the expansion of [its] Uber Freight offering.” Uber Freight currently operates exclusively in the U.S., but the company will expand that program to Europe in March 2019.
Uber also said that they believe autonomous vehicles will be an important part of their offerings long-term, and they spent $457 million of research and development expenses on their Advanced Technologies Group.
A Brief Look At Ownership
We broke down who owns what in a separate post, found here. Here’s a taste of what we saw: SoftBank Vision Fund, which pumped billions in 2017, has the most shares, and early investor Benchmark also got a slice. Also notable: Saudi Arabia’s Public Investment Fund, which invested in 2016, owns 5.3 percent of the company.
Plus, Travis Kalanick walked away with more shares that his other co-founder, Garrett Camp, which could set him up for billions in the future.
Summing It Up
For some industry perspective on Uber’s losses, let’s turn to Lyft’s own.
It doesn’t make sense to compare the companies’ hard numbers—Lyft lost only $911.3 million in 2018 while Uber’s operating loss was just over $3 billion. However, we may be able to glean something about Uber’s performance by comparing their net margins, or net loss as a percentage of net revenue.
Lyft’s net margin in 2018 was -42 percent, a significant decrease from its 2016 net margin of -199 percent. Uber, on the other hand, shrunk its net margin from -9 percent in 2016 and -50 percent in 2017 to positive 9 percent in 2018. However, if the company hadn’t gained that $3.2 billion from divestiture, its net margin would have been -19.5 percent (operating loss ran 26.9 percent in the same period), a slight increase over its 2016 net margin, but better than its 2017 record and, notably, better than Lyft’s.
Let’s take a minute and remember that, generally speaking, Uber may be in a good place. It may have lagged behind Lyft in the race towards the public markets, but the patience might pay off. Uber has some very, very big expectations to meet, even if the bar was lowered by $20 billion, but it’s still likely going to debut with a big, new valuation and a trunk full of cash.
That’s not too bad, no matter what happened in its expensive, slowly growing Q4 2018.
Illustration Credit: Li Anne Dias
editor’s Note: A previous version of this article listed that Uber’s operating loss was $3.1 billion in 2018. It was $3.03 billion. A correction has been made to reflect this change.
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