Morning Report: As expected, Uber will report its revenue more conservatively than before. That’s key for its ramp up to an IPO.
Uber will go public in the next few years, according to its newly-hired CEO. That means that the firm, known for its aggressive business practices, quick revenue growth, and chronic losses, needs to meet normal accounting standards. In doing so, it appears that Uber will list lower revenue figures than some may have hoped.
At play is the difference between Uber’s unadjusted net revenue and its adjusted net revenue. As always, you and I prefer the more conservative of the two, which, in this case, is Uber’s adjusted net revenue. That’s due to the company previously counting UberPool fares as revenue on a gross basis, but UberX and other rides on a net basis in its unadjusted net revenue result.
Therefore, Uber’s unadjusted net revenue became a hybrid of sorts, pushing the top line figure up as UberPool itself grew in popularity while still counting UberX rides differently. Turning to the more conservative sum, the firm’s adjusted net revenue, which counts only net revenue from UberPool, is growing quickly as well, but from a smaller base.
All of this we have touched on before during our regular check-ins regarding Uber’s financial performance. The firm has recently released data to a chosen publication each quarter, providing transparency to its current investors and possible future investors.
MarketWatch reported this morning that the move to reporting adjusted net revenue is Uber’s chosen way forward:
An Uber executive recently spoke with MarketWatch to discuss the change and the ride-hailing app’s continuing financial approach ahead of a potential IPO. In accounting parlance, Uber sees itself as an “agent” acting to connect the actual “merchant,” the driver, and the customer. Uber had been reporting gross revenue for UberPool and net revenue for other services under previous rules, but believes the new standards — based on the agent designation — allow it to report only the net revenue on all rides.
The same MarketWatch piece notes that Uber’s auditor has “signed off on the approach” and that the “SEC did not object in communications about the approach.”
Uber has cleaned up its house in terms of reporting its financial performance, as it continues to clean up that financial performance itself.
Previously, Uber lost more, even on an adjusted basis, in at least several quarters than it managed to post in terms of real revenue.1 The company posted an adjusted $991 million loss in the third quarter of 2016 against just $800 million in adjusted net revenue. In the second quarter of this year, adjusted net revenue came to $1.75 billion against an adjusted net loss of $645 million.
All the above sums to an interesting question: We now have a good look at how quickly Uber’s real revenue is growing, but when we fully understand its loss (on an unadjusted basis) pace, will those top-line figures lose their luster?
- Adjusted means incomplete, and adjusted loss numbers are nearly always less conservative. That Uber’s adjusted net revenue is a more conservative number than its unadjusted net revenue is a notable outlier to the general trend
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