The numbers shared in Uber’s IPO filing could make it hard for the ride-hailing leader to obtain the $90 billion to $100 billion valuation it’s reportedly seeking.
Indeed, many of the metrics that Uber shared in its filing actually compare unfavorably with those of smaller rival Lyft, which currently trades 15% below its $72 IPO price.
On Thursday afternoon, Uber announced that it plans to list on the NYSE under the symbol (you guessed it) UBER. The company reported having 2018 revenue of $11.27 billion, up 42% annually. And though it officially turned a profit thanks to asset sales and an unrealized investment gain, Uber reporting having a 2018 operating loss of $3.03 billion, down from $4.08 billion in 2017.
Here are some initial takeaways from Uber’s filing, which comes ahead of an IPO that’s reportedly set to happen in early May.
1. The Uber Eats Service Is Driving a Lot of Uber’s Bookings Growth
In line with prior disclosures, Uber says its gross bookings, which cover all of the customer payments generated by ride-sharing and food-delivery services outside of tips, rose 45% annually in 2018 to $49.8 billion and 37% in Q4 to $14.2 billion. However, Uber’s S-1 filing makes it clear that much of this growth is coming from its Uber Eats food-delivery service, rather than ride-hailing services.
In Q4, Uber’s ride-sharing bookings rose 25% annually to $11.48 billion, while its Uber Eats bookings rose 129% to $2.56 billion. The company also got $129 million in bookings from “Other Bets,” which primarily consists of its Uber Freight service for shippers, up from $35 million a year ago.
2. A Declining Take Rate (Driven in Large Part By Uber Eats) Is Weighing on Revenue Growth
Uber’s total take rate, defined as the percentage of bookings it keeps after backing out driver payments, restaurant payments and things like tolls and taxes, fell to 17.9% in Q4 from 21.7% a year earlier. As a result, while Q4 bookings were up 37% annually, revenue only grew 25% to $2.97 billion.
The biggest culprit behind the take rate decline: Uber Eats, which as previously noted is seeing much stronger bookings growth than Uber’s ride-sharing services, had a take rate of just 6.4%. That more than 50% below a year-ago level of 13.3%.
Uber observes that whereas its ride-sharing business only has to make payments to drivers, Uber Eats has to pay out both drivers and restaurants. The company also says its Uber Eats take rate has been pressured by deals with “large-volume restaurants” that carry low service fees, and by strong competition in places such as the U.S. and India. In the U.S., both GrubHub (GRUB – Get Report) and private DoorDash are major rivals, and Amazon.com (AMZN – Get Report) has also been trying to grow its restaurant-delivery business.
Uber’s ride-sharing take rate has also been slipping, something the company blames on “competitive pressure” (Lyft (LYFT , it should be noted, has been taking some share in the U.S.). In Q4, the company’s ride-sharing take rate fell to 20.2% from a year-ago level of 21.7%.
Not surprisingly, Uber expects its take rate to continue dropping in the near-term. This trend is very different from what’s being seen by Lyft, which doesn’t have a food-delivery service. In Q4, Lyft’s take rate rose to 28.7% from a year-ago level of 23.4%. That, along with price hikes and ride growth, helped its revenue rise 94% to $669.6 million.
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3. User and Trip Growth Is Healthy, But More Details Would Be Helpful
Uber’s “monthly active platform consumers” (MAPCs), defined as anyone who used its consumer transportation or food-delivery services in a given month, rose 11% sequentially and 35% annually in Q4 to 91 million. Total trips on Uber’s platform rose by 37% to 1.49 billion.
However, Uber doesn’t break out how many MAPCs it respectively has for its ride-sharing services and Uber EATS, nor how fast those user bases are growing (presumably, Uber Eats has been seeing much faster growth). And though Uber says 52% of its Q4 bookings came from outside the U.S., the company doesn’t break out its MAPCs by geography.
4. Emerging Markets and Carpooling Services Are Weighing on Uber’s Bookings Per Ride
Though fast-growing Uber Eats transactions carry a higher average gross booking than ride-sharing transactions, Uber’s gross bookings per trip still fell by 1% in 2018.
Uber notes that bookings per trip are lower in regions such as Latin America, India, the Middle East and Africa than they are in places such as the U.S. and Europe. It also notes that carpooling services such as UberPOOL and Express POOL have weighed on bookings per trip.
5. Uber Still Has a Ways to Go Before it Turns Profitable
Amid a 25% increase in revenue to $2.97 billion, Uber reported a $1.05 billion GAAP operating loss in Q4, compared with a $1.2 billion operating loss a year earlier. Operating loss would have risen if not for the fact that Uber’s general & administrative (G&A) spend, which was inflated a year earlier by one-time expenses, fell 42% to $555 million.
While its depreciation and amortization expenses fell 9% to $109 million, Uber’s cost of revenue rose 34% to $1.62 billion, its sales and marketing spend rose 43% to $974 million, its R&D spend rose 14% to $366 million and its operations and support spend rose 13% to $408 million.
It’s worth adding here that Uber previously reported an “adjusted” Q4 net loss of $768 million, and an adjusted Q3 net loss of $939 million. Clearly Uber, like Lyft, still has a lot of work left to do to improve its cost structure and margin profile.
6. Uber’s Cash Burn Isn’t Quite as Bad as its Operating Losses
Uber’s free cash flow (FCF), defined as its operating cash flow minus its capital expenses, was negative $2.1 billion. That’s less than its $3.03 billion operating loss for the year, and improved a bit from 2017 FCF of negative $2.24 billion.
7. Uber Is About to See a Lot of Debt Converted Into Stock
Of the $7.5 billion in debt that Uber had at the end of 2018, $2.8 billion consists of convertible notes that are expected to be converted into stock at the time of its IPO. In addition, the company is set to issue $1.7 billion in convertible debt to help finance its pending acquisition of Middle Eastern ride-sharing rival Careem; the debt matures 90 days after its issuance, and features a conversion price of $55.00 per share.
8. Following the IPO, Uber Should Have Enough Cash to Last a While
Uber had $6.4 billion in cash at the end of 2018, and Reuters recently reported that the company is looking to raise about $10 billion through its IPO. Even if Uber ends up raising less than this sum — given the numbers shared in Uber’s IPO filing, as well as Lyft’s performance to date, this wouldn’t be surprising — the company should have ample funds for quite some time as it works to pare its losses and cash burn.
