7 Charts Every Investor Should Look at Before Uber’s IPO

Uber’s highly anticipated initial public offering is likely to be held over the next three to six months. As media reports have suggested, Uber’s IPO — at a valuation exceeding $100 billion — could be the largest public offering for a U.S.-based VC-backed company, ever. (Facebook’s market cap peaked at $104 billion on the day of its IPO.)

While Uber’s official S-1 filing remains confidential, the company has been fairly disciplined in disclosing headline growth and profitability metrics over the past several quarters.

Based on the most recent reports for the period ending on December 31, 2018, we have cataloged Uber’s financials and key metrics including gross bookings.

The headline is that Uber’s scale and scope are unlike any other private company that we have seen in the past. However, the law of large numbers is quickly catching up with the company, as Uber continues to burn significant cash.

Observations from Uber’s reported financials are as follows:

1. Uber could generate more than $70 billion in gross bookings in 2020. In Q4 2018, Uber generated $14.2 billion in gross bookings globally. All in, Uber eclipsed $50 billion in bookings during 2018, up from roughly $34.4 billion reported in 2017. Uber is currently at an annual run rate approaching $60 billion in gross bookings. We expect this growth to continue as Uber could generate more than $70 billion in gross bookings in 2020.

Figure 1: Uber gross bookings (quarterly) ($ in millions)

2. Uber could generate more than $15 billion in net revenues in 2020. In Q4 2018, Uber generated $3 billion in net revenue globally. During 2018, Uber eclipsed $11 billion in net revenue during 2018, up from roughly $8 billion reported in 2017.

Uber is currently at an annual run rate of $12 billion in net revenues. We expect this growth to continue as Uber could generate more than $15 billion in net revenue in 2020.

Figure 2: Uber net revenue (quarterly) ($ in millions)

3. But, Uber’s top-line growth is slowing down. Over the past eight quarters, Uber’s gross bookings and net revenue growth have consistently decelerated — from a growth rate exceeding 60 percent year-on-year at the end of 2017 to roughly 25 percent year-on-year growth at the end of 2018.

We would highlight that Uber’s organic growth may not have decelerated by such a magnitude. For context, Uber completed its Didi transaction in 2H 2016, and Yandex and Grab transactions in 1H 2017.

We believe the law of large numbers has caught up with Uber. However, we wouldn’t exclusively focus on the rate of deceleration, as it may not tell the entire Uber global growth story.

Figure 3: Gross Booking and Net Revenue growth rates

4. Uber’s take rate has been relatively stable. We calculated Uber’s take rate as net revenue divided by gross bookings. Uber charges a roughly 20 percent commission to drivers on its platform. So far, as observed in the chart below, this take rate has been relatively stable, despite mix-shifts related to new products (Pool, Eats), new categories (scooter, bikes), and new geographies.

Longer term, we believe that marketplaces can flex its supply by lowering take rates, and we think Uber has significant flexibility to do so in profitable cities.

Figure 4: Uber’s Take Rate = Net Revenue / Gross Booking

5. Uber’s pathway to profitability hasn’t been along a straight line. Uber continues to burn cash quarterly. We illustrate Uber’s reported operating loss (pre-tax) in the chart below.

Over the past couple of years, there has been a gradual shift in Uber’s mindset – from “growth at all costs” to “growth at reasonable costs.” Despite such a shift, we haven’t yet witnessed a profitable quarter.

As Uber approaches its IPO, we believe investors would likely have a significant focus on this topic.

Figure 5: Quarterly Trends in Uber’s Operating Loss

6. Uber’s core operating expenses appear to be under control. We calculate core operating expenses as net revenues minus operating profit (loss). This includes driver subsidies, sales and marketing spend, R&D costs, and miscellaneous ongoing variable costs.

Interestingly, over the past three quarters, Uber’s operating expenses hovered around $3.7 billion per quarter, implying a stable cost structure while growing bookings and revenues.

Figure 6: Uber’s Core Operating Expenses (quarterly) ($ in millions)

7. Uber Eats is already at an estimated $10 billion annual bookings run rate. With its success scaling Uber Eats, Uber has clearly demonstrated that it can layer on additional revenue streams on its core marketplace connecting drivers and consumers.

We estimate Uber eats generated more than $2.5 billion in gross bookings or more than 17 percent of overall bookings in Q4 2018.

Figure 7: Uber Eats Gross Bookings (quarterly) ($ in millions)

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