Insights

The ride-sharing giant, Uber finally filed for its long-awaited IPO

23 April 2019  |  TRADING IDEAS

Uber, the ride-sharing giant finally filed for its long-awaited IPO.

Highlights

  • Monthly active users reached 91 million. Average user takes 5.5 trips in a month.
  • Uber Eats accounted for 18% of total bookings, but the take rate (profit margin) has been on a declining trend.
  • The largest shareholder is Japanese SoftBank Group (16.3% holding).
  • Uber is reaching markets throughout the world by affiliating with or acquiring other companies.

Company Overview

Uber was founded by Travis Kalanic in San Francisco, California in 2009. The company created the ridesharing market and expanded its business into food delivery services, freight sharing services and more. The total number of trips taken worldwide is over 14 million per day.

Revenue and operating loss


Uber reached $11.2 billion in total revenue (+42.1% year-over-year) with CAGR of 118% and $3.0 billion in operating loss in 2018.

In 2018, Gross Bookings (the total dollar value of ridesharing, UberEats food deliveries and amounts paid by shippers for Uber Freight shipments) were $49 billion and Trips (the number of completed consumer ridesharing or UberEats food deliveries) were 5.2 billion. With simple calculation, it equals to that the company’s service is being used 165.5 times per second worldwide.

Key Metrics

As a Core Platform business, Uber offers ridesharing and Uber Eats. Beyond that the company is also working on new businesses such as Uber Freight that matches transportations between shipper and carriers, and JUMP, an e-bike sharing service.



Number of Trips is increased by 37.2% year-over-year to 1.4 billion in the last quarter.


Monthly active platform consumers increased by 33.8% year-over-year to 91 million in 4Q18.


On average, consumers take up to 5.5 trips a month.



Bookings from ridesharing ($11.4 billion) accounted for 81% of total bookings ($14.1 billion) in 4Q18. Also, Uber Eats has grown rapidly year-over-year and made just under $2.5 billion revenue in 4Q18, which includes Thanksgiving and Christmas holidays in the United States.


However, looking into the adjusted net revenue (the total net financial activity generated by Core Platform after taking into account all driver and restaurant earnings), growth rate has been slowing down since 1Q18. In 4Q18, revenue growth stopped and it fell compared to the previous quarter.



Take rate of ridesharing, which represents Uber’s profit ratio calculated by dividing adjusted revenue by bookings, was 20.2% in 4Q18. It is lower than that of Lyft (26.8%). Take rate of Uber Eats is decreased by 6.9% year-over-year to 6.4%. Background factors for the slowing take rate is due to the rise of competitors.



Lyft, which went public a little earlier than Uber, is catching up Uber rapidly. Though Uber had dominated the market with over 90% market share up until 2015, it decreased to around 60% by 2018.



Uber is also facing competitive situation in the food delivery market. According to Forbes, Uber Eats is growing rapidly and taking market share from other competitors, however the market is competitive with multiple players. There was a report that says DoorDash surpassed Grubhub and took the largest share of food delivery market in January 2019.



Cost of revenues, which once decreased to 47.6% in 1Q18, increased to 60.4% in 4Q18. Sales and marketing expense was 36.4% and operation and support expense was 15.3%. Cost for retaining customers and drivers are on the increase in both ridesharing and food delivery businesses.

Financial Data


Looking into the raised capital, redeemable convertible preferred stock accounted the largest portion ($14.1 billion). Long-term debt is also on an increase. Accumulated deficit decreased to -$7.8 billion in 2018 from -$8.8 billion in 2017.



The largest shareholder is SoftBank Group (16.3%), followed by Benchmark Capital (11.0%). Mr. Travis Kalanick who founded the company but already left holds 8.6% and Mr. Carrett Camp, co-founder, holds 6.0%. Public fund of Saudi Arabia and Alphabet, Inc. (Google) hold over 5%. Tencent, Sequoia and Toyota are also the shareholders of the company.


Cash flow from operating activities was -$1.5 billion. The company keeps raising large amounts of money, and investing to expand its businesses.


Cash and cash equivalents ($6.4 billion) surpassed working capital ($4.4 billion), which is defined as total current assets less total current liabilities. Since 2017 investments has increased significantly.

Global Strategy

Though Uber created the ridesharing market, competitors who provide ridesharing services have sprouted across the world.Uber decided to sell operations in China to Didi in exchange of 15.4% of Didi’s shareholdings in 2016. Uber also owns 38.0% of Yandex in Russia and 23.2% of Grab in Southeast Asia. Regarding Middle East, Uber acquired Careem, Dubai based ride-hailing startup in 2019.

[Minority-owned affiliates (Uber’s ownership %)]

Chinese market: DiDi (15.4%)


Russian market: Yandex (38.0%)


Southeast Asia market: Grab (23.2%)


[Acquired company]

Middle Eastern market: Careem



56.4% of Uber’s revenue is from North America. Brazil is the second largest revenue source for Uber, which accounted for 8.5% of total revenue.

Uber estimates Personal Mobility TAM (Total Addressable Market) as $5.7 trillion market opportunity in 175 countries. As the ridesharing market is getting competitive across the world, it is remarkable how Uber would move with raised funds through IPO.

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The original article was published by Stockclip, Inc. on 12/04/2019.


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