Uber posts US$50bil in annual bookings
But profit remains elusive ahead of IPO
SAN FRANCISCO: Uber Technologies Inc had US$50bil in total bookings for its ride-service and food-delivery businesses last year, a testament to the size and global reach of the company as it prepares to woo investors in one of the biggest public stock listings to date.
But figures released by the company on Friday showed revenue grew just 2% in the fourth quarter, a sign that Uber continues to heavily subsidise rides in competitive markets, raising questions about its future growth prospects.
Uber’s full year revenue for 2018 was US$11.3bil, up 43% from the prior year. Its losses before taxes, depreciation and other expenses were US$1.8bil, an improvement over the US$2.2bil loss posted in 2017.
Uber highlighted the annual bookings figure, which was up 45% over 2017, in its release on Friday of a smattering of selected figures for its fourth-quarter and full-year results, a practice it has had for the last several quarters as it anticipated going public. The full-year figures are particularly important to show potential investors the trajectory of the business, as opposed to Uber’s more erratic quarterly results.
Uber in December filed confidentially for an initial public offering, which may come as early as the second quarter this year. It is racing neckand-neck with rival Lyft to become the first ride-hailing IPO.
“Last year was our strongest yet, and Q4 set another record,” Uber chief financial officer Nelson Chai said in a statement.
Uber said gross bookings for the fourth quarter were a record US$14.2bil, up 11% from the prior quarter.
That marks an improvement after bookings growth slowed to just single-digit percentages throughout much of last year.
Uber’s revenue in the fourth quarter reached US$3bil, up 2% from the third quarter and a 24% increase over the previous year. The food-delivery service, Uber Eats, accounts for more than US$2.5bil in bookings quarterly, according to a person with knowledge of the matter. Uber has trumpeted Uber Eats as the largest online food delivery business outside of China.
Uber must convince public market investors that its market share, growth trajectory, global scale and diversity of businesses make it a compelling investment, despite its enormous losses.
“Uber needs to show it can control costs and can make money, basically provide a strong argument that its business model is not broken and that it can achieve and sustain profitability despite issues with drivers, customers and politicians,” said David Brophy, professor of finance at the University of Michigan’s Ross School of Business.
Ongoing intense competition with ride-hailing foes across the globe has kept Uber in the red. Rivalries in India with ride service Ola, in Latin America with Didi Chuxing and in the Middle East with Careem have pressured Uber to lower prices, raise driver commissions and invest heavily in marketing and recruiting. Uber has held talks with Careem since the middle of last year about a potential merger, but the companies have not reached an agreement.
Uber Eats is also battling a crowded food-delivery industry, forcing it to adopt discounting tactics to compete with companies like food-delivery startup DoorDash, which is in the process of raising US$500mil from investors at a US$6bil valuation, and restaurant and grocery delivery company Postmates, which filed for an IPO this month. Uber has no plans to slow investment in Uber Eats or other costly areas such as autonomous car development to show profit any time soon. The company’s losses before interest, taxes and depreciation spiked in the fourth quarter to US$940mil, a 43% jump over the previous quarter and 21% increase from 2017.
“I believe investors will forgive even higher fourth-quarter losses if there’s evidence of significant topline growth,” said Arun Sundararajan, a professor of business at New York University Stern School of Business.
But, he said, Uber’s business still represents a fraction of global consumer spending on transportation, and “evidence that Uber is making significant inroads into changing behaviors” is critical to its long-term success. — Reuters