Uber Publishes Initial Registration Statement For IPO

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About: Uber Technologies, Inc. (UBER), Includes: DOORD, EXPE, GOOG, GOOGL, LYFT
by: Donovan Jones
Summary

Uber has filed its first IPO registration statement; the amount referenced was $1 billion but reports indicate the firm will seek up to $10 billion.

The company operates ridesharing and small package delivery networks worldwide.

Top line revenue and gross profit continues to grow; other financial and operating metrics show increasing efficiencies as the firm continues to scale.

When we learn more details about IPO pricing and valuation, I'll provide an update.

Quick Take

Uber Technologies (UBER) has filed to raise $1 billion in an IPO of its common stock, according to an S-1 registration statement, although the final figure may be as high as $10 billion.

The firm operates ridesharing and related delivery service networks worldwide.

UBER continues to grow top line revenue and gross profit quickly, although at a decelerating rate of growth while producing improving sales & marketing efficiencies as the firm scales operations worldwide.

Company And Technology

San Francisco-based Uber was founded in 2009 to enable consumers to pay for ridesharing service from independent drivers using the firm’s mobile application.

Management is headed by CEO Dara Khosrowshai, who has been with the firm since December 2017 and was previously CEO of Expedia (EXPE).

The firm partners with a wide variety of travel, finance, and other related service providers as management has adopted a ‘capital light’ approach to increasing its growth trajectory.

Investors in Uber include a large number of venture capital, private equity, and sovereign wealth funds including SoftBank (OTCPK:SFTBY), Benchmark Capital, Google (NASDAQ:GOOGL) (GOOG), and the Public Investment Fund (Saudi Arabia sovereign wealth fund).

Below is a brief driver promotion video:

Source: Uber

Customer/Driver Acquisition

Uber operates a multi-sided marketplace, connecting drivers who wish to share their vehicles with consumers who need a ride.

In addition, the firm enlists drivers in delivering restaurant food orders and is continuing to explore light freight delivery in some locations.

Uber advertises for both consumers and drivers via online and social media as well as offline media and events.

Sales and marketing expenses as a percentage of revenue have dropped materially as revenues have increased, as the figures below indicate:

Sales & Marketing

Expenses vs. Revenue

Period

Percentage

2018

28.0%

2017

31.8%

2016

41.5%

Sources: Company registration statement and IPO Edge

The sales efficiency rate, defined as how many dollars of additional gross profit are generated by each dollar of sales & marketing spend, was 1.5x in the most recent year, an improvement, as shown in the table below:

Sales & Marketing

Efficiency Rate

Period

Multiple

2018

1.5

2017

0.0

Sources: Company registration statement and IPO Edge

Average Revenue per Monthly Average Active Customer has been increasing, although at a decelerating rate, per the table below:

Average Revenue Per

Monthly Active Customer

Period

ARPC

Variance

2018

$10.32

6.2%

2017

$9.72

36.5%

2016

$7.12

Sources: Company registration statement and IPO Edge

Market And Competition

According to BLS statistics, U.S. consumers spend over $1.2 trillion on transportation each year. Worldwide consumer and light delivery transportation totals several trillion in additional spending.

Key elements driving expected growth in ridesharing usage include increased user awareness of ridesharing options and continued buildout of ridesharing networks in middle- and lower-tier cities.

Major competitive vendors that provide ridesharing or ground transportation services include:

  • Lyft (LYFT)
  • Ola
  • Did
  • Taxify
  • Sidecar
  • DoorDash (DOORD)
  • Waymo and other autonomous car firms
  • Light cargo delivery services
  • Existing taxi companies

A number of automobile manufacturers have announced plans to provide various types of ridesharing services or autonomous vehicle operations in the near future.

Additionally, scooter companies such as Lime and Bird compete for short trips in dense urban areas.

Uber also faces competition restrictions from governmental authorities in some jurisdictions, potentially limiting its ability to expand, acquire, or partner with firms in those areas.

Financial Performance

Uber’s recent financial results can be summarized as follows:

  • Continued high growth in top line revenue, although decelerating
  • Increased though decelerating growth in gross profit
  • Increasing gross margin
  • Decreased negative EBITDA and decreased negative EBITDA margin
  • Uneven cash used in operations, although trending downward from 2016

Below are relevant financial metrics derived from the firm’s registration statement:

Total Revenue

Period

Total Revenue

% Variance vs. Prior

2018

$11,270,000,000

42.1%

2017

$7,932,000,000

106.3%

2016

$3,845,000,000

Gross Profit (Loss)

Period

Gross Profit (Loss)

% Variance vs. Prior

2018

$5,647,000,000

49.7%

2017

$3,772,000,000

133.3%

2016

$1,617,000,000

Gross Margin

Period

Gross Margin

2018

50.11%

2017

47.55%

2016

42.05%

EBITDA

Period

EBITDA

EBITDA Margin

2018

-$2,607,000,000

-23.1%

2017

-$3,570,000,000

-45.0%

2016

-$2,703,000,000

-70.3%

Cash Flow From Operations

Period

Cash Flow From Operations

2018

-$1,541,000,000

2017

-$1,418,000,000

2016

-$2,913,000,000

Sources: Company registration statement and IPO Edge

As of December 31, 2018, the company had $6.4 billion in cash and $17.2 billion in total liabilities.

Free cash flow during the twelve months ended December 31, 2018, was a negative ($1.73 billion).

The firm’s Core Platform Take Rate was 20% in 2018, notably lower than U.S. competitor Lyft’s which was 30%. Included in the Core Platform is both ridesharing and Uber Eats. Uber Eats had a Take Rate of 10% in 2018, lowering the combined rate accordingly.

IPO Details

Uber has filed to raise $1 billion in gross proceeds from an IPO, although the final amount may be as high as $10 billion according to several reports.

Notably, the firm is offering to sell common shares as opposed to Class A shares with rival Lyft’s IPO.

Observers are expecting the valuation sought by management to reach $100 billion, though we won’t know the final number until a subsequent registration statement is published.

Management says it will use the net proceeds from the IPO using standard boilerplate text, as follows:

We intend to use the net proceeds we receive from this offering for general corporate purposes, including working capital, operating expenses, and capital expenditures. We may also use a portion of the net proceeds to acquire or make investments in businesses, products, offerings, and technologies, although we do not have agreements or commitments for any material acquisitions or investments at this time.

Management’s presentation of the company roadshow is available here.

Listed bookrunners of the IPO are Morgan Stanley, Goldman Sachs, BofA Merrill Lynch, Barclays, Citigroup, Allen & Company, RBC Capital Markets, SunTrust Robinson Humphrey, HSBC, SMBC, Needham & Company, Loop Capital Markets, Academy Securities, BTIG, Canaccord Genuity, CastleOak Securities, Cowen, Evercore ISI, Mischler Financial Group, Oppenheimer & Co., Raymond James, William Blair, The Williams Companies, Deutsche Bank Securities, Mizuho Securities, Siebert Cisneros Shank & Co, JMP Securities, Macquarie Capital, and TPG Capital DB.

Expected IPO Pricing Date: To be announced.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.