Ahead of IPO, Uber’s Losing Less—but Growing Less, Too

The year of the gig economy IPO continues, when Uber Thursday made public its first bit of official paperwork with the Securities and Exchange Commission—a sign that the tech company is preparing to list its shares on the New York Stock Exchange. The filing shows a sprawling transportation business with operations stretching into 63 countries and over 700 cities, providing 5.2 billion rides in 2018: roughly one for every person in Europe and Asia.

Uber pulled in $11.3 billion in revenue in 2018, a 42 percent jump over the year previous. And though its operating losses are still heavy—$3 billion in 2018—the company has managed to stem them, at least a bit, bringing operating losses down from $4.1 billion in 2017. Uber had 91 million active users at the end of 2018, 23 million more than a year earlier. Revenue growth, however, fell by half in 2018. This is due in part to the increasing might of Lyft, which is now snapping up users faster than its larger rival, but also because of tightening competition in meal delivery, where Uber’s big success story, Eats, is no longer growing as quickly.

Still, the company is reportedly expected to go public at a valuation of $90 billion to $100 billion, which would make it the largest US tech company to go public in the last half-decade. (Facebook went public in 2012 at a $104 billion valuation.)

Uber is ride-hail; Uber is e-scooters and e-bikes; Uber is a burgeoning delivery business; Uber is trucking and logistics software; Uber wants to build a fully functional self-driving car. And Uber only wants to get bigger: “Today, Uber accounts for less than 1 percent of all miles driven globally,” CEO Dara Khosrowshahi wrote in a letter included in the filing. “Because we are not even 1 percent done with our work, we will operate with an eye toward the future.”

But the filing also depicts a company struggling to recover from its messy past. The company said it lost “hundreds of thousands” of customers in early 2017, when its drivers continued to operate in airports during protests against the Trump administration’s immigration restrictions on visitors from Muslim countries; that led to the #DeleteUber campaign. The filing notes reams of bad press stemming from accusations of sexual harassment, discrimination, and a then-toxic company culture. It references, obliquely, investigations into its Greyball tool, software that attempted to circumvent regulation in cities that did not want the company operating on its roads. These events prompted, if not presaged, today’s tech-lash. And from a business standpoint, the company says that history has made it more difficult for Uber to retain users, stay on the right side of important city and federal regulators, and to avoid writing very large checks to lawyers, who are representing Uber in lawsuits and investigations around the world.

Now, as it preps to go public, Uber faces critical questions. What happens if the company fails to achieve profitability…ever? Uber believes it will need to invest in finding new users, be they riders, drivers, restaurants, or shippers—and use incentives, discounts, and promotions to do it. (More than $3 billion, over a third of total operating costs, went to sales and marketing last year.) It will need to pour money into new markets and operations. It will need to keep finding new employees and drivers. It will have to write checks for expensive “flying taxi” and autonomous vehicle research along the way. (The company acknowledges in the filing that it expects a competitor such as Waymo, General Motors/Cruise, Tesla, Apple, or Zoox to “develop such technologies before us.”)

“Many of our efforts to generate revenue are new and unproven, and any failure to adequately increase revenue or contain the related costs could prevent us from attaining or increasing profitability,” the company writes in its filing.

What happens if regulators decide Uber’s drivers are no longer independent contractors, but employees entitled to benefits and more intense oversight? Today, Uber faces litigation and driver protests challenging its core business model all over the globe. The filing notes that more than 60,000 drivers have entered into (or expressed interest in entering into) arbitration over employee misclassification, which the company writes “could result in significant costs to us.” The company also expects to spend significant money recruiting and retaining drivers in the years ahead.

Updated 4-11-19, 9:35 pm EST: This story was updated to correct the annual growth in monthly active Uber users.


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