Morning Report: Understanding Uber’s Q1 Financial Results

Morning Report: Uber released select pieces of its first quarter financial performance yesterday. Let’s understand them.

Uber released financial results this week, detailing key elements of its first quarter financial performance. As you surely recall, the company explained much of its fourth quarter business in April.

The firm posted larger revenues, larger gross bookings, and a smaller loss. The results paint the picture of a deeply unprofitable, quickly-growing company somewhat narrowing its negative margins. However, before we parse the company’s first quarter results, let’s remind ourselves what we knew before.

Recapping quickly, here’s what Uber disclosed in April:

• Uber generated gross bookings of $6.9 billion in the fourth quarter. That figure was up 28 percent from the sequentially preceding quarter.
• Uber’s gross bookings led to $2.9 billion in GAAP revenue. That result was up 74 percent from the sequentially preceding quarter.
• The company’s GAAP revenue result was inflated by how the firm accounts for UberPool revenue.
• Uber lost $991 million in the fourth quarter, up just over 6 percent from the sequentially preceding quarter.
• The company’s loss figure is greatly adjusted, discounting for, as Bloomberg reported, “employee stock compensation, certain real-estate investments, automobile purchases and other expenses.”

With a revenue result inflated by accounting requirements—Uber has to count Pool top line differently—and losses shaved by the exclusion of various costs, Uber looked cash rich and cash flow poor.

Now, the new numbers, relating to the company’s first quarter performance. Bear in mind that our prior notes are still in effect:

• Uber generated gross bookings of $7.5 billion in the first quarter of 2017. That figure was up 8.7 percent compared to the sequentially preceding quarter.
• Uber’s gross bookings led to $3.4 billion in revenue (here we presume GAAP, inclusive of larger Pool incomes). That result was up 18 percent from the sequentially preceding quarter.
• Uber lost $708 million in the first quarter, down 28.5 percent from the sequentially preceding quarter.
• The company’s loss figure is greatly adjusted, discounting for, as the Wall Street Journal reported, “employee stock compensation and other items.”

As you can quickly see, this is a slightly messy set of information. Given the impact of UberPool revenue, we likely can’t compare year-over-year GAAP revenue results too closely, as the company’s revenue mix and gross and net — sigh-ish — margins are therefore wonky.

(Bloomberg reported that “in the case of its carpooling service, [Uber] counts the entire amount of an UberPool fare as revenue” due to accounting requirements. This means that Uber’s GAAP revenue grew steeply in recent quarters; however, as it has to pay out much of those dollars to drivers, presumably UberPool revenue has a much lower margin than UberX top line. Of course, it’s just an accounting technicality, but it does skew our results.)

But we can cut through the noise and understand that Uber’s gross bookings grew nearly 9 percent from the fourth quarter to the first. That’s sequential growth that many companies would kill for. And the company is putting up big revenue figures. Annualizing the company’s first quarter revenue puts Uber on a $13.6 billion run rate. Since that figure presumes no growth, it is conservative.

Of course, Uber won’t be valued like a software company, because it isn’t. As such, we can’t break out our SaaS models to understand what its worth. But if it can’t command SaaS multiples of, say 5 times sales, the company has work left to do to grow into its valuation. And that’s presuming it can get its adjusted quarterly losses under the half billion mark.

Just for fun, Uber lost (adjusted!) roughly $327,777 per hour last quarter. That’s a bit much.

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