Uber opens its books to bloomberg

I don't use Uber much so I'm not sure the ins and outs...help me understand how they lose money. They have no capital expenditures right? An employee just signs up, uses his/her own assets to buy their car, then Uber starts making money off their fares. How do they lose so much money?

quote:

---

An employee just signs up, uses his/her own assets to buy their car, then Uber starts making money off their fares

---

you still have to manage that employee, they have millions of drivers. That cost money.
Also investing back into the company (driverless cars)
Advertising
Lord knows how much on legal fees and dealing with governments and municipalities.


Their gains are apparently still outpacing their losses, but still they have burned through A LOT of cash.

quote:

---

Their gains are apparently still outpacing their losses, but still they have burned through A LOT of cash.

---

its ridiculous how much cash they burn through. A warning sign that something is not right with management if you ask me.

quote:

---

This isn't typically the case with high growth "unicorns" in the valley. People plow the cash into a business that has proven unit economics and scalability which is what Uber has. Say what you want about management's ability to control culture and PR sure, but their business model and trajectory is tight.

---

Yeah, its easier to fix shitty management than it is to fix a product that has no fit.

But its still a warning flashing warning sign that something is amiss.

quote:

---

I'm trying to wrap my head around Gross Sales of $20B resulting in only $6.5B in Net Sales. I'm going to take the Gross Sales figure it basically mythical based on some standard fare that is never actually paid.

---

my guess is gross sales is all rides, net sales is their revenue from said rides.

Seems like the money paid to drivers would need to be recognized as SG&A or maybe COGS? I don't want on the service industry so less familiar with the accounting standards.

Uber takes a 20% cut from the driver which would only get us to $4B in net sales.

quote:

---

Uber takes a 20% cut from the driver which would only get us to $4B in net sales.

---

I think their commission structure changes of the service offered and location.

Plus they have other revenues - ads, promotions, ubereats.

quote:

---

But its still a warning flashing warning sign that something is amiss

---

I think it's still a long game with investors seeing a fleet of self driving cars as the ultimate destination. I mean it's an onbscene amount of cash burn even for a unicorn, but I think the belief is if self driving cars take off they are going to be swimming in profits.

quote:

---

There prospects look great IMHO. the thing is any ownership is going to be extremely watered down if they keep burning through the cash. Or they are going to have a very heavy debt load.

Someone is going to get rich that is for sure, the question is who will that be.

---

Every time they raise money, management gets a new option pool so ownership is probably not getting as diluted as you might think. They've raise mostly equity from what i've read with probably a number of different loan facilities as extra cushion. I'd be much more interested to hear about the terms, liquidation preference, voting rights, and relative capital stack based on their former raises. It's going to be really interesting what happens after all the Uber backlash over the past couple months. What has happened historically is that existing investors will get pissed that the numbers aren't as good as they thought it would be, new investors will demand a down round when they are in a cash crunch, management will say "no down round, but we will give you better terms (liq pref, dividends, etc)", and then the common shareholders/employees get burned when there is exit since there is so much preference on top.

From a business model standpoint, Uber is just following the model of everyone else at this point. Prove positive LTV/CAC, show a shrinking number of months from new market entrance to cash flow positive per market, generally find an acceptable "plateau" when the market is relatively saturated, and then deploy the other Uber Goods and Services. Square burned through loads of cash, Snapchat did the same, Zillow, LinkedIn, so did Facebook, etc. All that matters is that you can tell the story of how you will make money in the future and as long as you have investors willing to believe, you're on solid ground.

The model is that once self driving cars exist, there is no point in owning one.