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Uber: Journey to Becoming a Self-Funded, Autonomous Leader

Jul 21, 2024

Uber: Journey to Becoming a Self-Funded, Autonomous Leader

Introduction to Uber's IPO and Investor Returns

  • IPO'd in May 2019, making history with the biggest first data loss in U.S. history.
  • Investors who invested $10,000 at IPO would still have $10,000 four years later; S&P 500 returned 50% during the same period.
  • Uber is in a self-funding stage: breaking even, reinvesting in growth, and fine-tuning its business model.
  • Contrast in perception: some see a sinking ship, others focus on long-term potential and unit economics.

Past Controversies

  • Various global protests and legal battles
    • Lost license in London (2017), regained in 2022
    • U.S. legal controversy on whether drivers are employees or contractors reshaped the gig economy
  • 2017 Scandals:
    • Allegations of a sexist and hostile work environment by a former female engineer
    • Numerous top-level executive departures; Travis Kalanick resigned
  • Under Dara Khosrowshahi's new leadership, the focus shifted towards better corporate culture.
  • Voted as a best place to work in 2023.

Operating Model and Competition

  • Uber connects riders with drivers using their own cars; does not own a fleet.
  • Key partnerships:
    • Alphabet's Waymo for autonomous driving
    • Driver metrics improved post-pandemic
  • Key Competitors:
    • Ride-hailing: Lyft (US), Didi (China), Ola (India), Grab (Southeast Asia)
    • Food Delivery: DoorDash, GrubHub, Just Eat Takeaway, Deliveroo

Growth Strategy

  • Expanding services (Uber Eats, Uber Health)
  • Autonomous driving investments and partnerships
  • Entering advertising market with a goal of $1 billion revenue by 2024
  • Diversifying revenue with a high-margin initiative

Strategic Investments

  • Represent over $5 billion in equity stakes
  • Examples:
    • Didi (China)
    • Grab (Southeast Asia)
    • Aurora (Autonomous vehicle technology)

Key Performance Metrics

  • Monthly Active Platform Consumers: 12% YoY growth to 137 million
  • Trips: 22% YoY growth to 2.3 billion in Q2 2023
  • Gross Bookings: $33 billion in Q2 2023 (18% YoY growth)
  • Take Rate: Mobility (29%), Delivery (20%), Freight (Variable)

Financials and Margins

  • Revenue Segments:
    • Mobility: 46% of gross bookings, 29% take rate
    • Delivery: 48% of gross bookings, 20% take rate
    • Freight: 6% of gross bookings
  • Improved operating margin since 2019
  • Gross Margin: Declined toward 40% due to Uber Freight acquisition
  • Adjusted EBIT Margin:
    • Used to compare to expectations over time.
    • Positive trends in top 20 markets

Recent Quarterly Performance

  • Revenue driven by gross booking and take rate trends
  • Cost savings from lower general administration and marketing expenses
  • Adjusted EBITA improves to 2.7% of gross bookings (from 1.3% prior year)
  • Management forecasts $5 billion in adjusted EBITA by 2024.

Long-Term Targets

  • FY 24 goals:
    • Gross bookings growth: 22-25%
    • Adjusted EBITA: 3% of gross bookings
  • Aim to exceed 7% incremental margin
  • Potential scalability comparable to Amazon

Conclusion

  • Uber focusing on scaling efficiently amidst competition.
  • Vision to build a generational company remains strong.
  • Regulatory and competitive hurdles continue.

[Note: Check out related videos for in-depth analysis on specific topics like Airbnb's financial model.]

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