Some financial statements leaked to Gawker show a beloved, hugely hyped unicorn deep in the red: In the second quarter of 2014 alone, Uber lost nearly $110 million. Moreover, “the documents suggest that CEO Travis Kalanick’s boasts about the company’s exponential revenue growth may be overblown,” Gawker reports.
But just how badly in the red is Uber? It is actually impossible to tell from the numbers that got leaked, putting aside the question of their veracity. That’s because they do not show a gross revenue figure, meaning the actual dollar amount that Uber brings in before it gives its drivers their cut and pays its other expenses, among them marketing, payroll, research and development, and legal costs. The leaked financials show only a net revenue figure, likely meaning what is left over after Uber has given drivers their 80-percent-or-so share of a given ride’s fee but before other costs.
Thus, the leaked financials make it look as if Uber pulled in $57 million in the second quarter of 2014 against costs of $164 million. But a little back-of-the-envelope math — take this with heaps of salt — suggests it might have pulled in gross revenue in the range of $285 million against overall costs of $395 (or so) million, with $230 million or so going to drivers and $164 million going to other operating expenses. The former view makes it look like Uber is deep in the red with few prospects for profitability. The latter view — one backed up by other leaked financials — makes it look like a behemoth rolling in cash and running fairly large losses in order to soak up market share and rapidly expand its business.
Precise numbers aside, I think that latter view is the right one, and it is certainly the one that investors throwing dollar bills at Uber like it is Magic Mike on molly grinding at a club in Vegas on New Year’s Eve at the turn of the millennium seem to have. In time, with that big revenue base, the company will be able to jack up fares and/or reduce driver payouts to keep bumping up revenue and improve its margins. At the same time, it will be able to cut costs, in part by reducing the big payments it makes to acquire drivers and riders. And it might already be doing so. A year ago — when the documents are apparently from — is a long time in the tech world, after all.