The Story of UberFreight, Q2, 2019 Edition.
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I’ve written about UberFreight’s figures before, so with UberFreight reporting today it seems appropriate to update some of the numbers in that article. So here’s UberFreight: the good, the bad, the ugly.
The Good: Back to Revenue Growth
First and foremost, UberFreight is back growing again. After consecutive flat quarters, the business seems to have been growing at 46% to $182m of quarterly revenue.
Some of that may have been its expansion into the European market. However, the business only started in the EU at the beginning of Q2. Moreover, its initial focus was on the Dutch domestic market. Thus, it remains doubtful that there’s much of an EU expansion effect in there. Q3 and more likely Q4 figures will be interesting to observe here, with UberFreight expanding into the substantially larger German market now.
So it seems fair to say that much of the growth is organic, US growth. With falling rates reported by most freight brokerages, the growth is also most likely volume-driven.
The Bad: Revenue at a Cost
When I looked at UberFreight before, I tried to understand how much different it looks compared to a typical freight brokerage business in terms its economics. I took C.H. Robinson’s figures as a stand-in for “the industry” for no other reason than the fact that it’s the largest freight brokerage in the US.
UberFreight lost a staggering $122m last quarter, while a typical brokerage would have expected a profit of ca. $13m on the same level of revenue. UberFreight is paying about $135m more to earn its $182m than CH Robinson does to earn the same revenue.
$29m of that is in subsidizing rates, with UberFreight targeting a gross margin of 1% compared to CH Robinson’s ca.17% gross margin. The more striking feature though is the $106m UberFreight has as additional operating costs.
The Ugly: Accounting Footnotes
Caution: This gets very technical
It’s becoming a bit more challenging to decompose UberFreight’s financials. The business is hosted in the Other Bets segment of Uber’s accounts, which separates it from the Ridesharing business unit and the UberEats business unit.
Uber discloses that in 2017 and 2018, fundamentally all of the revenue of the segment comes from UberFreight. It does not have to make that assessment for 2019 until the end of the year. Thus, it may be that some other business is contributing a non-trivial part of the segment’s revenue. An obvious suspect here is JUMP bikes which Uber acquired mid-2018.
It may be that some of the revenue increase attributed to UberFreight can be attributed to JUMP bikes or another business in the Other Bets segment. Similarly, and a bit more likely, it may be that another business causes some of the $106m of additional operating costs.
It’s good to see that UberFreight is growing again. It’s quite frankly a bit scary that a business that is so aggressively subsidizing rates and marketing to shippers didn’t manage to grow for consecutive quarters. The cost of the growth is still staggering, though.
Alexander Hoffmann is the Co-Founder & Managing Director at TNX Logistics.