UberFreight: slowing growth in Q4 2019
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I’ve been keeping tabs of UberFreight’s performance over the last few quarters. The company published its fiscal year 2019 results last week, so it is time to update the analysis.
Revenue growth slows down
Revenue growth has effectively come to a halt. After grossing $218m in Q3, Q4 came in at $219m. This is the second time UberFreight’s revenue growth has plateaued having done so Q3, 2018 – Q1, 2019 previously.
UberFreight thus has not cracked the $1bn mark yet, neither annualized nor in the last twelve months.
Trucking had a challenging fourth quarter, with many players reporting considerable pressure on pricing while showing modest volume gains. I expect that the overall industry growth quarter on quarter has been around -1%, meaning that UberFreight marginally outperformed the industry.
Marginal outperformance though, has never been the goal for UberFreight, and it’s tough to view the top-line result as anything but disappointing. Digital freight platform competitor Convoy, unfortunately, does not provide any revenue numbers. Still, I’d be interesting to see whether the slowdown in growth is UberFreight intrinsic, or shared by their immediate competitors.
Costs are down
Putting cost control and Uber into the same sentence is always challenging. UberFreight has had a history of spending substantially above its more established peer group. That is still true, but the extent of it has dropped. The business has had an operating loss of $55m in the quarter, which is down from an $88m loss the quarter before. You have to admire the companies ability to spend.
Adjusting the loss for the expected margin UberFreight’s traditional competitors generates, it has spent $69m more to the industry than traditional brokers have for a similar sized business. That’s a staggering number, but a staggering number that is coming down from almost $100m in the quarter before.
Given this level of spending, it is hard to believe that UberFreight’s subdued growth is due to a lack of capital allocated to the business. The questions thus are:
- Has UberFreight hit just a temporary growth speed-bump or a growth barrier? Can we expect growth to continue in Q1?
- Do the venture-capital-backed competitors share the growth troubles? Is there a point in any well-funded upstart where they need to grow into substantial transport and logistics knowledge?
- What happens when the traditional players in the industry hit back with similar or superior technology. All major brokers have announced substantial technology investments, and companies such as TNX Logistics are offering digital freight matching technology out of the box?
Alexander Hoffmann is the Co-Founder & Managing Director at TNX Logistics.