UBER’SBADWEEK:DOOMSDAYSCENARIOORJUSTPRFIASCO?

Shameandscandal,cashflowsandvalue!

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TheUberBackStory

Uber,theUrbanCarServiceCompanyTheStory

Uberisanurbancarservicecompany,drawinginnewusersintocarservice.Itwillenjoylocalnetworkingbenefitswhilepreservingitscurrentrevenuesharing(80/20)andcapitalintensity(don'towncarsorhiredrivers)model.

TheAssumptionsBaseyear Years1-5 Years6-10 Afteryear10 Storylink

TotalMarket 100billion Grow6%ayear Grow2.5%UrbanCarService+Newusers

GrossMarketShare 1.50% 1.50%>10% 10% LocalNetworkingbenefitsRevenueShare 20.00% Staysat20% 20.00% PreserverevenueshareOperatingMargin 3.33% 3.33%- 40% 40.00% StrongcompetitivepositionReinvestment NA Salestocapitalratioof5.00 Reinvestmentrate=10% LowcapitalintensitymodelCostofcapital NA 12.00% 12%->8% 8% 90thpercentileofUSfirmsRiskoffailure 10%chanceoffailure(withequityworthzero) Youngcompany

TheCashFlowsTotalMarket MarketShare Revenues EBIT(1-t) Reinvestment FCFF

1 $106,000 3.63% $769 $37 $94 $(57)2 $112,360 5.22% $1,173 $85 $81 $43 $119,102 6.41% $1,528 $147 $71 $764 $126,248 7.31% $1,846 $219 $64 $1565 $133,823 7.98% $2,137 $301 $58 $2436 $141,852 8.49% $2,408 $390 $54 $3367 $150,363 8.87% $2,666 $487 $52 $4358 $159,385 9.15% $2,916 $591 $50 $5419 $168,948 9.36% $3,163 $701 $49 $65210 $179,085 10.00% $3,582 $860 $84 $776

Terminalyear $183,562 10.00% $3,671 $881 $88 $793TheValue

Terminalvalue $14,418PV(Terminalvalue) $5,175PV(CFovernext10years) $1,375Valueofoperatingassets= $6,550Probabilityoffailure 10%Valueincaseoffailure $-AdjustedValueforoperatingassets $5,895 VCspricedUberat$17billionatthetime.

Potential)Market Market)size)(in)millions)A1.$Urban$car$service $100,000A2.$All$car$service $175,000A3.$Logistics $230,000A4.$Mobility$Services $310,000

Growth'Effect CAGR'(next'10'years)B1.$None 3.00%B2.$Increase$market$by$25% 5.32%B3.$Increase$market$size$by$50% 7.26%B4:$Double$market$size 10.39%

Network(Effects Market(ShareC1.$No$network$effects 5%C2.$Weak$local$network$effects 10%C3.$Strong$local$network$effects 15%C4.$Weak$global$network$effects 25%C5.$Strong$global$network$effects 40%

Expense'Profile Operating'MarginE1:$Independent$contractor 40%E2:$Partial$employee 25%E3:$Full$employee 15%

Competitive)Advantages Slice)of)Gross)ReceiptsD1.$None 5%D2.$Weak 10%D3.$Semi4strong 15%D4.$Strong$&$Sustainable 20%

Increases overall market to $618 billion in year 10

Risk EstimatesG1. Cost of capital at 75th percentile of US companies = 10%

G2. Probability of failure in next 10 years= 0% Uber Valuation: September 2015

Base 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 AssumptionsOverall3market $230,000 $253,897 $280,277 $309,398 $341,544 $377,031 $416,204 $459,448 $507,184 $559,881 $618,052 A3+&+B4Share3of3market3(gross) 4.71% 6.74% 8.77% 10.80% 12.83% 14.86% 16.89% 18.91% 20.94% 22.97% 25.00% C4Gross3Billings $10,840 $17,117 $24,582 $33,412 $43,813 $56,014 $70,277 $86,900 $106,218 $128,612 $154,513Revenues3as3percent3of3gross 20.00% 19.50% 19.00% 18.50% 18.00% 17.50% 17.00% 16.50% 16.00% 15.50% 15.00% D3Annual3Revenue $2,168 $3,338 $4,670 $6,181 $7,886 $9,802 $11,947 $14,338 $16,995 $19,935 $23,177Operating3margin J23.06% J18.26% J13.45% J8.64% J3.84% 0.97% 5.77% 10.58% 15.39% 20.19% 25.00% E2Operating3Income J$500 J$609 J$628 J$534 J$303 $95 $690 $1,517 $2,615 $4,026 $5,794Effective3tax3rate 30.00% 31.00% 32.00% 33.00% 34.00% 35.00% 36.00% 37.00% 38.00% 39.00% 40.00%3J3Taxes J$150 J$189 J$201 J$176 J$103 $33 $248 $561 $994 $1,570 $2,318AfterJtax3operating3income J$350 J$420 J$427 J$358 J$200 $62 $442 $956 $1,621 $2,456 $3,477Sales/Capital3Ratio 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 F3J3Reinvestment $234 $267 $302 $341 $383 $429 $478 $531 $588 $648Free3Cash3Flow3to3the3Firm J$654 J$694 J$660 J$541 J$322 $13 $478 $1,090 $1,868 $2,828Terminal3value $56,258Present3value3of3FCFF J$595 J$573 J$496 J$369 J$200 $7 $248 $520 $822 $1,152Present3value3of3terminal3value $22,914Cost3of3capital 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 9.60% 9.20% 8.80% 8.40% 8.00% G1

PV3of3cash3flows3during3next3103years3= $515PV3of3terminal3value3= $22,914Value3of3operating3assets $23,429Probability3of3failure 0.00% G2Adjusted3value3of3operating3assets $23,429Less3Debt $0Value3of3Equity $23,429

Capital IntensityF: Status Quo: Sales/Capital = 5

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OperatingUpdatefor2016:Moreofthesame?¨ Highgrowthinbusiness:Ubergeneratedmorethan$20billioningrossbillingsin2016,doublingits2015numbers.

¨ Heftyshareofbillings:Uber’sshareofthisrevenuewas$6.5billion(whichrepresentsitsnetrevenues)butitreporteditsgrossbillingsfromUberPool,itscarpoolingservice,asrevenues.

¨ Butlossescontinue:Therevenuegrowthhasbeendazzlingbutthelossescontinuedtomountaswell.Uberreportedalossof$2.8billionfor2016,butthatnumberwouldhavebeenworse(closerto$3.8billion)iflossesinitsdefunctChinaoperationshadbeencounted.

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Uber:Thepricinggame

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OneBigReason:TheCompetition

¨ Somehaveadapted:Lyft,whichhaslongbeenviewedastheweakercompetitor,reportedan increaseinmarketshareintheUSridesharingmarketin2016 andmaybefirsttoturnaprofitinthisbusiness.

¨ SomehavematchedUberincapitalraising:Didi Chuxing,withapricingof$50billion,showedthe capacitytoraisecapital andburnthroughitjustasfastandrecklesslyasUberhas.

¨ Othersareusinglocaladvantages:Ola,has playedtolocaladvantages toestablishabeachheadagainstUberinIndia.

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Uber’sextracurricularactivities

¨ TheGoogle/Waymo Legaltangle:AnthonyLevandowski,theemployeethatUberhiredawayfromGoogle/Waymo,wasaccusedofstealingandbringGoogle’selectriccarsecretstoUber.

¨ TravisandtheUberdriver:Aminor,butstilltellingepisode,whereTravisKalanickwascaughtonvideoarguingwithanUberdriveraboutwhetherUberwassqueezingdriverswithitslowfares.

¨ Sexualharassment:SusanFowler,anex-engineeratUber,chronicleshermistreatmentatthecompanyandhowUberignoredhercomplaints.

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TheHolderReport

¨ UberhiredEricHolderandTommyAlbaran toexaminecultureandpracticesatUberandmakesuggestionsforcreatingamoreinclusiveculture.

¨ Theirreportchronicledbadbehavioratthecompanyandmade47recommendations,withthisoneleading:¤ Uber'sboardofdirectors "shouldevaluatetheextenttowhichsomeoftheresponsibilitiesthatMr.Kalanick hashistoricallypossessedshouldbesharedorgivenoutrighttoothermembersofseniormanagement"

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AnEventfulweek

¨ TravisKalanick announcedthathewastakingabreak fromhisroleasCEO "toworkonTravis2.0tobecometheleaderthatthiscompanyneedsandthatyoudeserve".

¨ Itwasinafollow-upmeetingwithUberemployeesthatAriannaHuffingtonchaired,withtheintentofmakingUberamorewelcomingenvironmentforwomen,thatDavidBonderman quippedabouthowhavingmorewomenasdirectorswouldmakeit "muchmorelikelythere’llbemoretalking"atmeetings.

¨ NoannouncementsweremadeaboutinterimCEOsanditlookslikeUberwillberunbyacommitteeofKalanick’slieutenants.

¨ Update:Today,TravisKalanickannouncedthathehadresigned,openinguptheCEOpositionfora“newhire”.

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Whatnow?

¨ Ina storybreak,youlearnsomethingaboutacompanythatrendersyourstorymootandmakesyourvaluationirrelevant(perhapsmakingitzero).ThisisthetakethatsomehavetakenwithUber,whentheyhavearguedthatthemostrecentnewsstorieshave doomedthecompany bybreakingitsstory.

¨ Ina storychange,thenewsthatyouacquirecanleadtoyousignificantlyexpandingorcontractingthestorythatyouweretellingaboutthecompany,withtheformerincreasingvalueandthelatterreducingit.MystoryforUberdramaticallyexpandedfromtheurban,carservicecompany,withavalueof$6billioninJune2014,toagloballogisticscompanyfacingchallengesinturningrevenuestoprofits,withavalueof$23billion,inSeptember2015.

¨ Ina storyshift,yourbasicstorystaysunchangedbutwithshiftedcontours.WithUber,thatiswhattranspired,atleastforme,betweenSeptember2015andSeptember2016,wherenotwithstandingallofthenewsaboutthecompany,thestoryremainedmostlyunchanged,withperhapshigherrevenuegrowthandlowerprofitabilityoffsettingeachothertoleavevalueunchangedatabout$25billion.

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ThePotentialfordamage..

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Uber’sOperations

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Uber’sbusiness

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Uber’sfinancing

Baseyear Years1-5 Years6-10 Afteryear10TotalMarket $200,000 Grow1.5%ayearGrossMarketShare 10.00% 40%RevenueShare 20.00% 15.00%OperatingMargin -43.08% 20.00%Reinvestment NA Reinvestmentrate=7.5%Costofcapital NA 10.00% 10%->8.00% 8.00%Riskoffailure

TotalMarket MarketShare Revenues(15%ofGross) EBIT(1-t) Reinvestment FCFF1 220,780$ 13.00% 8,826$ (2,149)$ 775$ (2,924)$2 243,719$ 16.00% 11,309$ (2,096)$ 828$ (2,924)$3 269,041$ 19.00% 13,930$ (1,773)$ 874$ (2,647)$4 296,995$ 22.00% 16,661$ (1,153)$ 911$ (2,064)$5 327,853$ 25.00% 19,466$ (217)$ 935$ (1,152)$6 361,917$ 28.00% 22,294$ 1,046$ 943$ 104$7 399,520$ 31.00% 25,080$ 2,633$ 929$ 1,705$8 441,030$ 34.00% 27,741$ 2,913$ 887$ 2,026$9 486,853$ 37.00% 30,173$ 3,168$ 811$ 2,357$10 537,437$ 40.00% 32,246$ 3,386$ 691$ 2,695$

Terminalyear 548,723$ 40.00% 32,923$ 3,457$ 363$ 3,094$

52,440$ 21,359$ (5,145)$ 16,214$

5%-$

15,404$ 5,000$6,000$

26,404$

Uber,TheGlobalLogisticsCompanywithabehaviorproblem(June2017)TheStory

Uberisalogisticscompany,doublingthemarketsizebydrawinginnewusers.Itwillenjoyweakglobalnetworkingbenefitswhileseeingitssliceofrevenuesslip(85/15),highercosts(withdriversaspartialemployees)andlowcapitalintensity.Theextracurricularproblemsatthecompany,withitlegaltanglewithGoogle'sWaymodivisionandaccusationsofcondoningofsexualharassmentwillslowthecompanydownintheneartermbut

notdamageitenoughtoalteritsstorysignificantly.TheAssumptions

StorylinkGrow10.39%ayear Delivery&Moving+Ridesharing

10%>40% Bigplayer20%->15% Lowerrevenueshare

-43.08%->20% CostpressurescontinueSalestocapitalratioof3.00 Morecapitalinvestmentmodel

At75thpercentileofUSfirms5%chanceoffailure,ifpricingmeltdownleadstocapitalbeingcutoff Cashonhand+Capitalaccess

TheCashFlows

TheValueTerminal valuePV(Terminal value)PV (CF over next 10 years)Value of operating assets =Probability of failureValue in case of failureAdjusted Value for operating assets

Mostrecentpricingputthepriceatgreaterthan$70billion

+Cashonhand+CrossholdingsValueofallassets

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TheClosing

¨ Uberhashadaweekfromhellbutthecompanyistooembeddedinourday-to-daylivestoimplode.

¨ Theirbehaviorisshockingandmaybeevenbeyondthepale,forsome,butmostoftheirconstituentgroupsaretooinvestedinit(inonewayortheother)towalkaway.

¨ Thebiggestdangertothecompanyremainsontheinvestingside,whereaprickingofthepricingmomentumcancausethepricetoshrinkbacktowardsamorereasonablelongtermvaluethatreflectsnotonlythecompany’spotentialbutalsothechallengesthatitfacesalongtheway.