You are here
Uber narrows loss but is a long way from finding profit
UBER Technologies Inc said on Wednesday it narrowed its quarterly losses from a year earlier, although the ride-hailing company is still a long way from proving it can be profitable as it gears up to go public in 2019.
Under the leadership of Dara Khosrowshahi, who became chief executive in September, Uber has juggled investing in new markets while retreating from others where it was losing millions of dollars. It is building up services like food delivery and freight hauling as it seeks new revenue, and possibly a path to profitability, outside its core business.
Uber's net loss narrowed to US$891 million in its second quarter ending June 30 from US$1.1 billion a year earlier. Its adjusted loss before interest, taxes, depreciation and amortisation was US$614 million, down from US$773 million a year earlier.
Net revenue rose more quickly than gross bookings in Q2 from the prior period as the company dialled back on promotional subsidies of rides.
But its growth faces risks from decisions like that by New York City this month to cap licences for ride-hailing services for one year.
Uber has also had to grapple with corporate scandals and has lingering and costly legal battles, including over its classification of drivers as independent contractors, and federal probes to resolve.
"I remain unimpressed," said Brent Goldfarb, associate professor of management and entrepreneurship at the University of Maryland.
Improving losses by cutting "the lowest hanging fruit doesn't mean the underlying model is profitable".
The company's most recent valuation was pegged earlier this year at US$72 billion. But that was based on Uber becoming the global winner in ride-hailing and logistics, a vision it has retrenched from, and public investors may see a smaller company worth less.
Uber can expect a valuation haircut in an initial public offering (IPO) if it does not show more progress towards becoming profitable, said David Brophy, professor of finance at the University of Michigan.
Adjusted losses in the first quarter were US$312 million, excluding gains from Uber selling some overseas businesses to local competitors.
The sale of its Russia and South-east Asia operations resulted in a one-time US$2.5 billion gain in Q1 and lowered Q2 costs.
Under pressure from its board, Uber has endeavoured to find more savings after years of a growth-at-all-cost mentality under prior CEO Travis Kalanick, enabled by billions of dollars in private investment.
The company had US$12 billion in quarterly gross bookings, which includes rides and Uber Eats, up 6 per cent from the previous quarter and about 40 per cent from a year before.
Net revenue, which strips out what gets paid to drivers as well as promotions and refunds, was US$2.8 billion, up 8 per cent over Q1 and more than 60 per cent from last year.
"We had another great quarter, continuing to grow at an impressive rate for a business of our scale," Mr Khosrowshahi said in a statement.
Uber is a private company and not required to publicly disclose financials, but recently boosted transparency by starting to release selected figures as it eyes an IPO.
Faced with criticism about flooding cities with cars, Uber is spending on bike and scooter rentals, including its acquisition of JUMP electric bikes in April.
While Uber has retreated from China, South-east Asia and Russia, it says it is sticking with India and the Middle East, tough markets with strong local competitors.
"We are cementing our leadership position," in India and the Middle East, Mr Khosrowshahi noted.
Several Uber investors have told Reuters they want Uber to leave these costly markets too and focus on North America, where US-based Lyft continues to pose a threat, and pull back on ancillary businesses like Uber Freight.
Uber has US$7.3 billion in cash on hand, up a billion dollars from the end of Q1. The company listed an inflow of US$1.5 billion from term loan issuance, net of costs. REUTERS