Uber's loss narrows to $891mn in Q2 but firm still far from profitability

Uber Technologies Inc said on Wednesday it had narrowed losses from a year earlier, although the ride-hailing company is still a long way from proving it can be a profitable business even 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, while also building up services like food delivery as it seeks new revenue outside its core ride-hailing business.

Uber's net loss narrowed to $891 million in its second quarter ending June 30 from $1.1 billion a year earlier. Its adjusted loss before interest, taxes, depreciation and amortization was $614 million, down from $773 million a year earlier.

 

Net revenue rose more quickly than gross bookings in the second quarter 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 the licenses for ride-hailing services for one year.

Uber has also had to grapple with its own corporate scandals, and still has a number of lingering and costly legal battles, including over its classification of drivers as independent contractors, and federal probes to resolve.

Adjusted losses in the first quarter were $312 million, excluding gains from Uber selling businesses in Russia and Southeast Asia to local competitors. Khosrowshahi started as CEO in September.

"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."

Uber sold Russia and Southeast Asia operations to local competitors earlier in the year, booking a one-time $2.5 billion gain in the previous quarter and lowering second-quarter costs.

Under pressure from the board, Uber has endeavoured to lob off costly experiments like autonomous trucking and find more efficiencies in the business after years of a growth-at-all-cost mentality under prior CEO Travis Kalanick.

The company had $12 billion in quarterly gross bookings, which includes both rides and its food-delivery service, 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 $2.8 billion, up 8 per cent over the first quarter and up more than 60 per cent from the same quarter a year earlier.

"We had another great quarter, continuing to grow at an impressive rate for a business of our scale," Khosrowshahi said in a statement.

Uber continues to invest in areas outside its core ride-hailing business to find profit, including Uber Eats, a business Khosrowshahi has said is growing quickly and helping to drive increases in gross revenue.

Uber is also expanding into new forms of transportation as it faces criticisms about flooding cities with more cars, spending on bike and scooter rentals, including its acquisition of JUMP electric bikes in April. This month its freight brokerage business was spun off into an independent business unit.

STICKING WITH INDIA, MIDDLE EAST

Uber has retreated from China, Southeast Asia and Russia, where fierce competition with local rivals led to untenable losses. But Uber says it is sticking with India and the Middle East, tough markets with strong competitors.

"We are cementing our leadership position," in India and the Middle East, Khosrowshahi said.

Several Uber investors, however, have told Reuters they want Uber to leave these costly markets too and focus on North America, where U.S.-based Lyft continues to pose a threat, and pull back on some of its ancillary businesses like Uber Freight.

Uber is a private company and not required to publicly disclose its financials, but recently boosted transparency ahead of its planned IPO in 2019 by starting to release figures.

Uber can expect a valuation haircut in an IPO if it does not show more progress towards becoming profitable, said David Brophy, professor of finance at the University of Michigan.

The company's most recent valuation was pegged earlier this year at $72 billion. That was based on Uber becoming a globally dominant logistics company, a vision it has retrenched from.

Uber has $7.3 billion in cash on hand, up a billion dollars from the end of the first quarter. The company listed an inflow of $1.5 billion from term loan issuance, net of costs.