Uber posts $5.2bn loss as IPO costs hit earnings

Uber disappointed investors with second-quarter results that showed a big hit from costs related to its initial public offering, even as the ride-hailing giant said competitive pressures in the lossmaking industry were easing.

Its net loss ballooned to $5.2bn from $878m a year ago, in line with Wall Street’s estimates, according to S&P Global Market Intelligence. That included $3.9bn in stock-based compensation expenses related to the IPO. Revenue rose 14 per cent to $3.2bn, missing analysts’ expectations of $3.4bn and slowing from the first quarter’s 20 per cent growth rate.

The company said both top and bottom line figures reflected the impact of its stock market flotation in May, which raised $8bn.

Uber listed at $45 per share and has only briefly traded above that level. In after-hours trading following the results, the stock dropped as much as 13 per cent to $37.39 before rebounding somewhat. It had risen more than 8 per cent during Thursday’s official trading session, reflecting comments from rival Lyft on Wednesday that said competition between ride-hailing groups in the US was easing.

On Thursday Dara Khosrowshahi, Uber chief executive, said the company was benefiting from an emerging detente in the price wars that have long kept Uber and its rivals in the red.

“The competitive environment in most of the markets that we’re competing [in] are stable or improving, or our competitive tactics are improving,” he told analysts on a conference call.

Both Uber and Lyft spend heavily to subsidise fares and attract drivers, but since the companies went public earlier this year, they have come under increasing pressure to show a path to profitability. Lyft said on Wednesday that it had raised prices in late June and raised its 2019 financial forecasts.

Mr Khosrowshahi acknowledged the questions surrounding the company. “There’s a meme around which is, can Uber ever be profitable? I have certainly heard that meme.” He said he believed Uber had the potential to build “a spectacular business long term” in ride-hailing and food delivery.

Mr Khosrowshahi pointed to Uber’s core platform contribution margin — a measure of how much money the company makes from rides and food delivery after direct costs — as evidence of its improving economics. The metric rebounded to 8 per cent in the second quarter from a negative 4.5 per cent in the first three months of the year. It was below the 14.7 per cent level reached a year ago, however, showing there is still a way to go.

“Bottom line: as a growth company, you have to beat your revenue numbers, and that didn’t happen this quarter,” said Gene Munster, an analyst at Loup Ventures. “Uber has many moving parts to their story.”

The company has made clear it intends to keep spending — on self-driving cars, bikes and scooters, freight delivery and other ventures — even as it takes a more measured approach to discounting fares.

But Mr Khosrowshahi told reporters the company expected losses to narrow in the coming years, with spending reaching a peak in 2019. The company issued its first guidance on Thursday. It is expecting an adjusted earnings before interest taxes depreciation and amortisation loss of $3bn-$3.2bn in 2019, below the $3.6bn Wall Street has forecast. Gross bookings are expected to grow 31 per cent to 35 per cent year-on-year to $65bn-$67bn.

The second-quarter results showed Uber is seeing growing demand for rides and food. Gross bookings — the money it takes in before paying drivers and restaurants — rose 31 per cent from a year ago to $15.8bn. The number of monthly active consumers rose 30 per cent to 99m and the number of trips rose 35 per cent to 1.7bn.

The Eats food delivery business was a bright spot, with monthly customers more than doubling in the past year and revenue up 72 per cent.

Excluding the IPO-related costs, Uber’s net loss was $1.3bn in the quarter, wider than the $878m a year ago.

Revenue was squeezed by a $298m award given to drivers in connection with the IPO, because Uber calculates its revenue as the difference between what it takes in from passengers and what it pays out to drivers and, in its food delivery business, restaurants. Excluding the award and currency effects, its adjusted net revenue increased 26 per cent from a year ago.