2019-10-22 09:30:251970-01-01 00:00:00

Uber Reported Loss

On the 30th May, Uber announced their first quarter financial results for 2019. The world’s largest ride-hailing and food-delivery company reported a $1.5 billion loss from operations, this was a 116% increase from the previous corresponding period, which also reported around $700 million loss. During the period Uber initially went public, the company expected its first-quarter losses to fall between $1.4 billion to $1.6 billion.

First quarter results for 2019

Some of the financial and operational highlights are inclusive of a 34% increase in gross bookings, an indicator of the customer’s total expense with Uber, and a 33% jump in Monthly Active Platform Consumers (MAPCs). The company lost around $1.5 billion from its operations even though its revenue was $4.5 billion. Adjusted EBITDA reported a loss of $1.3 billion. Compared to the previous quarter’s adjusted EBITDA of a loss of $400 million, this is a 210% increase in losses for the first quarter of 2019. Investors were not pleased with Uber’s performance as the loss per share totalled US$2.23.

Uber’s costs and expenses were largely attributed by costs of revenue, sales and marketing. Both categories contributed to more than 65% of the total costs and expenses. Combining other costs, Uber’s Q1 total costs and expenses wiped out its entire revenue and reported a $1.5 billion loss. The total costs increased by almost 35% since the previous corresponding period, ascribed by a 54% increase in sales and marketing.

The increased costs and expenses had already resulted in a negative cash flow of $1.5 billion before any operating activities for Uber. The company reported that costs in operating activities were more than $1 billion for the first quarter. This was a significant increase in losses from the previous period, which was around $430 million. Cash flows from investing activities appeared to be healthier. Net cash provided by investing activities reported a positive figure of $295 million, against the previous negative figure of $543 million. Finally, cash flows from financing activities amounted to a $67 million loss, a huge decrease compared to last period’s figure, $1.6 billion.

Of the $4.5 billion in revenue, more than 75% of the revenue derived from ridesharing revenue. Around 17% of the total revenue came from Uber Eats, which was increased by 89% compared to the previous period. In terms of region, revenue from United States and Canada contributed almost 60% of the total core platform revenue. Followed by Europe, Middle East and Africa, which comprised more than 15% of the total revenue. However, revenue in Latin America experienced a 13% drop. The adjusted net revenue came to be around $4 billion, a 14% increase since the last period.

Gross bookings for ridesharing totalled $16.6 billion and $4.5 billion for Uber Eats. Both figures had increased since the previous corresponding period by 22% and 108% respectively. This indicates Uber’s growing business in Uber Eats worldwide.

Uber’s IPO

Uber was floated on the New York Stock Exchange on 10 May, offering 180 million shares priced at US$45 each, raising US$8.1 billion in the process. Ahead of its initial public offering (IPO), Uber expected to lose between $1.4 billion to $1.6 billion and its gross bookings to be in the range of US$14.44 billion and US$14.66 billion.

During its IPO, Uber’s share began trading at US$42, closing below US$42 at the end of the first day with a market capitalisation of US$69.7 billion. Since Uber’s debut, its share price has yet to touch its offering price of $45. Amid global uncertainties, Uber’s stock fluctuated, trading as low as US$37 and as high as US$43. The latest trading session indicated that the company’s share price is almost US$40.

Competitive environment

Uber appeared to mirror its formidable competitor, Lyft, in terms of share performance. Both companies were heavily scrutinized after posting significant losses. Lyft’s IPO was not far in the past compared to Uber. Floated in March, the stock experienced a steep decline ever since, dropping more than 25% as of now. Since Uber’s IPO, however, Lyft’s share price had increased by more than 7%, against a drop by more than 4% for Uber.

Aggressive competition between the two transportation giants had already reflected in their financial performance. Both companies are losing a lot of money attempting to fight over market share. While Uber lost $1.3 billion in its adjusted EBITDA, Lyft reported $313 million loss in its adjusted EBITDA. Uber’s Chief Financial Officer Nelson Chai said the company’s investments “remain focused on global platform expansion and long-term product and technology differentiation,” but “will not hesitate to invest to defend our market position globally.”

Uber’s Uber Eats is growing rapidly in the world. Uber’s partnership with franchises such as McDonald’s is becoming increasingly profitable, helping the fast-food giant reaping in about 2% to 3% of the revenue. However, while Uber Eats appears to have a significant opportunity, many analysts believe that Uber’s business model is unsustainable. This month had been tough for Uber, underperforming in the market. Amid fierce competition and global turmoil, Uber needs to find a way to regain investors’ confidence fast.

By Jack Lee

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