By on November 16, 2018

Uber’s in a bit of trouble after quarterly losses surged to $1.1 billion dollars. The ride-hailing giant has watched its sales growth dwindle this year, despite an expensive attempt to promote its global expansion.

It’s not the kind of thing you want to see from a company at the forefront of “revolutionizing” the automotive sector, especially since so many automakers seem keen on copying aspects of its business model.

Still planning on an initial public offering in 2019, Uber really could have used good news. However, according to figures released on Wednesday, revenue growth of 38 percent in the third quarter half of what it was half a year ago. It’s also still largely unprofitable, but that has a lot to do with what’s on its plate right now.

The ride-hailing company is currently working toward developing a traffic analytics program, a transport logistics management system, food delivery services, autonomous vehicles, and electric scooter rentals. That’s in addition to spending a fortune in the hopes it can break into new markets across the globe.

According to Bloomberg, Uber released a limited set of financial figures on Wednesday, offering a glimpse into its food delivery business for the first time. Uber Eats generated $2.1 billion in gross bookings, representing 17 percent of Uber’s gross bookings last quarter. However, its core ride-hailing business is in trouble and side projects aren’t making up the difference (due to the sizable investments needed just to get the ball rolling).

From Bloomberg:

On stage at the Wall Street Journal technology conference on Tuesday, Chief Executive Officer Dara Khosrowshahi defended the company’s ability to achieve profitability. He argued that some ride-hailing markets generate profit for Uber after accounting for local operations teams, drivers and other regional expenses. In the U.S., however, the business is not profitable even by this lower standard. “In the U.S., which is our largest market, we’re in a big battle” with Lyft Inc., he said.

Khosrowshahi has said publicly that Uber is targeting a public offering in the second half of 2019. Privately, he’s told investors that he’s aiming for the first half of the year, people familiar with the matter have told Bloomberg. Lyft is also considering an IPO in the first half of next year, people have told Bloomberg.

Uber was holding on to $6.55 billion in cash at the end of the quarter, which does not include the $500 million it recently raised from Toyota Motor Corp. and its $2 billion debt offering. It’s also a little unfair to call its current losses a backslide. While the company saw $2.6 billion in revenue in the first quarter of 2018, up from $2.4 billion in the previous quarter, that was largely due to merging businesses in Russia and Southeast Asia with local competitors.

“We had another strong quarter for a business of our size and global scope,” said Chief Financial Officer Nelson Chai. “As we look ahead to an IPO and beyond, we are investing in future growth across our platform, including in food, freight, electric bikes and scooters, and high-potential markets in India and the Middle East where we continue to solidify our leadership position.”

[Image: Sandeepnewstyle/Wikimedia Commons (CC BY-SA 4.0)]

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20 Comments on “Uber’s Quarterly Losses Reach $1.1 Billion in Third Quarter...”

  • avatar
    R Henry

    Some uber rides are under $5.00. How can anybody make money on $5.00 taxi rides?

    • 0 avatar

      Do 12 of them an hour, circling round and round the SF financial district….

      A buck a minute isn’t rockstar renumeration. But it’s still money.

    • 0 avatar

      Uber doesn’t provide taxi rides. They provide an app that let’s you book a taxi ride. That $5 taxi ride cost Uber $0.02 to fulfill (completely made up number).

      It’s the driver that lost money.

  • avatar

    How can an App company that gets a % of every ride lose so much money? They have no plant, no equipment, very few employees, and virtually no R&D – where does all the money go?

    • 0 avatar

      “The ride-hailing company is currently working toward developing a traffic analytics program, a transport logistics management system, food delivery services, autonomous vehicles, and electric scooter rentals. That’s in addition to spending a fortune in the hopes it can break into new markets across the globe.”

      Based on all other tech IPOs in recent history, the more the company loses, the more people want to buy it. I don’t know if tech has lost its luster on Wall St, but I’m sure everyone is dying to get on the Uber train.

      • 0 avatar

        The mindless pursuit of growth has killed many a company. They had a great thing going and are in the midst of screwing it. If they focussed on their core business, they would be immensely profitable.

        • 0 avatar

          Competition would eat their margins. Neither drivers nor hailers want to cut Uber in on the action. And while the tech was revolutionary and brilliant when it started, by now anyone can replicate the core functionality of it.

          Uber is in the position that the only way it can avoid being undercut, is by effectively subsidizing the business. Which it can only do, as long as it remains an “investor” darling. Which it can only remain, as long as it throws all manners of money at the kind of crazy, pie-in-the-sky projects that “investors” flush with freshly printed Fed welfare go gaga over.

        • 0 avatar
          Art Vandelay

          Have they ever been profitable?

        • 0 avatar

          Hubris is a powerful thing. I suspect they are trying (and spending $$) to be the Amazon of transportation rather than the replacement for Yellow Cab.

      • 0 avatar

        I used to watch a PBS program called Wall Street Week hosted by Louis Rukeyser. In the late 1990s, he had a guest who proclaimed that the value of a company was no longer connected to its profitability. We know how that ended.

      • 0 avatar

        It’s like a Veblen good of investing.

    • 0 avatar

      Uber makes $2.40 per ride for the “booking fee” regardless of the trip length. Then they make a varying cut of the rest of the fare. With Uber’s “upfront pricing” they don’t charge the passengers the actual time and miles of the trip, but a made up amount based on an estimated time and miles (always higher than the real numbers).

      2 examples from trips I did yesterday:

      Minimum fare trip:

      Passenger pays $7.11
      Uber’s booking fee: $2.40
      Uber’s service fee: $1.46 (the amount they keep of the fare – booking fee)
      Driver earnings $3.00
      Ubers cut = 54.3%

      Longer trip 19.19 miles, 26 minutes

      @ $1.00/mile and $.10/minute, this trip should have cost the passenger $24.19 with booking fee

      But this is what the passenger actually paid:

      Passenger paid: $31.92
      Uber booking fee: $2.40
      Uber service fee: $9.88
      Driver’s earnings: $17.14
      Uber’s cut: 38.5%

      The point is, Uber is making more than they even should, and STILL losing money. And all they really need to do is sit there and keep the app running.

      • 0 avatar

        The posted rates in my market are $1.00/mile and $.10 per minute, and Uber pays the drivers $.75/mile and $.75/minute, implying that Uber takes a 25% commission plus the booking fee. In reality, they take much more

    • 0 avatar
      Art Vandelay

      I would imagine insurance is a decent chunk

      • 0 avatar

        And you would think Uber covers insurance not only after the pickup, but to get to the pickup.

        But they don’t.

        And if your personal insurance finds out you’ve been Ubering, they may not cover you either.

        How a business can shift all the risk and volatility onto the employee, overcharge the customer (see upfront pricing not matching driver compensation), and still not make money…it’s a mystery.

    • 0 avatar

      Pay per engineers (i.e. $240k ea on average)
      Lobbying to politicians
      Driverless cars R&D
      Subsidizing rides

  • avatar

    UBER has a lot on its plate, but honestly how can they continue to support their supposed market value for an IPO next year? Yet at the same time, GM, Ford, and the like are trying to position themselves as technology companies instead of auto manufacturers.

    Reminds me of Spotify, which is now trading for less than the company was valued on the opening day of its IPO. They have to pay between 60-65% of top-line revenue to secure blanket licenses from the major labels. So they don’t really own anything, kind of like UBER. Don’t get me started on how much money actually goes to the content creators.

    Netflix, on the other hand, does own most of their content, but even they are down 20% this month. They recently did a $2 billion raise for more content. I’m not a Luddite, but I don’t think technology is always going to make a stronger bottom line.

    • 0 avatar

      ” …..but honestly how can they continue to support their supposed market value for an IPO next year? ”

      Uber’s job is dreaming up unsubstantiated promises of new-new they can sell to recipients of Fed welfare. As well as to provide a place of work for those’s children, which let the welfare queens brag their children are “smart.” Uber’s involvement in “market value” ends there. Supporting it from there on out, is the Fed’s job.

  • avatar

    This is all just the TSLA model, which as I post this comment today, is at:
    361.45 USD +7.14 (up 2.02%). Keep pushing the vaporware, and those hungry for the next big win will keep paying into the scheme.

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