Uber Technologies, the ride-hailing giant is not a public company, but for every three months, many shareholders get on a conference call and they investigate the latest details on the company’s business performance from the head of finance.
Uber experienced a loss in the second quarter of 2016. In the U.S, Uber had profit in the first quarter whereas; there was a loss in the second quarter. The company again loosed money there.
In the first quarter of the year, the company experienced a loss of $520 million before interest, taxes, amortization, and depreciation whereas, in the second quarter, the losses exceeded $750 million, there was roughly $100 million fall in the U.S that is total loss since the first quarter resulted in $1.27 billion.
It is found that the subsidies of the Uber’s drivers are one of the major reasons for the company’s loss globally. The head of Finance at Uber said that people are familiar with the matter. A business professor at the New York state University said that no technology company will lose this much money.
Uber bookings grew rapidly from the first quarter of 2016 to the second quarter of the same year, from $3.8billion to more than $5 billion. Net revenue of the company accepted the accounting principles and it grew nearly 18% from $960 million in the first quarter to $1.1 billion in the second quarter.
Uber also informed its investors during the conference call that it was changing the way how it calculates UberPool’s contribution to the revenue in the second quarter of 2016 then it had the effect of increasing the revenue.
Uber’s revenue and loss
Uber’s revenue and losses had generally increased in the lockstep as the company’s global goals have expanded. Uber started losing money quarter after quarter. In 2015, uber lost about $2 billion before taxes, interest, amortization, and depreciation. Seven years old Uber has lost about $4 billion in its history.
It is hard to find reasons for the Uber’s losses. For example, take Amazon; it is famous for losing money while increasing its market value at the same time. The interesting challenge lies in the hands of the company to turn the loss into a profit and cash-flow positive entities are involved in it.
The second quarter of 2016 until June, was a rock-bottom period for Uber. The company’s losses are expected to fall. In July 2016, Uber has cut its deal with its largest rival in China Didi Chuxing; it left its hands of its massive losses in that country. Didi, on the other hand gave Uber a 17.5 stake in its business and it gave $1 billion investment in exchange of the Uber’s retreat. In china, Uber lost about $2 billion in the past two years. After August, Uber balanced its losses and there were no losses on its balance sheet.
Uber’s backers are from venture capital firms like Benchmark to invest in the bank Goldman Sachs. On the whole, Uber has raised more than $16 billion in cash and debt. The latest valuation of the company is huge $69 billion. With this amount, the company has redistributed $1 billion to the Chinese working class in case of heavy subsidies to drivers. Both uber and Didi Chuxing are investing heavily in China and both the companies are expected to turn a profit in the region. The executive officer of Uber Travis Kalanick wrote a letter reporting that company’s departure from China.
Uber Vs Lyft
Uber has been involved in a vicious price war with its rival Lyft. And it is also one of the reasons for its loss. Uber said that the company is willing to spend in order to maintain its market share in the country of United States. Uber believes that it has 84 to 87% of the market in the U.S.
Lyft also has its market share in the U.S and its market has grown 20% since the previous year. Uber argued that the market share is a misleading one and they offer more services in many markets than its rival Lyft.
One of the Uber investors has told that he was expecting Uber to continue losing money in the U.S. but Lyft, a small company in volume when compared to Uber started to lose money more than Uber in the U.S. Lyft has promised its investors that it will keep its losses under $50 million a month and that would result in $150 million in a quarter. Uber’s loss in the U.S totaled about $100 million in the second quarter of the year. In July 2016, Uber offered 62 million rides to Lyft’s 13.9 million. During that period, Uber’s subsidies were spread over more rides.
Uber had nearly $8 billion in the bank and it will receive $1 billion from Didi. In addition to this, Uber also have access to $2 billion credit line and $1.2 billion loan. Uber is trying to take all its losses up front to get disproportionate scale.
Loss exceeds $800 million
Since Uber’s establishment in China, the company’s financial loss has remained amazing whereas, in the first nine months of 2016, the company has started to lose more than $2.2 billion. In the third quarter, the company lost more than $800 million, without including the Chinese operations.
On the other hand, the company’s revenue has continued to grow even after leaving the most populous country. In the first nine months of 2016, uber generated the net revenue of about $3.76 billion and it is on the move to exceed $5.5 billion within the year.
Uber’s San Francisco Company is closely associated with the company. And its valuation has reached $69 billion making the company more valuable. In the third quarter, the total combined value of the fares was $5.4 billion. This is an increase from $5 billion in the second quarter and $3.8 billion in the first quarter.
Uber’s booking rate has slowly reduced and this was the partial reason for the company to leave China. The amount of money that Uber can make after paying its drivers was $1.7 billion in the third quarter of 2016 growing from $960 million in the first quarter and $1.1 billion in the second quarter.
The numbers of the third quarter were reported by the technology news site. The company would have lost around $2 billion in 2015 and $3 billion in 2016. These are the rough estimates of how much Uber money is losing without including the interest, taxes, or stock-based compensation.
Uber’s loss in the first quarter of 2016 was about $580 million and in the second quarter, the loss exceeded to $800 million, this count also includes China. And this number is far higher than the previous. Even in the U.S, Uber started to lose money and after gaining slight profit in the first quarter of the year, the company lost about $100 million in the country of United Stated in the second quarter of 2016. The loss further increased in the third quarter. Lyft, Uber’s largest rival in the United States has promised its investors to keep its losses below $150 million in a quarter. Experts predict that Uber will recover from these losses slowly and it will start finding profits in its business.