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Home / Business / How can a company lose $ 5.2 billion in revenue of $ 3.2 billion? Uber shows how

How can a company lose $ 5.2 billion in revenue of $ 3.2 billion? Uber shows how



And the revenue from the rideshage stagnates.

Uber's losses have been legendary for many years, ever since they were leaked to the public while it was still a privately owned company. But this takes the cake. Uber reported this evening that it had lost $ 5.24 billion in the quarter through June 30. The thing is that Uber reported sales of just $ 3.2 billion. In other words, the net profit went over $ 2 billion. It takes a bit to do.

Its $ 5.24 billion loss came on top of its $ 878 million loss in the first quarter. During the first half of 2019, Uber lost $ 6.25 billion. Total revenue for the two quarters was $ 6.3 billion. The chart of Uber's "Loss from business" ̵

1; which does not include interest expenses ($ 368 million in the first half) and "other income (expenses)", such as last year's gain on the sale of the shares in Grab and Yandex – shows the annual sum from 2014 to 2018 and first half total for 2019:

Lyft, Uber's largest competitor in the United States, reported yesterday that revenue in the second quarter of $ 867 million had resulted in a loss of $ 644 million. And that over the first half of the year, revenues of $ 1.64 billion caused a loss of $ 1.78 billion.

You see, this phenomenon of well-established global companies with thousands of employees generating as much or more in losses than they have in my old school income thinking of shorting.

Uber has been around for a decade, and it has already burned through billions of dollars in investor money to get where they are today, and there is still no working business model in sight.

So how did Uber lose $ 5.2 billion to $ 3.2 billion in revenue?

Of course, the company does not want to look at the business in this way. So, the report clearly points out what to look at and how to look at it, and what to ignore on purpose. It is at the very top of the press release:

"Our platform strategy continues to deliver strong results, with Trips up 35% and Gross Bookings [not including what drivers get paid] up 37% in constant currency, compared to the second quarter last year,"

OK, In spite of all this hoopla and red-hot growth of these calculations, actual revenue increased only 14%.

“In July, the Uber platform reached over 100 million Monthly Active Platform consumers for the first time, as we become an increasingly integrated part of everyday life in cities around the world. "

Sure, but who's paying for it? The check is divided in two ways: Users pay part of it, and investors pay the other part, digging deep into the pockets to subsidize each turn.

And another thing: 14% top line growth is not a high-growth company. And that 14% was far from previous growth rates. In the second quarter of 2018, for example, revenues increased by 52%.

By region: In Latin America, revenues plunged 24%, in the US and Canada, where most of the business is, revenues increased by 19%, in the EU, Middle East and Africa, revenues increased by 22%, and in Asia by 13%.

Rideshare revenue stagnation.

Worse, core revenue growth – its ride-hailing service – only increased 2% to $ 2.3 billion. The technical term for this is stagnation.

To escape this stagnation that was driving the trip, Uber got an e-bike service (Jump), Uber Freight and the last red-hot fad, food delivery. "Other Games" revenues increased 175% to $ 195 million. And Uber Eats revenue jumped 72% to $ 595 million. All this loses money handover.

That $ 5.24 billion loss includes $ 300 million in the cost of the "driver's license award" – those dang drivers again – related to the IPO. And it included $ 3.9 billion in costs for its stock-based compensation plans related to the IPO.

In terms of cash burn from operations – "net cash used in operating activities" – the company reported that it burned $ 1.64 billion in the first half.

But Uber isn't going to run out of money anytime soon. It has already picked up so much from investors, including during the IPO, that it is still swimming in nearly $ 12 billion in cash, cash equivalents and restricted cash. Even Uber will need some time to burn it all.

No one apparently – at least of all executives at Uber – has no idea how they can come to profitability, or at least come to a self-sustaining business model. The hope was for years that Uber would replace the viciously expensive drivers with driverless cars.

The autonomous cars would be capital-intensive, certainly, but the capital is cheap or free (as the funds collected during the IPO), and even underpaid people are too expensive for Uber. And since there are no drivers, there are no problems with drivers. This plan worked well – until one of Uber's self-driving prototypes (with a human on board) killed a pedestrian.

Instead of showing a clear and brief path to profitability, CEO Dara Khosrowshahi blamed us with vagueness during the conference call: Ride-hailing, he said, "should prove to be a spectacular business in the long run."

The business is already spectacular, considering the losses.

And "long term" includes the hopes – which have been pushed further and further – that autonomous vehicles will finally make it far enough where they can replace the expensive human drivers, at a reasonable cost and without knocking down too many pedestrians . Meanwhile, losses pile up. And rideshare revenue stagnates.

The rideshare industry is a peculiar creature: it roughly destroyed the taxi business – which was ripe for a major shake – because it is capable of evading taxi regulations and burning huge amounts of money, while taxi companies have to stick to taxi regulations and make money or go out of business – because taxi company investors are not willing to finance losses.

But rideshare investors have been dazzled by the promise of who knows what, and are eager to fund these losses year after year with no end in sight.

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