First Half of 2016 sees Uber Loosing at Least $1,2 Billion: Bloomberg

Every three months, dozens of shareholders get on a conference call to hear the latest details on Uber’s business performance from its head of finance, Gautam Gupta even though the ride-hailing giant Uber Technologies Inc. is not a public company.

Uber’s losses mounted in the second quarter, Gupta told investors. The company was once again losing money even in the U.S. where Uber had turned a profit during its first quarter.

Bloomberg reports that Uber lost about $520 million before interest, taxes, depreciation and amortization in the first quarter of this year. Sources reportedly told Bloomberg that including a roughly $100 million shortfall in the U.S., the losses significantly exceeded $750 million in the second quarter. This translates to a total loss of at least $1.27 billion for Uber in the first half of 2016.

Gupta reported told investors that the majority of the company’s losses globally was due to subsidies for Uber’s drivers. An Uber spokesman declined to comment.

“You won’t find too many technology companies that could lose this much money, this quickly. For a private business to raise as much capital as Uber has been able to is unprecedented,” said Aswath Damodaran, a business professor at New York University who has written skeptically of Uber’s astronomical valuation on his blog.

From above $3.8 billion to more than $5 billion, bookings grew tremendously from the first quarter of this year to the second. From about $960 million in the first quarter, the net revenue, under generally accepted accounting principles, touched about about $1.1 billion in the second  noting a growth of about 18 percent.

The manner of calculating UberPool’s contribution to revenue in the second quarter, which had the effect of artificially increasing revenue, was also being changed, Uber also told investors.

As the company’s global ambitions have expanded, Uber’s losses and revenue have generally grown in lockstep. And consequently, quarter after quarter, Uber has lost money. Before paying up for interest, taxes, depreciation and amortization, Uber lost at least $2 billion in 2015. In the seven year history of the company, Uber has lost at least $4 billion.

Much of a precedent for Uber’s losses is hard to find. Just over $1 billion was lost by  Webvan and Kozmo.com in their short lifetimes —two now-defunct phantoms of the original dot-com boom—combined together. Amazon’s biggest loss ever totaled $1.4 billion in 2000 even as the company is famous for losing money while increasing its market value. Uber exceeded that number in 2015 and is on pace to do it again this year.

“It’s hardly rare for companies to lose large sums of money as they try to build significant markets and battle for market share. The interesting challenge is for them to turn the corner to become profitable, cash-flow-positive entities,” said Joe Grundfest, professor of law and business at Stanford.

A nadir for Uber could be he second quarter of 2016, which ended in June. The company’s losses will likely fall. Washing its hands of its massive losses in China, Uber cut a deal with its largest global competitor, Chinese ride-hailing behemoth Didi Chuxing in July. In exchange for Uber’s retreat, a $1 billion investment and a 17.5 percent stake in its business were given by Didi to Uber. Uber  reportedly lost at least $2 billion in two years in China. The company said during the investor call that it won’t see any losses from China on its balance sheet after August.

(Adapted from Bloomberg)

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