The first quarterly report as a public company issued by United States based ride-hailing firm Uber has revealed a loss of $1 billion as the company is now investing heavily in building up its food delivery and freight businesses.
The report however showed a 20 per cent rise in its revenues at $3.1 billion which was the same as the upper end of the range for revenues as forecast by the company for the quarter.
Following a conference call with executives, there was a 2.6 per cent rise in the shares of the company. During the conference call, company’s chief executive Dara Khosrowshahi described 2019 as an “investment year” even though he also stressed on a number of business such as fewer consumer promotions in the second quarter.
The share price of Uber have fallen below more than 10 per cent of the initial public offering price of $45 and analysts say that it investors of the company would have to be convinced by Khosrowshahi that it is possible to make a profits. There are concerns about the profitability of the company because of its dependence on rider incentives and increasing competition in all parts of its business – starting from its core business of ride hailing to its business of food delivery to freight.
“Our story is simple. We’re the global player,” Khosrowshahi told analysts on his first earnings call after the company’s IPO earlier this month. “Our job is to grow fast at scale and more efficiently for a long, long time.”
Analysts however said investors can get some assurance because the quarterly results of the company have shown that as a public company, Uber has been able to hit its own financial targets.
The quarterly reports also showed that the company incurred higher costs with a 35 per cent increase in the quarter because of heavy spending by the company just before the launch of its IPO earlier this month. The company however also reported an increase of 34 per cent year-on-year in its gross bookings at $14.6 billion. Gross booking brings out the total value of rides before deduction of driver costs and other expenses. There was a 3.4 per cent increase in bookings during the quarter compared to the previous quarter which indicate that the company is facing a challenge in recruiting new riders in saturated markets.
Improvement in take rates and accelerating revenue growth were impressive, said Ygal Arounian, an analyst at Los Angeles-based financial firm Wedbush. “Take rate” is the money that is taken home by Uber after deduction of costs for driver or restaurant payments and any incentives offered.
“We’re still a while away from profitability, but Uber is expecting strong signs of improvement across many of its key metrics and that is an important sign for investors,” he said
The expansion of rides into suburbs of cities in Uber’s home market of US and a generational wave, where in much lesser interest in owning a car is showed by millennials , were the two drivers of growth, Khosrowshahi said.
(Adapted from TheNational.ae)