Uber Lost $1 Billion in Q1 2019

May 30, 2019
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Uber Technologies Inc. reports their earnings for Q1 2019 before their IPO.

Increase Market Share At All Costs

This is the second look the public has had at Uber (NYSE:UBER), the first being the S-1 filing before their initial public offering. When reviewing the quarterly earnings and the S-1 filing, they were conservative with their revenues when initially filing their IPO as their earnings were at the high end of the estimates.

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Overall the company had a 34% increase in bookings and a 33% increase in monthly platform users. Uber has made it clear they are currently in expansion and looking to gain as much market share as possible even while sacrificing short term profits. This is clear from their “Uber rewards” system that works to give riders a discount if they use the platform more, discouraging alternatives such as Lyft (NASDAQ:LYFT) and for drivers they launched Uber Pro. Their operating income was also indicative of their strategy; the company gained 34% more users but lost $869 million on $3.1 billion in revenue (and $14.65 billion in bookings) from its core platform compared to the loss of $280 million in 2018. Additional losses of $132 million stemmed from other divisions.

Other highlights provided by the company are below:

• Improved restaurant selection helps to drive Uber Eats growth: After successfully growing restaurant partners to 220,000 in 2018, the launch of restaurant self-sign up to become an Uber Eats partner has continued to grow independent and small chain restaurant selection. We also continue to expand large chain partnerships, including with Starbucks in seven large US cities and international pilot cities. Our “aggregator” delivery model (restaurants using their own couriers) has been launched in select markets and well-received by restaurant partners of all sizes.
• Uber Freight tackles opportunity with disruptive technology: In a little over a year and a half since launch, our logistics on-demand team has contracted with over 36,000 carriers with more than 400,000 drivers and have served over 1,000 shippers, including global enterprises such as Anheuser-Busch InBev, Niagara, Land O’Lakes, and Colgate-Palmolive.
• New Mobility (NeMo) launches new JUMP bike hardware and Transit, in app public transportation options: We launched a new JUMP eBike in January 2019, featuring next generation hardware that improved connectivity, is more durable, and has a swappable battery. We also launched our first public transit product in partnership with the City of Denver in the United States.
• Advanced Technologies Group (ATG) receives investment: Toyota, DENSO, and SoftBank Vision Fund agreed to invest an aggregate of $1 billion in our ATG business. This investment and expanded commercial partnership will further deepen the ATG-Toyota collaboration on next-generation autonomous vehicles. We currently expect the investment to close in July 2019.
• Announced the acquisition of Careem: We reached an agreement to acquire Careem, a ridesharing, meal delivery, and payments company operating in the Middle East, North Africa and Pakistan, for $3.1 billion, consisting of $1.4 billion in cash and $1.7 billion in unsecured convertible notes. The acquisition of Careem is subject to applicable regulatory approvals and expected to close in January 2020. Following closing, Careem will become a wholly-owned subsidiary of Uber, operating as an independent company under the Careem brand and led by Careem’s current CEO and co-founder.
• Balance sheet strengthened: In May 2019, we raised net proceeds, after deducting underwriting discounts and commissions and offering expenses, of approximately $8.0 billion in our initial public offering. Separately, we received a $500 million private placement investment from PayPal and continue to work with the company to drive digital payment efficiencies.

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Is Uber's Price War with Lyft Ending?

Lyft also cited massive losses on the quarter as well, but as MarketWatch has reported, they believe the price war between the companies in the United States may be coming to an end. Uber also invests in self-driving vehicles in the Advanced Technologies Group, which partners with other companies including Toyota (TYO:7203) in what will be an arms race in the automobile industry to get self-driving vehicles approved to lower platform costs for the companies.

Investors were eager to buy Uber stock around their IPO, but in the short run so far the stock has been trading below their IPO price of $45, currently around $41 at the time of writing. The company does not have a timeline for profit and instead is focusing on market share and technology development, which they intend to use to lower costs over time while maintaining market leadership. Q2 2019 results will be the first quarter the company is publicly traded and will change their balance sheet substantially. We’ll continue to cover major developments about the company.

 

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