According to the news report by Reuters, San Francisco-based ride hailing company Uber Technologies Inc. reported a loss of $1 billion for the quarter. The company has been investing heavily in building up its freight as well as food delivery businesses. The company also reported that revenues were up 20%.
The company reported that in the quarter it generated revenues of $3.1 billion, which was in the high-end range of its forecast. The $1 billion loss was also within the $1 billion to $1.11 billion range Uber has forecast.
The company had previously stated that it had expected its quarterly revenue to be in the range of $3.04 billion to $3.1 billion, and Wall Street analysts had pegged the revenue at $3.04 billion.
Uber’s shares went up by 2.6% after the earnings conference call, where Chief Executive Officer Dara Khosrowshahi outlined business improvements like lower consumer promotions for the second quarter. However, he also underlined the fact that 2019 was going to be a year of investments.
At this point, Uber’s shares are trading at 10% below its IPO price of $45 per share, and Khosrowshahi will need to convince investors that the company will be able to generate profits, especially since the company is reliant on incentives for riders and faces competition in all its businesses, whether it is its core ride hailing business or its newer food delivery and freight businesses.
On the company’s first earnings call after Uber’s IPO earlier in May, Khosrowshahi told analysts that the company was a global player. He stated that the company’s focus was on growing fast while remaining at scale, and doing so more efficiently for a long period of time.
The fact that the company was able to meet its own financial targets has given some assurance to investors.
Uber’s earnings report also showed that costs increased by 35% for the second quarter, as the company invested heavily in the run-up to its IPO. The good news is that gross bookings, which is the measure of the total value of rides before expenses and driver costs, were at $14.6 billion. Which means the figure went up by 34% as compared to the same time a year ago.
Bookings also grew by 3.4% as compared to the previous quarter, which underlined the challenges in roping in new riders in already saturated markets.
Ygal Arounian, Wedbush analyst, stated that he was encouraged by the increase in take rates and the improvements in revenue growth. The take rate is the revenue that is earned by the company after driver, restaurant and incentive costs are removed.
Arounian stated that while Uber was still some ways away from profitability, the company was showing strong signs of improvement in many of its key metrics. He said this was an important positive indicator for investors.
Incentives paid out to drivers, however, more than doubled as compared to a year ago, and this cost outpaced revenue growth, especially as Uber invested heavily in its food delivery service called Uber Eats. In the Uber Eats unit, while revenues generated went up by 89%, driver incentives also rose by as much as 3 times to $291 million.
Khosrowshahi said that Uber was in the nascent stages of how ride-hailing could assist its Eats division, and that take rates were expected to improve over the course of this year. He stated that Uber had been upselling riders to Eats deals, and the early signs of this initiative were encouraging.
The company also reported that its active user base went up to 93 million across the globe. That figure was at 91 million at the end of the 4th quarter of 2018.