Between new regulations in a key Canadian market and a reported $1.27 billion USD operating loss during the first half of 2016, Silicon Valley darling and “sharing economy” icon Uber Technologies Inc. may have lost some of its lustre during the past two months.
But if the company’s leaders are worried, they’re not showing it.
“I think what Uber is trying to do is, ‘Hey, look, we’re going to take the losses up front in order to get to disproportionate scale,'” Robert Siegel, a lecturer in management at Stanford’s business school, told Bloomberg Technology in an Aug. 25 story. “The question is when they can get to profitability.”
While not a public company, Uber hosts conference calls for dozens of shareholders every three months. According to Bloomberg, during the company’s Aug. 19 call its head of finance, Gautam Gupta, reportedly told investors that during the first quarter of 2016, Uber lost around $520 million (all subsequent figures USD unless otherwise noted) before interest, taxes, depreciation, and amortization, while losses exceeded $750 million in the second quarter – a total of at least $1.27 billion.
The majority of losses stemmed from subsidies for Uber drivers, Gupta reportedly told investors, though as Bloomberg noted, they’re hardly unprecedented.
In 2015, for example, Uber lost at least $2 billion before interest, taxes, depreciation, and amortization, and despite being valuated at $69 billion, the company has lost at least $4 billion during its seven-year history.
Yet the company’s revenue has grown as well: this year alone, earnings from bookings grew from above $3.8 billion during the first quarter of 2016 to more than $5 billion in the second. During the same period, net revenue grew from around $960 million to around $1.1 billion – a gain of about 18 per cent.
Uber’s losses are also likely to fall during the second half of the year, since the company sold its China division to its leading competitor, Chinese ride-hailing giant Didi Chuxing, for $1 billion and a 17.5 per cent stake in Didi’s business last month. At the time, Bloomberg reported that Uber had lost at least $2 billion during its two years in China – a loss that will reportedly be eliminated after August.
The company is also sitting on substantial reserves, with around $8 billion USD in the bank, plus Didi’s upcoming $1 billion, according to Bloomberg. It also has access to a $2 billion line of credit and a $1.2 billion loan, and is pursuing new markets such as delivery services – in fact, the company recently began seeking car and bike couriers in Toronto.
Meanwhile, the city of Toronto’s new “Private Transportation Company” (PTC) permit system, designed specifically in response to Uber’s descent upon the city, came into effect on July 15. To receive a permit, the PTC – i.e. Uber – is responsible for paying licensing fees of $15 CDN per driver and 30 cents CDN per trip.
An Uber spokesperson declined to comment for Bloomberg Technology’s story, while the company did not respond to ITBusiness.ca’s inquiries at all.