Uber Lost $1.5 Billion in the Third Quarter So Can It Be Profitable?
Can Uber ever be profitable? One thing is clear: The company will have to find a way to ensure its big payouts for legal woes become truly one-time — and not ongoing — expenses.
With so many scandals, it’s easy to lose track of one of the biggest problems over at Uber’s San Francisco offices: figuring out how to make money, or at least lose less of it.
I got my hands on some never-before-published financials and talked to Uber insiders about what to make of them. The blood-letting is jarring. Over just three months this year, the ride-sharing company lost $1.5 billion.
Interested Uber shareholders got an overwhelming packet of information on the deal from NASDAQ Private Market, including Uber’s financials. A few noble employees read me the numbers over the phone.
Here are the numbers you should pay attention to mixed in with some useful financial information that Uber has provided me in the past.
It’s worth noting that in 2015 and 2016, Uber’s net revenue included the total fare for the carpooling service UberPool, inflating the amount of revenue. Uber has since changed its accounting practice based on revised GAAP rules, and only includes its share of the revenue from UberPool.
OK. What to make of all this? Let’s look at the bull case first. Here’s how Uber has pitched investors over the years: Focus on gross bookings. That’s the figure that reflects the total value of fares paid to drivers. It is a massive number and it keeps doubling.
Gross bookings have grown exponentially for years, from $685 million in 2013 to $2.9 billion in 2014 to $8.9 billion in 2015 to $20 billion last year, according to a chart Uber provided in April. Last year, Uber more than doubled at massive scale.
Now look at 2017, Uber has said that its first quarter gross bookings were $7.5 billion. Add that to the gross bookings numbers disclosed to investors and we get to $26 billion over nine months this year. Uber’s fourth quarter is traditionally Uber’s best quarter thanks to holiday travel. If Uber’s fourth quarter grew by half as much as it did last year, it would reach $11 billion. That would translate to $37 billion in gross bookings for the year. Uber would come just short of doubling its gross bookings compared to the previous year.
The bull case is also buoyed by signs that Uber can increase its share of gross bookings, what the company calls its take rate. In the second quarter of this year, Uber’s share of gross bookings came in at 19 percent. In the next quarter, Uber took nearly 21 percent. That increase is good news for Uber’s shareholders and bad news for drivers. Uber has told investors in the past that it thinks that it can sustainably reach a take rate of from 22 percent to 26 percent of gross bookings.
HOWEVER, unless you’re Amazon, eventually you have to make a profit. Enter the bear case.
Uber had previously disclosed to investors and the press a number it refers to as “pro forma adjusted EBIT.” That is, its loss excluding one-time expenses like legal penalties and write-downs. It also excludes interest, taxes and stock-based compensation. According to that way of doing the math, Uber’s loss was only $743 million in the third quarter of this year.
I can see why the company likes that number. The question is whether fines, lawsuit settlements and write-downs are unusual or a perpetual feature of Uber’s business model. I’d recommend re-reading my story on Uber’s legal problems.
As worrying as the depths of Uber’s loss, is its trajectory. Even when you look at the numbers as Uber likes to count them, the company’s loss grew by 15 percent in the third quarter from the previous three months. At the end of the first half of this year, Uber had $6.6 billion cash on hand so it won’t run out anytime soon.
As gross bookings continue to soar, the question remains whether Uber will ever be able to make a profit.