Uber losses widen as incentives to lure drivers hit revenues

Ride-hailing and food delivery giant Uber Technologies reported widening losses for the second quarter, even as riders returned to its platform in bigger numbers.

Investors are worried about the ongoing shortage of drivers in the ride-hailing industry as demand ramps up [File: Damian Dovarganes/AP]
Investors are worried about the ongoing shortage of drivers in the ride-hailing industry as demand ramps up [File: Damian Dovarganes/AP]

Uber Technologies Inc on Wednesday reported widening losses even as trips and deliveries grew as driver incentives hit revenue at the ride-hail and food-delivery company.

Uber posted an adjusted $509m second-quarter loss before interest, taxes, depreciation and amortisation – a metric that excludes one-time costs, including stock-based compensation – widening losses by nearly $150m from the first quarter.

Uber shares fell 6 percent in after-hours trading after closing the day down 2.2 percent.

Analysts on average had expected the company to report an adjusted earnings before interest, taxes, depreciation, and amortisation (EBITDA) loss of around $324.5m, Refinitiv data showed.

But the company reaffirmed its goal of hitting profitability on an adjusted EBITDA basis at the end of this year and said it would reduce losses to $100m in the third quarter.

Uber said riders returned to its platform in greater numbers in July and it expects the trend to continue in the coming months, together with strong food delivery orders.

That assumes the more contagious Delta variant of the coronavirus does not reverse a gradual reopening of the United States economy, an issue that rival Lyft Inc said on Tuesday it was monitoring.

Uber said in an investor presentation that uncertainty from the Delta variant continues to impact visibility.

But investors are worried about the ongoing shortage of drivers in the industry as demand ramps up. Lyft on Tuesday said it expected limited driver supply to continue in the next quarter.

Uber on Wednesday said monthly active drivers and food delivery workers had increased by 50 percent, or by nearly 420,000 drivers from February to July.

Uber had spent a massive $250m in driver incentive investment in the second quarter, which increased losses at its ride-hail business.

The company had urged drivers to take advantage of the incentives before pay drops to pre-COVID-19 levels as more drivers return to the platform.

Uber’s delivery unit, which includes restaurant delivery service Uber Eats, narrowed losses on a quarterly basis and more than doubled gross bookings from last year.

Overall, the company reported second-quarter revenue of $3.9bn, beating average analyst estimates of $3.75bn, according to IBES data from Refinitiv.

Uber doubled down on Uber Eats, which has been a pandemic winner, by acquiring rival startup Postmates and last-mile alcohol delivery company Drizly.

Uber is also expanding its grocery delivery business, having announced partnerships with Albertsons Companies Inc and Costco Wholesale Corp.

In July, Uber also announced the acquisition of logistics company Transplace for about $2.25bn in a boon to its freight delivery unit, which is now expected to break even on an adjusted EBITDA basis by the end of 2022.

Source: Reuters

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