Uber loses $1 billion in quarter as costs surge for drivers and food delivery

Company faces increased regulation in several countries and disputes with its drivers over wages

The logo for Uber appears above a trading post on the floor of the New York Stock Exchange, Thursday, May 30, 2019.   (AP Photo/Richard Drew)

Ride-hailing firm Uber reported a $1 billion loss, as the ride-hailing service spends heavily to build up its food delivery and freight businesses, in its first quarterly report as a public company.

However, the revenues were up by almost 20 per cent. Revenue of $3.1bn matched the high end of the range Uber forecast for the quarter.

Company's shares rose 2.6 per cent following a conference call with executives in which chief executive Dara Khosrowshahi cited business improvements, such as fewer consumer promotions in the second quarter, but called 2019 an "investment year".

With its share price trading more than 10 per cent below its initial public offering price of $45, Mr Khosrowshahi will have to convince investors Uber can turn a profit, given its reliance on rider incentives and competition in all parts of its business, from its core business of ride hailing to food delivery to freight.

“Our story is simple. We're the global player,” Mr Khosrowshahi told analysts on his first earnings call after the company's IPO earlier this month. “Our job is to grow fast at scale and more efficiently for a long, long time.”

The results indicate the newly public company was able to hit its own financial targets, which is likely to offer some assurance to investors.

Costs went up 35 per cent in the quarter, as the company spent heavily in the run-up to its IPO earlier this month. Gross bookings, a measure of total value of rides before driver costs and other expenses, rose 34 per cent from a year ago to $14.6bn. Bookings were up 3.4 per cent from the previous quarter, showing the difficulty of recruiting new riders in saturated markets.

Ygal Arounian, an analyst at Los Angeles-based financial firm Wedbush, said he was encouraged by improvements in take rates and accelerating revenue growth. Uber's "take rate" is the revenue pocketed by the company after subtracting driver or restaurant pay and incentives.

"We're still a while away from profitability, but Uber is expecting strong signs of improvement across many of its key metrics and that is an important sign for investors," he said

Uber was the biggest of a group of Silicon Valley startups that have gone public this year against the backdrop of a global stock market sell-off sparked by renewed trade tensions between the US and China. Uber also faces increased regulation in several countries and disputes with its drivers over wages.

In the mature US market, where Uber's main rival is Lyft, Mr Khosrowshahi said two levers for growth were the expansion of rides into suburbs and a generational wave, in which millennials show little interest in car ownership.

Overall, incentives paid to drivers more than doubled from a year earlier, outpacing revenue growth, as the company invested in its growing food delivery service, Uber Eats. In that unit, driver incentives tripled to $291 million.