A tablet sits on display at the Uber Technologies Inc. office in Singapore. (Photographer: Huiying Ore/Bloomberg)

Uber Shows a Quarterly Profit, Sort of, Thanks to Grab Deal

(Bloomberg) -- Uber Technologies Inc., after years of historic losses, is laughing to itself this quarter. It turned a $2.5 billion profit during the first three months of this year -- technically.

The company recorded a profit on paper, after accounting for the value of selling its Southeast Asian business to Grab and its Russian business to Yandex. But it’s a different story without those windfalls. Uber had a loss of $312 million before interest, taxes and other expenses in the quarter, cutting those losses in half compared to the first three months of 2017, according to financials provided by Uber. That’s a marked improvement for a company that’s burned through more than $10 billion.

Still, Uber doesn’t expect those losses to go away. Even though Chief Executive Officer Dara Khosrowshahi preached responsibility when he took over in September, he’s grown convinced that Uber needs to invest in new areas of growth, spending on food delivery, autonomous vehicle research and electric bikes. Uber is taking a page from Amazon’s book: money-making businesses like ride-hailing can fund promising but decidedly unprofitable ones like designing flying cars.

“Cars are to us what books are to Amazon,” Khosrowshahi said at a Goldman Sachs conference in February.

The company reported that net revenue, after accounting for payments to drivers, grew 70 percent year-over-year to $2.6 billion. But gross bookings, the total value of the fares drivers bring in, only grew by 55 percent to $11.3 billion. That means Uber is taking more of the total bookings for itself, suggesting that a smaller portion of the pie is going to drivers.

Uber also announced on Wednesday that investment firms Coatue Management, Altimeter and TPG plan to purchase between $400 million and $600 million in Uber stock from existing shareholders. The deal values Uber at $62 billion. The transaction is meant to allow current Uber employees to sell some shares if they want to. Uber is aiming for a public offering next year. If it fails to do so, some of its investors could be free to sell their shares on the private market.

“We are off to a terrific start in 2018,” Khosrowshahi said in a statement, noting that the growth of Uber’s rides business was exceeding internal expectations. "Given the size of the opportunity ahead of us and our goal of making Uber a true mobility platform, we plan to reinvest any over-performance even more aggressively this year, both in our core business as well as in big bets like Uber Eats globally."

Uber is a private company, and so is not required to disclose performance metrics, but after years of leaked financials it has begun disclosing the numbers to reporters. For the second time, Uber has made retroactive adjustments to its financials -- though the impact of those changes is relatively minor, based on documents provided by the company.

Uber is still searching for a chief financial officer after talks with VMware Inc.’s Zane Rowe stalled, a person familiar with the matter said. The company has several empty board seats and is looking for a chair.

According to the release, Uber has $6.3 billion in cash, not including a $1.5 billion term loan that Uber inked in March. Uber valued the paper gain from selling its Russian and Southeast Asian businesses in exchange for stock in local companies at $2.9 billion.

Going forward, Uber is focused on India and the Middle East where it faces local competitors. Executives insist that its days of selling its overseas businesses to local rivals are over, and the company is doubling down in those markets. Meanwhile, Didi Chuxing, the Chinese company that Uber sold its business to in 2016, is now competing with Uber directly in Mexico and has quietly entered Uber-dominated Australia.

©2018 Bloomberg L.P.

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