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Uber is still burning cash at a rate of $2 billion a year

The good news in Uber’s second-quarter financials: Revenue totaled $1.75 billion, more than double the figure from a year ago and up 17 percent from the first quarter. The bad news: A $645 million net loss, which declined only 14 percent from the year-ago loss.

The ugly news: Cash on hand fell to $6.6 billion at the end of June, down from $7.2 billion at the end of March. At that rate, Uber is still burning through more than $2 billion a year.

The latest financials, leaked to Axios, suggest that Uber will either need to trim its losses or raise more capital within a few years, or both. The company has already raised nearly $15 billion in equity and debt financing to date.

Uber has endured a tumultuous 2017, starting with a #DeleteUber campaign, followed by a sexual-harassment scandal, the departure of its CEO and other top execs, and a bitter boardroom fight. The company has also reportedly been sued 433 times this year.

In July, Uber executives held a conference call with investors assuring them that bookings were rising and losses were narrowing, but made no mention about cash flows. The steady stream of bad news could make an IPO tough, as well as another private round of financing near its current valuation of $70 billion.

Uber could trim operating costs or raise prices. As Heather Somerville at Reuters pointed out today, the massive subsidies Uber has been using to win market share can’t last forever. Those subsidies mean Uber riders have paid at times 41 cents of an Uber ride’s actual cost. Uber can’t spend on subsidies forever, Somerville said, but when it raises prices it may lose customers to competitors.

“There is going to come a reckoning and they are going to have to raise prices,” Brent Goldfarb, an associate professor at the University of Maryland, told Reuters. “But we know what happens when you raise prices — demand goes down, and perhaps substantially so.”

Uber is facing competition from Lyft and others at home, while in Asia it’s facing pressure from Didi, which has a stake in Uber. In addition to its governance, leadership, and corporate-culture challenges, Uber faces a financial one: How to trim spending while managing growth to justify its valuation.

The longer Uber takes to solve that problem, the more cash it’s likely to keep burning through.

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Source: Microsoft