Uber posts $509 mln adjusted loss on driver incentives even as trips rise

Uber Technologies Inc on Wednesday reported widening losses as it spent more to entice drivers to return to its platform, sending shares of the ride-hail and food delivery company down in after-hours trade.

Investors sold the shares despite Uber management's assurances that the company can deliver a sharp turnaround in profitability even as New York and other major cities reimpose some pandemic restrictions.

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

Analysts on average had expected the company to report an adjusted EBITDA loss of around $324.5 million, Refinitiv data showed.

Shares were down 5% in after-hours trading after closing the regular session down 2.2%.

The company also warned investors that uncertainty from the Delta variant of the coronavirus continues to impact visibility into recovery.

But Uber Chief Executive Dara Khosrowshahi told analysts on a conference call that the company's food delivery business provided a hedge against potential ride-hail declines and that July trends support the company's confidence for the second half of the year.

Gross bookings during the second quarter reached an all-time high of nearly $22 billion, with more passengers returning for trips while food delivery orders also increased.

Nevertheless, the earnings call was dominated by questions over driver supply and the ongoing impact of the pandemic.

Investors are worried about the ongoing shortage of drivers in the industry as demand ramps up. Uber's smaller rival, Lyft, on Tuesday said it expected limited driver supply to continue in the next quarter, requiring further investments in driver incentives.

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.

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

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

Uber on Wednesday said monthly active drivers and food delivery workers had increased by nearly 420,000 from February to July. Passenger wait times in major US cities also decreased during that time, the company said.

Uber spent a massive $250 million in driver incentive investment in the second quarter, which increased losses at its ride-hail business. Uber said mobility profitability will expand significantly as US and Canadian driver investments fade, a trend it has witnessed in Australia and other markets.

US driver supply increased by 30% from June to July, even as incentives were reduced.

"We invested early and aggressively and are seeing very positive momentum," Khosrowshahi said.

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

Total costs and expenses in the second quarter jumped by over 57% to $5.12 billion year over year.

Uber also took advantage of unrealized gains in its investments in Chinese ride-hail company Didi Global and self-driving company Aurora to post second-quarter net profit of $1.1 billion.

Uber executives said the company might sell some of those positions after clearing regulatory restrictions if the market offered reasonable values for them.

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 $3.9 billion, beating average analyst estimates of $3.75 billion, 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 $2.25 billion 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.