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Uber’s Losses Grow, But So Do Its Profit Projections

Uber’s losses grew to nearly a billion dollars in the first half of last year, nearly 50% more than its full-year losses in 2014, according to confidential documents issued by the company as part of financing efforts last year. Net revenue in the first half of 2015 was $663 million, the documents showed. (Scroll down to see the documents.)

The rising losses reflect expansion efforts in places like China and India. But the company expects older markets in developed countries to generate billions of dollars in profit in the coming years, according to a person familiar with Uber’s thinking.

The Takeaway
Uber is losing money to gain market share in emerging markets that have fierce incumbents, but overall, it’s increasing the percentage of money it keeps from rider payments. And one projection shows the company could generate $14 billion in profit from developed-world markets during the next four years, as more cities turn cash-flow positive.

The five-year-old ride-sharing company’s finances are being increasingly scrutinized as it takes in new financing at a more than $62 billion private valuation and meets with wealth management firms and others.

Uber lost $671.4 million in 2014 and $987.2 million in the first half of 2015, the documents show. If the company continued on that trajectory through the second half of last year, Uber’s full year loss would have been more than $2.5 billion.

To be sure, Uber isn’t in danger of running out of money. The company has raised more than $6 billion. According to the documents, the company had $4.15 billion in cash and cash equivalents as of June 30, 2015, up from $1.96 billion at the end of 2014.

Uber’s net revenue appeared on track to nearly triple to more than $1.5 billion from $495 million between 2015 and 2014, based on the documents. The increased losses were primarily a result of higher sales and marketing expenses. For instance, net revenue rose 30.8% between the first and second quarters of 2015 while sales and marketing costs doubled to nearly $200 million during the same period.

One positive trend: Uber is keeping a greater percentage of the money it collects from rides. In 2014, the company generated $495.3 million in net revenue, or 16.9% of its $2.9 billion in gross bookings, with much of the rest going to drivers. The first half net revenue amounted to 18.3% of $3.6 billion in gross bookings.

Despite the losses, a person familiar with Uber’s thinking says the company could be profitable overall in its developed-country markets starting this year. Uber’s developed world operations include the U.S., Japan, Australia, Israel, U.K. and other parts of Europe. Dozens of cities in the developed world are already said to be cash-flow positive, with more turning that way this year.

According to one projection seen by The Information, Uber could generate $167 million in earnings before interest and taxes from $4.4 billion in net revenue in those developed markets this year, compared to a loss of $431 million in 2015 on $1.8 billion in net revenue. The projection suggested Uber would generate an $8.2 billion profit in 2019 from $22.7 billion in net revenue. During the next four years, according to the projection, Uber would expect to generate nearly $14 billion in profit in developed markets.

A spokeswoman for Uber declined to comment.

Uber isn’t in danger of running out of money. According to the the documents, the company had $4.15 billion in cash and cash equivalents as of June 30, 2015.

Projections for the developing world couldn’t be obtained. But if the aforementioned figures turn out to be even partially in line with actual results, it would give Uber breathing room to continue pouring funds into Asia and position itself to benefit from future growth in those markets. In China, it faces numerous product, operations and financing challenges in its fight against incumbent Didi Kuaidi there, as we reported in depth today. In India, Uber business chief Emil Michael says the company saw immense gains in market share in 2015 versus incumbent Ola Cabs.

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Amir Efrati is executive editor at The Information, which he helped to launch in 2013. Previously he spent nine years as a reporter at the Wall Street Journal, reporting on white-collar crime and later about technology. He can be reached at [email protected] and is on Twitter @amir