UBER TECHNOLOGIES, INC, 10-Q filed on 8/9/2019
Quarterly Report
v3.19.2
Cover - shares
6 Months Ended
Jun. 30, 2019
Jul. 30, 2019
Cover page.    
Document Type 10-Q  
Document Quarterly Report true  
Document Period End Date Jun. 30, 2019  
Document Transition Report false  
Entity File Number 001-38902  
Entity Registrant Name UBER TECHNOLOGIES, INC.  
Entity Incorporation, State or Country Code DE  
Entity Tax Identification Number 45-2647441  
Entity Address, Address Line One 1455 Market Street, 4th Floor  
Entity Address, City or Town San Francisco  
Entity Address, State or Province CA  
Entity Address, Postal Zip Code 94103  
City Area Code 415  
Local Phone Number 612-8582  
Title of each class Common Stock, par value $0.00001 per share  
Trading Symbol UBER  
Security Exchange Name NYSE  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Non-accelerated Filer  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   1,700,003,601
Entity Central Index Key 0001543151  
Amendment Flag false  
Current Fiscal Year End Date --12-31  
Document Fiscal Year Focus 2019  
Document Fiscal Period Focus Q2  
v3.19.2
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($)
$ in Millions
Jun. 30, 2019
Dec. 31, 2018
Assets    
Cash and cash equivalents $ 11,744 $ 6,406
Restricted cash and cash equivalents 137 67
Accounts receivable, net of allowance of $34 and $39, respectively 1,290 919
Prepaid expenses and other current assets 1,129 860
Assets held for sale 0 406
Total current assets 14,300 8,658
Restricted cash and cash equivalents 1,809 1,736
Investments 10,415 10,355
Equity method investments 1,370 1,312
Property and equipment, net 1,447 1,641
Operating lease right-of-use assets 1,337  
Intangible assets, net 78 82
Goodwill 167 153
Other assets 57 51
Total assets 30,980 23,988
Liabilities, mezzanine equity and stockholders’ equity (deficit)    
Accounts payable 167 150
Short-term insurance reserves 977 941
Operating lease liabilities, current 180  
Accrued and other current liabilities 4,246 3,157
Liabilities held for sale 0 11
Total current liabilities 5,570 4,259
Long-term insurance reserves 2,217 1,996
Long-term debt, net of current portion 4,526 6,869
Operating lease liabilities, non-current 1,274  
Other long-term liabilities 1,485 4,072
Total liabilities 15,072 17,196
Commitments and contingencies (Note 14)
Mezzanine equity    
Redeemable non-controlling interest (14) 0
Redeemable convertible preferred stock, $0.00001 par value, 946,246 and zero shares authorized, 903,607 and zero shares issued and outstanding, respectively; aggregate liquidation preference of $14 and $0, respectively 0 14,177
Stockholders’ equity (deficit)    
Common stock, $0.00001 par value, 2,696,114 and 5,000,000 shares authorized, 457,189 and 1,697,614 shares issued and outstanding, respectively 0 0
Additional paid-in capital 30,193 668
Accumulated other comprehensive loss (167) (188)
Accumulated deficit (14,104) (7,865)
Total stockholders’ equity (deficit) 15,922 (7,385)
Total liabilities, mezzanine equity, and stockholders’ equity (deficit) $ 30,980 $ 23,988
v3.19.2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($)
$ in Millions
Jun. 30, 2019
Dec. 31, 2018
Statement of Financial Position [Abstract]    
Allowance for accounts receivable $ 39 $ 34
Par value (in dollars per share) $ 0.00001 $ 0.00001
Preferred share authorized (in shares) 0 946,246,000
Preferred shares issued (in shares) 0 903,607,000
Preferred shares outstanding (in shares) 0 903,607,000
Aggregate liquidation preference $ 0 $ 14
Common stock par value (in dollars per share) $ 0.00001 $ 0.00001
Common stock shares authorized (in shares) 5,000,000,000 2,696,114,000
Common stock shares issued (in shares) 1,697,614,000 457,189,000
Common stock shares outstanding (in shares) 1,697,614,000 457,189,000
v3.19.2
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($)
shares in Thousands, $ in Millions
3 Months Ended 6 Months Ended
Jun. 30, 2019
Jun. 30, 2018
Jun. 30, 2019
Jun. 30, 2018
Income Statement [Abstract]        
Revenue $ 3,166 $ 2,768 $ 6,265 $ 5,352
Costs and expenses        
Cost of revenue, exclusive of depreciation and amortization shown separately below 1,740 1,342 3,421 2,498
Operations and support 864 349 1,298 721
Sales and marketing 1,222 715 2,262 1,392
Research and development 3,064 365 3,473 705
General and administrative 1,638 638 2,061 1,067
Depreciation and amortization 123 98 269 186
Total costs and expenses 8,651 3,507 12,784 6,569
Loss from operations (5,485) (739) (6,519) (1,217)
Interest expense (151) (160) (368) (292)
Other income (expense), net 398 63 658 5,000
Income (loss) before income taxes and loss from equity method investment (5,238) (836) (6,229) 3,491
Provision for (benefit from) income taxes (2) 28 17 604
Loss from equity method investment, net of tax (10) (14) (16) (17)
Net income (loss) including redeemable non-controlling interest (5,246) (878) (6,262) 2,870
Less: net loss attributable to redeemable non-controlling interest, net of tax (10) 0 (14) 0
Net income (loss) attributable to Uber Technologies, Inc. $ (5,236) $ (878) $ (6,248) $ 2,870
Net income (loss) per share attributable to Uber Technologies, Inc. common stockholders:        
Basic (in dollars per share) $ (4.72) $ (1.99) $ (7.97) $ 1.33
Diluted (in dollars per share) $ (4.72) $ (2.01) $ (7.98) $ 1.20
Weighted-average shares used to compute net income (loss) per share attributable to common stockholders:        
Basic (in shares) 1,110,704 440,958 783,900 439,022
Diluted (in shares) 1,110,704 441,408 783,982 476,394
v3.19.2
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($)
$ in Millions
3 Months Ended 6 Months Ended
Jun. 30, 2019
Jun. 30, 2018
Jun. 30, 2019
Jun. 30, 2018
Statement of Comprehensive Income [Abstract]        
Net income (loss) including redeemable non-controlling interest $ (5,246) $ (878) $ (6,262) $ 2,870
Other comprehensive income (loss), net of tax:        
Change in foreign currency translation adjustment 71 (58) 17 (65)
Change in unrealized gain (loss) on investments in available-for-sale securities 8 39 4 39
Other comprehensive income (loss), net of tax 79 (19) 21 (26)
Comprehensive income (loss) including redeemable non-controlling interest (5,167) (897) (6,241) 2,844
Less: Comprehensive loss attributable to redeemable non-controlling interest (10) 0 (14) 0
Comprehensive income (loss) attributable to Uber Technologies, Inc. $ (5,157) $ (897) $ (6,227) $ 2,844
v3.19.2
CONDENSED CONSOLIDATED STATEMENTS OF MEZZANIE EQUITY AND STOCKHOLDERS' EQUITY (DEFICIT) - USD ($)
shares in Thousands, $ in Millions
Total
Series G Redeemable Convertible Preferred Stock
Redeemable Non-Controlling Interest
Redeemable Convertible Preferred Stock
Redeemable Convertible Preferred Stock
Series G Redeemable Convertible Preferred Stock
Common Stock
Additional Paid-In Capital
Additional Paid-In Capital
Series G Redeemable Convertible Preferred Stock
Accumulated Other Comprehensive Loss
Accumulated Deficit
Mezzanine Equity, Amount at Dec. 31, 2017     $ 0 $ 12,210            
Mezzanine Equity, Shares at Dec. 31, 2017       863,305            
Increase (Decrease) in Temporary Equity [Roll Forward]                    
Issuance of Series G redeemable convertible preferred stock, net of issuance costs       $ 1,500            
Issuance of Series G redeemable convertible preferred stock, net of issuance costs (in shares)       30,755            
Mezzanine Equity, Amount at Mar. 31, 2018     0 $ 13,710            
Mezzanine Equity, Shares at Mar. 31, 2018       894,060            
Stockholders' equity, beginning balance at Dec. 31, 2017 $ (8,557)         $ 0 $ 320   $ (3) $ (8,874)
Shares, outstanding at Dec. 31, 2017           443,394        
Increase (Decrease) in Stockholders' Equity [Roll Forward]                    
Exercise of common stock warrants 1         $ 0 1      
Exercise of common stock warrants (in shares)           31        
Repurchase of outstanding shares 5         $ 0       5
Repurchase of outstanding stock (in shares)           (1,707)        
Issuance of common stock from stock option exercise and restricted stock awards 15         $ 0 15      
Issuance of common stock from stock option exercise and restricted stock awards (in shares)           7,689        
Repurchase of unvested early-exercised stock options 0         $ 0        
Repurchase of unvested early-exercised stock options (in shares)           (1)        
Reclassification of early-exercised stock options from liability, net 1           1      
Stock-based compensation 17           17      
Issuance and repayment of employee loans collateralized by outstanding common stock (1)                 (1)
Issuance of common stock as consideration for investment and acquisition 52         $ 0 52      
Issuance of common stock as consideration for investment and acquisition (in shares)           1,528        
Foreign currency translation adjustment (7)               (7)  
Net income (loss) 3,748                 3,748
Stockholders' equity, ending balance at Mar. 31, 2018 (4,726)         $ 0 406   (10) (5,122)
Shares, outstanding at Mar. 31, 2018           450,934        
Mezzanine Equity, Amount at Dec. 31, 2017     0 $ 12,210            
Mezzanine Equity, Shares at Dec. 31, 2017       863,305            
Mezzanine Equity, Amount at Jun. 30, 2018     0 $ 13,673            
Mezzanine Equity, Shares at Jun. 30, 2018       893,301            
Stockholders' equity, beginning balance at Dec. 31, 2017 (8,557)         $ 0 320   (3) (8,874)
Shares, outstanding at Dec. 31, 2017           443,394        
Increase (Decrease) in Stockholders' Equity [Roll Forward]                    
Unrealized gain (loss) on available-for-sale securities 39                  
Foreign currency translation adjustment (65)                  
Net income (loss) 2,870                  
Stockholders' equity, ending balance at Jun. 30, 2018 (5,508)         $ 0 514   (29) (5,993)
Shares, outstanding at Jun. 30, 2018           453,252        
Mezzanine Equity, Amount at Mar. 31, 2018     0 $ 13,710            
Mezzanine Equity, Shares at Mar. 31, 2018       894,060            
Mezzanine Equity, Amount at Jun. 30, 2018     0 $ 13,673            
Mezzanine Equity, Shares at Jun. 30, 2018       893,301            
Stockholders' equity, beginning balance at Mar. 31, 2018 (4,726)         $ 0 406   (10) (5,122)
Shares, outstanding at Mar. 31, 2018           450,934        
Increase (Decrease) in Stockholders' Equity [Roll Forward]                    
Repurchase of outstanding shares 7 $ 4   $ 0 $ (37) $ 0   $ 4   7
Repurchase of outstanding stock (in shares)       (5) (754) (287)        
Exercise of stock options 0         $ 0        
Exercise of stock options (in shares)           129        
Repurchase of unvested early-exercised stock options 0         $ 0        
Repurchase of unvested early-exercised stock options (in shares)           (129)        
Reclassification of early-exercised stock options from liability, net 1           1      
Stock-based compensation 11           11      
Issuance and repayment of employee loans collateralized by outstanding common stock (1)           (1)      
Unrealized gain (loss) on available-for-sale securities 39               39  
Issuance of common stock as consideration for investment and acquisition 93         $ 0 93      
Issuance of common stock as consideration for investment and acquisition (in shares)           2,605        
Foreign currency translation adjustment (58)               (58)  
Net income (loss) (878)                 (878)
Stockholders' equity, ending balance at Jun. 30, 2018 $ (5,508)         $ 0 514   (29) (5,993)
Shares, outstanding at Jun. 30, 2018           453,252        
Mezzanine Equity, Amount at Dec. 31, 2018     0 $ 14,177            
Mezzanine Equity, Shares at Dec. 31, 2018 903,607     903,607            
Increase (Decrease) in Temporary Equity [Roll Forward]                    
Mezzanine equity, net loss     (4)              
Mezzanine Equity, Amount at Mar. 31, 2019     (4) $ 14,224            
Mezzanine Equity, Shares at Mar. 31, 2019       904,530            
Stockholders' equity, beginning balance at Dec. 31, 2018 $ (7,385)         $ 0 668   (188) (7,865)
Shares, outstanding at Dec. 31, 2018 457,189         457,189        
Increase (Decrease) in Stockholders' Equity [Roll Forward]                    
Exercise of common stock warrants       $ 45            
Exercise of common stock warrants (in shares)       923            
Lapsing of repurchase option related to Series E redeemable convertible preferred stock issued to a non-employee service provider       $ 2            
Lapsing of repurchase option related to Series E redeemable convertible preferred stock issued to a non-employee service provider (in shares)       0            
Repurchase of outstanding shares $ 0         $ 0        
Repurchase of outstanding stock (in shares)           (1)        
Exercise of stock options 4         $ 0 4      
Exercise of stock options (in shares)           677        
Repurchase of unvested early-exercised stock options 0         $ 0        
Repurchase of unvested early-exercised stock options (in shares)           (32)        
Stock-based compensation 10           10      
Unrealized gain (loss) on available-for-sale securities (4)               (4)  
Foreign currency translation adjustment (54)               (54)  
Net income (loss) (1,012)                 (1,012)
Stockholders' equity, ending balance at Mar. 31, 2019 $ (8,432)         $ 0 682   (246) (8,868)
Shares, outstanding at Mar. 31, 2019           457,833        
Mezzanine Equity, Amount at Dec. 31, 2018     0 $ 14,177            
Mezzanine Equity, Shares at Dec. 31, 2018 903,607     903,607            
Mezzanine Equity, Amount at Jun. 30, 2019     (14) $ 0            
Mezzanine Equity, Shares at Jun. 30, 2019 0     0            
Stockholders' equity, beginning balance at Dec. 31, 2018 $ (7,385)         $ 0 668   (188) (7,865)
Shares, outstanding at Dec. 31, 2018 457,189         457,189        
Increase (Decrease) in Stockholders' Equity [Roll Forward]                    
Unrealized gain (loss) on available-for-sale securities $ 4                  
Foreign currency translation adjustment 17                  
Net income (loss) (6,248)                  
Stockholders' equity, ending balance at Jun. 30, 2019 $ 15,922         $ 0 30,193   (167) (14,104)
Shares, outstanding at Jun. 30, 2019 1,697,614         1,697,614        
Mezzanine Equity, Amount at Mar. 31, 2019     (4) $ 14,224            
Mezzanine Equity, Shares at Mar. 31, 2019       904,530            
Increase (Decrease) in Temporary Equity [Roll Forward]                    
Mezzanine equity, net loss     (10)              
Mezzanine Equity, Amount at Jun. 30, 2019     $ (14) $ 0            
Mezzanine Equity, Shares at Jun. 30, 2019 0     0            
Stockholders' equity, beginning balance at Mar. 31, 2019 $ (8,432)         $ 0 682   (246) (8,868)
Shares, outstanding at Mar. 31, 2019           457,833        
Increase (Decrease) in Stockholders' Equity [Roll Forward]                    
Lapsing of repurchase option related to Series E redeemable convertible preferred stock issued to a non-employee service provider 3           3      
Conversion of warrant to common stock in connection with initial public offering (in shares)           150        
Conversion of warrant to common stock in connection with initial public offering 6         $ 0 6      
Conversion of convertible notes to common stock in connection with initial public offering 4,229         0 4,229      
Exercise of stock options 1         $ 0 1      
Exercise of stock options (in shares)           501        
Stock-based compensation 3,943           3,943      
Unrealized gain (loss) on available-for-sale securities 8               8  
Foreign currency translation adjustment 71               71  
Issuance of common stock in connection with initial public offering, net of offering costs 7,973         $ 0 7,973      
Issuance of common stock in connection with initial public offering, net of offering cost (in shares)           180,000        
Conversion of redeemable convertible preferred stock to common stock in connection with initial public offering 14,224     $ (14,224)   $ 0 14,224      
Conversion of redeemable convertible preferred stock to common stock in connection with initial public offering (in shares)       (904,530)   904,530        
Issuance of common stock related to private placement 500         $ 0 500      
Issuance of common stock related to private placement (in shares)           11,111        
Issuance of common stock for settlement of RSUs 0         $ 0        
Issuance of common stock for settlement of restricted stock units (RSUs) (in shares)           80,015        
Shares withheld related to net share settlement (1,368)         $ 0 (1,368)      
Shares withheld related to net share settlement (in shares)           (30,504)        
Net income (loss) (5,236)                 (5,236)
Stockholders' equity, ending balance at Jun. 30, 2019 $ 15,922         $ 0 $ 30,193   $ (167) $ (14,104)
Shares, outstanding at Jun. 30, 2019 1,697,614         1,697,614        
v3.19.2
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)
$ in Millions
6 Months Ended
Jun. 30, 2019
Jun. 30, 2018
Cash flows from operating activities    
Net income (loss) including redeemable non-controlling interest $ (6,262) $ 2,870
Adjustments to reconcile net income (loss) to net cash used in operating activities:    
Depreciation and amortization 269 186
Bad debt expense 67 22
Stock-based compensation 3,952 81
Gain on extinguishment of convertible notes and settlement of derivative (444) 0
Gain on business divestitures 0 (3,201)
Deferred income tax (31) 470
Revaluation of derivative liabilities (58) 402
Accretion of discount on long-term debt 78 149
Payment-in-kind interest 10 35
Loss on disposal of property and equipment 13 37
Impairment on long-lived assets held for sale 0 79
Loss from equity method investment 16 17
Gain on debt and equity securities, net (14) (1,984)
Non-cash deferred revenue (26) 0
Gain on forfeiture of unvested warrants and related share repurchases 0 (152)
Unrealized foreign currency transactions (5) 48
Other (1) 6
Change in operating assets and liabilities, net of impact of business acquisitions and disposals:    
Accounts receivable (436) (21)
Prepaid expenses and other assets (178) (312)
Accounts payable 9 (52)
Accrued insurance reserve 257 516
Accrued expenses and other liabilities 1,140 354
Net cash used in operating activities (1,644) (450)
Cash flows from investing activities    
Proceeds from insurance reimbursement, sale and disposal of property and equipment 41 230
Purchase of property and equipment (277) (209)
Purchase of equity method investments 0 (423)
Proceeds from business disposal, net of cash divested 293 0
Acquisition of businesses, net of cash acquired (7) (64)
Net cash provided by (used in) investing activities 50 (466)
Cash flows from financing activities    
Proceeds from issuance of common stock upon initial public offering, net of offering costs 7,977 0
Taxes paid related to net share settlement of equity awards (1,368) 0
Proceeds from issuance of common stock related to private placement 500 0
Proceeds from exercise of stock options, net of repurchases 5 15
Repurchase of outstanding shares 0 (9)
Issuance of term loan and senior notes, net of issuance costs 0 1,478
Principal repayment on term loan (13) (6)
Principal repayment on revolving lines of credit 0 (197)
Principal payments on capital and finance leases   (34)
Principal payments on capital and finance leases (72)  
Proceeds from issuance of redeemable convertible preferred stock, net of issuance costs 0 1,250
Dissolution of joint venture and subsequent proceeds 0 38
Other 0 (59)
Net cash provided by financing activities 7,029 2,476
Effect of exchange rate changes on cash and cash equivalents, and restricted cash and cash equivalents 12 (102)
Net increase in cash and cash equivalents, and restricted cash and cash equivalents 5,447 1,458
Cash and cash equivalents, and restricted cash and cash equivalents    
Reclassification from (to) assets held for sale during the period 34 (6)
End of period, excluding cash classified within assets held for sale 13,690 7,280
Reconciliation of cash and cash equivalents, and restricted cash and cash equivalents to the condensed consolidated balance sheets    
Cash and cash equivalents 11,744 5,647
Restricted cash and cash equivalents-current 137 118
Restricted cash and cash equivalents-non-current 1,809 1,515
Total cash and cash equivalents, and restricted cash and cash equivalents 13,690 7,280
Cash paid for:    
Interest, net of amount capitalized 166 43
Income taxes, net of refunds 80 161
Non-cash investing and financing activities:    
Conversion of redeemable convertible preferred stock to common stock upon initial public offering 14,224 0
Conversion of convertible notes to common stock upon initial public offering 4,229 0
Changes in purchases of property, equipment and software recorded in accounts payable and accrued liabilities 5 (12)
Financed construction projects 0 86
Capital and finance lease obligations 150 60
Settlement of litigation through issuance of redeemable convertible preferred stock 0 250
Common stock issued in connection with acquisitions 0 93
Ownership interest in MLU B.V. received in connection with the disposition of Uber Russia/CIS operations 0 1,410
Grab debt security received in exchange for the sale of Southeast Asia operations $ 0 $ 2,275
v3.19.2
Basis of Presentation and Summary of Significant Accounting Policies
6 Months Ended
Jun. 30, 2019
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Basis of Presentation and Summary of Significant Accounting Policies
Note 1 - Basis of Presentation and Summary of Significant Accounting Policies
Description of Business
Uber Technologies, Inc. (“Uber” or “the Company”) was incorporated in Delaware in July 2010, and is headquartered in San Francisco, California. The Company is a technology company that is powering movement in countries around the world, principally in the United States (U.S.) and Canada, Latin America, Europe, the Middle East, and Asia (excluding China and Southeast Asia).
The Company’s principal activities are to develop and support proprietary technology applications (“platform(s)”) that enable independent providers of ridesharing services (“Driver Partner(s)”), Eats meal preparation services (“Restaurant Partner(s)”) and Eats meal delivery services (“Delivery Partner(s)”), collectively the Company’s “Partners,” to transact with “Rider(s)” (for ridesharing services) and “Eater(s)” (for meal preparation and delivery services), collectively defined as “end-user” or “end-users.”
Driver Partners provide ridesharing services to Riders through a range of offerings based on vehicle type and/or the number of Riders. Restaurant Partners and Delivery Partners provide meal preparation and delivery services, respectively, to Eaters.
In addition, the Company also provides freight transportation services to shippers within the freight industry and leases vehicles to third-parties that may use the vehicles to provide ridesharing or Eats services through the Platforms. Refer to Note 2 - Revenue for further information.
The Company has organized its operations into two operating and reportable segments: Core Platform and Other Bets. Core Platform primarily includes the ridesharing and Uber Eats products; while Other Bets primarily includes the Company’s Freight and New Mobility products. In June 2019, the Company announced a number of leadership and organizational changes. The Company is currently evaluating the impact to its operating and reportable segments based on how the businesses will be managed subsequent to the changes. These organizational changes will be effective in the third quarter of 2019. Refer to Note 13 - Segment Information and Geographic Information for further information.
Initial Public Offering
On May 14, 2019, the Company closed its initial public offering (“IPO”), in which it issued and sold 180 million shares of its common stock. The price was $45.00 per share. The Company received net proceeds of approximately $8.0 billion from the IPO after deducting underwriting discounts and commissions of $106 million and offering expenses. Upon closing of the IPO: i) all shares of the Company’s outstanding redeemable convertible preferred stock automatically converted into 905 million shares of common stock; ii) holders of the 2021 Convertible Notes and the 2022 Convertible Notes elected to convert all outstanding notes into 94 million shares of common stock; and, iii) an outstanding warrant which became exercisable upon the closing of the IPO was exercised to purchase 0.2 million shares of common stock. In addition, the Company recognized a net gain of $327 million in other income (expense), net in the condensed consolidated statement of operations upon conversion of the 2021 Convertible Notes and the 2022 Convertible Notes during the second quarter of 2019, which consisted of $444 million gain on extinguishment of debt and settlement of derivatives, partially offset by $117 million loss from the change in fair value of embedded derivatives prior to settlement. The extinguishment of debt resulted in the derecognition of the carrying value of the debt balance and settlement of embedded derivatives.
Upon the Company’s IPO, the Company recognized $3.6 billion of stock-based compensation expense. Upon the IPO, shares were issued to satisfy the vesting of restricted stock units (“RSUs”) with a performance condition. To meet the related tax withholding requirements, the Company withheld 29 million of the 76 million shares of common stock issued. Based on the IPO public offering price of $45.00 per share, the tax withholding obligation was $1.3 billion.
As a result of stock-based compensation expense for vested and unvested RSUs upon the IPO, the Company recorded an additional deferred tax asset of approximately $1.1 billion that is offset by a full valuation allowance. Due to the valuation allowance, no income tax benefit was recognized in income during the three months ended June 30, 2019.
ATG Investment
In April 2019, the Company entered into a preferred unit purchase agreement with affiliates of SoftBank Vision Fund (“SoftBank”), Toyota Motor Corporation (“Toyota”), and DENSO Corporation (“DENSO” and together with SoftBank and Toyota, the “ATG Investors”). Pursuant to the preferred unit purchase agreement, the ATG Investors agreed to invest an aggregate of $1.0 billion in a newly formed corporate parent entity for the Company’s Advanced Technologies Group (“ATG”) in exchange for preferred units of ATG collectively representing approximately a 14% ownership interest in ATG on a fully diluted basis. The Company agreed to contribute certain of its subsidiaries and all assets and liabilities primarily related to its autonomous vehicle technologies, (excluding liabilities arising from certain indemnification obligations related to the Levandowski arbitration and any remediation costs associated with certain obligations that may arise as a result of the Waymo settlement), in exchange for common units of ATG representing approximately an 86% ownership interest in ATG on a fully diluted basis. The preferred units held by each of the ATG Investors will receive an annual dividend of 4.5%, which will be payable in cash or accrete to the holder of preferred units, at ATG’s election. The Company and Softbank also agreed to put and call obligations with respect to SoftBank’s preferred units (priced at the greater of (i)
cost plus any accrued and unpaid dividends and (ii) the then fair market value of the preferred units) if ATG has not gone public or been sold as of the seventh anniversary of the closing of the transaction. If the Company is a publicly traded company as of the seventh anniversary of the closing of transaction, the Company has the option to satisfy all, or a portion of, its put and call obligations with shares of its common stock and any remainder will be satisfied in cash. If the Committee on Foreign Investment in the United States blocks or unwinds the ATG Collaboration Agreement (described below) or requires mitigation measures that materially and adversely affect the strategic benefits of the ATG Collaboration Agreement, the ATG Investors will each have the right to require ATG to redeem some or all of its preferred units at a price equal to its respective initial investment amount, which redemption(s) may be satisfied in cash or in exchange for shares of the Company’s common stock if a cash redemption would have a material and adverse impact on ATG.
In addition to the unit purchase agreement, the Company has entered into a joint collaboration agreement with Toyota, DENSO, and ATG with respect to next-generation self-driving hardware and the development of self-driving vehicles leveraging technology from each of the parties (the “ATG Collaboration Agreement”), which became effective as of the closing of the transaction. Pursuant to the ATG Collaboration Agreement, ATG and Toyota will agree on development plans, and thereafter Toyota will contribute to ATG up to an aggregate of $300 million in cash over six semi-annual installments to fund the ongoing activities contemplated under the ATG Collaboration Agreement.
On July 2, 2019, the investment by the ATG Investors in ATG was consummated. Softbank and Toyota are existing investors in the Company.
Pending Acquisition of Careem
On March 26, 2019, the Company entered into an asset purchase agreement (the “Agreement”) with Careem Inc. (“Careem”). Pursuant to the Agreement, upon the terms and subject to the conditions thereof, Augusta Acquisition B.V., an indirect wholly-owned subsidiary of the Company, will acquire substantially all of the assets and assume substantially all of the liabilities of Careem for consideration of approximately $3.1 billion, subject to certain adjustments. The total consideration will consist of up to approximately $1.7 billion in non-interest-bearing unsecured convertible notes and approximately $1.4 billion in cash. Careem is a Dubai-based company that provides ridesharing, meal delivery, and payment services across the Middle East, North Africa, and Pakistan. The acquisition is subject to applicable competition authority approvals in certain of the countries in which Careem operates. The closing is expected to occur in January 2020.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. The condensed consolidated balance sheet as of December 31, 2018 included herein was derived from the audited consolidated financial statements as of that date but does not include all of the information and notes required by GAAP for complete financial statements. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. As such, the information included in this Quarterly Report on Form 10-Q should be read in conjunction with the audited consolidated financial statements and the related notes thereto as of and for the year ended December 31, 2018, included in the Company’s final prospectus filed with the SEC pursuant to Rule 424(b) under the Securities Act of 1933, as amended (“the Securities Act”), on May 13, 2019 (“the Prospectus”).
In the opinion of management, these financial statements include all adjustments, which are of a normal recurring nature, necessary for a fair statement of the financial position, results of operations, cash flows and the change in equity for the periods presented.
There have been no changes to the Company’s significant accounting policies described in the Prospectus that have had a material impact on the Company’s condensed consolidated financial statements and related notes, except for the adoption of the new accounting standard related to lease accounting.
Basis of Consolidation
The condensed consolidated financial statements of the Company include the accounts of the Company and entities consolidated under the variable interest and voting models. All intercompany balances and transactions have been eliminated. Refer to Note 15 - Variable Interest Entities ("VIEs") for further information.
Use of Estimates
The preparation of the Company’s unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions, which affect the reported amounts in the financial statements and accompanying notes. Estimates are based on historical experience, where applicable, and other assumptions which management believes are reasonable under the circumstances. On an ongoing basis, the Company evaluates its estimates, including those related to the incremental borrowing rate (“IBR”) applied in lease accounting, accounts receivable allowances, fair values of investments and other financial instruments,
useful lives of amortizable long-lived assets and intangible assets, stock-based compensation, income and non-income taxes, insurance reserves, and contingent liabilities. These estimates are inherently subject to judgment and actual results could differ from those estimates.
Significant Accounting Policies - Leases
The Company accounts for leases in accordance with ASC 842, Leases (“ASC 842”), which requires lessees to recognize leases on-balance sheet and disclose key information about leasing arrangements. The Company adopted ASC 842 along with all subsequent ASU clarifications and improvements that are applicable to the Company, on January 1, 2019, using the modified retrospective transition method and used the effective date as the date of initial application. Consequently, financial information is not updated and the disclosures required under ASC 842 are not provided for dates and periods before January 1, 2019. ASC 842 provides a number of optional practical expedients in transition. The Company elected the “package of practical expedients,” which permits the Company not to reassess under ASC 842 its prior conclusions about lease identification, lease classification and initial direct costs. The Company also made a policy election not to separate non-lease components from lease components, therefore, it will account for lease component and the non-lease components as a single lease component.
The Company determines if a contract contains a lease based on whether it has the right to obtain substantially all of the economic benefits from the use of an identified asset and whether it has the right to direct the use of an identified asset in exchange for consideration, which relates to an asset which the Company does not own. Right of use (“ROU”) assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets are recognized as the lease liability, adjusted for lease incentives received. Lease liabilities are recognized at the present value of the future lease payments at the lease commencement date. The interest rate used to determine the present value of the future lease payments is the Company’s IBR, because the interest rate implicit in most of the Company’s leases is not readily determinable. The IBR is a hypothetical rate based on the Company’s understanding of what its credit rating would be to borrow and resulting interest the Company would pay to borrow an amount equal to the lease payments in a similar economic environment over the lease term on a collateralized basis. Lease payments may be fixed or variable, however, only fixed payments or in-substance fixed payments are included in the Company’s lease liability calculation. Variable lease payments are recognized in operating expenses in the period in which the obligation for those payments are incurred.
The lease term of operating and finance leases vary from less than a year to 76 years. The Company has leases that include one or more options to extend the lease term for up to 14 years as well as options to terminate the lease within one year. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise such options.
Operating leases are included in operating lease right to use assets, operating lease liabilities, current and operating lease liabilities, non-current on the Company’s condensed consolidated balance sheets. Finance leases are included in property and equipment, net, accrued and other current liabilities, and other long-term liabilities on the Company’s condensed consolidated balance sheets. As of June 30, 2019, less than 15% of the Company’s ROU assets were generated from leased assets outside of the U.S.
Cash and Cash Equivalents
Cash and cash equivalents as of June 30, 2019 consisted of cash held in checking and savings accounts as well as investments in money market funds and U.S. government securities. The Company considers all highly-liquid investments purchased with an original or remaining maturity of three months or less at the date of purchase to be cash equivalents. Cash includes amounts collected on behalf of, but not yet remitted to Partners, which are included in accrued and other current liabilities on the consolidated balance sheets.
Recently Adopted Accounting Pronouncements
In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842),” which requires lessees to recognize leases on-balance sheet and disclose key information about leasing arrangements.
Upon adoption of the new leasing standard on January 1, 2019, the Company recognized ROU assets of $888 million and lease liabilities of $963 million. The Company reassessed the build-to-suit leases that no longer meet the control-based build-to-suit model and derecognized $392 million in build-to-suit assets, $350 million corresponding financing obligation, and recorded $9 million of deferred tax liability. The initial cash contribution to the Mission Bay 3 & 4 joint venture that was previously reported as a defeasance of a build-to-suit financing obligation of $60 million was derecognized by reclassifying it as an increase to the Mission Bay 3 & 4 equity method investment. The $9 million difference between the total derecognized assets and total derecognized liabilities was recorded in the opening balance of accumulated deficit, net of tax, as of January 1, 2019.
In July 2017, the FASB issued ASU 2017-11, “Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception” to simplify the accounting for certain instruments with down round features. The amendments require companies to disregard the down round feature when assessing whether the
instrument is indexed to its own stock, for purposes of determining liability or equity classification. Further, companies that provide earnings per share (“EPS”) data will adjust the basic EPS calculation for the effect of the feature when triggered and will also recognize the effect of the trigger within equity. The Company adopted this new standard as of January 1, 2019 and applied the changes retrospectively. The adoption of the new standard did not have a material impact on the Company’s condensed consolidated financial statements.
In June 2018, the FASB issued ASU 2018-07, “Improvements to Non-Employee Share-Based Payment Accounting,” which expands the scope of Topic 718, to include share-based payments issued to non-employees for goods or services. The new standard supersedes Subtopic 505-50. The Company adopted the new standard effective January 1, 2019 on a modified retrospective basis. The new standard did not have a material impact on the Company’s condensed consolidated financial statements.
Recently Issued Accounting Pronouncements Not Yet Adopted
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” to require the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. The standard also amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. The standard is effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company is currently evaluating the impact of this accounting standard update on its consolidated financial statements.
In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement,” which modifies the disclosure requirements in ASC 820, “Fair Value Measurement” (“ASC 820”). The new standard is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted. An entity is permitted to early adopt any removed or modified disclosures upon issuance of this ASU and delay adoption of the additional disclosures until their effective date. The Company is currently evaluating the impact of this accounting standard update on its consolidated financial statements.
In August 2018, the FASB issued ASU 2018-15, “Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract,” which aligns the requirements for capitalizing implementation costs incurred in a cloud computing arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use-software. The standard is effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted. The Company is currently evaluating the impact of this accounting standard update on its consolidated financial statements.
In October 2018, the FASB issued ASU 2018-17, “Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities,” which amends the guidance for determining whether a decision-making fee is a variable interest and requires organizations to consider indirect interests held through related parties under common control on a proportional basis rather than as the equivalent of a direct interest in its entirety. The standard is effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted. The Company is currently evaluating the impact of this accounting standard update on its consolidated financial statements.
v3.19.2
Revenue
6 Months Ended
Jun. 30, 2019
Revenue from Contract with Customer [Abstract]  
Revenue
Note 2 - Revenue
The following tables present the Company’s revenues disaggregated by offering and Core Platform revenue by geographical region. Core Platform revenue by geographical region is based on where the trip was completed or meal delivered. This level of disaggregation takes into consideration how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors. Revenue is presented in the following tables for the three and six months ended June 30, 2018 and 2019, respectively (in millions):

 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2018
 
2019
 
2018
 
2019
Ridesharing revenue
 
$
2,291


$
2,348

 
$
4,471

 
$
4,724

Uber Eats revenue
 
346


595

 
629

 
1,131

Vehicle Solutions revenue(1)
 
34


3

 
89

 
13

Other revenue
 
26


25

 
52

 
57

Total Core Platform revenue
 
2,697


2,971

 
5,241

 
5,925

Total Other Bets revenue
 
71


195

 
111

 
340

Total revenue
 
$
2,768


$
3,166

 
$
5,352

 
$
6,265

 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2018
 
2019
 
2018
 
2019
United States and Canada
 
$
1,493


$
1,776

 
$
2,880

 
$
3,526

Latin America ("LATAM")
 
547


417

 
1,065

 
867

Europe, Middle East and Africa ("EMEA")
 
413


502

 
801

 
989

Asia Pacific ("APAC")
 
244


276

 
495

 
543

Total Core Platform revenue
 
$
2,697


$
2,971

 
$
5,241

 
$
5,925

(1) The Company accounts for Vehicle Solutions revenue as an operating lease as defined under ASC 840 for 2018 and ASC 842 in 2019.
Revenue from Contracts with Customers
Ridesharing Revenue
The Company derives revenue primarily from fees paid by Driver Partners for the use of the Company’s platform(s) and related service to facilitate and complete ridesharing services.
Uber Eats Revenue
The Company derives revenue for Uber Eats from Restaurant Partners’ and Delivery Partners’ use of the Uber Eats platform and related service to facilitate and complete Eats transactions.
Other Revenue
Other revenue consists primarily of revenue from the Company’s Uber for Business (“U4B”), financial partnerships products and other immaterial revenue streams.
Other Bets
Other Bets revenue consists primarily of revenue from Uber Freight and other immaterial revenue streams.
Contract Balances
The Company’s contract assets for performance obligations satisfied prior to payment or contract liabilities for consideration collected prior to satisfying the performance obligations are not material for the three months ended June 30, 2019.
Remaining Performance Obligations
As a result of a single contract entered into with a customer during 2018, the Company had $113 million of consideration allocated to an unfulfilled performance obligation as of June 30, 2019. Revenue recognized during three and six months ended June 30, 2019 related to the contract was not material.
The Company’s remaining performance obligation is expected to be recognized as follows (in millions):
 
 
Less Than or
Equal To 12 Months
 
Greater Than
12 Months
 
Total
As of June 30, 2019
 
$
52

 
$
61

 
$
113


v3.19.2
Fair Value Measurement
6 Months Ended
Jun. 30, 2019
Fair Value Disclosures [Abstract]  
Fair Value Measurement
Note 3 - Fair Value Measurement
The Company’s investments on the condensed consolidated balance sheets consisted of the following as of December 31, 2018 and June 30, 2019 (in millions):
 
 
As of
 
 
December 31, 2018
 
June 30, 2019
Non-marketable equity securities:
 
 
 
 
Didi
 
$
7,953

 
$
7,953

Other
 
32

 
94

Debt securities:
 
 
 
 
Grab(1)
 
2,328

 
2,334

Other(2)
 
42

 
34

Investments
 
$
10,355

 
$
10,415

(1) Recorded at fair value with changes in fair value recorded in other comprehensive income (loss), net of tax.
(2) Recorded at fair value with changes in fair value recorded in earnings due to the election of the fair value option of accounting for financial instruments.
The Company defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In accordance with ASC 820, the Company uses the fair value hierarchy, which prioritizes the inputs used to measure fair value. The hierarchy, as defined below, gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three levels of the fair value hierarchy are set forth below:    
Level 1
Observable inputs such as quoted prices in active markets for identical assets or liabilities.
Level 2
Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities in active markets, quoted prices in markets that are not active or inputs other than the quoted prices that are observable either directly or indirectly for the full term of the assets or liabilities.
Level 3
Unobservable inputs in which there is little or no market data and that are significant to the fair value of the assets or liabilities.
The Company measures its cash equivalents, certain investments, warrants, and derivative financial instruments at fair value. Level 1 instrument valuations are based on quoted market prices of the identical underlying security. Level 2 instrument valuations are obtained from readily available pricing sources for comparable instruments, identical instruments in less active markets, or models using market observable inputs. Level 3 instrument valuations are valued based on unobservable inputs and other estimation techniques due to the absence of quoted market prices, inherent lack of liquidity and the long-term nature of such financial instruments.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following table presents the Company’s financial assets and liabilities measured at fair value on a recurring basis based on the three-tier fair value hierarchy (in millions):
 
As of December 31, 2018
 
As of June 30, 2019
 
Level 1
 
Level 2
 
Level 3
 
Total
 
Level 1
 
Level 2
 
Level 3
 
Total
Financial Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Money market funds
$
268

 
$

 
$

 
$
268

 
$
6,000

 
$

 
$

 
$
6,000

U.S. government securities

 

 

 

 

 
1,049

 

 
1,049

Restricted cash and cash equivalents:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Money market funds
1,237

 

 

 
1,237

 
1,497

 

 

 
1,497

Investments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt securities

 

 
2,370

 
2,370

 

 

 
2,368

 
2,368

Total financial assets
$
1,505

 
$

 
$
2,370

 
$
3,875

 
$
7,497

 
$
1,049

 
$
2,368

 
$
10,914

Financial Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Accrued and other current liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other
$

 
$

 
$
9

 
$
9

 
$

 
$

 
$
3

 
$
3

Other long-term liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Warrants

 

 
52

 
52

 

 

 

 

Embedded derivatives

 

 
2,018

 
2,018

 

 

 

 

Total financial liabilities
$

 
$

 
$
2,079

 
$
2,079

 
$

 
$

 
$
3

 
$
3


During the six months ended June 30, 2019, the Company did not make any transfers between the levels of the fair value hierarchy.
The following table summarizes the amortized cost, unrealized gains and losses, and fair value of the Company’s financial assets measured at fair value on a recurring basis as of December 31, 2018 and June 30, 2019 (in millions):
 
As of December 31, 2018
 
As of June 30, 2019
 
Amortized Cost
 
Unrealized Gains
 
Unrealized Losses
 
Fair Value
 
Amortized Cost
 
Unrealized Gains
 
Unrealized Losses
 
Fair Value
Cash and cash equivalents:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government securities
$

 
$

 
$

 
$

 
$
1,049

 
$

 
$

 
$
1,049

Investments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt securities
2,305

 
65

 

 
2,370

 
2,307

 
61

 

 
2,368

Total
$
2,305

 
$
65

 
$

 
$
2,370

 
$
3,356

 
$
61

 
$

 
$
3,417


The Company’s Level 3 debt securities as of December 31, 2018 and June 30, 2019 primarily consist of redeemable preferred stock investments in privately held companies without readily determinable fair values.
Depending on the investee’s financing activity in a reporting period, management’s estimate of fair value may be primarily derived from the investee’s financing transactions, including the issuance of preferred stock to new investors. The price in these transactions generally provides the best indication of the enterprise value of the investee. Additionally, based on the timing, volume, and other characteristics of the transaction, the Company may supplement this information by using other valuation techniques, including the guideline public company approach.
The guideline public company approach relies on publicly available market data of comparable companies and uses comparative valuation multiples of the investee’s revenue (actual and forecasted), and therefore, unobservable data primarily consists of short-term revenue projections.
Once the fair value of the investee is estimated, an option pricing model (“OPM”) is employed to allocate value to various classes of securities of the investee, including the class owned by the Company. The model involves making key assumptions around the investees’ expected time to liquidity and volatility.
An increase or decrease in any of the unobservable inputs in isolation, such as the security price in a significant financing transaction of the investee, could result in a material increase or decrease in the Company’s estimate of fair value. Other key unobservable inputs, including short-term revenue projections, time to liquidity, and volatility are less sensitive to the valuation in the respective reporting periods, as a result of the primary weighting on the investee’s financing transactions during 2018 and 2019. In the future, depending on the weight of evidence and valuation approaches used, these or other inputs may have a more significant impact on the Company’s estimate of fair value.
The following table summarizes information about the significant unobservable inputs used in the fair value measurement for the Company’s investment in Grab as of December 31, 2018 and June 30, 2019:
Fair value method
 
Relative weighting
 
Key unobservable input
Financing transactions
 
100%
 
Transaction price per share
 
$6.16

The Company determines realized gains or losses on the sale of equity and debt securities on a specific identification method. The Company did not recognize any other-than-temporary impairment losses during three and six months ended June 30, 2018 and 2019.
The following table summarizes the amortized cost and fair value of the Company’s debt securities with a stated contractual maturity or redemption date as of December 31, 2018 and June 30, 2019 (in millions):
 
As of December 31, 2018
 
As of June 30, 2019
 
Amortized Cost
 
Fair Value
 
Amortized Cost
 
Fair Value
Within one year
$

 
$

 
$
1,049

 
$
1,049

One year through five years
2,275

 
2,328

 
2,277

 
2,334

Total
$
2,275

 
$
2,328

 
$
3,326

 
$
3,383


The following table presents a reconciliation of the Company’s financial assets measured and recorded at fair value on a recurring basis as of June 30, 2019, using significant unobservable inputs (Level 3) (in millions):
 
 
Debt Securities
Balance as of December 31, 2018
 
$
2,370

Total net gains (losses)
 
 
Included in earnings
 
(8
)
Included in other comprehensive income (loss)
 
4

Purchases
 
2

Sales
 

Settlements
 

Balance as of June 30, 2019
 
$
2,368


The following table presents a reconciliation of the Company’s financial liabilities measured at fair value as of June 30, 2019 using significant unobservable inputs (Level 3), and the change in fair value recorded in other income (expense), net in the condensed consolidated statements of operations (in millions):
 
 
 Warrants
 
Convertible Debt Embedded Derivative
Balance as of December 31, 2018
 
$
52

 
$
2,018

Vesting of share warrants
 
1

 

Exercise of vested share warrants
 
(53
)
 

Change in fair value
 

 
(58
)
Settlement of derivative liability
 

 
(1,960
)
Balance as of June 30, 2019
 
$

 
$


Convertible Debt Embedded Derivative
Convertible debt embedded derivatives originated from the issuance of the 2021 convertible notes and 2022 convertible notes (collectively the “Convertible Notes”) during 2015. Refer to Note 7 - Long-Term Debt and Revolving Credit Arrangements for further information. The fair value of the embedded derivatives was computed as the difference between the estimated value of the Convertible Notes with and without the Qualified Initial Public Offering (“QIPO”) Conversion Option (“QIPO Conversion Option”). The fair value of the Convertible Notes with and without the QIPO Conversion Option was estimated utilizing a discounted cash flow model to discount the expected payoffs at various potential QIPO dates to the valuation date. The key inputs to the valuation model included the probability of a QIPO occurring at various times, which was estimated to be 100% cumulatively by 2019 and a discount yield that was derived by the credit spread based on the average of the option-adjusted spreads of comparable instruments plus risk-free rates. Fair value measurements are highly sensitive to changes in these inputs; significant changes in these inputs would result in a significantly higher or lower fair value. No value was attributed to other embedded features as they are triggered by events with a remote probability of occurrence. Upon closing of the IPO, holders of the 2021 Convertible Notes and the 2022 Convertible Notes elected to convert all outstanding notes into 94 million shares of common stock. Refer to Note 1 - Basis of Presentation and Summary of Significant Accounting Policies for further information.
Warrant Liabilities
In February 2016, the Company issued two warrants to an investor advisor to purchase up to 205,034 shares and 820,138 shares of the Company’s Series G redeemable convertible preferred stock at an exercise price of $0.01 per share in exchange for advisory services. The warrants were liability-classified due to the contingent redemption features in the underlying preferred stock and were consequently measured at their fair value of $45 million as of December 31, 2018. The vested shares were exercised during the first quarter of 2019, and the Company reclassified the $45 million fair value of the vested shares to Series G redeemable convertible preferred stock. Upon closing of the IPO, the Series G redeemable convertible preferred stock were automatically converted to shares of common stock.
Assets Measured at Fair Value on a Non-Recurring Basis
The Company’s non-financial assets, such as goodwill, intangible assets and property and equipment are adjusted to fair value when an impairment charge is recognized. Such fair value measurements are based predominately on Level 3 inputs.
Non-Marketable Equity Securities
The Company’s non-marketable equity securities are investments in privately held companies without readily determinable fair values and primarily relate to its investment in Didi. On January 1, 2018, the Company adopted ASU 2016-01, in which the carrying
value of its non-marketable equity securities are adjusted based on price changes from observable transactions of identical or similar securities of the same issuer or for impairment (referred to as the measurement alternative). Any changes in carrying value is recorded within other income (expense), net in the condensed consolidated statements of operations. Non-marketable equity securities are classified within Level 3 in the fair value hierarchy because the Company estimates the fair value of these securities based on valuation methods, including the common stock equivalent method, using the transaction price of similar securities issued by the investee adjusted for contractual rights and obligations of the securities it holds.
The following is a summary of unrealized gains and losses from remeasurement (referred to as upward or downward adjustments) recorded in other income (expense), net in the condensed consolidated statements of operations, and included as adjustments to the carrying value of non-marketable equity securities held during the three and six months ended June 30, 2018 and 2019 based on the selling price of newly issued shares of similar preferred stock to new investors using the common stock equivalent valuation method and adjusted for any applicable differences in conversion rights (in millions):
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2018
 
2019
 
2018
 
2019
Upward adjustments
 
$

 
$
4

 
$
1,984

 
$
22

Downward adjustments (including impairment)
 

 

 

 

Total unrealized gain for non-marketable equity securities
 
$

 
$
4

 
$
1,984

 
$
22


The Company did not record any realized gains or losses for the Company’s non-marketable equity securities as of June 30, 2019.
The following table summarizes the total carrying value of the Company’s non-marketable equity securities held as of December 31, 2018 and June 30, 2019 including cumulative unrealized upward and downward adjustments made to the initial cost basis of the securities (in millions):
 
 
As of
 
 
December 31, 2018
 
June 30, 2019
Initial cost basis
 
$
6,001

 
$
6,041

Upward adjustments
 
1,984

 
2,006

Downward adjustments (including impairment)
 

 

Total carrying value at the end of the period
 
$
7,985

 
$
8,047


v3.19.2
Equity Method Investments
6 Months Ended
Jun. 30, 2019
Equity Method Investments and Joint Ventures [Abstract]  
Equity Method Investments
Note 4 - Equity Method Investments
The carrying value of the Company’s equity method investments as of December 31, 2018 and June 30, 2019 is as follows (in millions):
 
 
As of
 
 
December 31, 2018

June 30, 2019
MLU B.V.
 
$
1,234

 
$
1,232

Mission Bay 3 & 4(1)
 
78

 
138

Equity method investments
 
$
1,312

 
$
1,370

(1) Refer to Note 15 - Variable Interest Entities ("VIEs") for further information on the Company’s interest in Mission Bay 3 & 4.
MLU B.V.
During the first quarter of 2018, the Company contributed the net assets of its Uber Russia/CIS operations into a newly formed private limited liability company (“MLU B.V.” or “Yandex.Taxi joint venture”), with Yandex and the Company holding ownership interests in MLU B.V. The Company contributed $345 million of cash, contracts in the region including Rider, Driver Partner, and Eater contracts, and certain employees in the region to MLU B.V. The Company concurrently issued approximately 2 million shares of Uber Technologies, Inc. Class A common stock, with a fair value of $52 million to MLU B.V.’s parent, Yandex. These shares are subject to a put/call feature resulting in Uber Technologies, Inc.’s contingent obligation to buy back these shares at $48 per share after twelve months from the closing date. Neither the put nor the call had been exercised as of June 30, 2019.
In exchange for consideration contributed, the Company received a seat on MLU B.V.’s board and a 38% equity ownership interest consisting of common stock in MLU B.V. Certain contingent equity issuances of MLU B.V. may dilute the Company’s equity ownership interest to approximately 35%. The investment was determined to be an equity method investment due to the Company’s
ability to exercise significant influence over MLU B.V. The initial fair value of the Company’s equity method investment in MLU B.V. was estimated using discounted cash flows of MLU B.V. As a result of the loss of control over Uber Russia/CIS resulting from the transaction, the Company derecognized the assets/liabilities of Uber Russia/CIS and recorded a $954 million gain during the first quarter of 2018 recognized in other income (expense), net in the condensed consolidated statement of operations.
Included in the initial carrying value of $1.4 billion, which represents the fair value on the transaction date, was a basis difference of $908 million related to the difference between the cost of the investment and the Company’s proportionate share of the net assets of MLU B.V. The carrying value of the equity method investments are primarily adjusted for the Company’s share in the losses of MLU B.V. and amortization of basis differences. The carrying value was also adjusted for currency translation adjustments representing fluctuations between the functional currency of the investee, the Ruble and the U.S. Dollar.
As of June 30, 2019, the basis differences between the carrying value of the Company’s investment and its share in the net assets of MLU B.V. amounted to $792 million, including the impact of foreign currency translation, and are comprised primarily of equity method goodwill. Equity method goodwill is not amortized. The Company amortizes the basis difference related to the intangible assets over the estimated useful lives of the assets that gave rise to the difference using the straight-line method. The weighted-average life of the intangible asset is approximately 5.3 years as of June 30, 2019. The investment balance is reviewed for impairment whenever factors indicate that the carrying value of the equity method investment may not be recoverable.
v3.19.2
Property and Equipment, Net
6 Months Ended
Jun. 30, 2019
Property, Plant and Equipment [Abstract]  
Property and Equipment, Net
Note 5 - Property and Equipment, Net
The components of property and equipment, net as of December 31, 2018 and June 30, 2019 were as follows (in millions):
 
 
As of
 
 
December 31, 2018
 
June 30, 2019
Land
 
$
67

 
$
67

Building and site improvements
 
93

 
40

Leasehold improvements
 
315

 
345

Computer equipment
 
858

 
893

Leased computer equipment
 
288

 
438

Leased vehicles
 
34

 
31

Internal-use software
 
51

 
73

Furniture and fixtures
 
39

 
39

Dockless e-bikes
 
10

 
58

Construction in progress
 
832

 
661

Total
 
2,587

 
2,645

Less: Accumulated depreciation and amortization
 
(946
)
 
(1,198
)
Property and equipment, net
 
$
1,641

 
$
1,447


Depreciation expense relating to property and equipment was $92 million and $174 million for the three and six months ended June 30, 2018, respectively, and $115 million and $252 million for the three and six months ended June 30, 2019, respectively.
Amounts in construction in progress represent buildings, leasehold improvements, assets under construction, other assets not placed in service, and build-to-suit leases prior to the adoption of ASC 842 on January 1, 2019. Upon adoption of ASC 842, the Company derecognized build-to-suit assets from construction in progress. Refer to Note 1 - Basis of Presentation and Summary of Significant Accounting Policies for further information.
v3.19.2
Leases
6 Months Ended
Jun. 30, 2019
Leases [Abstract]  
Leases, Finance
Note 6 - Leases    
The components of lease expense were as follows (in millions):
 
 
Three Months Ended June 30, 2019
 
Six Months Ended June 30, 2019
Lease cost
 
 
 
 
Finance lease cost:
 
 
 
 
      Amortization of assets
 
$
35

 
$
71

      Interest of lease liabilities
 
4

 
8

Operating lease cost
 
79

 
146

Short-term lease cost
 
10

 
18

Variable lease cost
 
29

 
54

Sublease income
 

 
(1
)
Total lease cost
 
$
157

 
$
296

Supplemental cash flow information related to leases was as follows (in millions):
 
 
Six Months Ended June 30, 2019
Other information
 
 
Cash paid for amounts included in the measurement of lease liabilities:
 
 
Operating cash flows from financing leases
 
$
6

Operating cash flows from operating leases
 
107

Financing cash flows from financing leases
 
72

Right-of-use assets obtained in exchange for lease obligations:
 
 
Operating lease liabilities