Uber, posting first-ever quarterly decline in rides amid coronavirus pandemic, says worst is over
- Uber is expects to turn an adjusted quarterly profit next year, CEO Dara Khosrowshahi says
- The ride-hailing business was down about 80 per cent in April, but Khosrowshahi says sales are increasing
The San Francisco-based company has never turned an adjusted quarterly profit and is unlikely to do so this year. Uber now expects to hit that milestone next year, thanks to cost cutting that will eliminate more than US$1 billion in expenses, chief executive officer Dara Khosrowshahi said on a conference call with analysts.
The ride-hailing business was down about 80 per cent in April, but Khosrowshahi said sales have increased for each of the last three weeks and are on track to do so again this week. “We believe the US is off the bottom,” he said. Shares were up about 6 per cent in extended trading Thursday.
The problems last quarter for Uber’s rides business, and for most of the transport industry, can be traced to the spread of the virus around the world. With the stock under pressure in the first quarter, Khosrowshahi sought to reassure investors on a conference call in March explaining the business would have a US$4 billion cash cushion in a worst-case scenario.
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However, Uber inched closer in the first quarter to its goal of generating an adjusted profit. The loss, excluding taxes, interest and other expenses, declined 30 per cent from a year ago, to US$612 million.
“While our rides business has been hit hard by the ongoing pandemic, we have taken quick action to preserve the strength of our balance sheet,” Khosrowshahi said in a statement. “Along with the surge in food delivery, we are encouraged by the early signs we are seeing in markets that are beginning to open back up.”
During the past week, Uber has embarked on a blitz of cost-trimming moves. Uber said it will end food delivery operations in more than a half-dozen countries and that its Middle East unit Careem will terminate 31 per cent of employees. On Wednesday, the company told employees it was cutting 14 per cent of staff and indicated that more cost reductions would be conveyed in the next two weeks. Uber said Thursday it will transfer its bicycle and scooter business to another company, Lime, and invest more capital in the start-up.
To achieve the company’s revised profit plan, all departments will need to make reductions, Nelson Chai, the chief financial officer, said on the conference call Thursday. “There are no sacred cows,” he said.