Uber Technologies said it will deliver a first-ever quarterly profit by the end of the year, signalling that cost-cutting measures are exceeding even the company’s own recent expectations.
The company will become profitable, on an adjusted basis, by the fourth quarter of 2020, Dara Khosrowshahi, the CEO, said on a conference call to discuss financial results on Thursday. A previous plan set this goal for 2021. The stock was up about 5% in extended trading.
The drive toward profitability is likely to take a toll on growth. Nelson Chai, the chief financial officer, said gross bookings will decline slightly in the first quarter from the previous period.
For the fourth quarter, Uber edged out Wall Street’s expectations, with bookings up 28% and a loss that was narrower than analysts’ estimates. Gross bookings for the fourth quarter were US$18.1-billion, showing demand for transportation and food delivery orders remains strong. The measure, which represents the total value of rides, food orders and other businesses, is closely watched by investors.
Efforts to rein in spending are proving to be especially effective. The San Francisco-based company reported an adjusted loss of $615-million, compared to a $713-million average of analysts’ estimates compiled by Bloomberg. The loss, which excludes interest, taxes and other expenses, was $817-million in the same quarter a year earlier.
Uber is trying to more closely connect its various services and increase usage among the more than 100 million customers who open the app each month. The company is investing in electric bicycle and scooter rentals and experimenting with helicopter rides and temporary staffing.
The new businesses are pricey, though, and investors have punished the company for burning cash to fuel growth. The stock, which went public in May, trades below its initial offering price. Uber said on Thursday that its loss for the year using generally accepted accounting principles was $8.51-billion. The startling figure was driven primarily by stock compensation and one-time costs associated with the IPO.
In the last year, Uber has taken steps to check its spending habit. It reduced marketing expenses, cut more than a thousand employees and abandoned some unprofitable food delivery units. It ended delivery in South Korea and sold the delivery operation in India last month.
The company will consider abandoning delivery in other countries or acquiring businesses with the goal of only competing in markets where Uber Eats would be the biggest or second biggest option, Khosrowshahi said. Eventually, Uber Eats will reduce discounts for customers, which will drive a decline in spending by the second quarter. The strategy is similar to what the company did in ride-hailing. “The Eats team is running the same exact play,” Khosrowshahi said. “It’s just running a year behind.”
The ride-hailing business was profitable on a standalone basis in the fourth quarter, Uber said. The company lost $130-million on its “other technology programmes”, including the autonomous driving division, which is funded by Uber, SoftBank, Toyota and others. — Reported by Lizette Chapman, (c) 2020 Bloomberg LP