Uber targets profitability by the end of the year

An Uber in Chicago
An Uber in downtown Chicago. (Kari McMahon/Medill)

By Kari Mcmahon
Medill Reports

Uber Technologies Inc., a ride-hailing company, reported a wider quarterly net loss, but its shares still rose as the company said it expected to meet their adjusted profitability target by the end of this year, a year earlier than previously estimated.

Dara Khosrowshahi, CEO of Uber, said on the earnings call that 2019 was a “milestone year” for the company as they crossed the 100 million mark in the number of monthly active platform consumers and saw a 68% increase in the number of consumers using both their rides and eats services. He said the company’s progress in 2019 gave him the confidence to accelerate their adjusted profitability target from full-year 2021 to quarter four in 2020.

“We recognize that the era of growth at all costs is over,” Khosrowshahi said in a press release. “In a world where investors increasingly demand not just growth, but profitable growth, we are well-positioned to win through continuous innovation, excellent execution, and the unrivaled scale of our global platform.”

Investors responded positively to Uber’s focus on profitability instead of growth; the stock price rose 5% in after-hours trading.

Wedbush analyst Ygal Arounian told Seeking Alpha that Uber’s earnings were “an important first step forward towards regaining [Wall] Street credibility.”

Uber currently operates in 69 countries and in more than 900 cities and is the number one ride-hail company in every major region they operate in. Khosrowshahi said on the call that the company steadily delivered on its strategy to be number one and number two in every market with their food delivery business, Uber Eats, by further investing in some countries and exiting others.

After going public in May 2019, investors were skeptical over Uber’s ability to reach profitability. Uber has since focussed on cutting costs. In 2019, Uber laid off around 1,000 workers and at the beginning of this year exited its food delivery business in India.

In 2020, Uber said it would invest in its Uber Eats business in the first quarter and then look to combine growth and improve margins within each business. The company said that subscription-based offerings were promising based on location specific trials and predict that “2020 will be the year of subscriptions.”

Uber, however, continues to face challenges with regulation. The company said it was “too soon to tell” the impact of Assembly Bill 5 legislation in California, a piece of legislation that extends employee classification to gig workers such as ride-hail drivers. The legislation presented challenges to Uber’s business model because they would have to classify drivers as employees and provide them with a minimum wage and employee benefits, which would be an additional expense for the company.

Uber is also in the process of requesting a reversal Transport for London’s decision not to renew their license to operate in London. TFL, London’s local governing body for transport, said they found a pattern of failures that put passengers and their safety at risk. The failures included enabling suspended and dismissed drivers to create a new Uber accounts and pick up passengers. They also found unauthorized drivers were able to upload their photos to authorized drivers accounts, which meant drivers could pick up passengers as if it were booked with the original driver.

For the quarter ended Dec. 31, Uber’s net loss rose to $1.1 billion, or 64 cents a share, from $887 million. Revenues rose to $4.07 billion from $2.97 billion a year earlier. CNBC said that analysts expected Uber to report a revenue of $4.06 billion and a loss of 68 cents a share.

Uber’s main competitor Lyft Inc is expected to announce its fourth quarter earnings on Feb. 11.

Photo at top: An Uber in downtown Chicago. (Kari McMahon/MEDILL)